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Godrej Agrovet reports 97% increase in Q4 profit, preparing groundwork for IPO

LiveMint logoLiveMint 23-05-2017 Soumya Gupta

Mumbai: Godrej Agrovet Ltd, the agri-inputs business of the Godrej group reported a 97% increase in its fiscal fourth quarter profit before tax on higher volume growth, the company said in an investor call on Tuesday.

Godrej Agrovet is 60.8% owned by Godrej Industries Ltd and is preparing groundwork for an initial public offer (IPO).

A spate of acquisitions particularly in the dairy business also helped boost revenues and profits, the company said.

Godrej Agrovet posted a 4% increase in revenues during the quarter ended March 2017 to Rs1,025 crore and a 31% increase in FY16-17 to Rs4,985 crore.

Total profits from agri business, animal feeds, and dairy made up nearly 36% of Godrej Industries’s profit before interest and tax (PBIT) and 45% of revenues for the quarter.

“The animal feeds business grew despite headwinds while Creamline dairy products grew 10% as compared to a year ago, with growth in value added products,” Godrej Agrovet’s managing director Balram Yadav said. Animal feeds sales declined 10% to Rs583 crore, which Yadav said was due to high input costs.

“Animal feeds are driven by commodity prices,” he said, adding that business was seeing better volumes than before.

Yadav said the company has been expanding its dairy business with smaller acquisitions.

“We bought one asset in Hyderabad as we look at temperature neutral products (dairy products that need not be cooled or frozen),” he said. “We also acquired another asset near Tirunelveli called RBS Dairy, which sells products under the Matha brand name.”

Yadav said the acquisition gives Agrovet more exposure to markets in the south. The dairy firm had sales worth Rs125 crore, Yadav said without specifying a time period, adding that “the company will grow much faster with Godrej stepping in.”

Creamline is also expecting to increase production capacity by 14% with a new facility at Vizag. “We are a little delayed because of some land issues, expect construction to start in July and take 9-10 months to complete the plant,” Yadav said.

Finally, Agrovet is betting on growth from its palm oil plantation business anticipating breaks and subsidies from the government for the farmers of this crop.

“Our production will be higher but we will have lower prices than last year,” Yadav said.

Analysts tracking Godrej Industries are optimistic about Agrovet’s performance, citing its diversified business interests and robust overall growth.

“Godrej Industry’s strong profitability was driven by all businesses, including Godrej Consumer and GodrejProperties that did well despite demonetization,” an analyst at an equities brokerage firm said, requesting anonymity. “Creamline dairy will continue to look at small acquisitions to drive growth, while the palm oil plantation business is looking steady,” the analyst said, saying it was a “cash cow kind of business”.

“Besides, the number of juvenile plantations to mature plantations is very high,” that promises high growth in the coming fiscal years. “Now the thrust on R&D will improve the animal feeds business and the crop protection business” that includes insecticides and pesticides, the analyst said.

On 9 March, Mint reported that Godrej Agrovet has appointed three investment bankers for its IPO. However, the management at Godrej Industries declined to share a timeline of the IPO, saying they “do not make forward projections” at the analyst call.

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