Godrej Agrovet bets on Astec, innovation to improve topline

The company expects the tide to turn for the animal feed business, especially poultry, in the next six to eight weeks

Godrej Agrovet, the agri-business unit of Godrej Industries, expects its business to grow to around Rs 4,500 crore this financial year from last year's close to Rs 3,800 crore. The acquisition of agro-chemical company Astec LifeSciences, for which the open offer began on Tuesday, will be the major reason for this growth, said its managing director B S Yadav.

The company has spent Rs 400 crore on the new acquisition, including the open offer, which would end on December 8. If fully subscribed, Godrej Agrovet would hold 71 per cent in it, he said.

Yadav said the company also expected the tide to turn for the animal feed business, especially poultry, in the next six to eight weeks. "We are not insulated from what is happening in the macro-environment. Animal protein prices are coming down and input prices are going up resulting in increased cost," he said.

During the 2014-15 fiscal, the company registered a profit before tax (PBT) of Rs 273 crore on a turnover of Rs 3,800 crore. The animal feed business accounted for 60 per cent of the topline and 50 per cent of the profit. Its 35 animal feeds-making units produce 1.3 million tonnes annually and sells about 1.1 million tonnes of feed.

The "rough" phase, according to the company, was seasonal as well as cyclical and "even two-three years ago we had a similar problem". Godrej Agrovet has written to the government to waive the 15 per cent import duty on non-genetically modified oil seed crops. "We cannot import cheaper soyameal and corn because everything is of GM origin and attract an import duty of 15 per cent," he said.

The government move, according to him, would soften the speculation even if the industry did not go for imports. "We had a similar situation in 2012-13 and the government reacted very quickly and removed the duty and as a result the prices came down 10 to 15 per cent within a week," he said.

He said the company has been spending Rs 125 crore to Rs 150 crore every year for the past five years on capital expenditure, and would continue doing so for the next three years. "R&D, which forms an essential part of the business, sees almost 10 per cent of our PBT," he said.

Innovation was key to making animal products inexpensive, said Nadir B Godrej, chairman of Godrej Agrovet Ltd and managing director Godrej Industries. The company's animal husbandry centre in Nashik was making less expensive ingredients to reduce the dependency on soyabean and corn. "In the last three years, this effort has seen fish layer and cattle feed business grow at more than 13 per cent compound annual growth rate (CAGR) whereas the industry grew 4-5 per cent CAGR," he said.