IFB Agro Industries Plans to Expand Using a Capex-Light Strategy During FY23

During the current fiscal year, IFB Agro Industries Ltd plans to expand through a low-capex model. The company believes that the increase in input prices and higher freight costs will have an impact on margins during FY23 and is making all efforts to ensure improved margins and better returns on capital employed.

The company operates in two segments: spirit, spirituous beverages and allied products, and marine products.

"The current fiscal year will be challenging for both domestic and export business." Input price increases and higher freight costs are likely to have an impact on margins. Distillery margins are also likely to be impacted by increases in the prices of non-edible grain and fuel cost,” the company said in its latest annual report.

Growth in the aqua feed industry is also likely to be hampered by the company's market competition and restrictive credit policies. The company would concentrate on direct sales to farmers through its aqua shops using cash and carry model. "During 2022-23, the company is focused on resource allocation and is looking for expansion through a capex light model," the company stated.

In the fiscal year 2021-22, IFB Agro reported a 34% increase in gross revenue from operations on a standalone basis to Rs 2,277 crore, up from Rs 1,693 crore in the previous year. The operational profit (EBITDA) increased by 27 percent to Rs 92 crore in 2021-22 (from Rs 73 crore in 2020-21).

During the current fiscal year, the company intends to focus on margin improvement plans across all verticals by improving the procurement of key raw materials such as broken rice and shrimps. The distillery's capacity expansion plan from 110 KL per day to 170 KL per day was completed in 2021-22.

The Indian Made Indian Liquor (IMIL) industry saw a 15% drop in volume during the previous fiscal year as product MRPs increased. Due to the excess capacity created by the new bottling plants in West Bengal, the industry continues to face challenges and stiff competition.

The company's marine exports increased by 144% last fiscal year due to increased demand in the export market as hotels and restaurants opened in the exporting countries. The margins were impacted by higher freight costs and a reduction in the Centre's export incentive with a retroactive effect. However, the company stated that it will focus on improving margins by strengthening its marketing by adding new supply destinations, lowering overhead, and increasing overall efficiency.

Last year, revenue from the marine aqua feed business increased by 75%. The company's restrictive credit policy remains in effect. It introduced its own branded fish and prawn feed under the brand names "Nutrisigma" and "Nutrafeed." Through its retail aqua shop chain "Aquashop," the company focuses on direct sales to farmers.

"The marine domestic food business suffered as demand from hotels and restaurants fell significantly." To maintain revenue and margins, the company is focusing more on online and e-commerce sales. "The company will continue to invest in this business in terms of product innovation, marketing, and infrastructure," the company stated.