Kriti Nutrients Ltd: Great potential!
(BSE Code: 533210) (CMP: Rs.35.90) (FV: Re.1) By Vihari
The good Q2FY19 and H1FY19 financial results of Kriti Nutrients Ltd (KNL) were totally missed by discerning investors given the recent lacklustre market.
From the stable of the MP-based Kriti group headed by Shiv Singh Mehta, KNL is in the business of processing of soyabean seeds, refining soya oil for edible use and production of soya based value-added products. The soya products are used as nutritive supplement in various food products across the world.
In January 2010, the Kriti group demerged into two different entities: Kriti Industries (India) Ltd and Kriti Nutrients Ltd. This was done to focus on each business, by separate teams specific to their requirements. Indian soyabean is a nonGMO (genetically modified organisms) crop and has an advantage over other origins. KNL’s production facilities are ISO9001:2001 certified and operate under stringent quality control measures. It has a state-of-the-art manufacturing set up, which includes solvent extraction plants, vegetable oil refinery, lecithin plant, effluent treatment plant, fluidized bed boilers and an in-house tin and jar manufacturing facility. It uses the best quality, non-GMO soyabean seeds with a high nutrient content to manufacture a premium quality product range. It added a 50 tonne edible oil refinery in 1998 and enchanced its capacity to 70 tonnes within two years. This earmarked the successful launch of the brand ‘Kriti Refined Edible Soya Oil’ which was further expanded to 120 tonnes. Exports constitute 36% of KNL’s sales. Its products are exported to almost all countries in South East Asia, China, Japan and Europe.
KNL now plans to add new food products to its retail sales network. Its product range includes refined soyabean oil, sun flower oil, superhypro meal, defatted soya flakes, soya flour, soya grits and lecithin used for human consumption, cattle feed, poultry, aquaculture, confectionery, dairy products, industrial applications and pharmaceutical preparations.
Kriti cooking oil has established its name in the market for its consistent quality and good packaging. The product is manufactured and packed under hygienic conditions. Kriti Cooking Oil is ideal for human consumption.
KNL’s marketing network is spread deep down from large cities to small towns in over 15 states of India. It is also expanding the sales network for Kriti Soya Refined Oil.
During Q2FY19, KNL reported 40% higher PAT of Rs.4.2 crore on 26% higher sales of Rs.115.09 crore and an EPS of Re.0.84. For H1FY19, it reported 66% higher PAT of Rs.10.3 crore on 25% higher sales of Rs.253 crore and an EPS of Rs.2. For FY18, it reported 151% higher PAT of Rs.15.8 crore on marginally higher sales of Rs.460.7 crore and an EPS of
Rs.3.2. A dividend of 18% was declared.
With a small equity capital of Rs.5 crore and reserves of Rs.48.5 crore, KNL’s share book value works out to Rs.10.7. Net debt of Rs.30 crore gives net DER of 0.6:1. The value of its gross block was Rs.66 crore. The promoters hold 66.1% of the equity capital, which leaves
33.9% stake with the investing public.
The demand for non-GMO protein rich soya is continuously growing and KNL is well placed to harness this opportunity. The Indian agricultural sector reported a creditable performance following a healthy monsoon. According to the Economic Survey 2017-18, India’s agriculture sector grew 2.1% in 2017-18, followed by industry (4.4%) and services (8.3%). The agricultural sector contributes 17% of India’s Gross Value Added.
In India, Madhya Pradesh is the largest producer of soysbean accounting for ~50% share of the total national production. But the Soya crop depends greatly on the monsoon and deficient rainfall in any year will hamper its prospects. India's per capita edible oil consumption is rising and is estimated at 15.7 kg. This is however below the global average of 21.9 kg. The growing population, rising income levels and improved supply conditions are likely to boost the consumption of edible oil in India.
KNL has created a niche market segment for itself through its high quality soya products and strong distribution network. The ‘Kriti’ brand is positioned strongly in the minds of customers and it caters to the premium segment of the