In Conversation With Bikaji Food's Manoj Verma
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00:00Hello and welcome, you're watching NDTV Prophet, I'm Mahima Vachrajani, well today's focus
00:12is on Bikaji Foods International and we're joined by Mr. Manoj Varma from Bikaji Foods
00:18and you know he'll talk to us about how the future of the company holds, like welcome
00:24to the show sir, you know my first question to you is on the PLI part of things, you know
00:30what is the kind of consistency that you're observing here, you know in the next five
00:34years will you continue to bid for the same and what is the kind of inflow that you're
00:39expecting?
00:40Thank you Mahima for the opportunity and talking to NDTV, talking about PLI, I think this is
00:48one of the governments incentive which has gone by very very smoothly, we already have
00:53got for two years in our books and third year is what we have made provision for because
00:58as per the financial rules for the year, relevant to we'll have to book it, so thus far we have
01:05already made a booking of 95 crores to our books, overall what we are to get is 261 crores
01:13over next three more years, so that's how it will go by.
01:18Okay, and you know I want to shift focus to your frozen business part, you know what is
01:23the kind of status here first thing, how aggressive are you on the frozen business part and how
01:30are things looking like from a longer perspective, let's say end of FY25, end of FY26 and you
01:37know overall also margins in frozen business are better than the normal snacks business?
01:44So frozen is too nascent a business now for the industry and for we as a company as well,
01:51it's a futuristic investment what we have now made in this stuff, good part was that
01:57we already are into frozen business in our exports market and this therefore would definitely
02:02give us quite a support or uplift to improve our exports business, howsoever this will
02:09also help us to get into domestic business, I mean eventually as we get into QSR business,
02:15so this would be a very strong back-end support to us, so if you speak in a very short-term
02:21manner it may not look as bright, but then this is a futuristic investment and in the
02:27times to come this will definitely help us getting growths or developing another room
02:33for growth for the organisation, got it but the margins are better in frozen business
02:37or no they are same as the snacking business?
02:40See it's about pricing, they are not very much competition in this stuff, so definitely
02:44company will look at that this should not be margin eroding business for us.
02:50Got it and you know with respect to competition, you know snacking business still faces a lot
02:55of competition from the unorganised space right, so what are the kind of trends that
03:00you are observing overall in the snacking business with respect to competition from
03:04unorganised players?
03:06I think let's talk about category first, when you say competition, so in the category space
03:11no competition falls in, so after mild slowdown in demand last financial year what we heard
03:17and read and also felt in the marketplace, there's an uptick in the first quarter what
03:22we have witnessed and this is both in urban and rural, snackery as a category I believe
03:30has done better than overall food industry in quarter one.
03:35In terms of competitive space yes, I mean everyone is looking now for the space is same
03:40and all competition are there to play, it's a battleground, everyone is putting their
03:44best effort hence it is intense but the way we look at it is that it's better for category
03:51growth, I mean more competition there definitely will be a category growth as well and will
03:58always be a law of origin survival of the fittest that who does the best, who brings
04:02the best offering will definitely take the lead that's where it is, so it's not a place
04:08wherein there is no competition.
04:10Got it and so you know considering all of these situations going forward in FY25 will
04:15you be looking for some kind of discounts on your products or will you be considering
04:19some kind of price hikes and if yes in what products will you consider these price hikes?
04:25Many many years, last year was the one year wherein the prices or the commodity prices
04:32softened and companies decided to pass this benefit to the consumer, hence if you see
04:38that last year volume growth and the price growth were hand in hand for the category
04:44and if I talk about BKG per se, our volume growth were by far higher than the value growth
04:50so which essentially means that we pass the benefit to the consumers.
04:55Now this year what we feel is that it will be about 2-3% price increase will be there
05:01now in course of the year.
05:03Got it and you know with respect to your product mix, it's not changed much as compared to
05:08FY23, it's remained the same overall, you know considering the trends, all of the like
05:14in terms of contribution to margin it's remained the same, so do you expect the same going
05:18forward or do you see some kind of mix in terms of product mix because as far as I understand
05:23in the industry, the western snacks are picking up pace?
05:27Yeah, in the past western snacks has done better and today if we speak, western snacks
05:34contribution to overall stactionary is higher than the traditional snacks and this is nothing
05:39but an outcome of that western has been growing faster but last year what we have seen is
05:44that the growth of western and traditional snacks has been the same and this is what
05:48we believe that would now the trend would continue.
05:51So both would be growing almost at the same pace plus minus something, so that's where
05:57it is, so it's not that just western is growing, I would want to make a point here that improving
06:05gross margins or the product mix, one is the category mix, the second is product mix.
06:11So within the category, let's say when we speak about namkeen, so there's a huge range
06:17of namkeen, so we made about 16 plus namkeens within it and there are some namkeens who
06:22are at a higher gross margins, who are not as high, so there is something what we keep
06:26doing is that to improve the mix within namkeens, so the category level it would look same but
06:32within the category mix, there is a change.
06:34Got it and in respect to your focus mix, there was some kind of lowering of exports in the
06:41mix entirely in FY24 as compared to FY23, do you see the same trend to continue in FY25
06:47or do you see a larger portion coming from exports as compared to domestic?
06:56I think these are two different questions, there is a different mix in exports what we
07:01do, so for example in frozen business, sorry in exports business, about 40% of the business
07:08is frozen foods itself and which will continue to be going forward, what we believe is that
07:13the frozen growth would be faster in that case, with the capacities liberating the price
07:19which are on having new products and all, so frozen would grow fast and hence higher
07:24contribution in the exports business.
07:26However, in domestic business, frozen has hardly a role to play, within in domestic
07:31business, we have another set of focus SKUs which our teams are working on, they focus
07:36on SKUs and that's a concentrated effort to drive them faster.
07:40And with respect to raw material price trends, you said that raw material eased in FY24,
07:46edible oils, pulses, flour, including laminates and corrugated boxes, now corrugated boxes
07:51the GST also has been lowered on them, so going forward what is the kind of benefit
07:56you are expecting in FY25, do you expect raw material prices to be within the same range
08:01or do you expect them to go up?
08:04It will be very unlikely that if it stays same, so there is a likelihood that no it
08:09would move but I think not the way it happened in say 21-22 and which is what is the reason
08:18that when we say that this year we should see 2-3% price increase.
08:22Okay, so and you know with respect to that, do you think that your margins which have
08:28increased from 11% operating margins, from 11% to 17% do you expect them to be sustained
08:33at the same level or do you see an upside or a downside from there?
08:38First let me correct you, it's not 17%, it's about 13.5%, what we have planned and budgeted
08:47for is that year on year we should be increasing or improving by 50 basis point, that's where
08:52we wish to be at about 15%, that's the target, now the team intern we are working on and
09:00this is just not on the gross margin or on the cost, there are other parameters as well
09:07on the efficiency side, on the capacity utilisation side which is what would help us improve these
09:14bottom line margins.
09:15Okay, and one last question with respect to capacity expansion, any kind of capacity expansion
09:21plans going ahead in FY25?
09:23I think we have built quite a capacity for ourselves, we are at about 44-45% utilisation
09:30currently and we believe that now the kind of growth what we have been delivering and
09:35the plans what we have going forward, so in another 3-4 years we should be able to reach
09:40about 80% utilisation on this, so till then there is no plan in increasing capacity, it
09:46is to now utilise them more.
09:48Got it, okay, well Mr. Verma thank you so much for giving us those insights on Bikaji
09:52Foods and taking our time and speaking with us at NDTV Profit, it was a pleasure speaking
09:56with you.
09:57Thank you very much.