Patanjali Foods eyes revenue of ₹35,000 crore this year, excluding acquisitions
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
In its latest results release, the company mentioned that the board has found a committee to consider the proposal of acquisition of the non-food business of Patanjali Ayurved.
Sanjeev Asthana, CEO of Patanjali Foods, expects revenue to grow to ₹35,000 crore this year from around ₹32,000 crore clocked in the last financial year (FY24).
In its latest results release, the company mentioned that the board has found a committee to consider the proposal of acquisition of the non-food business of Patanjali Ayurved.
“All the categories: home care, personal care, dental care, skin care, and there are some very solid sort of brands and products there, which are extremely receptive, well received by the consumers. So the entire portfolio is going to move once we go through the diligence, and the acquisition happens,” Asthana told CNBC-TV18.
The annual revenue target does not include the new business that will be integrated into the company over time.
This is the verbatim transcript of the interview.
Q: Before we just talk about the business and the growth going forward, there was an interesting footnote in your accounts, which said that the board has found a committee to consider the proposal of acquisition of the non-food business of Patanjali Ayurved. So I just wanted to know a couple of things. One, by when are we likely to hear on any development that will take place out here and what could their revenue potential of the business that you are on boarding here, and margin potentially be?
A: So on the revenue potential, I will keep the remarks reserved right now. On the announcement, you will hear very soon. The diligence is going on and we are pretty hopeful that you will see in a couple of weeks an announcement in terms of the acquisition part, once the diligence is done.
I would say that it’s going to be extremely EBITDA accretive, very positive for the company’s overall consolidation of the FMCG portfolio. But more importantly, we are hoping that the high margin products that it has and some of the most solid brands in this category, I think would come into the listed entity which would be beneficial overall for the investors perspective as well as for company’s performance.
Q: So this will just be the personal care business or would this also includes some of the ayurvedic products, medical care business as well? Because what we know of Patanjali non-food which is not part of your listed entity, there is Danti Kanti, and the soap, shampoo, and wash business. Is there anything else that would be added or what is it that would be added according to you?
A: So all the categories home care, personal care, dental care, skin care, and there are some very solid sort of brands and products there, which are extremely receptive, well received by the consumers. So the entire portfolio is going to move once we go through the diligence, and the acquisition happens.
Q: Is there a ballpark figure that you can share on the revenue potential?
A: It would not be fair, I think that’s an unlisted entity, the diligence is going on, but it’s a very large business from the numbers that we see currently, very profitable. And so I think just be patient for a couple of weeks, you will soon hear from us.
Read Here | Patanjali Foods weighs a proposal to buy non-food business from Patanjali Ayurved
Q: The last time you joined as you said the revenues for the company would be around ₹35,000 crore and for the group, it would be around ₹50,000 crore. The delta here is ₹15,000 crore. How much of that is the non-food business, is it fair to say, it is 50:50?
A: Certainly not, I don’t think we will have that size and scale which will accrue. So broadly, that was a reflection of the prices where we have on the commodity portfolio. So this year, for example, our revenues have been in general pretty flat, because even though the volumes went up across the board in the business, but because the price points were lower, especially on edible oil, where we saw a significant decline from the price point per tonne, which is why you are seeing lower volumes, but our margin profile etc. will certainly keep getting better. And once the non-food part sort of comes in as and when that happens, you will see a significant addition both to the bottom line as well as to the top line.
Q: A food and FMCG currently accounts for 33% of your revenues, this is in your current mix of things, once the non-food business comes in, how much would food and FMCG account?
A: You are forcing me to give a number right now but it would be wrong on my part to be sharing the numbers. I think suffice it to say from an FMCG perspective, that’s a large number and high margin business also. I would imagine that at least on the FMCG portfolio itself, we should add anywhere between 35 to 50% addition to the FMCG portfolio.
Q: Your finance costs had gone up significantly. What would you attribute that to, because there has not been a proportionate increase in your debt but the finance cost has gone up significantly.
A: This was just an accounting treatment to the redemption of preference shares. So we had almost nearly ₹92 crore of preference share redemption, that is the reason the finance cost has going higher. There’s absolutely no other sort of charge and no debt increase, etc. So that’s purely an accounting sort of entry, which is showing a higher cost.
Q: What is the kind of revenue, volume growth that you are targeting this year, in all your segments and what are the kinds of margins that one should expect?
A: So on the FMCG, we have always mentioned that we want to maintain a growth rate of anywhere between 8 to 10% on the revenue side. The margin construct, we want to maintain between 16 to 18%, we are pretty much on course, for that. The foods portfolio has been very positive, the configuration of the whole portfolio, which we were just doing on the investor call as well undergoes a mix changes. So this year, we had a high proportion of the staples portfolio and the premium portfolio also continue to grow.
But broadly, on the FMCG side, you should hear from us that we nearly ₹10,000 crore now. We are expecting that we should see a 10% plus growth in this year on the existing business, not the new business that will come into our fold. And on the edible oil side, the growth in volumes of nearly 13%. But on the revenue side, we saw the price point declined by almost 25%, because the edible oil prices came down. But we expect that the growth in edible oil will taper off closer to 6 to 8%, you know, compared to the country’s growth of 2 and 3%. So broadly, I think comparing ₹31,000 crore of revenue this year, we should see closer to about ₹35,000 crore next year, not including the new business, which will get added to the company over the course of time.
Q: Has there been any impact on the business, because of the issues that Patanjali Ayurved has faced when it comes to the Supreme Court?
A: None at all. In fact, Q4 has been very positive for us when the most of these of issues were getting discussed. So largely completely untouched and that also should be thing of the past very soon. So I think the direction is positive, and we are pretty hopeful that all of it will be past behind us. But on the business front, we see virtually no impact at all.
Q: There was an important question to ask largely because now some more brands from Patanjali Ayurved would be coming into your fold as well. But do you have any internal measure of the metric of brand structure, brand strength right now, which may have taken a dent if at all?
A: So just to clarify, in terms of the brands, typically these are all ayurvedic medicines, which are not at all either in the mix of the businesses that we are evaluating, nor it has had any impact. But those are the ayurvedic medicines that are under discussion, and so, almost no impact on either the sales or the imagery or the consumer response, nothing, not one bit on our business.
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