concludes. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Anup Bajari from CDR India.
Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on Goldfish Aggravate's Q1 FY 2022 earnings conference call. We have with us Mr. Nadir Goldrich, Chairman of the company Mr. Balram S.
Yagav, Managing Director and Mr. S. Falraj, Chief Financial Officer of the company. We will begin the call with 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 statements made in today's call may be forward looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier.
I would now like to invite Mr. Nadir Govrich to make the initial remarks.
Good afternoon, everyone. I welcome you all to the Govrich AgroVest conference call. I hope that you and your families are safe and healthy in these difficult times. The COVID second wave has severely impacted India in the Q1 with daily cases touching a high of 4 lakh cases per day. Rural India was impacted more with nearly 50% of the cases and 50% of the deaths reported in rural India.
Economic recovery, which was seen in the Q4, was subdued from April 21 onwards. All macroeconomic indicators such as the PMI Index, GST collections, etcetera, started declining from April 21. However, the situation has started improving from the June 15 onwards with cases decreasing and lifting of the lockdown leading to a gradual recovery. For the agricultural sector, the Southwest Monsoon started on a positive note, but then there was a large gap of 20 to 25 days of scanty and erratic rains, which lowered Karim sowing and the farmers' income. All input commodity prices were significantly higher due to an increase in demand in the domestic and international markets.
On the other hand, output prices were lower in a few businesses due to subdued demand, especially from the Horeca segment. Despite these situations, GAVL has been able to register a stable performance in the Q1 of the year. The financial highlights and key developments during the quarter are as follows: Consolidated total income was INR 2,003 crore for the quarter compared to INR 15.62 crore in the same period of the previous year. Profit before tax was INR137 crore compared to INR 134 crore in the previous year. Now I will discuss the key highlights for each of our segments.
The Animal Feed business had a very good quarter. Volumes were up 18%, driven by volume growth in cattle, broiler and layer feed. This coupled with price hikes taken led to 34% growth in segment revenues. While raw material prices were at the peak, R and D benefit realization and strategic raw material stocking contributed to segment profitability, which grew by 32%. However, in the aquafeed business, shrimp feed margins declined as the raw material price increase could not be fully passed on to the farmers.
In the vegetable oil segment, the oil prices were very remunerative and the oil extraction ratio was higher than the previous year. Crude palm oil prices increased by 76% year on year and the oil extraction ratio was 69.95% compared to 16% in the previous year. As a result, in quarter 1 fiscal year 2022, segment revenues grew by 84% and segment results were 4 times higher than quarter 1 fiscal year 2021. This is despite a marginal 1.6% increase in fresh fruit crunchies arrival over the previous year. The standalone crop protection business posted sales growth of 15%, driven by higher sales of in house products.
Segment results grew by 6% as high raw material prices limited the growth in profit. It will be higher for the good and early start of Southwest Monsoon was followed by a long gap of 20 to 25 days of low range, which affected the sowing of major crops and thereby the demand for agno chemicals. Moving to the performance of our subsidiaries. In Astec Life Sciences, sales grew by 15% in quarter 1, driven by higher sales in the domestic markets as exports declined. Segment wise, sales mainly consist of enterprise sales as the Q1 is not a strong quarter for the contract manufacturing business and a large part of orders are executed in quarter 2 to quarter 4 of every year.
The EBITDA declined by 14% year on year due to high input cost inflation. Further, fixed expenses such as power cost, freight cost and other fixed costs have increased due to the normalization of business activities and the acute global container shortage. For our poultry subsidiary, Goodrich Steichen Foods Limited, it was a very difficult quarter. End product prices declined sequentially as micro lockdowns led to lower demand from the HoReCa segment, but the raw material prices increased sharply over the last year due to higher commodity prices. As a result, while sales grew by 7.3%, the company reported a marginal loss at the EBITDA level compared to a profit in the previous year.
In our dairy subsidiary, Creamline Dairy Products Limited, sales recovery seen in the beginning of April of 2021 was impacted by the decline in out of home consumption and the decline in demand from the Horita segment. Further, procurement costs increased over the previous year. As a result, while sales grew at 14% on a low base of Q1 of last year, the company reported an EBITDA loss of street cost. We believe that with the easing restrictions across states, volumes and sales will increase in our food businesses. JVL's joint venture in Bangladesh ACI Growbridge AgroVet Limited recorded strong revenue growth of 22% and PBT growth of 18% in quarter 1 fiscal year 2022.
The growth is driven by strong volume growth in cattle and poultry feed. In these challenging times, we are ensuring business continuity along with maintaining employee safety. We are conducting a nationwide vaccination drive for company employees and families, contractual workforce and our trade partners. Nearly 88% of our employees have received the first dose and we will cover the entire employee base with both doses shortly. With this, I'll conclude our business and financial performance update for the quarter and the year.
We will now be happy to take your questions. Thank you.
Thank you very much. Ladies and gentlemen, we will now begin the question Thank you. We take the first question from the line of Deepesh from Ikora Securities. Please go ahead.
Yes. Hi, sir. Thank you for taking my questions. So firstly, on the Animal Feed segment, it will be helpful if you can please give the category wise volume growth numbers. And also in the last call, you spoke about the price hike in the selling feed segment and you also spoke that the industry was further contemplating to take a price hike.
So just wanted to know what stopped that and what is the outlook on this margin because the RMPI is continuing to rise.
Okay. So volume growth in Q1 over Q1 of 2021 is cattle feed about 9.5%, broiler feed about 70%, layer feed about 20% and aqua feed about 4%. Definitely, price was required in shrimp feed, particularly where inclusion of soya meal is substantial. And soya meal prices were rising at the rate of 2%, 3% every day in the month of April May. So if you ask me our contribution which used to be about 14%, 15%, at one time in shrimp feeder dropped to 4%, 5% because of delayed price increases.
Two reasons, one was that the shrimp prices were very low. So the farmer's association, etcetera, were requesting for low for delaying price increase. And the other thing is that if you are following the news articles, I think Andhra Pradesh government is implementing several price controls in several commodities linked to agriculture. And that has also led to delay in taking a price increase and that is why contribution levels in shrimp feed came down significantly. However, in last 2 months, we have taken a price increase of almost INR7000 a tonne, but it is nowhere near whatever is required.
Now another good piece of information I wanted to give you was the government is likely to allow import of soya meal. So soya meal prices which had gone to almost INR 100 a kg in last 2, 3 days have come down to about INR 85 a kg. Let us see whether our government notification comes out in the next few days and how markets react. But my sense is that even if at INR85,000 INR80,000 a ton of soya meal, one more price increase will be required in shrimp feed to get to the historical contribution margins.
Got it, sir. Secondly, sir, this week on the palm oil business, government announced a new initiative on the palm oil production where they plan to increase the area to 10 lakh hectares by FY 'twenty six and further by FY 'thirty. So my question is that previously also such initiatives have been announced. So what are your thoughts like how this time it is different and will this actually work out?
So I think earlier, most of the initiatives were unilaterally taken by the government and which were inconsequential and insignificant. But I must congratulate the government this time because for last about 9 months in intensive consultation with the private sector player and the state government concern has been happening. Now I think government realizes that there is nothing better than oil farms to produce quantity of oil palm per hectare as compared to other oilseeds, which produce between 300 to 700 kilos per hectare. It is only oil palm which can give 3.5 tonne per hectare. Now we have been engaged and I personally have been engaged with the government for last 9 months.
There have been recommendations made by us where support to the industry and support to the farmer should be given. It is not that it is not given, but now it is routed through the state government. And we said that whatever support has to be given now the DBT system is there. And those vehicles should be used to transfer funds to the farmers as well as processor. And that will only give the boost to oil palm because through the state government subsidies take years for to be realized.
So apart from that, there will be a formula which has been recommended, which will be beneficial to us as well as the farmer. And gap between the formula price and the farmer price will be paid by the central government. So modalities are still to be understood. But I think that if whatever we have recommendation recommended and all our recommendations are taken on board by the government, I'm very sure that we can accelerate production of palm oil in the country. Apart from that, there will be a separate section for Northeastern states where the benefits will be several times more than what they will be for rest of India.
So let us wait. I'm also eagerly waiting for the gazette which should be out in next 2, 3 days. And my sense is I think that the kind of consultation the government has done, a lot of our issues and expectations will be taken on board.
Great, Savyet. Thanks and all the best.
The next question is from the line of Abhijit Dakela from IIFL Securities. Please go ahead.
Yes. Good afternoon. Thank you so much for taking my questions. So first one, just a clarification on the animal feed segment. In case this import of soy meal is permitted by the government at significantly lower prices, Would that be a benefit for margins of the entire animal feed industry?
Or will we have to pass it on to the farmers and therefore it's really margin neutral? And in that context, how do you see goodrigger agrofit placed relative to the rest of the industry in terms of maybe able to being able to retain some of the benefits of the lower RM cost?
So, 1st and foremost, there will be significant benefit only in broiler feed and shrimp feed where the quantum of use of soya meal is much higher than other feed, point number 1. Point number 2, I think most of the poultry players have not been able to pass on all the cost increases. And one of the reasons why there is so much of clamor for early imports and so much pressure was built on the government because all the other players were financially stretched because there was a limit to which what can be passed on with chicken prices lower because of COVID, etcetera. Now my sense is that immediately the price reductions will not happen. But eventually, they will have to be done because our domestic crop also is only about 5 to 6 weeks away.
So that definitely will have. Now how much of it is passed on, we have seen in such situations that entire cost drop because of soybean will not be passed on because the members, the players have been very stretched as far as margins are concerned in the past. Now we are reasonably insulated because of our R and D initiatives. We have been able to use other raw materials instead of soya and protect our margins. So let us see, but my sense is that this level of margin, which we have got is sustainable.
And I must also tell you that even though the market has shrunk both in layer feed, fish feed and in broiler feed, I think this is our time to use our use the play we have in margin to grab more market share. And I must tell you that this 70% growth which has come in broiler feed in spite of shrinking market is a huge jump in our market share actually.
Got it. Thank you, sir. And the second question was on the oil palm segment. In the context of sharply higher prices of CPO and related products, we see the margin expansion seems a little bit maybe below expectations this quarter. So any specific reasons that you might want to point out for that?
And also just wanted to check when we could get when we could expect to see the benefits from the higher oil extraction ratio that we have been talking about, the 0.4% to 0.6% benefit on the OEI.
Yes, yes. So let me answer your first question first. So you know the formula as the price goes up, the payout to the farmers also goes up. That is point number 1. Point number 2, Andhra Pradesh government unilaterally increased the formula price, thereby eating into almost 2% of our gross margin.
So I think that is the second reason why the margins are not expanded in the line of price expansion. 3rd thing is that if you see don't look at absolute also, but David, if Hudson contribution is also not reflecting the kind of inflation which it should have. Apart from that, the FFB arrivals have been a little subdued because of some dry period in June mid July up to mid July. It is still picking up because this crop is very different year on year and we are seeing depending on monsoon and depending on a lot of other reasons, the production pattern keeps on changing. So our expectation is that it is CUL has started late and it is going to end late and probably towards the end of the season, we will make up the FFO volume.
Lastly, you asked me about OER. Definitely, all the initiatives we have taken have resulted in improvement in OER and we have reported almost 0.95% in the Q1. I think similar improvement of OER or around that will be reported in Q2 also. And not only our plant modifications, R and D initiative to improve oil extraction efficiency improvement initiative, oil loss controlling initiative, we have also started massive grading exercise at our collection center. We are taking over most of the collection center ourselves so that we can keep a tab on the quality of fruit.
Because during these months of June July and partly August, because of monsoon and because of dry season, normally we pay for good and water also. So I think that thing will be controlled. And these measures we will keep on strengthening because we are paying substantially higher than last year to the farmers. And we are going to expect more stricter quality performance from the farmers. And I think that state government is cooperating as far as quality improvement initiatives are concerned.
I think so. I'll come back in the queue for more, sir. Thank you so much.
Thank you. The next question is from the line of Ankur Barywal from Axis Capital. Please go ahead.
Yes. Hi, sir. Thanks for the opportunity. So a couple of clarifications. First, if I got you right, in the animal feed market, you did mention that our trust will be gaining market share.
So does that come at the cost of margin or probably one can expect the current margins to sustain and there could be an incremental volume growth?
Yes. So current margin is likely to sustain. Even if you have a difference in this quarter, it will be in basis point only. And my sense is that this momentum of 17%, 18% growth will be sustained in the current quarter also. And most likely, what we are aiming for because the season will start only from October, November onwards, we will push our system further to get more market share, more volume growth in Q3 and Q4 at a similar margin profile.
According to it, since the margin is good, we will go for improved market share this year.
Sure, sir. That's helpful. Secondly, on the crop protection side, last year, we were focusing on higher collections even at the cost of growth if that would be the case. But how are our thoughts this year? I did go through the commentary which Birendi mentioned that there were certain delays in Monsoon and hence slightly lower uptake.
But structurally what is our thought in terms of will we go for growth here, obviously keeping balance sheet intact?
I tell you that I'm saying that even quarter one numbers look respectable, but I must tell you that the herbicide segment in the industry has been very badly affected because of this dry spell between 10th June to 7th July, which was the herbicide period because both Hit Weed Max and Hit Weed are early stage herbicides and those sprays should have happened from 20th June to 30th June, which where we have a big dent now. Now if you really ask me 2 of our scar products, if the targets are not achieved, and I can definitely tell you that even though we registered growth, we will not achieve our growth target we had set for this year. I think that we will have to scramble and plans are underway to focus on lot of other products which we have to make up for the lost margin and lost sales. So I think we are in a little bit of a scramble right now. I will not I will be honest with you that I think it will require us some effort to probably focus on some other high margin products to make up the shortfall of herbicide.
Having said that, definitely market hygiene has always been our focus and that will continue to be our focus. But it is the start is not as we expected.
Sure, sir. That's helpful. And lastly, on the dairy segment, now if I go by history, we have been not as our performance has not been as great in this segment and it has been probably almost 5, 6 years now. What are our thoughts in terms of either ramping up this business because in between also we had changed the product profile, the quality of the products were changed, we had introduced new products, but somehow things are not clicking here. So any thoughts there?
So where I'm coming from is there has been a pretty impressive performance in a couple of segments, but that in a way gets overshadowed by sort of suboptimal performance by certain other sector. And this dairy segment has been a problem area for quite a while. So your thoughts there.
So let me just tell you that over last several years, we had made a lot of changes. And one of the big, I would say, structural issue with our business, which was not such a big issue pre COVID, was the overdependence on institutional segments in milk and short shelf life products. About 1 third of our turnover in milk, in curd and in ice cream bulk used to come from the institutional segment, which just vanished in COVID. The second thing was that over the last few years, we have been focusing on value added products and they had crossed they had almost 30% pallion at a very, very fast clip for us. But unfortunately, particularly in 2nd wave, which was more severe in Southern India where most of our markets are, our value added product sale, which is a very high contributor to our crop margin, just collapsed.
So coupled with that, definitely, we had this spike of milk prices also and buffalo prices are also all time high in the history of milk industry right now also. So all this turmoil has I'm saying that all the benefits and all the changes and all the structural changes we had made there, the effect could not be or the benefits could not be realized because of these disturbances. Having said that, let me just tell you a few more things. One is that I think we have stabilized a lot of things right now. We have brought back focus of retail in milk.
Value added products is just a matter of time as the markets open up which they have started opening up in last few weeks. This trend has been very, very encouraging. So I would say that if you really ask me our big question and our big effort is to get scale now. If we register a 15%, 20% growth for 2 consecutive years, I am telling you as far as other parameters of the business are concerned and efficiencies of business are concerned, we are there. Now if you ask me strategically, definitely, I would like to give myself a little bit of discount because of COVID because several of our initiatives which should have worked have not worked.
But I would say we will still wait and watch. I am very sure that quarter on quarter we will start doing improved performance by whatever correction we have done. In case there is another COVID wave or some other newer mutation comes, we may come back to square 1. But I think that we know what is to be improved and we will improve in future.
The next question is from the line of Madhav Marda from Fidelity International.
So I was just wanting to continue Ankur's question on the dairy business. This is a question I've sort of just tried to understand from you in the past as well that dairy consumes almost 80% of the sorry, 20% of the business is capital employed, but it's not generating EBIT for the last few years since IPO. The business profile of goods is aggregate, the ROIC is actually much higher, but it's getting masked because of the daily capital employed that's sitting on the balance sheet. So just wanted to understand that it would be like maybe a 3, 4 year outlook on where how the margins can scale up for the dairy business and certainly how you're thinking. So we can sort of improve the entire Hello?
Hello? Hello?
Yes, sir, we can hear you. Please go ahead.
But I cannot I did not hear the question, the second part.
Yes, sir. Can you hear me now?
Yes, yes, yes.
Yes, I was just saying that for GVHDI Agubate for the entire business except for DD, the ROIC profile on a post act basis, I think it's upwards of 20%. But because of the dairy business, the capital employed sitting, it's bringing down the entire ROIC profile of the company.
So if
you could just give us some sense in terms of 3, 4 years out, how you see the margin profile picking up, obviously, in a situation where COVID doesn't impact us hopefully, that would be really helpful because that helps the entire company's return taxes.
So I fully agree with you. I also personally disappointed at our performance in dairy business in last few years. And as I have conveyed already that we have taken a lot of steps to improve the business and we are very, very optimistic that whatever we have done is most likely start giving us results in the coming quarter. And considering that we have shared our optimism earlier also and not delivered on that, I would abstain from giving a 3 quarter outlook. But I must tell you that all efforts are there to improve the business.
And I think the proof of this pudding will be meeting. And once that comes, we will definitely see you will all see whatever steps we have taken have the desired results or not. Today, if you really ask me, I think huge amount of efficiency improvements have happened. It is just a question of scale. If we get to that scale, which we want to get to in Q4 of this year, I am very sure we will not disappoint you in the coming years.
That is point number 1. Point number 2 is that strategically one thing you must realize is that world works on animal protein value chains. A disintegrated industry is not something which exists in several developed countries. If you see broiler industry was almost integrated. Shrimp is also on way.
So I think similar things will start happening particularly in private sector in the milk industry to secure supply chain. People will go back and get into feed business also. So milk sellers will milk companies will get into feed and feed companies will get into milk. I think that you will see rollout in next 5 to 10 years in this country. Some of the signs are already seen.
So I'm saying we don't have our eyes on next 3, 4 years only, but we have to our eyes on next 5, 10 years where we see an opportunity of building a good milk business, supported by our Maxi Mills Wave where we produce cutting edge genetics and our cattle feed business where we are number 1 in the country.
Understood. And if I can just ask one more question on the dairy business, like given that all the efficiency improvements, value added product mix, scale up, etcetera, that we have done, In your understanding, in a steady state basis, what would be like the steady state margin profile, bit margin profile for the dairy business in your view as these things play out? If you would just give us an understanding that that will be helpful.
Yes. Steady state margin. So, it is what is? Hold on for a minute. So let me answer your question like this.
Look, the liquid milk business, we are price takers. So most of the effort in our milk business is focused on quality improvement, smarter distribution, lowering cost of logistics and procurement of high quality milk at reasonable price. So I think that is the focus which has been there and that is why we went directly to the farmers also for procurement. And that thing got really, I would say, discontinued because of COVID, because nobody would allow us in the villages, etcetera, at that time. So I'm saying that we are price takers.
But come what may, a 9% to 10% contribution margin in milk is something which we should get to. Right now, we would be at about 6% to 7%, but I think that is possible. And after that, it is a scale game. Some year, we will get 8%, some year, we will get 10%, but we need to probably grow the milk business by 10%, 12%, 15% at the base we have to become even relevant. In the value added segment, I think we are operating at close to 20% contribution margin.
I am very sure that the opportunity is only 1%, 2% here and there. And there again on a small base if we grow 30%, 40% per annum and in 2 years I think we would have utilized all our capacity. I'm very glad to say that I used to talk about ghee generation because the kind of products we sell require a lot of buffalo milk. And we used to have surplus ghee generation and we used to take a lot of provisions and hits because of low prices of bulk ghee. But I am very glad to say that one of the initiatives which we have undertaken a year ago was to make sure that we develop a ghee market.
And I must tell you that growth in ghee is almost 70%, 80% over last year in Q1. And today, we'd have no provisions on ghee. We are not taking any provision. And actually, the ghee sale has increased so much that for the first time in our after taking over, we are buying buffalo cheese from outside. So I'm saying that is the biggest correction in the model which we have made.
Otherwise, there was a leakage of 2%, 3% of gross margin because of this provisioning we used to make on G. So I think several improvements are in pipeline, several improvements we have made, but I think we need to get to scale now. So in case we improve the business by 20% or so in a year's time, I would definitely say that a lot of these volatility will not be seen so clearly later.
Understood. Thank you.
Thank you. The next question is from the line of Prakash Kapadia from Honeywell portfolio. Please go ahead.
Thanks. My questions have been answered. Thank you.
Thank you. The next question is from the line of Sumant Kumar from Motilal Oswal, AMC. Please go ahead.
Yes, hi, Ashish. So my question is the crop protection margin is our correction. So and you mentioned in the PPT raw material pricing increased sharply. So can you talk more about what are the 3 raw material prices increased in this quarter?
Yes. I will have to answer this question offline if you want specific raw materials where the prices have increased. So pardon me, I think there are some of the technicals which we import particularly for Hit Weed and Oriso Star, but exact names and kind of deltas which have happened, I will let you know. Do you have some information?
Mostly generics, if the cost will go now, if I like to go now?
Yes. So I have some details here. Thank you, Avi. So mostly generics and pre, Thiophlor, pentamethylene, amectabenzolate,
So my question is, Ravindra is when the price was increasing and how much we have passed on and why we are unable to pass on is because of the weak demand and what?
Yes. So in some of the products which we use in Khareep because of this lull, let me just also tell you that the dry periods of 10th June to 5th July is again getting repeated in last few days again because August trends are very, very important for Indian agriculture. So I think some bright period has already set in, in several parts of the country. So I really do not know how well or how badly the sector will do, but I can definitely tell you that specified industry will be in little bit of stress. I'm not talking about companies which have got proprietary chemicals, they must still do better.
But plenty of us who have growth regulators and herbicide focused businesses are going to find it a little challenging.
Can you talk about the palm oil volume in this quarter and what's your volume growth? Yes.
So the revenue growth was about 83.5 percent and segment growth was last year, we made INR 6.5 crores, we have INR 32.6 crores profit. And volume of CPO sold has grown by almost 6.5%. FFB process is only about 2% more than last year. And last year, the delay was because of COVID lockdown, but this year, I think, there is a little bit of shift in this season. And what we are seeing is that at least 4 to 5 week delay in this season is expected in case it rains well from now on.
But my sense is that on an overall basis, I think, because of price increase and because of OEUR improvement, we will see a significant improvement in profitability in this business. I am very sure that last year's number for volume of FSB, CPO and CPQ all will be surpassed.
Thank you so much.
Thank you. The next question is from the line of Ritesh Gupta from Kotak Securities. Please go ahead.
Hi, sir. Thanks for taking my question. Just one on the palm oil side, what was the reason you told for the margins to be weakest for that? Because I think palm oil prices have increased strong, so that's what has driven margin
for us. So I would say there are two things, but entire increase in the palm oil prices has not come to us. So let me tell you that what has happened. So palm oil prices have increased and we pay farmers as a percentage of oil price. So last year, that is 2019, 2020, 2020 1.
So 2019, 2020 because oil here is from October to September, we were paying farmers in the formula at about 16.8% or 16.85% of oil price. But this year unilaterally both Telangana government and Andhra government have made it 18.62%. So it is almost about 1.9% increase. So definitely, the quantum which we should have gained because of increased price, that quantum is very less. But one good thing is that lot of our initiatives, including some R and D initiatives, particularly because of this high price government has allowed us to implement lot of quality improvement initiatives in farmer farms also.
And we are doing a lot of grading. So today, if you asked me earlier, we used to reject about 0.5% to 1% of the fruit. But now that rejection rate has come to 4%, 5%. And that is showing in higher OER of almost 1% in the 1st quarter and similar improvement we will see in the 2nd and the 3rd quarter also. I am extremely confident.
And I need to tell you that higher OER is direct injection into our PBT, sorry, direct injection into our PBT because we pay the farmers on weight of FFPB, not on oil recovery.
Understood, sir. And just on the crop protection side, now that you have reached a certain size and scale in the business and you have historically grown faster than the industry as it go over the last 3 years, you growth faster than the industry as it were over the last 3 years period. What is unique that you are what is the unique thing that you are doing in the cost protection business? Because honestly, in this industry, it's easy to get up to a $1,000,000 or $8,000,000 to $2,000,000 off line base. And then I assume income is starting to kind of I mean, start making a bit.
So in terms
of next 3 to 5 years, let's say,
what are what is unique that you are doing in terms of the same licensing part of this or something else? Or maybe in terms of distribution, etcetera? How are you looking at it over next few 5 years?
So let me tell you that one of the great things we were doing in this particular business was very good execution because our big strength was sales and distribution. We were getting about 7%, 8% organic growth from existing molecules and we were able to launch 1 or 2 new molecules every 2 years, which will give us another 4%, 5%, 6% increase. So we maintained 13% to 15% growth in this business for several years post-two thousand and seven-eight. The other reason was that our EBIT margins were always very high because our new products would be either coming from our stable or will be in licensing products where our gross margins will be significantly higher than the existing products we had. So I think this was the combination of these three things were giving us very good results but for 2019, 2020, 2021.
And I think 2019, 2020 is one time when we took a breather and probably set a lot of things right in this business. Of course, that continued. But unfortunately, because of COVID, again, be it collection, be it inventory management, be it sales or production of certain products, In last 1 year, we have seen some disruption. And mind you, the opportunity for us is very, very small, certain chemicals like I'm telling you, if you don't sell hit wheat from 10th of 20th June to 10th July, in 20 days we have to dispose of 200 crores worth of herbicides. So I'm saying if we miss that opportunity, it is very difficult to recover and very difficult to come back.
So I think it is a combination of events which have been hurting us. And definitely, we are committed. So we might we will just come back to the earlier levels very quickly. Now just to give you another flavor, I think 6 products are in pipeline already in next 3 to 5 years and at different stages of registration. These are all products which are coming from our own system.
4 are herbicides, 1 is a fungicide and one is a growth regulator and bio fertilizer. Most of them have got usage in padding and cotton. The in line sensing products, which are already signed up and are in process of registration, there are 5 of them, 2 insecticides, 1 herbicide and 2 fungicides. So I'm sure that in case we roll out these 10 products in next 3 to 5 years, we will get back to the growth rates, which we have done earlier in profitability as well as top line.
The next question is from the line of Nitinavasti from Incred Research. Please go ahead.
Hello, sir. Couple of questions from my side. Firstly, on this investment of the company in a company called KFC. And why I ask this is, if I look at the other shareholders of KFC, it would be the promoters of Gojel Agrawal, it would be the largest shareholders in that company along with Gojel Agrawal. So if you could just explain, is this an acquisition candidate that is the company is looking at because of similar lines of business or what is it?
So let me just tell you something about KFC, then Mr. Bharadaraj will talk about the financial questions you have asked. KFC is a company which is into cattle feed and some solvent extraction business in Inajalakoda in Kerala. And they are the dominant player for cattle feed in Kerala. And they do a lot of gopra extraction also.
Company is very closely held and the float is very low. But if you really ask me, definitely, it is a very, very good company to acquire. But we don't see any opportunity like that in near future at one time when we saw this opportunity payment for acquisition of some shares. Mr. Bhatia?
Yes. So since we are
in the same business as I to the extent to sort of make a financial investment, we have sort of made an investment of around INR 26 crores in this company. Anything else
you'd like
to know on this?
No, sir. That's all on the TST front.
Second question would be on
the import allowed of soya beans, GM soya meal by the government. Now the landed cost of imports, given the taxes and the sales that has to be paid on the imported GM soya meal, would come close to INR 50. So wouldn't that mean that in some segments you could actually retain the margins and take a price cut helping the segment grow? Is that or is that too far fetched?
Look, I will tell you that there will be 2 phases of imports. One phase of import will be from Nepal and Bangladesh. And that will not come at the numbers you are mentioning because we already have we have gone in for contracts with Nepal and Bangladesh and landed soya, which is domestic today that's about 19,000 and this will come between 70,000 to 75,000 in different factories. And we have contracted some quantity in the hope that the notification of the government of India will come in next few days. The second thing is that the big soya meal import from South Africa and America can only hit in 6 weeks' time in case the containers are available.
And that can definitely come between after paying the duty, etcetera, between INR 50.55. So that math we are still doing because number is fluctuating. So that definitely will be a very big blessing in their guide. That will also stabilize the new soya meal prices. Now in case the soya meal price in October, when our domestic production is also started starts and imports start hitting Indian ports, at INR55, we can pass the benefit significantly and retain a decent margin for us also.
And you will see a big spike in our contribution margin if that happens.
Okay, understood. Thank you, sir. That's all from my side.
Thank you. The next question is from the line of Utsav Mehta from EDELWEISS AMC. Please go ahead.
Hi, sir. Thank you for taking my question. My first question is on the acceptances. So last quarter, we've seen a sharp drop in acceptances because of the differential interest rate. Could you provide some update as to when that will normalize?
And
Yes. So this is Wargrat here. So the acceptances as you rightly said, we reduced the acceptances, the supplier financing fees because of the differential in interest rate. Even now the gap between acceptances, the cost of acceptances and cost of borrowing, this should go end up 3%. With those kind of a differential, it's still not appropriate for us to resort to supplier financing as a tool.
And hence, we are continuing to focus more on borrowing on the books of the company. As and when this sort of gap reduces in future, that's when we will sort of relook at it. But at the time being, definitely, we don't have any strong intent to do that. Okay.
My second question is sort of harping back again on dairy and even the poultry business. So after many years last year, we've probably seen a positive EBIT in both these businesses to the tune of like INR 11 crores INR 25 crores. I know it's not been a very good start to the year, but do you believe that you can at least reach back to that absolute number at least for this year in F22? Or do you think that's probably going to be unlikely given how we've started?
So the answer is that in chicken business, I think the industry has been badly hit. And chicken population is even lower than last year, this year. So as in when India starts opening up big time because this is Shravan. So Sawan is a subdued month particularly in West and Central and parts of North India. So my sense is that in a month's time we will start seeing shortages in chicken and eggs and the prices will become remunerative.
So I'm very, very optimistic. I think we still have to see what will happen. I'm very optimistic that we will probably improve our number significantly in the chicken business. I must also tell you that July was just the opposite of June because July the shortages had set in and suddenly we had seen prices giving us about 20% PBT on sales. So I'm saying this is a cyclical business, diesel business and I'm very sure that there is no way the company can come the country can come back to the same production level as pre COVID.
The consumption will go up in case there is no third wave and the industry will benefit. Now coming back to the dairy business, yes, I think we have in our current best estimates for the year factored in improved volumes in milk at a reasonably good percentage per quarter. The reason is that once things open up, definitely some of our institutional sales, which we have lost, is going to come back. So my sense is that, that will definitely come back. And that has started happening week on week.
In last few weeks, we have seen that. 2nd thing is that we need to get to the volumes, which we have talked about in the value added business, which we will. So my sense is that what we what the profit numbers will look like, whether we will reach last year or crossing, the big question will be how much milk prices and milk cost will drop in the flush. In case it drops, normally the drop is between 50% to 20% here. Every year, we have seen that off season and in season price drops to this level.
In case it drops to this level, definitely, we will get to those numbers. But there is very little we can do on price. We have pushed the volumes also in our current best estimates, and we are getting that volume in last almost 8, 9 weeks. We have been on track. The only thing is that if the cost of this comes down, we can definitely get back to those levels.
Understood. So just to summarize from what you're saying, you're basically from all the segments, you just circumspect on the dairy business and the crop protection businesses. And the other segments, you believe that segmental profits in absolute can easily grow?
Dairy business, crop protection business, I can definitely tell you that we still have 4, 5 months to go. And we still have products which we can sell and up the game for ourselves. So I am very sure that even if we miss, we will definitely grow our last year in CP business that goes without saying. But point is that will we grow 10% or will we grow 20% that is still matter of conjecture. So I would say that growth will be there.
We will do it will be a profitable growth. We will be able to put up a much better show in spite of erratic monsoon. But definitely last year numbers will be crossed.
So growth in all businesses exactly, I think.
I will keep my fingers crossed for Milk.
Understood. Thank you so much, Kartik.
Thank you. We take the last question from the line of Sentil from Itot Financial. Please go ahead.
Hello, sir. So we have a couple of questions. First question is on the top line. So the last 5 years, it feels like your acute asset and also we've increased stake in dairy and Tizen puts dairy. And so the growth came about around 11% on the top line.
So the earlier call you mentioned that a lot of activities or initiatives has taken on the dairy business. So considering this, in the next 5 years, what will be the medium term growth guidance that the company is eyeing? So let me
tell you that why whatever I will say will not make sense in 2, 3 quarters also because let me just give you an example. So let me tell you that the volume increase in feed was 18.33%. The value increase was 34%. Okay. So what kind of inflation, if you tell me, will prevail in next 5 years, I will tell you what will be the forecast for the company.
Similarly, I'll tell you one plant number. In palm, palm, palm, the revenue has increased by 83.5%. The oil sold over last year, the crude increased by about 6%, 7%. So my sense is that lot of things are dependent on the commodity inflation. But that is why during budgeting, actually, we top line is just a derived number.
Most of it is focused on volume. We always talk in volume terms. And second thing is that the targets of contributions and profit on all our businesses, barring 1 or 2, are fixed on rupees per kilo, rupees per tonne, etcetera or rupees per liter. So my thing is that top line, definitely, we will surprise you. Some year, we will on the positive side, we will surprise you on the negative side.
But what we are more focused is a steady growth in PAC, not even PBT year on year. And that is what we will drive.
Okay, sir. Second question is on the capital allocation side. So in any new projects, what is the internal target that the company has raised? Can we measure the range also?
So let me just tell you that fish feed is growing in the country and fish production will continue to grow. We are already committed to a fish feed plant in Barabanki in UP at the cost of close to INR 88 crores, which will be commissioned by February, March next year. We are already in the completing stages of this herbicide plant in Aztec Life Sciences, and we have already made plans for further investments in Aztec Life Sciences. Plus that R and D, we have been talking about and doing nothing for about 2 quarters. All permissions are in place and most likely in the beginning of next month, we will start that project also and try to complete that in 12 months' time.
However, having said that, ASEK also hired a laboratory, so their R and D initiatives are not affected. It will be just moving from a leased building to our own building in a year or year and 2 months' time. So I think those investments will continue. All this will add up to INR250 crores or so in next, say, 3 or 4 quarters.
Okay, but the yes, here are the names that you'll be looking into these products?
So we have a capital investment committee, which looks at these businesses. And all of them are like I'm saying that you can always come and meet me because our businesses are such that we can make very good IRR at 1.5x asset terms in Astec Life Sciences and make a very bad IRR in 4 asset terms in our feed business. So point is that definitely we take all these things into consideration. So but a standard IRR is something which we cannot work out. The other reason is that all businesses also borrow at different interest rates.
If you ask me in animal feed business, anybody is ready to give us money at 3.5%. Isn't it? Yes. So they are I'm saying in case you want some more insights, more than glad to engage with you.
Sure, sir. Yes, that was it. Thanks.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back 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'll 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.
Bye.
Thank you. On behalf of Gold Ridge AgroBet Limited, this concludes this conference. Thank you all for joining. You may now disconnect