Fastest-Growing Emerging Companies Rank: 3
Group: SUBSIDIARIES/ JVs
Segment: REVENUE Rs 3,000-6,000 crore
Balram Yadav, Managing Director at Godrej Agrovet Ltd (GAVL), is eagerly waiting for the monsoon to hit Haryana and Punjab. "Our business is cyclical in nature and the monsoon has a huge bearing on our business and profitability," he says, enjoying the glimpse of rain from his fifth-floor office at Godrej One, the new headquarters of Godrej Group at Vikhroli in Mumbai. Good rainfall will help the agribusiness firm by pushing volumes higher. "Rise in commodity prices may increase value but it doesn't mean anything without volumes," he adds.
The unpredictability of the monsoon notwithstanding, GAVL has grown at a steady pace over the past few years. This is thanks to a business restructuring. "The big focus was to de-risk the business, which meant we had to be very efficient. We cut excess flab and tied up with the right partners to grow in areas where we didn't have core strength. Most importantly, we invested heavily in R&D, particularly in animal feed and palm oil businesses," says Yadav.
GAVL now has 34 facilities compared with 56 four years ago while its capacity has increased to 1.8 million tonne from one million tonne. Last year itself, the company raised the capacity by 3.5 lakh tonne. It has invested close to Rs 550 crore for expansion over the past four years, with most of the money going into animal feed plants and palm oil mills. "The big driver for the animal feed business in the future will be our R&D initiatives. We have been investing 10 per cent of our profits in R&D in this business," says Yadav.
Rs 3,251.62 crore
Rs 135.92 crore
THREE-YEAR AVERAGE TOPLINE GROWTH: Two other initiatives helped the company accelerate growth. In 2008, it sold a majority stake in its retail business, Aadhaar, to Future Group and tied up with US-based Tyson Foods for its packaged foods business. "The [packaged foods] business was loss-making but the tie-up with Tyson Foods brought in expertise and in no time the business became profitable," says Yadav. The company, through a joint venture with Bangladesh firm ACI, recently invested Rs100 crore to build South Asia's largest fish feed mill at a single location, at Rajshahi in Bangladesh.
GAVL earns revenues from five businesses - animal feed, oil palm mills, agricultural inputs such as seeds and pesticides, the JV with ACI, and the JV with Tyson Foods. It is the largest seller of animal feed commercially in India and sold close to 1.1 million tonne last year. The animal feed business accounts for two-thirds of the companys revenues and half its profit. For 2014/15, GAVL reported a 29 per cent jump in consolidated net profit to Rs 214 crore on a six per cent rise in revenues to Rs 3,795 crore.
FULL COVERAGE: India's Emerging Companies 2015 The growth potential in the company also attracted Singapore-based private equity player Temasek, which picked up a stake of about 20 per cent in GAVL in 2012 at a valuation of almost Rs 3,000 crore. "We had to establish some valuation for our businesses, which are totally disconnected from each other - animal feed, palm oil, farm inputs," says Yadav. He sees huge potential in the Rs 550-crore farm input business, which is growing at 20 per cent annually. Growth in this business will come from mergers and acquisitions as well as tie-ups in the pesticide segment. So far, GAVL has been trading in pesticides but it is talking to a Japanese chemical company to acquire the know-how for making pesticides.
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In the palm oil business too, the company has put in a lot of effort in recent years. It is encouraging contract farming of about 5,000 to 6,000 hectare of palm plantation in coastal regions every year. The company today produces 75,000 to 80,000 tonne of palm oil and aims to touch two lakh tonne in the next four to five years. "I see huge opportunities in all businesses. In next three to five years, in an average commodity price scenario, an average annual growth of 13-14 per cent in the top line and 15-16 per cent in the bottom line looks achievable," says Yadav. And if the rain gods keep smiling, the crown jewel of Godrej Group could surpass its own expectations.