Developments in 3Q FY 2016-2017
- Launched new marketing campaign for the flagship ghee product with new positioning “Pyaar ka Rang Sunehra"
- Veer Das signed to promote new product “Spice up”
- Efforts made in ramping up Pride of cows business by extending its reach to Surat.
- Distribution system expanded by establishing new depot in Chennai.
- Increase in milk procurement by around 27% during the quarter
- Company launched Whey protein absolute named “Avataar” on February 1st.
Impact of Demonetization
- During Q3, which starts from October and ends in December, marks as the flush season. Milk prices stay increased in this quarter and settle down by next quarter
- Flush season resulted in procurement of ~1.2 million liters of milk per day.
- Demonetization did not provide the right window to increase the consumer product prices and the company had to wait for its effect to settle
- During Q3 FY17 SMP grew by 273% YOY due to better realization in the market
- Gross margin declined by 770 basis points from a 29.8 % margin in Q3 of last year to 22.1% in this quarter of the current year
- Increase in the share of skimmed milk powder from a mere 4% last year to 12% this year
- Have incurred an operating loss of Rs.14.4 Cores in Q3 of this year as compared to Rs.38.3 Crores positive profit in the December quarter of the last year.
- Significant operating profit margin drop from 9.9% in the last year being positive to a -3.2% in the current quarter of the current year
- Company’s net loss is minus Rs.37.9 Crores in Q3 of FY2017 as compared to the net profit of Rs.14.5 Cores in Q3 of FY2016.
Decline in PAT and EBITDA Margin
- PAT margin decline from a positive 3.7% in Q3 of the last year to a negative 8.5% in the Q3 of the current year.
- PAT growth impacted due to expense of Rs.16.5 Crores pertaining to prior year.
- The negative PAT for the current is minus 4.8%
- The EBITDA margin has declined and has gone into a negative territory of minus 3.2% and the PAT margin has gone down with an exceptional expense to minus 8.5% and without an exceptional expense to minus 4.8%
Revenues and Strategy of The Company
The revenue from the operations for Q3 of FY17 has grown up by 15.1%to Rs.446.1 Crores in this quarter of the financial year 2017 which is Q3 from Rs.387.5 Crores in the similar financial quarter of the last year which is Q3 FY16.
- Contribution of Fresh milk remained at 21% in Q3.
- Revenue of fresh milk increased by 15%
- The share of the skimmed milk powder has increased by 800 basis points Y-o-Y to 12% as a share of pie in the revenue along with an increase in its revenue by 273% from a sale.
- The long-term strategy of the company is to focus on milk and milk products.
- Modest growth observed in revenue of milk products which increased by 5% from Rs 281.4 crores to Rs 295.3 Crores
- Advertising expense runs up to about 8% to 8.5% of the revenue.
- Money raised from IPO is Rs.300 Crores, Rs.100 Crores is for repayment of debt, Rs.50 Crores is for working capital and Rs.150 Crores is for Capex
- Total of Rs.150 Crores is laid down in the IPO document.
- Increase in the prices of milk roughly by 14%