Moneycontrol Exclusive: Vadilal Ind ups ice-cream prices 3%

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By Nachiket Kelkar

Ahmedabad-based Vadilal Industries has raised prices of its ice-creams by 3% effective April 1 to offset rising costs of raw materials, Managing Director Rajesh Gandhi told moneycontrol.com Friday.

The latest price hike comes on the back of a 7% hike taken by the company in February.

Prices of raw materials such as milk, chocolate and dry fruits have gone up over the last several months, which necessitated the price hike, Gandhi said.

"Input costs started going up towards the end of last year. But due to the winter off-season, we didn't raise prices. Now in 2011, we have hiked prices in February and from today, together by 10%," he said.

Gandhi said these price hikes would help the company improve margins in 2011-12 (April-March).

"Our profit margins are around 2.5%. These margins should significantly grow in 2011-12," he said.

Vadilal has no plans to hike prices further at least for the next few months.

Vadilal Industries reported a over 400% jump in standalone net profit at Rs 5.75 crore in 2009-10, and net sales rose 28% on year to Rs 188.91 crore.

For the nine months to December 31, the company's net profit was down 14.5% year-on-year to Rs 6.91 crore. Its net sales during the period were up 25.5% to Rs 187.2 crore.

Vadilal's profit for the nine-months period was mainly impacted by higher expenses, which rose 28.6% from a year ago to Rs 170.80 crore.

Vadilal Industries shares have gone up over 87% in the last one year. The share Friday closed at Rs 147.30, down 2.3% on Bombay Stock Exchange.

 The BSE's benchmark Sensex has gone up 10.8% during the same period.

However, apart from Acacia Institutional Partners, which holds 5.83% shares, there has not been much interest in the Vadilal Industries stock among institutional investors.

Meanwhile, Vadilal expects the price hike it has taken would not only aid improve margins, but also help its revenue grow around 40% in 2011-12, at a time the ice-cream market in India is growing at 15-20%.

The company's strong sales growth will also be aided by the recent capacity expansion that the company has completed, Gandhi said.

Vadilal's production capacity has gone up to 3,25,000 liters per day from  2,25,000 liters from this month. The company has also set up a new cone making machine. It has a capacity to make 18,000 cones per hour, compared to earlier machine, which made 6,000 per hour.

Gandhi said the company invested Rs 80 crore in the last two years for the capacity expansion.

With the capacity expansion completed, Vadilal will now focus on brand building and expanding its distribution network to grow sales further, he said.

The company also plans to open more of its 'Happinezz' ice-cream parlours to boost sales.

It currently has 140 ice-cream parlours currently, of which 100 are in Gujarat alone. It plans to open 40 more such outlets in 2011-12, Gandhi said. The company operates these 'Happinezz' stores on a franchisee basis, so would not require huge capital expenditure.

Vadilal currently sells products under three categories - premium ice-creams, regular ice-creams and frozen deserts.

Gandhi said the company will focus on ice-creams at least for the next six months, but in the long-term it does have plans to leverage the Vadilal brand to other products.

He refused to elaborate on that matter.