Kriti Nu­tri­ents Ltd: Great po­ten­tial!

Money Times - - Expert Eye -

(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

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