This conference is being recorded. I now hand the conference over to Mr. Nihesh Patel from ICICI Securities. Thank you. Over to you, sir.
Thank you. Good afternoon, everyone, thank you for joining us on Godrej Agrovet Q1 FY 2024 earnings conference call. From the company, we have with us Mr. Nadir Godrej, Chairman of the company, Mr. Balram S. Yadav, Managing Director, Mr. S. Varadraj, Chief Financial Officer, and Mr. Anurag Roy, Chief Executive Officer of Astec LifeSciences. We would like to begin the call with the brief opening remarks from the management, following which we will have the forum open for an interactive question and answer session. Before we start, I would like to point out that some of the statements made in today's call may be forward-looking, a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Nadir Godrej to make the initial remarks.
Good afternoon, everyone. I welcome you all to Godrej Agrovet Earnings Call. I hope you are doing well. Godrej Agrovet started fiscal year 2024 with a strong growth in profitability and margin expansion. Total profit in quarter one, fiscal year 2024, increased to INR 124.5 crore from INR 102.6 crore, a growth of 21% year-on-year. Growth in profitability was driven by the strong performance of the domestic crop protection, animal feed, and poultry category. Our in-house herbicides, which we delivered robust volume growth and improved realization. In the feed business, the same volume growth in cattle feeds and aqua feeds was accompanied by the recovery in margins across categories. Our business also maintained volume growth momentum in the branded and value-added products portfolio and delivered margin expansion.
However, Astec LifeSciences and the vegetable oil businesses were adversely impacted by the challenging market conditions. Coming to the key financial and business highlights of each of our business segments. The animal feed business continued to gain share gains in the cattle feeds category and recorded overall volume growth in quarter one, fiscal year 2024. The cattle feed volumes grew by 19% year-on-year. Margin also improved considerably in quarter one as compared to the previous year and the previous quarter on account of softening commodity prices. In our vegetable oil segment, volume growth in fresh food supply arrivals was offset by significantly lower end product prices from the last year's high growth. Through palm oil and palm kernel oil prices declined by 42% and 50% year-on-year respectively.
During the quarter, CADA received area allocations and accelerated promotion of oil palm cultivation from the state governments of Odisha and Telangana. These had a combined potential of around 57,000 acres. The crop protection segment delivered record top line and margin performance in quarter one, fiscal year 2024. This is attributed to a strong volume growth and higher realization in the in-house herbicides portfolio, which grew by 254% year-on-year, with margin of 32% quarter one. Robust growth and profitability was accompanied by an improvement in working capital. Astec LifeSciences continued to face demand-supply imbalance in the enterprise product portfolio in both the domestic as well as global markets. Revenue and profitability were severely impacted due to the sluggish demand and poor realization in respect of these enterprise products.
However, contract manufacturing revenues grew 3 times year-on-year, led by new product development, and the profitability is also improved. The dairy business turned additional profits in quarter one, led by volume, margin performance across categories, and sustained volume growth in value-added products. Value-added products revenue grew by 20% year-on-year, and its sales increased to 42% of sales from 38% a year ago. Lower raw material costs, aided by the mini flash, which led to the key procurement market, had a significant improvement in the margin profile. Inditization recorded excellent all-around performance in quarter one, with both the top line and profitability growth across categories. The branded business delivered 16% year-on-year volume growth, led by real good fit, with lower raw material costs into profitability. The Lifevere business also contributed to increased profitability on account of sustained efficiency improvement.
Our joint venture in Bangladesh, ACI Godrej, recorded revenue growth of 15% year-on-year on a local currency basis in quarter one, fiscal year 2024. It was mainly driven by higher realization as compared to quarter one, fiscal year 2023. That concludes our business and financial performance of this quarter. With this, I close my opening remarks. I will now be happy to take your questions. Thank you.
... Thank you, too. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may enter star and 1 on your touchtone telephone. If you wish to withdraw yourself from the question queue after your questions have been answered, you may enter star and 2. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue is handled. To ask a question, you may enter star and 1. We have the first question from the line of Eesha Mohanty from Kotak Securities. Please go ahead.
Hi. I'm on.
Please go ahead.
My first question, could you please let me know the OER and volume for this quarter?
Just hold on. Yeah. OER is 13.67%, and every process is 1.3 lakh. The OER is dropped by 50 basis points, but FFB processed will be 9.1%.
Thank you. Another question is, what is the asset of the CMO business? Can you share any numbers? What are the numbers which are expected in the next couple of years?
I, I think it will look clarity, I think.
The audio is not very clear.
I think I have to more.
The audio is not clear.
Could you switch to handset mode?
Oh.
Hello, is it better now?
Yeah.
Just on the aspects of the CMO business and Astec LifeSciences, are you able to share some numbers, expected revenue numbers for the next couple of years?
Typically, we do not give the number guidance or future earnings or numbers guidance. If you look historically for the CDMO business, we have been doubling our revenue, obviously from a smaller base, but we have been doubling our revenue year-on-year. Our revenues were close to INR 84 crores a couple of years back. Last year, we closed at INR 152 crores, and coming year, we would like to maintain almost similar or closer to that runway. That is our guidance on how it looks like.
As you are aware, with the new R&D center which has come up, we are almost doubling down our efforts on CDMO company business, which leads us to believe that we would like to go on, you know, 20%, 30% growth each year-on-year on the CDMO side of the business.
Thank you. That's all for me.
Thank you. Ladies and gentlemen, to ask a question, you may enter star and 1. We have the next question from the line of Vidit Shah from IIFL Securities. Please go ahead.
Hi, good afternoon, and thanks for taking my question. My first question was, you know, on the oil palm business, you mentioned a fall in OER. Could you just give some clarity on why that has happened? Is that just a normal, you know, drop because of the quality of the fruits or, or has, has, has it been impacted, and do you expect it to be less of the year as well?
One thing you must realize is every year, 2021 and 2022, the pattern will change depending on the heat stress and at the time, and the arrival of monsoon. You all know that the monsoon was delayed and there was a lot of heat initially, and that was one of the reasons why the drop in OER started in June. I must also tell you that continued in July also. My sense is that now the rain is very good. We will have an extended season and towards the better half of the year, which is September, October, November, December, we will catch up OER as well as fresh fruit bunch arrival. In no way our OER will be below last year on an annual basis.
Okay, got it. Just on the same business, this 50,000, you know, allocation that we've got, you know, would it be safe to assume that we start producing actual volumes from this after 4-6 years? Would that be the right estimate to take?
For the benefit of everybody, I must say that the total area practically possible for us to plant is close to about 100,000 hectares over and above the area we have in next five to six years. The kind of infrastructure of nursery and other people we have created, we will ramp up our plantings every year from 3,000, 4,000 hectares in last year to about 10,000-12,000, going up to 15,000, 15,000 in five years' time.
The first results of this addition, you will start seeing from F.Y. 2028, F.Y. 2029, and full impact you will see in F.Y. 2030 and F.Y. 2031.
Okay, understood. In terms of aspects, just some color on any expected recovery. Are you thinking now or, you know, there is an elongated period of stress that we are anticipating?
Thinking on the aspects, as you are aware, there are two segments of the business. One is the CDMO segment, which is cruising along well. Most of the impact on profitability is coming from the enterprise business, as Mr. Nadir Godrej was also highlighting. It has to do with the correction in the market, which started sometime later part of last year. You know, Astec LifeSciences along with other companies with the same, the market are facing similar segments of high inventory. You know, they've been destocking, which is happening at the customer level. For some of the enterprise products, we feel that the bottom has already reached. We still see some muted cycles on those enterprise products.
On the others, we are still seeing that liquidation in the inventory in the market might take a few more, few more months. You know, the data, the market and the supply and demand will balance out. Overall, I would say that things have improved from the last quarter. It might take two, two more months to achieve normalcy as we see it currently.
Got it. The newly commissioned plants that we have, the herbicide one and the NPC, they both, they're all running as per our planned capacity ramp, just to clarify as well? Yeah, I mean, I, I'm asking from the point of view of the elongated slowdown. Are we, are we lagging behind also?
Yeah. On the herbicide plant, our first one, the guidance which we gave was, we'll utilize that plant within three years, ramp up accordingly. You know, it can achieve around generation 1.6-1.8 roughly in that range. We are very much on target or exceeding those targets on the whole herbicide plant.
Okay, thanks. I was a bit confused, no question.
Thank you. Participants, if you have a question, you may enter star and 1. We have the next question from the line of Hitesh Shah from Omkar Broker. Please go ahead.
Hi. Am I audible?
Yes, please go ahead.
With respect to aspects in the on-site segment, how does our positioning seem, at least for the rest of the year? You know, what kind of a sense are we getting on the destockings? I would say, at some parts and in some value chains, we can see, you know, sort of a bottom. What are we seeing?
Yeah, see, as I was mentioning, in the previous question asked as well, that on few of the products, we continue to see the headwind for a few more months. As you rightly mentioned, on some of the other products, we've seen the bottoming out. Inventories have been flushed out, and we might then start into, you know, seeing grown on the profitability. That's one. You know, what we have seen in the last few quarters, obviously, we were thinking of this downturn, but the extent of this downturn was little unexpected. We have also planned for, you know, diversifying our product portfolio. The new R&D center coming in, it has offered us enough flexibility now to experiment and put some of the new products, at a much faster pace.
one, obviously we are trying our best to bring these products back in the market, but there's that much macros which are in our control. We are heavily focusing on, you know, building the sustainable margin from CDMO business and also trying to push some of the new products as soon as possible to mitigate this downturn from our different portfolio.
Right. For Anihad, I think when you had joined, you know, how did our CDMO portfolio look like in terms of, number of products and, you know, the types of products versus, you know, now, in terms of contribution, you know, to top line?
In terms of the pipeline, as you see, which is also reflected in our revenues for the last 2.5 years, we have been doubling our CDMO sales of the business.
Small.
On a, on a smaller base, obviously, some of these products have gone from the development piloting to commercially, which has added to the revenues. In other cases, we have also built the newer pipeline. With the new R&D center now, we are in a very good situation, to, you know, double down or triple down on this pipeline.
I would say, you know, this cycle for CDMO, as you know, right from development or scale up to commercial, take 3-4 years. There have been a lot of activities that has been done over the last 2 years to build this pipeline. With the new R&D center coming up, you know, this will only expedite that entire pipeline generation process, and we expect to reach benefits, as we move forward in the coming years. All right, thanks, Anuja.
Thank you. We have the next question from the line of Jagdish Singh from Sharekhan. Please go ahead.
Good afternoon, and thanks for the opportunity. My question is related to the vegetable oil business. Margins are down. When we can see the normalized margin in this business, the second half on, on next year, any expectation?
Margin is down primarily because of low OER. I think that recovery has already started, and as we go along the year, we strongly believe that we will have a very strong October, November also, in terms of FFB arrival. Later part of the year, the OER is always very high. We believe that in next few months, that is from, say, August to November, our OER will continuously improve. We will definitely hit the 18.4%, what was the last year OER, and probably exceeded by 5-10 basis points. That's not a very big issue for us. The thing is the oil prices, we believe that they are going to hold.
I must also tell you that the refinery and polyolefins extraction plant, which we have set up, is delivering the yielded results, delivering the planned results. I must also tell you that when we were selling TPO, we had 2, 3, 4 big customers, but now when we are selling only in we have up to 50 customers. The problem of stock piling at our factories, FFB increasing, et cetera, also not there. Not only the margins will improve, but the polyolefins extraction plants as well as refinery will add 1.5%-2% to the bottom line overall because of this value addition.
That's a very high. My second question is, related to the crop protection business. In the other than Astec LifeSciences, in the crop protection business, done very well for us. Can you give some color on this, sir?
Let me tell you that last two years we suffered in crop protection business for numerous reasons, and you know that we took a hit in terms of sales return, obsolescence, et cetera. It took us some time to recover outstanding also, because even though our profitability was less in crop protection business, but our collections were extremely good last year. I am very glad to say that those problems are over. Not only we have set the business on right track, but also built very good checks and balances and digital infrastructure to monitor the business on real-time basis. That is point number one. Point number two is that because of timely placements, our in-house products like Hitweed, Hitweed Max, have done really well.
The cash flow is good. The profitability is good because almost half the Hitweed and Hitweed Max business is through partners, where there is no returns. The margins have also improved. We strongly believe that we will be able to liquidate more than 90% of the cost which we have put in the market in all products. The rest of this division is yet to come, because last year, you know, the was last year. We plan to double that volume this year. I think that we will also have a good second half. However, we must always remember that we may have very high profitability this year because of very benign monsoon conditions. We are very sure that with the improvement in portfolio, another in-licensing products will be launched in December.
There is a product pipeline ready for next 3 years, also, both in-house and in licensing. We believe that we will be able to maintain 16%-18% EBITDA on sales.
Is there any cyclicality in this business, like in the, for mostly in the crop protection business, a half is better in some countries, in some countries, second half is better?
Yeah. For us, no, first half used to be almost, 3/4 of the business at one time, but two more new molecules, I think the first half will be about 60% and the second half will be 40%. Our, our-- because we, we, we have seen it can work all 12 months, I think we have started to make it 50/50 by next year.
In lifestyle CDMO business, so what you told in some other parts and answering the question of other parts, and a 20%-35% growth with the R&D pipeline or the cinematic portfolio?
I think one of the key requirements for a successful CDMO portfolio is R&D, and I can definitely say that within six months of establishment of R&D center, we have our hands full with several projects. On a small base, initially we may double it once or twice, but on a steady state basis, we are looking at when steady state is FY 25 onwards, we are looking at a 20%-25% increase in CDMO business because that will be our focus. Not only we focus on sales, but also focus on investment, because whatever comes out of our R&D center in terms of co-creation or working with some partners, it would require us to put production infrastructure also in time to come.
We have very aggressive plan, and I'm very sure that we are likely to make CDMO a significant part of our business in time to come.
It will take a couple of next two years. Expect in the next two years, CDMO business will be different than what it is right now.
That is our plan and hope, but I cannot say what will happen in future. I could not say it for last three, four quarters, what has happened in the pesticide market across the world. I'm saying that, but on a long-term basis, the answer is a very big yes.
Last question related to the dairy business. Other companies have come out with very good numbers in the dairy business. Because of last year, a lot of issues in the dairy business, but this time complete change in future. In the second half or sometime at some point of time, can we see the 3%, 4%, 5% negative margin in the dairy business? Is it, is it possible?
Let me just tell you that a lot of correction has been made in dairy business also. I think the focus is on improved efficiency because of reworking of the supply chain, as well as making the supply chain dense and going for scale. That is point 1. Point 2, improvement in various value-added varieties. I'm very glad to say that the losses came down in the first quarter as compared to last quarter. I strongly feel that we will turn into black in this quarter without any help from external external environment, which we believe will put us into profitability, the way the milk prices are coming down.
Having said that, the whole year will be focused on looking inside, even in this business and whatever, whatever support comes from outside in terms of improved margin will make us profitable.
Thank you a lot, sir. This is from my side. Thank you very much.
Thank you. Ladies and gentlemen, to ask a question, you may enter star and 1. We have the next question from the line of Trupti Karade from Axis Securities. Please go ahead.
Yeah, hello, sir. Thanks for taking up my question. I have a couple of questions. On animal feed front, like, would like to know the outlook on volume and margin. Also, in the palm oil business-
Can you please repeat the question?
Yeah. Is it audible now?
Yeah, yeah.
Yeah. Just a couple of questions. On the animal feed business, we would like to know the outcome on the volume and the margins. Plus on the palm oil front, you had alluded that FFB volumes would, you know, improve H2 onwards. How should we look at the growth in FFB over the next few years?
Yeah. The animal feed margins have improved significantly over last year. You know, the volatility in raw material prices was there, and we are already at 4.2% EBIT margin. My sense is that the monsoon has been very good. The sowing has been excellent, and we believe that the raw material situation will be very benign. To top it all, the banning of export of rice also means that the rice selling, et cetera, will happen for a longer period of time. We believe our main raw material in fish feed and, and cattle feed, because pure rice bran is not likely to inflate the rate you inflate in a normal year. With this, I'm very sure that as we go along, the margins in animal feed will continuously increase.
My expectation is that we should see the margins going back to FY 2022 level this year in the animal feed business. Apart from registering a volume growth of 8%-10%, which is considered a very good volume growth in this industry. The next question was on OPP. OPP, I'm very sure that because I think these businesses are, are, are dependent on temperature, are dependent on monsoon, and which we have their own behavior year on year. So we cannot answer quarter by quarter. I can say on an annual basis, FFB arrival will be up by 8%-10%. Our OER will definitely match the last year's numbers, and the profitability improvement will come from solvent extraction plant and refinery.
My sense is that the rice outlook will also, will, will revolve around current prices, which are prevailing.
Okay. Thank you, sir.
Thank you. Ladies and gentlemen, to ask a question, you may enter star 1. We have the next question from the line of Suman Kumar from Motilal Oswal. Please go ahead.
Can you talk about the crop protection business, 35% growth? What you were talking about, strong volume growth and higher realization of the output side portfolio.
... Apart from that, any other factor or base effect, why we are seeing a 34% kind of growth? We have not seen this kind of growth in any agricultural company as reported in, in this quarter. Is it replacement or we are going to maintain this momentum in Q2 of 2022?
Definitely every quarter this year will be better than last year and much, much better than the year before last. I can tell you a lot of sorting out of the problems we had has happened. I must also tell you that we have, we have three more products because Gracia also, I consider it as a new product for us. We did launch MaxPot, which is a product which we launched early in the season. And MaxPot is a very great edge, because if it does not rain, MaxPot will be very useful. If it rains, if we get a Max will be very useful in Kharif from now onwards. This is a hedge we have created in, in, in Kharif.
We are going to launch another insecticide in, in September, which will become a significantly important product in next year. I think it is a pipeline of new products which have helped us do that. Apart from that, a lot of monitoring, which we are doing of stock at the category level and at country level, we don't track sales now, we track liquidation, and we are using several digital tools to monitor that. My sense is that, as I already said, that I think that this year is an exceptional year, but a 15%-20% growth in top line, driven largely by new product introduction and a similar growth in bottom line on the base of FY 2024 should not be a problem in future.
Okay. This margin expansion is all because of the new product, high margin business?
Yeah, margin expansion. Sorry, I should have told you that, that our big margin erosion which used to happen because of pesticide portfolio, which was a trade portfolio. That portfolio we have curtailed significantly because that is one which brought us down significantly last year because of obsolescence also. A lot of housekeeping has been done in terms of SCU and number of. I would also say that we are setting up our own formulation unit in Jammu, which will be up and running by January and February. We will focus on pesticides, but we need to be very careful not to sell pesticides on low margin or negative margin.
Second thing is that we used to have a lot of problem of outstanding because of the some both regulatory segments, which products like Hitweed Max and Gracia are coming, I think, in that product line also our recovery has been very good. The focus is margin expansion because of improved hygiene and also keep on bringing down working capital in this business as we go along.
Why I'm asking, this is segment result is right and the 34% of numbers are significantly higher. I have not seen any-
Annual, annual. Don't look at quarter. Sometime it rains, sometime it does not rain. Don't look at the quarter. A, 18%-20% is something which we are very sure of.
Okay. Thank you so much.
Thank you. We have the next question from the line of Siddharth Kaikar from Equirus. Please go ahead.
First one, okay, last time we had highlighted, we had done roughly around INR 150 crore in the homicide plant. What is the capex for the Phase 2 plant and when will that be upcoming? When will this plant come online?
The, this time phase 2, more or less similar CapEx numbers, slightly on the lower side, around INR 120-130 crore is what we are estimating. We expect that to be commercialized by end of this year.
Can you elaborate CapEx? How should we look at CapEx for FY 2024 and FY 2025, sir?
Over the CapEx numbers, I think, we normally give the guidance, as we go there, but roughly we are looking at.
There'll be 2 more CapEx. I think 1 is already on the drawing table, which is, we have some more ability to expand in Mahad. We will set up another facility in Mahad, which will be very similar in size and CapEx as the 1 which we have already established. District CapEx will come, which will drive our CDMO. That will take a long time. I think we are still working out what kind of multipurpose plant we have, but I think that should be finalized in 3 to 4 months.
Got it. For enterprise business, when we are talking about diversity replacement to Adopta, are we looking at adding a newer trial or some launch, which are likely to be launched in the next year, maybe over the next two to five years? Or how should we look at this time?
While our focus is primarily on the CDMO business, from the enterprise business, since we have a very strong trial ball platform, technology platform, and we are also investing heavily on some of the other adjacent platforms. With the new R&D center, we will be, you know, strategically looking at molecules within that segment as well to work on and launch in the coming years.
Okay, sir. Got it. While the, you know, the focus is more on building the pipeline on CDMO, we'll also take the easy bet within the enterprise segment. Okay, sir. Got it. Thank you.
Thank you. We have the next question from the line of Manish Manchanda and Investra. Please go ahead.
Hello, am I audible?
Yes, sir.
Hello. Thank you for the opportunity, sir. I have couple of questions. My first question is, how much area is matured in the oil palm plantation, which is generating revenue right now, sir?
Just wait here. Hold, hold on. Right now I have makeup of about 45,000 hectares, of which about 50% is this year.
Okay, okay. Secondly, right now, as we are saying, we are getting so much land allotted in our name. Is there any arrangement between the farmers and our company, that the area which is being allotted to us, so the farmers won't be able to sell the fruits to any other company or some type, some type of that arrangement is there for us?
That, that is the law, that we cannot take from farmer who does not belong to our area, and our, our farmer, cannot go to the other area. Having said that, 1% or 2% leakage is definitely happen every year. It's a very good support from the government in trying to prevent that.
Okay. sir, what is the revenueness rate for our company and the amount which comes to us and goes to farmers, is that 15%-20%, am I correct?
Yes. Roughly, it is right. About 80% of the oil price goes to the farmer, about 20% remains with us, yeah.
Okay. Sir, one is your observation. Don't you think that there is a contradiction is running for the businesses together? When you have a good time for one business, it acts as a bad time for the... Like, right now, the inflation is giving out, especially impacting our oil palm business.
I'm saying that definitely this hedge is good, but my sense is that valuation in oil palm is more important. We have taken that direction because we are also very scared of these low oil prices and high oil prices, which is very difficult to explain, considering I'll give you an example of the kind of inflation we are talking about. You will not see in any other industry. One last year, the CPO price was INR 139,000, and this year it is INR 81,295, which is a 41% drop. Palm kernel oil last year was INR 206,000. It is INR 102,000 in quarter one, which is a 50% drop. That is why we have talked about wealth, wealth from this.
That is why we have gone in for refining, that is why solvent extraction. We convert everything and anything which comes out of the plantations into a revenue and profit stream.
Sir, is there any deal margin on the cost for the business? The, the job rate thing is only clearly impacting the valuation of our company, which had been, as we know. Is the management conscious about this factor?
Management is definitely conscious, but there's nothing which we we can tell you right now or we are working on. I think we are conscious of the fact that the value capture is... Our valuation is not fully built into the the the work we are doing should not be reflected in the valuation I think that, yes, we need to communicate better. We need to perform in all businesses individually also. We are moving in that direction.
Last question is in dairy business. How much is our procuring cost in comparison to the other companies? Is it 50% higher than that? What is that cost? Milk procuring cost, no?
No, no. Milk procuring cost is... Let me break it into three components. One is that the procurement of milk is one, that is cost. Second thing is logistic, is a very big cost to get some to our factory. Third is that, our processing costs and outward logistics cost. I think we have done work on all these three, both in terms of efficiency because of structural issues, that is, that is giving up, giving up certain collection centers because they were unviable or too far, can make our procurement very dense. Apart from that, there are some scale advantages are also coming. My sense is that on gross margin basis, we will come... I think Q2 is very critical for us. I think a lot of things which we have done have to have the full impact in Q2.
My sense is that on the gross margin, we will come at par with our or with our peers in Q2, where we were 3%-5% apart about a year ago. I think that we will do. Then rest of the gross margin growth will be driven by less by cost reduction in future, but more by improved cadence of value-added products.
Okay, how much is the how, how much % do we procure directly from the farmers here?
Today, out of about 7 million liters we procure, about 77% is direct farmer, and it is increasing at the rate of about 20%-25% per annum.
Interesting.
That's the new model.
Okay. Thank you. Thank you from my side. I wish you good luck. Thank you.
Thank you. Ladies and gentlemen, to ask a question, you may enter star and 1. We have the next question from the line of Rajan Kumar, Raithat and An investor. Please go ahead.
Yeah, good evening, sir. Thanks for taking my question. I have two questions. The first one is on the animal feed segment. I think that we have an opportunity to output from the bottom line for this solution go forward. You know, among the key levers that we have, that price, volume, and ... I just wanted to know what levers are currently working in our favor and what, what is your team strategy?
Price is as per the competition. That lever never works in a business like this. We are almost at par with competitor. Our problem in this business is in every state, in every pocket, which we change the competitor. That makes the competitive intensity very high. I think two things which are working for us is the R&D benefits in terms of cost reduction. They continue to come in. If you want to see the example of that, you must see our Bangladesh profitability. Because we commissioned an R&D project there about six months ago, and the profitability of that business has definitely improved. The second thing is that our raw material calls, which we have taken, I think they are holding us in very good shape.
My sense is from H2 onwards, the benign environment of raw materials will help the profitability of this.
Okay. Okay. Thank you, sir. The second question is, with regards to the holding, we, we have, some investment in a company called KAC Limited. I just want to know, what is the strategic intention, because we have not seen any significant increase in the shareholding, you know, in the last few quarters.
KAC has been a very interesting company for us, and it is very well established in Kerala and certain parts of Tamil Nadu and southern Karnataka. In a very small area, they have significant volume. With the intent of probably at some point in time, having a good stake there, we have started buying shares. You all know that it is very closely held, and it is the, and the availability of shares in market is very low, et cetera. We also had a closer look at that company to be not very keen to increase our mark share now. If you see, whatever we did was about 6 quarters ago, and nothing has happened after that.
Our view has appreciated.
Okay. we do not intend to ask for a fee because, because we will use a downturn in the industry to, you know, look at some inorganic thing.
Right. At the right price, we would increase our share.
Okay. Because I went through a report of KAC, they are telling that the shareholding is high. That is the reason I'm asking.
Gaurav Gore said, at the right price, we are interested.
Oh, okay. Okay, sir. Thank you.
Thank you. We have the next question from the line of Althea from Securities Investment Management. Please go ahead.
Yeah. Hi, good morning, sir. I had a question on your dairy business. A couple of days, which are the major procurement areas for us, and what kind of decrease in procurement prices do you have on a Q2 basis? Major procurement areas and prices?
Procurement areas is that wherever we have the plants, we are procuring from within 100-150 kilometers of that area. The only exception being that just to have a benefit of Maharashtra prices also, we have developed Kolhapur district of southern Maharashtra, one or two places for procurement of milk. That we have done. In terms of prices, I think because we have procurement, which is quite spread out, every place has got different price. I think in case you want that information offline, for Q1, we can give that.
Can I have the prices to see if these other issues are available today on prices, which is?
My sense is that, I think the, the, the several shortages which were happening in this industry in last 2 years because of disruption of, cattle breeding, et cetera, during COVID time. I think that is all over. We see more and more animals, in the, in the market, and that is also reflected in the very good growth in cattle feed we have had. This is 1 indicator. The second thing is that, there is no, and thank God, there is no disease challenge also, like the, the diseases which were there of, lumpy skin disease, et cetera, in the past. I believe that it will be a good year from milk availability point of view. Whenever there has been a good year, there has been a flush and the prices have come down.
How much is something we still cannot put our finger on.
Got it. The market, which was made of 1% in Q1, this should improve potentially going forward. That is normal. Can we update on the same day?
100%. We are hoping to be decently positive in this quarter.
Awesome. Thank you.
Thank you. Ladies and gentlemen, that was our last question. I would now like to hand the conference over to the management for closing comments. Please go ahead.
Thank you. I hope we have been able to answer all your questions. If you have any further questions about the company, we will be happy to assist you. Stay safe and stay healthy.