Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kumar from Motilal Oswal Financial Services Limited. Thank you, and over to you, Mr. Kumar.
Good afternoon, everyone, and thank you for joining us on Godrej Agrovet 3Q fiscal 2023 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. Varadaraj, Chief CFO, and Mr. Anurag Roy, CEO of Astec LifeSciences. We would like to begin the call with a brief opening remarks from the management following, which we will have the forum open for the interactive question and answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking, and a disclaimer to the this effect has been included in the earning presentation shared with earlier. I would now like to invite Mr. Nadir Godrej to make the initial remarks. Over to you, sir.
Good afternoon, everyone. I welcome you all to the Godrej Agrovet earnings call. I hope and wish you are doing well. Godrej Agrovet continues to report a healthy top line growth of 12% in Q3 FY 2023 and 17% in the nine months of FY 2023 year-on-year. Most of our businesses maintained robust growth in volumes. However, profitability was impacted due to adverse sector specific macro conditions, unfavorable commodity price movements, and limited transmission of input cost inflation. During the quarter, we successfully sold land situated at Ambattur, Tamil Nadu. The profit net of expenses of INR 68.4 crore has been included in other income for Q3 FY 2023 and nine months FY 2023. Coming to the key financial and business highlights of each of our business segments.
In animal feeds, we achieved the highest ever quarterly volumes in quarter three fiscal year 2023, recording a 7% year-on-year volume growth. The volume growth was mainly led by market share gains in the cattle feed category as we further cemented our dominant position in the western region. On the margin front also, the animal feed segment was able to sustain sequential recovery in EBIT per metric ton from INR 1,381 in quarter two to INR 1,507 in quarter three. Our vegetable oil segment registered 13% growth in Fresh Fruit Bunch volumes in quarter three fiscal year 2023. However, the average realization of Crude Palm Oil and palm kernel oil declined from last year's high base by 24% and 26% respectively in quarter three fiscal year 2023.
As a result, segment profitability declined year-over-year. During the quarter, we signed an MoU with the State Government of Nagaland for development and promotion of oil palm cultivation. The standalone crop protection business revenues more than doubled in quarter three fiscal year 2023, driven by higher sales of in-licensed products, namely Gracia and lower return as compared to the previous year. Profitability also improved in quarter three fiscal year 2023 as compared to the previous year. Business maintained its steadfast focus on credit hygiene and achieved further improvement in working capital. For Astec LifeSciences, quarter three was a very challenging quarter as performance was impacted due to demand headwinds and pricing correction. Business was impacted on account of high inventories and reduced realization from last year's high base. Contract manufacturing performance, however, was in line with our expectations.
The poultry segment recorded strong growth in top line as well as profitability. Revenues grew by 38% year-on-year with an EBITDA margin of 6.3% in quarter three fiscal year 2023, led by robust volumes in branded categories coupled with a recovery in live bird prices. Real Good Chicken, RGC, and Yummiez achieved volume growth of 45% and 46% year-on-year respectively. For the dairy segment, sustained volume growth in both value-added products and milk volumes was offset by a continued rise in milk procurement prices. Revenues grew by 21% year-on-year in quarter three fiscal year 2023, led by 22% growth in value-added products. Sales of value-added products portfolio was at 32% of the total sales in the nine months fiscal year 2023. Profitability continued to be impacted by limited transmission of rising procurement prices.
GADL joint venture in Bangladesh, ACI Godrej recorded revenue growth of 31% year-on-year in quarter three, driven by a combination of higher realization and volume growth. That concludes our business and financial performance updates for the quarter. With this, I close my opening remarks. We will now be happy to take your questions. Thank you.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands-free while asking a question. Ladies and gentlemen, to ask a question, you may enter star and one on your touchtone telephone. We have a question from the line of Lokesh Maru from Nippon India Mutual Fund. Please go ahead.
Hi, sir. I just have one question on the our feed segment wherein since soy meal prices are down year-over-year, what is in general hurting the margins, margin recovery as such in this segment for us?
Your voice was not very clear. Can you please repeat the question?
Hi. I just have one question on margins within the feed segment. As in, given that soy meal prices have corrected quite significantly, what is hurting our margin recovery as such?
I must also tell you
What is our expectation going forward on margin front? Yeah.
I must tell you that particularly shrimp and poultry feed, both layer and broiler, there is a shrinkage in the market size. We still are growing, and our market share is growing. Just because there is a little bit of intense competition, the transmission of increased raw material cost had not been fully transmitted. We can see a little bit of, I would say price competition amongst the players. My sense is that the margin recovery will start probably towards the end of this quarter when the rapeseed, et cetera, et cetera, is available, and we see a further drop in raw material cost. I think I don't see that happening in next three to four weeks, but definitely in six weeks' time things will start improving in the animal feed business.
I must also tell you that we have a single-minded focus of going in for more and more volume growth, that is more and more market share. In several markets, where we were in three and four in positions, we have come to one or two in several segments. I think we have the initiative. In case we are able to wait for the margin for about a quarter or two, I can definitely say that we will register a double-digit growth in coming quarters in the animal feed business.
Sure, sir. got that. Sir, should the, within feed there should be a blend of, like, let's say soybean and wheat and soy meal, et cetera. With grain prices being again in that inflationary pressured zone, what are you From this blend of three, how are you seeing the, margins actually on each of them, you know, turning around as in coming along as of now?
The blended margin will continue to be close to about INR 1,500, whatever we got in Q3.
Sure, sir. Understood. Sir, within our palm oil business, we are seeing some shrinkage in our extraction ratio. Any particular reason for that?
A lot of work has happened in production process, in handling, and I think there is a lot of efficiency which has been built up across the supply chain. Starting with now we have supervisors who tell the farmer when to harvest. That also helps us in scheduling the arrival of fruits in the factory so that they are put in the mill within few hours, unlike previous times when the fruit would have to wait on ramps for about 12-18 hours before being processed. It is the entire supply chain efficiency plus some improvements in our production process which has resulted in this improvement in OER. I must say that the major improvements have already happened. You won't see such quantum jumps in future. Marginally there is a scope of continuously improving OER for next few years because of improved practices, improved germplasm and improved supply chain.
I would add that, you know, on a quarter on quarter basis, there will be some minor variations in OER because of oil content in the fruit. Those minor variations will be there.
Overall, how should not be annually, right?
Yeah.
Mm-hmm.
Seasonal impact as such. Got that. Sir, keeping the palm price, global, like palm prices apart, where we have seen that our volume growth has been quite handsome. How do you guide the volume growth going forward, and where do we stand today in terms of acreage and any additions, potential additions because of this, Nagaland approval? Any light on, growth part, volume part of the palm oil business? That's my last question. Thank you.
Let me tell you something futuristic, that not only Nagaland, we have MoU is in place with Assam, Nagaland, Manipur, Tripura, Mizoram, and we are likely to get more allocations in Assam. Apart from that, Tamil Nadu and Odisha have also renewed their program. We are in a massive expansion mode as far as our nursery is concerned. Say a year ago we had a nursery of about 1 million seedlings. Today we have nursery capacity of 2.5 million seedlings that will result in area expansion of close to 10,000-12,000 hectares per annum, up from 3,000-4,000 hectares, which used to happen in last few years, including this year.
I think NMEO-OP scheme is doing whatever it is was required to do, and there is a huge focus of state and central government in this space. That is point number one. Point number two is that we are also very worried about this volatility of oil price. There have been certain investments made by us to insulate this business as much as possible. We have set up a 400 ton refinery so that we are able to refine the oil and increase the shelf life of that oil so that there is no particular pressure on us to sell on daily basis. Because, you know, CPO develops FFA, which is then CPO goes at a discount to the market price if FFA is higher.
We have also set up a solvent extraction plant of 100 TPD, mainly for certain by-products which come out of this process. We will extract more oil and make them usable for the animal feed business. I think that these initiatives will continue. There are several other initiatives where we convert waste from waste, and I think that will continue. Our sense is that in a year's time, significant part, when I say significant part, almost 45%-30% of our profits will come from allied activities other than oil sales. I think that is the effort. Regarding the prices, I cannot say much. Mr. Godrej, would you like to give some guidance on CPO prices, sir?
Yes. We do expect that CPO prices will rise a little bit, but not very much.
Okay, sir. Got that. Thank you so much for answering my question, and all the best.
Thank you. Participants, if you wish to ask any questions, please enter star and one on your touchtone telephone. The next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.
Good afternoon, sir. Thanks for taking my question. You know, just a few from my side. One is on the crop protection business, including Astec. If you could please just talk about your outlook for how that business is expected to perform, you know, given the inventory glut that seems to be underway across a lot of the world. Thank you.
I'll request Mr. Anurag to talk about Astec first, then I'll brief you about the crop protection business.
Yes, sir. For Astec, as you might have seen the numbers, we have experienced a significant headwind, particularly in Q3, because of the muted domestic demand and the price erosion in the export market. That's how our Q3 was. We are seeing some uptakes in the market for supply demand situation to balance out for most of our enterprise products. That uptake pace is, you know, relatively lower than what we have seen last year. We continue to have, you know, very cautious next few months to beat the volatility coming in from the macros. We continue to focus on producing the highest efficiency products and strategic sourcing. That's in brief the outlook on Astec, at least for the next thre to four months.
I'll turn it over to Mr. Yadav to talk about, CPB.
I think CPB has been a mixed bag this year. If you ask me our performance as far as this year is concerned, there's no problem in the top line growth, et cetera. We have been extremely cautious not to get into that debtor and inventory trap. Our big problem has been a little bit of hygiene, which is a, I would say, hangover of last two years of monsoon failure and COVID during our main months, April, May, June, July, in both the years. I think that cleanup has been the significant part of the dent which has come in profitability. My sense is that from this quarter onwards we will see things going up.
I must also say that we are very encouraged by the huge success of Gracia and Hitweed this year. You can say, what is the growth in Gracia? In crores, nine months, Hitweed and Hitweed Maxx last year, nine months were INR 105 crore. It is now INR 183 crore. Nine months Gracia last year was INR 47 crore. We budget was INR 47 crore, and we have done already INR 115 crore. I think that portfolio choices have been made. Whatever was supposed to be provided have been provided, in spite of the fact that we believe that some part of it we will definitely recover in the coming quarters, but for good order sake, we have provided so that we don't continue with them.
The team has also been changed. I think all the things which were required to transform this division has been done, and you will see a very, very big improvement in the performance in coming quarters. I think we should get back to our normal PBT levels, which used to be for last several years in this business.
Got it, sir. On the standalone business, you know, basically, I guess we are implying that the upcoming year will be significantly better, in terms of margins, particularly. On Astec, you know, if you could, I mean, share your thoughts on how you see the industry shaping up. You know, do you see these challenges persisting for some indefinite amount of time in the future or, you know, will it be more of a transient passing phase?
If for Astec, what we have seen is, clearly, you know, there were a host of factors that led to weakening of margins and volumes, particularly in Q3. One was the erratic weather conditions across the globe, which we spoke about in the previous calls as well. China has also become extremely aggressive, particularly in the export market. One, because of their dual control policy in China has also been relaxed, and they also have seen weakening in demand in the internal China market. There's been two or three of these factors that has significantly contributed to, you know, weakening of volumes and margins. For few of the product portfolio which we have, we are still seeing an overcapacity or huge price competition from China.
You know, For the other, we are clearly seeing that the supply-demand balance is about to be reached or we are already see those products reaching the supply-demand balance. I would say that the situation is temporary. it should have, you know, turned around a little bit quicker. As we currently see that it might take two more months before some of the balance in the market, both from the supply and demand side could be achieved. Then hopefully our margins and our profitability would be back on track.
Got it. Thank you. That's helpful. Also just on the oil palm business, a quick bookkeeping question. Is it possible to share the volumes for this quarter as well as YTD?
Sure. This quarter we had an FFB arrival of around 159,000 metric tons, which is almost a 10% growth over the same quarter last year. Area added is double of almost last year. We did about 1,800, now we have done about 3,300 hectares.
Yeah. The OEA remains in the range of 18%- odd , sir. Is that right? 19%.
No. The OEA for the quarter is close to 20%.
Okay. Just one last thing from my side was actually on the Bangladesh business, where also margins seem to have declined quite substantially. Expect these price controls to continue in the foreseeable future? You know, how do you see margins progressing in that business?
To tell you something about Bangladesh, their import dependence on food is very high. For our sector also, if you ask me, almost 70% of the feed ingredients are imported, and their currency is depreciating almost every month. I think that the country is in a little bit of fix, and that is why just to make sure that their almost INR 18 crore-INR 19 crore population is secure, they have brought in price controls in lot of essential food commodity. I'm saying that that is part of the game there. I must tell you the kind of hit we have had is that if you see our contribution in FY 2022 in poultry feed was about INR 2,375 crore.
Nine months of FY 2023, it is -INR 1,123 crore. I must say that the call of the government, I think all the industries and including all feed companies have cooperated with whatever government has said. My sense is that now they have acceded to most of the demands of IMF, and they are likely to get, I think lot of relief from IMF. We are seeing the first signs of removal of price controls in some commodities.
My sense is I think that not in next few weeks, but I think by April or May, I think it will be business as usual for Bangladesh, unless and until a global recession sets in and, I think, they suffer as an economy because lot of their foreign exchange is because of garments to Western world and remittances from the Western world.
Got it, sir. Just to clarify the, you know, you mentioned the contribution has turned negative contribution margin, and yet we are seeing positive income from associates. You know, how do we reconcile those two?
No, it's negative only in a particular segment.
In cattle feed.
In cattle feed, et cetera, there is no control.
Okay.
Cattle and aqua is almost two-thirds of our business where we are getting very good. If you see nine months profit is about INR 26 crore, that is INR 52 crore because it's a 50/50 JV. It is already there. I'm saying that had there been no price control we should have been close to almost INR 100 crore.
I understand, sir. Sorry, if you'll permit just one last thing from me.
Sure.
It's on the portfolio management side. We have, you know, indicated some sort of thoughts in the past of we're trying to restructure our overall business portfolio to sort of make it, you know, more efficient, et cetera. If you could comment on that and maybe also particularly touch upon the crop protection side, whether you see both Astec and the standalone business remaining separate or, you know, would there be some merit in considering a combination of the two at some point? What are your thoughts on that? Thank you so much.
I think, if you see our past as a group, investing and harvesting is part and parcel of our business. I think, buying and selling and non-core, core, et cetera, is something which we always continue to look at. I think in case there is opportunity, which is not there right now, because I think most of our businesses are under external challenges and I think not a great time to probably look for any kind of consolidation. I must say that definitely it is always on the table for us to review these things. Having... Since you have asked about the Astec LifeSciences question, I think, we have put to rest the discussion that we will ever merge CPB and Astec. It is not going to be there.
We are just going to commission in six to eight weeks' time a state-of-the-art R&D center, which will launch us into CDMO. One of the requirements of CDMO is that it should have the ability of operating independently, because I think lot of confidential work happens and lot of confidence of our associates and our partners will come from Astec being independent. We have understood it very clearly. I think we appointed consultants to understand that in greater depth, and I can assure you that Astec LifeSciences will continue to be an independent company.
Thank you so much. That's very helpful. All the best.
Thank you. The next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead.
Hi, team. Thanks for the opportunity. My first question is to Anurag. Anurag, if you could call out the couple of things. One is, you know, CDMO, second half is usually better. How is that trending in this year? Also, if you could call out what kind of price erosion has happened for the enterprise products, and more specifically for, you know, the two products that, you know, we have a good amount of revenues coming from, you know, terbinafine and propiconazole. If you could specifically call out what kind of erosion has happened. Is there inventories which are still built up at customers end? For the base business, what is the normalized margin range that we should think for 2024?
Right. I think there are three, four questions here. I'll first talk about the CDMO business. As Mr. Balram was also highlighting, for Astec LifeSciences, we clearly understand that in our current product portfolio on the enterprise side, there is a huge amount of volatility and a threat from China's aggressiveness, quarter-on-quarter or year-on-year. In terms of our future strategy, clearly the focus has been on the CDMO part of business so that we can ensure sustainable and profitable, you know, growth year-on-year. That we would kickstart once our R&D is coming on board in a big way. In terms of our performance on CDMO, we stay very much on track.
If you see our numbers, last year, we were roughly around, you know, INR 84 crore or INR 85 crore on CDMO revenues. We plan to almost double it this year. That's the indication which we have given in the previous call as well. Year on year, we plan to maintain, you know, healthy 30%-50% growth on our CDMO business as we are seeing a strong pipeline of inquiries building up as our R&D is also coming on board. Coming back to the question on the margin deterioration, the last quarter has been, you know, we were expecting as we got into the quarter, significant margin deterioration. It deteriorated by more than what we were expecting.
There was some cancellation of, you know, some of the big orders from the customer beginning of the quarter. That also took us by surprise because there was lot of, you know, inventory build-up, primarily because of the poor kharif season in the domestic market, and you would have seen that degrowth in the domestic business in the last quarter. Then two, you know, particularly on one of our key gold products, while we do not give, you know, product wise indication on the margin, but as you talked about terbinafine, on that product, if you just see the price erosion that has happened over the last, you know, six to eight months, we are seeing the price erosion of high of almost $22-$23 price of terbinafine coming down to less than $9.
There has been an overcapacity situation from the China. There's been muted demand, which all is contributing to, you know, significant pricing pressure. We are observing these trends and the aggression from the China relaxation of dual control policy, we are going forward, you know, with the preparation that for some of our gold products, we'll continue to see these margin trends. Hence our strategy to quickly diversify and expand into CDMO business. The sooner we get there, the more, you know, we would be immune to these kind of volatility in the margin. Talking specifically on these JOL products, we still feel that it's a temporary supply demand imbalance, change in strategy or competitiveness from China.
There's been some, you know, high cost inventory, build up from our side as well, which will all start to ease out, and we'll start seeing some uptick in the coming months as we move forward even on these products. At a broad level, our vision or our strategy is very clear, that we want to immune from these volatility by quickly, you know, increasing the share of the CDMO business in our overall revenue.
That's helpful. Anurag, could you call out the nine-month number for CDMO? Base business, what kind of margin range should we expect for 2024 or it's too early to call it out?
Sure. Yeah, nine months CDMO numbers, revenue numbers are, I think already there around INR 93 crore. That's where we are.
Enterprise is INR 407 crore.
Enterprise is INR 407 crore. As I mentioned for CDMO, whatever indication for the year we have given, we are well on track on achieving that number.
Got it. Balram sir, one question to you. You mentioned at the start of the call that, you know, in the animal feed business, you're expecting the, you know, INR 1.5 crore/ kg to sort of continue. You didn't quantify the duration for that. Are you expecting that for the subsequent quarter? Also in the AF business, you mentioned a point that there's been a shrinkage of market size for poultry and shrimp. Is that a, is that something which is just a temporary blip or is there something that we should read into further? When do we expect to go back to that 5%-6% range, you know, from an EBIT perspective, in that segment?
Let me talk about poultry first. I think poultry has gone through some tough times and that is why the population has come down. It is a cyclical business, I will not be very surprised if poultry market is back once the prices rise, which will happen in next few months. My sense is that we will be back to poultry growth by... I'm not talking about poultry feed, I'm talking about poultry growth by, say, September, October this year because that is when the season will start. Having said that, we will continue to go for more and more volumes in poultry segment and increase our market share.
As far as margins are concerned, I think that margins will continue at the same levels at least for next two quarters, Q1, Q4 and Q1. The reason being that these are off-season for most of our raw materials and the kind of cost price competition we are seeing, it is highly unlikely that transmission of all costs will be possible and maybe some players going, who want to go for volume may drop prices also. As far as shrimp is concerned, the problem is real. As we are unseated by Ecuador from our number one position as a shrimp exporter because a lot of our quality issues, et cetera, shrimp is going to have tough time unless and until some correction is done.
My sense is that this decline in the size of the market in shrimp is likely to continue next year also.
Got it. That's very helpful. Just one last question on, you know, FFBs. What kind of volume should one be thinking about for FY 2024? Because I think on last call you had said that, you know, substantial amounts would come in from 2025. Could you just call out how volume should be for the palm oil?
My sense is that next year also we will see a 10%-12% growth. FY 2025 or FY 2026, I think for in agriculture and particularly horticulture crop, things can change by a quarter or two. In your parlance quarter or two may be a different financial year also. The issue is that time definitely more and more acres are going to come into production. We might see in FY 2025-2026 another say 14%-15% jump. 2027-2028 all these increases of this year will start coming in. You will see progressively the quantum of jumps increasing as we go along. From next year onwards we are very sure that from 3,000-5,000 hectares per annum our expansion will go to something 10,000-12,000 hectares per annum.
I've already told you that we have doubled the size of our nursery and now we are going to triple it in next six to eight months time. I think that is the opportunity which has been created by the central and the state government because of that NMOOP scheme. I think that will continue. You must have also read that we have already got very good allocations in Telangana. We have asked for more. Telangana itself, in case the government support continues the way it is, will be 10,000 hectares per annum in case everything fructifies.
Got it. Thanks. I'll follow back with you.
Mm-hmm.
The next question is from the line of Siddharth Gadekar from Equirus Capital. Please go ahead.
Hold on one sec. I just wanted to add one point on aqua feed. While shrimp looks bleak, the fish is the next big thing in this country because of renewed support. I think the central government is so encouraged by that Pradhan Mantri Matsya Sampada Yojana, which was brought in four years ago and INR 20,000 crore were spent. You cannot believe the kind of growth inland fisheries have had. That has encouraged them to put another INR 6,600 crore in the coming year. My sense is that shrimp decline will definitely be off-set scheduled by the phenomenal growth we will see in fish. The constraints will be hatchery plants. Okay, go ahead, please.
Thank you. We have Siddharth Gadekar from Equirus Capital under question queue.
Yeah. Hi, sir. Just on the enterprise business in Astec, now, given that we have spoken about the overcapacity in a few products, is there any way that over the next 1.5 , two years, we can look at diversifying away from these products, given that the competition from China will always be there and the margin volatility is likely to continue because of that?
Absolutely. That is what I mentioned earlier. Getting into CDMO is obviously one diversification strategy for having a sustainable margin. Within the goal for, you know, our product portfolio within the enterprise products as well, we are working on further diversifying, looking at few of the products, which could serve us higher margins in the short-term duration. Absolutely.
That's clearly one of the key strategies, which we would be seeing if we see these muted margins in the coming quarter as well. Okay. Secondly, in terms of our land acquisition and MPP, which was supposed to be starting work in this year, what is the status on that? It's on track and, at the right time we'll make that announcement. The review process is still on track and-
Due diligence is on. Tell them.
Due diligence is being conducted right now. As soon as anything is finalized, we'll inform the stakeholders. What will be the CapEx amount this year then? Because we had guided for INR 375 crore for FY 2024.
We already are implementing 1 more plant, so that will be commissioned in September, October.
Right.
And, uh-
Let me. I think this is what we mentioned earlier also. There has already been a herbicide expansion plan which is in taking in Mahad, which we have already started working on, and that should be up and running by this year, September or latest by November, December. That's on track. The projection for the CapEx what we have given for this year, we are on track on implementing that.
Okay. Got it. Thank you.
Thank you. The next question is from the line of Nitin Awasthi from InCred Equities. Please go ahead.
Hello, sir. wanted to know your views on two things. broadly with acting, changing a little bit in the industry and the impact it would have on the company, if any. one is the use of DDGS. now there's this boom of ethanol plants coming up, ethanol made from grain, and the byproduct DDGS is being out, going out there in plenty, which was not there and available in all parts of India previously. but what I understand from whatever is out there is that the synthesis of DDGS is not possible by everybody. It requires technological advancement by companies. is Godrej looking at it? is Godrej being able to synthesize it to use it to a great extent? does it matter to Godrej at all?
DDGS is going to be a very welcome thing for the feed industry in this country because it is a very good source of protein and it's very competitive also. We would welcome that. I must tell you that when DDGS comes out of the system, it has almost 80% moisture. I think that there is the biggest cost in DDGS is the energy cost to dry it. One of the issues which we are seeing with several ethanol plants is that they are not making efforts or not investing enough to dry DDGS. They just want to get rid of it in the neighboring areas as a slurry, which can be directly fed to cattle also. Of course, not that it is the best way to feed DDGS.
We definitely will look for opportunities of collaboration where we can co-invest and get that DDGS in dry form available to us in feed business. The bottom line is that in any combination, DDGS is a very welcome change.
Understood, sir. Is the part about synthesization true that only the blending will increase only once the protein is synthesized, and that cannot be done in general by everybody?
No, it's not. I'm saying once we put a dryer system on other things, rest, other thing is handleable, not a big issue.
Okay. What percentage of DDGS can you mix to a normal, your normal feed proportion? I think it's the highest in fish feed, if I'm not wrong?
No. I'm saying that fish and poultry and everywhere in high quality cattle feeds also this can be used. Now this, it's a very good quality protein. Definitely it competes with other high quality proteins like fish meal and fish meal in aqua feeds and soybean in aqua feeds and poultry feeds. I think at different levels and different prices, we run a linear program and include that. According to me, easily anything between 5%-10% in these feeds is easily usable. Which is going to be a very substantial quantity as far as feed industry is concerned.
Understood, sir. Understood. Secondly, I wanted to know a little bit about the.
Such is the attractiveness of this product that about a decade ago, we had given an application to Government of India to allow imports of DDGS into the country so that pressure on protein inputs can reduce. Unfortunately, all the DDGS outside is GM, and that is why that permission was not given. I think it's a wonderful raw material.
Understood, sir. Understood. Thank you. The next thing I wanted to understand also a little bit from the competition front. We had a lot of agritech companies, let's call them that, you know, start up and venture into kind of becoming a middleman between the farmer and the products. Now they have launched their own products. I'm talking about companies in particular where they had now data mined who are the customers, what they need, and now they are trying to fill that pipeline by themselves. One of these companies have started a direct animal feed product which competes with you. Do you have any thoughts whether these agritech companies will be able to make a dent in the market?
We have been watching this space, but I think that it is still time to form a judgment on this. I would not like to comment, but I think in case you have any specific questions, any specific company, any specific area you want to discuss, I'll be more than glad to enlighten you on what I know about that space offline.
Definitely, sir. Let's catch up then on that. Thank you. That's all from my side.
Thank you. The next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead.
Yeah, thanks for the follow-up. Just want to get a sense of the poultry business specifically. What was the contribution of live birds and the branded business this quarter?
Hold on. Let me just hunt the numbers.
Contribution.
No, no. If you see, the branded business was about 51% and live bird business was 49%.
Yeah. What is that number?
You want in crores? You want in crores?
That's fine. No, no, sir. That's fine. I was just checking what. Can you call that out for nine months as well? Because, you know, your trajectory-
Nine months, we are 46% live and 54% branded.
Got it. Got it. Got it, sir. Sir, could you just also just again validate that contribution margins for RGC are, you know, in the low teens and, you know, Yummiez is quite high, right? That understanding is broadly correct, right?
Yeah. You're absolutely right. Live bird is close to about 8%.
8%. Okay, perfect. Sir, just want to get a sense that again, the focus is, could you speak a little bit on how the branded business distribution is playing out? Because, you know, your focus is to grow that part of the business to reduce volatility. Could you comment a little bit about that?
I think, I must tell you that we have a very stable RGC business now. We are processing close to 60,000 birds a day in both our two facilities. I must tell you that every bird is used up profitability in both our plants. We are the biggest suppliers to several QSR. We are also the one of the big suppliers to D2C company, which is a very, very stable business. I must also tell you that we are only part suppliers to these companies because we still have constraints in capacities because we have our own retail business also, and we also have to produce boneless chicken for our Yummiez facility.
I can definitely say that, margins are stable, and we have top-of-the-line customers also, and we work very closely with them to improve quality as well as, do a lot of value addition in our plants, what is needed by them. I think, one more round of upgradation of plants is likely to happen in next, three to four months, and we will increase our capacity by another 15%-16%. That will be the focus for next year.
Got it, sir. That's very helpful. Sir, just another recheck on the dairy business that, you know, at what levels of sales and value add does that business sort of break even today?
I think, it's a interesting question, but I have a slightly longish answer. Last two years are very, very different from what it has been because we have data for our Creamline dairy business for last 25 years. We have never seen such low margins because, you know, and it is known to everybody, and results of every company has showed that we are not able to pass through all the cost increases of milk in price. That is because of cooperatives and several of our industry players are very reluctant to increase milk prices regularly. I think that has hurt the industry.
If you ask me, we will do close to about INR 1,500 crore at the current contribution, and we will make a loss. Had we done INR 2,000 crore, we would have been very close to breakeven. Today, we have already reached 40% value-added products in first nine months, which is a big leap over last year actually. Now we have already invested in one SIG line, so we will have the capability of making multiple packing also. My sense is that we'll try very hard to reach 50% value-added products. We will also try and take price increases wherever possible in value-added products, because it is not that price elastic as milk is.
In case we reach the number I talked about next year with 50% value addition, we will be, I think, home as far as profitability is concerned.
Got it, sir. This was very helpful. The direct procurement. It's still that one-fourth range only broadly, or?
I just want to tell you that where our confidence comes from. I'm saying that in first nine months, our total value-added product grown by about 45%. 48%, sorry.
Growth in volume of value-added products is 39%.
39%, value growth is?
Value growth is about 22%? What's the
43% value growth, 39% volume growth, salience has jumped to 41% already in first nine months. The second thing is the direct procurement. Definitely, I think that has been focused, but it is a slow grind considering there is milk shortage, and I think everybody is holding on to their supply chain. That has been a very, very important focus, and that will continue to remain focused. Some substantial results you will see in coming years. I can't put a number because the current situation is a little bit grim as far as milk supply is concerned, sir.
Got it, sir. Sir, could you finally just call out what has been the CapEx for the first nine months, and what is it for expected for 2023 and outlook for 2024 on the CapEx?
Pardon?
Yes, sorry. CapEx
CapEx. CapEx, sir. CapEx for nine months, full year 2023 expected and 2024.
Just for Godrej Agro is consolidated.
Yes, sir.
Do you have any?
We'll give it offline to you. I must tell you that I think this year we will definitely cross, about, I think we will capitalize close to INR 300 crore because there will be a spillover of some plants, particularly Astec plant, which is close to more than INR 150 crore, will be capitalized sometime in September, October. I can definitely say that we are in the process of, finalizing AOP for next year. I think within two weeks time we will be able to tell you offline.
Got it, sir. Thanks, Sudhakar, and wish you the best.
Thank you. The next question is from the line of Harsh Mantri from Flute Aura Enterprises Private Limited. Please go ahead.
Hello, sir. Sir, I needed to understand the breakup of your market share of all the sub-segments in animal feed business. As you mentioned that shrimp business is having some volatile time and the aqua business may grow in future. What would be the future growth aspect, and whether you would be further diversifying the 50% revenue share you are gaining from the animal feed segment? What is the future outlook on the same?
I did not understand.
Sir, I needed to understand the breakup of the market share of all the sub-segments in the animal feed business.
Very difficult. What we do is that we collect this data once in Q4 when we discuss our AOP, NRP. I think that process is on, but I cannot give you a number. In next, definitely next time we have this, we will give you segment-wise market share. For that also we make an estimation of the industry since the data is very, very scattered in this industry. I think the question is very good. The only thing is that we need some time to answer that.
Sir, any broader guideline on the same? Not to be precise.
Actually we did not work that out for some months, so I won't have that again right now.
We would have a discussion in the line.
I think in a few weeks time we will be able to share that. Make a note of it.
Yeah, yeah.
Mm-hmm.
Sir, a further question on the same, like, as you are diversifying into different businesses and reducing your revenue share from animal feed business, getting more products on your top line. Would it continue in the future also? What is your outlook?
Animal feed business, revenue share, even increase in case there is inflation in raw material prices. In volume terms, if you see that the other businesses will grow much faster. Animal feed is likely to grow by 11%-12% next year. If you see, crop protection business will grow faster than that. OPP will grow, oil palm plantation faster than that. The CDPL or our dairy business will grow faster than that. I think it just depends on inflation numbers also. My sense is that salience of animal feed business slowly will come down because other businesses are likely to grow much faster on volume basis.
Okay, sir. Thank you.
Thank you. The next question is from the line of Aman, individual investor. Please go ahead. Aman is not in the queue anymore. Participants, if you wish to ask any questions, please enter star then one. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you. I hope we have been able to answer all your questions. If you have any further questions or would like to know more about the company, we would be happy to be of assistance. Stay safe and stay healthy. Thank you once again for taking the time to join us on this call.
Thank you very much, sir. On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us. You may now disconnect your lines.