Spotlight - Gujarat Ambuja Export
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By Manish Gupta
Managing Director
What is your take on the current economic scenario in India and on the global front?
India is on growth trajectory and it will maintain the same growth story for couple of years. Indian economy and system has strong base and was able to survive the worst global crisis of 2008. Indian economic scenario is impacted by rising inflation but with momentum of growth, its scope and sustainability, the inflation will be absorbed. I also feel that close surveillance and monitoring by Central bank and various agencies of Central Govt will also help to curb inflation within short span of time.
At the global front, though situation is not fully recovered and we are getting jittery now and then in terms of nature crisis faced by Japan, economic and political instability in Asia, European Countries and USA. These factors have put the global business environment on the back foot for time being. The impact may continue in the first quarter of the current financial year.
However the global business would flourish as historically such tragedy is followed by a positive future. Asian countries, especially China and India are (also) poised to deliver notably higher GDP growth in coming years and with recovery path of USA and European countries, no unforeseen crisis is visible at global front.
One of the most important factor that has ruled businesses and markets in the current times is the worry of a spiral-ling inflation. You are in an industry (food processing) where this is even more pertinent. Can you share with us your insights on this?
Spiralling inflation is result of imbalances in supply of food and commodities market which is partially attributable to increased spending power with developing economies with vast population like India and China and partially due to speculation power in hands of few. History is evident that spiralling inflation takes its own cause of recourse to resolve the same and phenomena will be of short term.
We are into Agro based diversified products and spiralling inflation has affected the margins to some extent but with increased finished product prices and better parity though partially, we are able to shift the partial burden of increased input cost on customers. Even otherwise, the margin in the Agro processing industry is very low and we are used to cost control and reduction measures and believe in philosophy of penny saved is penny earned.
You have reported a good set of numbers for FY11 where your topline has almost gone up by 38% over the corresponding period while net profit is up 57%. What are the factors that have helped you in coming up with such solid set of numbers?
At outset, the company’s presence is in the segments of Agro Processing, Cotton Yarn, Maize processing & Windmills. In agro processing industry, the margins are not high and to keep a check and control on expenses and closely monitoring the parity is the basis to get sustainable returns in this business. We were able to rollover speedily during FY10-11, able to keep control over cost of operations, able to lower interest burden, with support and confidence of bankers and a lower tax outgo resulted in more growth in net profit percentile as compared to topline.
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Your Q4FY11 numbers look even stronger. Your comment on what has helped a better Q4 performance
Last quarter of FY09-10 was sluggish and the major contributor to our top and bottom line i.e. Agro processing gave a lukewarm performance. In the last quarter of FY10-11, this segment has given a better realisation. At the same time the maize processing segment also performed better in terms of realisations as compared to the same period of the previous year and was able to absorb the moderate performance of cotton spinning division.
On a segmental basis the other agro-processing division has been the highest contributor to your revenues. Which are the items that fall under this category?
The agro-processing segment includes solvent extraction, edible oil, de oiled cakes, wheat processing and cattle feed. Though this segment, still contributes highest in terms of top line, maize processing division gives highest contribution to bottom line with value added products revealing a clear shift in focus.
How have margins been in FY11 and what do you foresee going forward on this front?
The cotton yarn segment and the windmill segment have more or less comparative margins as compared to FY09-10. Though the agro-processing segment contributed more to the top line, margins were squeezed during FY10-11. Improved margins and performance, during FY 10-11, was from the maize processing segment. We look forward to the improved performance and margins in the Maize processing segment and also from Agro processing segment in time to come.
Tell us about your plans of diversifying if any
We are well diversified into various Agro based commodities and same alongwith strong financials provide leverage to the Company to absorb sluggish performance of any one segment during particular span. We plan to put more strength on each segment and expand the existing segments to make optimum utlisation of resources and expertise developed over a period. In fact, every year, we are putting up additional capacity in each segment more particularly in maize processing and agro processing. We have already made considerable investment in environmental friendly energy generation viz,. Wind Turbines, Bio mass and Bio gas based equipments and propose to make more investments as a green initiative.
Tell us about your capex plans going forward
As said above, as a strategy to expand and to be present geographically in maize processing segment, we have started a greenfield project of 750 TPD capacity which is expected to be operational in the coming year.
Do you intend raising money from the markets in any form going forward?
No. We propose to utilise internal accruals to build additional capacity. We do not have any near future plans for raising money from market.
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What according to you will be the major growth drivers for the company going forward?
Well established inland and foreign customer base, expertise in processing of the agro based products, established marketing network, new innovative technologies and dedicated human resources are backbone of the company to take the Company on new path of growth trajectory.
Where do you see the company five years down the line.
Our growth has always been slow and steady through various process of consolidation. You may be able to witness that our growth strategy is very different from our peers in the industry. We have the capacity, capability, drive and ambition to double the top and bottom line in less than five year span.