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00:00Bikaji Foods and lots happening in the snacking sector and we're joined by Manoj Verma who's
00:06Chief Operating Officer at Bikaji Foods who's joining us now. Welcome to the show Mr. Verma.
00:12You know my first question to you is that GST on overall snacks has been reduced. So
00:19first of all I want to understand that how is this overall going to impact your business?
00:24Thank you very much for inviting for this show. Talking on the GST part now if we look at GST
00:32was pre-de facto implemented. So none of the companies were paying. So those were the areas
00:38which had come up and that was a challenge which this industry was facing. Now of late what is
00:43announced is that going forward it will be the same. So there's no impact you know of this the
00:50the GST reduction what what now people are talking about at this point in time.
00:56All right Mr. Verma okay then let's talk about you know your recently acquired majority in
01:02Ariba Foods. I want to understand that you've acquired 55 percent there. So what is the kind
01:07of synergies you're expecting there? What is the kind of top line growth that you're expecting
01:12from this particular business because it's it's into frozen foods right?
01:16So I think three four quarters back we spoke about that when we were getting into the frozen
01:22foray of frozen space and that's where we started one of our plant in Bikaner last year December.
01:28So I think this is the another milestone of that and this completes our frozen back-end
01:34capabilities. This is a long-term plan so you will see over the years now these these investments
01:41will start yielding the results. At this point in time to us frozen business is very small
01:47now majorly it's in the exports market and this is to bring up or get apart the back-end to get
01:56into this frozen space that's where it is. So top line at this point in time if you look at is now
02:02would not add as much but I think in two quarters from now you will see that the results will be
02:06coming in. Okay I want to delve a little deeper with regard to GST changes on snacks. I know you
02:15spoke about that but just the reduction from 18 to 12 do you believe this was long called for
02:21and do you believe that this is a good relief to your customer and will it aid growth for you?
02:29So two things you know earlier it was 12 percent and then with retrospective effect this was
02:35implemented and made from 12 to 18 percent. There were a lot of representation from the industry
02:41players and this was there now with the ministry. It is now that ministry has given the relief in
02:48terms of saying that it will be back to normal. Even in the erstwhile regime the GST what was
02:55charged was 12 only it was the areas which were standing and which were no companies were asked
03:01to pay. I think that's where is the relief that going forward there is no carry forward.
03:07What government is saying is that whatever is pending companies will have to pay and for that
03:11I'm sure you know the this lobby would be going to the ministry and you know putting forward this
03:17case. So from a consumer standpoint there is absolutely no impact. All right Mr Varma you know
03:24I also want to talk about the recent hike in import duty of edible oil because edible oil is one of
03:29your raw materials. Do you import edible oil or do you source it locally? Will this impact you in
03:36any which way? No certainly it will impact and not only to us I think to all the major players
03:42because this cost this 20 percent increase is quite substantial and eventually you will see
03:49that you know whatever companies can bring up by their efficiencies make it up but I think
03:54so beyond the point this cost would be passed to the consumer. And how much of a hike are you
04:01expecting even if the cost will be you know passed to the consumers but what kind of overall
04:08impact on the cost will it have? I think somewhere between two to four percent kinds. All right and
04:15you know in terms of the frozen food business just wanted to understand what is the kind of
04:20contribution right now and going forward from a long-term perspective what will it be like
04:25and what are the kind of margins in the frozen food business? Okay so I'll take the last question
04:31first. So margins are in line with the company's margin because you know since it goes more
04:36in the export market and there it's a cost plus model so that's where it is. In terms of
04:41contribution about three and a half four percent contribution comes from our exports business
04:49and of the exports business it's about 35 percent which comes from the frozen food so that's where
04:54it is. Going forward what we see that this the contribution in the exports business this 35
05:02would move up to about 40 percent over last over next six quarters. Okay also trying to
05:11you know break this down a little bit further just with regard to this in this decrease with
05:18regard to edible oil you said contributes roughly to or just makes or gives you a benefit of two to
05:25four percent so can one expect margins to creep up by that much is that the correct way to interpret
05:31this? No no I what I said was that with increase in oil prices the prices will go up by two to
05:38four percent so it's not a relief. Understood okay and so therefore what will be the margin
05:46impact for you? No so which is what I said that you know and eventually this cost will go to the
05:52consumer because now we have to safeguard our bottom line I mean if we would yeah.
05:59And just with regard to how you see growth coming through you've I mean phenomenal shareholder
06:05returns over the last 12 months sir so credits for that but how do you expect top line growth
06:11to shape up maybe over the next three years? So what we look at it is that you know it would be
06:16upwards or close to about 15 percent plus minus one percent that's the kind of numbers what we
06:22are looking at I mean which would be ahead of overall food industry growth and the peer group
06:27that's that's what the team is working on and we have you know geared up our back into to support
06:33this stuff. 15 plus kind of margin is that sustainable for you or are you expecting some
06:39bit of dilution on that? See I don't think that no unless until some catastrophe or something goes
06:46no beyond our control but the kind of investment what we have made the kind of readiness from the
06:53back end standpoint what we have done I think that's pretty much doable. All right Mr. Varma
07:00you know now I want to try to understand that what are the kind of trends that you're observing in
07:04the market when it comes to your product mix do you see that western snacks are picking more
07:10paste as compared to the ethnic and traditional snacks? Western snacks is very small pie in our
07:17entire kitty right so it'll not be fair to say that no western snacks are doing very well there
07:23we have larger white spaces so therefore western snacks will continue to do better for at least
07:29next couple of years and that's what we have said that currently you know it contributes about
07:34eight percent to our overall business which eventually it will go to about say 11 percent
07:39kind of stuff. All right and in terms of your e-commerce channel although it's again a very
07:45small share but it's growing at a significant pace so what is the kind of trend you're observing
07:51there because you know the consumer shift is you know now moving towards the e-commerce business
07:57so what are the kind of sales that you're expecting from that particular distribution chain?
08:02So the e-com and particularly q-com is doing extremely well the platforms are very excited
08:08they've geared up and how I look at this platform e-com is certainly you know there would be certain
08:15cannibalization from say from the general trade or a moderate to e-com but other than that I mean
08:21I see that this is helping category grow because many a times you know you intend to have something
08:28only for the sake of convenience you know you place an order so that's a quad category
08:34opportunity so but certainly you know people are moving towards q-com and this is growing
08:40phenomenally you know. And Mr. Verma your exports in q1 roughly contributed three percent to your
08:48total revenues but you've guided that your exports will be growing by 20 to 25 percent of
08:53course one of that segment will be frozen foods but where will the other growth come from which
08:59segments will it come from and then what kind of revenue uptake will you expect and overall margins
09:04also there? So I'll take exports first so what we said so we still stick on what we said we would
09:12deliver that kind of growth in exports market amongst rest of the channels if you will see
09:18that modern trade would be growing at a faster pace and that's how overall if we see FMCG space
09:24modern trade is taking the lead that's where it is and then followed by general trade which is the
09:29largest before in terms of EBITDA what we are working or what the striving for is to to gain
09:35say 50 basis point year on year kind of first time. Sir on distribution you are doing you know incredibly
09:42well the guidance seems to be 50,000 new outlets that you're trying to reach annually
09:47is this new geographies you're targeting within the country as well as outside that's the first
09:53part of my question? So it's both it's both so going deeper in the geographies where we are
10:00strong what we call is our core markets and then the rest would be focused market other than focused
10:06market no it will be a no organic whatever is happening we'll do we will not be putting too
10:11much of weight there at this point in time. So sir where are you investing because your
10:16your capacities you've suggested will last you another three years so where's your utilization
10:21currently and therefore what will you do with all the free cash flow that's coming your way?
10:28So that's a good question so we are in terms of our capacity I think we can double our sales
10:35in next four years kind of our stuff so till then we may not need as much you know investment
10:40it is only about the maintenance or the regular some NPD spend so what we're looking at it is
10:47one is that we look for some MNA so some small acquisitions over the years that's one and second
10:54is that we'll increase our dividend payouts as well over a period of next couple of years.
11:01Okay thank you so much Mr. Varma it's been a pleasure chatting of course
11:05interesting the fact that you are looking for acquisitions in organic
11:08growth opportunities will be fun to understand once you do that take that first step.