Kwality is working on widening its focus from institutional to consumer business, says President and Head of Transformation Nawal Sharma in an interview to CNBC-TV18. Share of B2C segment was around 40 percent in the first quarter this year, he adds.
Milk prices, which had been subdued for the last couple of years, have now gained traction, he says, adding the third quarter and fourth quarter numbers are likely to benefit from higher prices.
The company plans to focus on developing its domestic consumer business and is currently not looking at exports, he says.
Kwality is India's largest private dairy company with milk processing capacities of 3.2 million litres a day.
Below is the verbatim transcript of Naval Sharma’s interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: Globally, we hear that milk prices are rising. Are you going to be seeing higher prices for your products as well, will you be able to push product prices higher in the coming months?
A: As you talk about the global prices last couple of years there was a slowdown. Obviously, because China import almost stopped. Russia also put a ban and there was end of quota regime. Of late, if you see in last couple of quarters we were seeing lot of upliftment. The rates, which dropped to as low as USD 1,300 per tonne, has started picking up. If you see currently it is around USD 2,800 so far the India part is concerned and so far the European Union (EU) part is concerned that is around USD 2,300.
We are very upbeat that by Q3 and Q4 things should be extremely positive. So, that is what we are looking for so far as the coming quarters is concerned and obviously it will impact the entire industry.
Latha: What is the volume and revenue growth that you are seeing in FY17?
A: As we talk about value growth, I will just talk about both topline as well as bottomline. If you see the last quarter, we have grown from Rs 1,396 crore to Rs 1,474 crore, which is around 5.5 percent growth. However, the point to be noted is the consumers business, which is a key strategic focus area, now when we talk about this particular bucket, it has grown by 31 percent from Rs 453 crore to Rs 592 crore and that is the key focus area.
If I see the contribution, last quarter consumer business contributed some 40 percent but if you compare it with the last year same quarter, it is around 32 percent. This is basically in terms of where we are going from the strategic perspective.
Now as we talk about the bottomline starting from bottom up which is a profit after tax (PAT) layer -- this has grown from Rs 35 crore to 42 crore, which is around 19 percent growth and in terms of percentage from 2.5 to 2.9 percent. Similarly, even profit before tax (PBT) has also increased by 33 percent and EBITDA level also margins have improved by around 19 percent. So, this is very clear that we are improving on an overall basis and this is on account of our business to consumer (B2C) strategy. The entire focus is shifting from institutional business to consumer business.
Sonia: Just tell us a little more about your export strategy as well because recently you set up a 100 percent subsidiary in the Jebel Ali Free Zone in Dubai. What will that do to augment your exports and as a percentage of total sales how much will your exports be over the next one to two years?
A: So far as export part is concerned that is an opportunity based business. The overall strategic focus is not there on exports. As I discussed as an organisation the entire strategic focus is how to build a very strong consumer brand and focus on the consumer business because that is where the profitability lies and that is where the entire organisation is moving. The entire focus is not on export but on the building a very strong consumer business.
For entire discussion, watch accompanying video...
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