AVT Natural Products Ltd

 AVT Natural Products Ltd

Part of the A.V. Thomas Group of Companies (Ajit Thomas - Promoter)

AVTNPL’s product portfolio includes 

1. Marigold extracts,(reducing to 35-40%) -  for Eye care, Food colouring & Poultry pigmentation 
2. Spice oils and oleoresins (paprika, capsicum, pepper, etc) ( 30-40% ) -  food coloring and flavoring 
3. beverages (instant tea and decaffeinated tea) among others. ( 25-30% )
4. Rosemary extract started from 2021 

Sale Contribution	2018	2019	2020	Mar 2021
Marigold (Food Grade) Oleoresin	83	111	153	163
Spice Oleoresins	119	121	112	179
Decaffeinated teas & Instant Tea	111	82	97	127
Animal Nutrition	0	0	4.2	0.68

Mar 2022 - Marigold sale increased to 240 Cr. Others things were flatish.

Manufacturing facilities in 

1. Vazhakulam - Cochin (Kerala) and 
2. Tiptur (Karnataka). 
3. Sathyamangalam (Tamil Nadu) 

Subsidiary

1. AVT Natural Europe Ltd. (100%)
2. AVT Natural S.A. De C.v., Mexico (100%)

Reason for Good top and bottom line

• Significant improvement in bottom line in 2020-21 was achieved through a combination of improved operational performance over the year, higher price realizations for marigold & growth in new product segments (high-margin marigold extracts.)
• Despite severe weather challenges, the company achieved a 40% increase in marigold flower collection compared to previous year, brought about by an aggressive expansion in the growing areas and close coordination between all the stake holders particularly the AVT team & the growers 
• AVTNPL’s operating income grew due to volume growth in the spice oleoresins and beverages segments and introduction of new product lines
• Has entered into long-term strategic agreements with key customers, including Kemin Industries (5-year agreement ), for exclusive supply of rosemary extract. Started from 2020-21
• https://www.myrecipes.com/extracrispy/rosemary-extract-does-the-most

 

+Ve

• Major portion of the company’s working capital requirements has been funded through accruals, reducing dependence on borrowing.
• Continue to generate cash flow from operations worth ~Rs. 55-60 crore per annum over the medium term 
• R&D spend per year has increased from 2.2 Cr in 2013 to 10 Cr in 2021 for development of Hybrid seeds of Marigold with higher Xanthophyll yield. It is a continuous process.
• Promoter's salary in form of commision is upto 1.5 Cr
• Very insignificant related party transaction

 

-Ve

• High working capital intensity of the business owing to seasonality in availability of raw materials which translates into high inventory holding requirements.
• The company’s raw materials comprise agricultural commodities, which are exposed to agro-climatic risks, lending uncertainty to the business both with respect to availability and market prices. (Long experience of Promoter)
• Earnings remain sensitive to fluctuation in foreign exchange rates due to the company’s export (98%) oriented business model (forex hedging practices)
• Company’s top-3 customers accounted for ~60% of its revenues (long and established relationships with major customers coupled with exclusive supply agreements with some key customers )
• Prior to COVID marigold product faced stiff competition from China players leading to subdued margin.

2022: Hybrid seed cultivated on approximately 1000 acres during the Summer/ Monsoon season in 2021-22 The expansion planned for year 2022-23.

2020: After thorough testing and screening a new hybrid has been selected for commercial seed and flower production. This Hybrid will be cultivated on approximately 500 Ac during the Summer / Monsoon season in 2020.

2018: Invested in a new state of the art facility for marigold production. Will become more efficient and cost effective producer.

2016-17: It was a breakthrough year for the Company in the Instant Tea business. Years of development work to produce quality products at competitive prices, coupled with a focused marketing strategy, have resulted in the Company acquiring key customers during the last quarter of 2016-17.

The Decaff business will continue to do well and the Company will reaffirm its status as the largest Tea Decaff Company in the world.

2013: Very high prices of Marigold Oleoresin Feed grade meant for Poultry Pigmentation lead to very high profit

Neelamalai Agro has holding in below companies which is leading to other income of 34 Cr.

Gujarat Ambuja Exports

Gujarat Ambuja Exports is engaged in manufacturing of 

Feb 2022

The ethanol capacity of around 180 klpd each to be added at Hubli and Chalisgaon by end of fiscal 2022 

17 Jan 2022

Setting up of 1000 TPD Corn Wet Milling Plant to manufacture Starch, Starch Derivatives and Polyols viz., Sorbitol, Maltitol and Mannitol at Sitarganj, UttaranchaL Will increase revenue by 15%.

Capex of 400-500 cr via internal accrual

31 Aug 2021

- Upcoming 1000 TPD State-of-the-art Maize Crushing Plant at Malda, West Bengal. Coming live by Jun 2022. Will increase revenue by 15% 800 cr

- 1MW Solar Plant at Akola, Maharashtra

Business Divisions

Maize Processing (52% of FY21 revenue)[1]

- GAEL is the largest maize processing company in India with installed capacity of 3,000 tonnes per day (TPD). The company's products include liquid glucose, sorbitol, dextrose anhydrous, dextrose monohydrate, maltodextrin and high fructose corn syrup.

- Operating margins in excess of 20% for fiscal 2022

- Corn Starch Derivatives, 

GAEL has four plants located at 

1. Himmatnagar (500 tpd) in Gujarat, 
2. Sitarganj (750 tpd) in Uttarakhand, - adding 1000 tpd 
3. Hubli (750 tpd) in Karnataka and 
4. Chalisgaon (1,000 tpd) in Maharashtra. 

Agro Processing (30% of FY21 revenue)[1]

- GAEL has India's second largest soybean crushing capacity with six plants located across Gujarat, Madhya Pradesh and Maharashtra with combined capacity of 4,600 tpd. GAEL also has capacity for edible oil (1200 tpd) and wheat milling.

- Edible oil margins have remained stable in the range of 6-7%

Soya Derivatives, 

Feed Ingredients,

Edible Oils. 

Cotton Yarn (4% of FY 21 revenue)[1]

- GAEL has one plant located at Himmatnagar, Gujarat for its cotton yarn segment, with a capacity of 65,520 spindles. GAEL has recently entered into an agreement with a large textile company to provide this plant on a dedicated basis for contract manufacturing.[2]

- The cotton yarn segment has been incurring losses over past few years, however has turned profitable in fiscal 2021. 

Marquee Clientele

GAEL's clients include Dabur, Mondelez, Asian Paints, Patanjali, Nestle, Colgate, Heinz [1], ITC, HUL, Biocon, Parle[3], Cargill India, Agro Tech Foods, BL Agro Oils[4]

The company has its own warehouses as well as fleet and not on rent, unlike its competitors supporting the margins. Also most of company’s processing plants are near to the raw material sources which reduces the freight costs and improves the operating efficiency.  

All these states are major maize growing areas.

Planned raising of funds

GAEL has proposed an equity issuance for fund raising up to Rs 1000 Cr. [5]

Economies of scale

GAEL has a market share of 25%. GAEL buys raw materials in bulk once a year around the harvesting season (typically in March), giving them a 4-5% procurement cost advantage compared to peers.[2][6]