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00:00Hello and welcome. You're watching The Smith Show here on NDTV Profit. I'm Harsh Saita,
00:15with me is Puneet Javeri. And let's quickly look at where markets are at, because it's
00:20a very interesting day of trade to start this week off. We're seeing good traction, especially
00:26on the benchmark itself, up around 0.7 odd percent in trade. We've slipped off the day's
00:32highs, but we've breached the 25k mark very, very early in the week. So going to be a very,
00:38very interesting week ahead of us. Where the broader markets are concerned, before I come
00:43to what's contributed to the gains on the index itself, the nifty mid cap, as well as
00:49the small cap indices, underperforming the nifty 50. But nonetheless, both of them trading
00:56with healthy gains. Mind you, both of those indices, especially the small cap, gained
01:00over 2% last week. So therefore, on that base, you're seeing good traction, both on the mid
01:05cap and small cap. Let's pull up the breadth of the market, see what's happening with regard
01:09to the advance decline. And in that sense, too, it seems like it's a healthy day of trade,
01:16even with regard to advance decline, even though there's a bit of a taper with regard
01:20to the advances, as you can see on your screen, a 1.5x, nonetheless, in favor of the advances.
01:27Let's quickly take it across to what are the contributors on the nifty 50 before I quickly
01:32take it to guests. Those two largest of large caps, HDFC and Reliance, both contributing
01:39healthily to the nifty's gains, roughly 60 points between the two of them getting contributed.
01:45So that's definitely aiding the nifty. Among the losers, too, it's far and few. I mean,
01:51you're looking at just about 15 losers on the nifty as we speak. And therefore, the
01:57gainers are the breadth of the market, especially on the benchmark is aiding the index higher,
02:03along with, of course, the heavyweights, Infi, TCS, Reliance and HDFC Bank. So it's essentially
02:09that kind of day quickly on to where we are, where the sectors are concerned. Let's pull up
02:16the sectoral heat map, see which sectors are doing well. The nifty IT, no surprises there,
02:22given that both TCS and Infosys are, you know, doing fairly well in trade. The nifty IT is up
02:29a very pretty one and a half odd percent. You're seeing good traction in the nifty bank as well,
02:33around 0.6 odd percent higher. Nifty auto also doing fairly well. So gains across the board,
02:41what's not doing well is likely just the PSU Banking Index, which is absolutely flat. The
02:45nifty realty also absolutely flat. So those are some of the sectors buzzing, but pretty much all
02:51others are trading in the green. So even PSU Bank flat, slight negative, but outside of that,
02:57nearly positive across the board. So that's a key positive to take away, at least from today,
03:05early morning trade. But let me bring on board Rishabh Jain, CFO of Bikaji Foods International.
03:10He is with us. Of course, the acquisition also possibly one of the reasons, and we'll try to
03:18cover that as to, you know, a good point of conversation. So, sir, let me go straight to
03:24the acquisition. What does it bring to you? What does it bring to Bikaji, both from a short-term
03:29as well as from a longer-term perspective? How does it add value to your longer-term goals?
03:33Yeah, thank you Arsh for inviting. So we are very excited to join hand with Ariba Foods.
03:39This is a small acquisition for us. But overall, we always look at acquisition in two phases,
03:44basically. One, if it adds some category addition and find a growth lever in the coming future.
03:50And number two, if it adds any distribution muscle. So this acquisition, Ariba Foods,
03:55they have built a super factory in Ujjain. And they are already doing close to 40 crore rupees
04:01of business in India and mainly export market. So largely, we haven't planted in frozen segment.
04:08And this equity is where we mainly manufacture sweets. And this acquisition, so largely they
04:14mainly focus on frozen snacks and multiple types of frozen snacks and vegetables, multiple things.
04:20This will complete our frozen portfolio. And largely, we are excited to enter into this
04:24segment and to cater India as well as export market. Well, good morning, Mr. Jain. This
04:30is Puneet Desai. And thank you so much for joining us today. Just wanted to take this
04:34particular point forward because you're already present in this particular, the frozen snacks
04:38category. And this will, of course, be an addition and a much better addition as well,
04:42because you also get a very operational factory as well. I just wanted to talk about the segments
04:46because you didn't mention briefly that it's within sweets as well. Correct me if I'm wrong,
04:50it's also present in other Indian sweets such as, you know, like the Indian side of the frozen food
04:56snacks, samosas as well as others. How are you seeing this particular frozen fruit category as
05:01a whole? Because it has multiple on the western side as well. It has multiple snacks categories.
05:06How do you see this particular portfolio as a whole? And with this particular addition,
05:10what kind of market expansion are you expecting? So largely, currently, you'll see that frozen is
05:16very big in export market. And it's right. So we mainly will mainly focus on frozen export market
05:21and they are manufacturing all type of frozen snacks and vegetables, be it parathas to curries
05:26to vegetables to chars, everything. So we in Bikaner mainly will focus on frozen sweets and
05:32few snacks. And that addition will add a complete portfolio for us in frozen segment. And I think
05:37this will in coming three to five years, this can become a reasonably good portfolio for us
05:42in overall business sense. Will you be doing it under your brand or would you be doing it under
05:48Ariba's existing brand? We'll be doing it in our own brand. Got it. And how large will it become
05:56to the overall as you will help it scale because you have more touch points, more
06:03distributorship, you'll be able to leverage that. So both from a from an existing investment
06:09perspective, is there additional investment required in the subsidiary to try and help you
06:13scale? That's one. And second is, how large do you expect this to become in terms of mix?
06:21So basically, currently, your frozen market is very frozen in overall business, very small, right?
06:25We are doing close to 25-30 crore rupees in overall category. But yeah, it can become 100 crore rupees
06:30in next three to three and a half years. That's what target we have in our Bikaner sector.
06:35And any additional, sorry, apologies. We don't see any additional cash flow in Ariba
06:41folks as of now. This will be sufficient for next three years of growth. Okay. And maybe as you scale,
06:50you currently don't require capex in Ariba, but is there enough space in around the plant to do
06:58organic expansion? Yes, we have enough land around there to have our own expansion. So we
07:04can comfortably go up to 150 crore plus top line in that plant. So that's very much in our overall
07:10scheme today. Just wanted to get into the acquisition as well as the valuation point of
07:16view, sir. Now, we have seen, you mentioned that the company had roughly around 60 odd crore revenue
07:20in the last year. Sorry, 40 odd crore revenue in the last year. You acquired it for 60 odd crores.
07:26You didn't mention, if you could just walk us through what you see, because this is for FI23.
07:31How has FI24 been for Ariba specifically? And if you could walk us through what led to this
07:35particular valuation? So basically you see, for this only, all the money goes into the company.
07:42There is no any secondary exit in the company. So all 60 crore rupees will go in the company,
07:46right? So we are given valuation of close to 110 crore rupees post money. And along with us,
07:52there are promoters also investing in the company. So pre-money valuation is close to 40 crore rupees
07:57on a net way. And we are getting close to 40 crore top line in the company. And they also
08:02put subsidies from stakes. So overall, we are largely giving it a overall asset value. That's
08:10what we are investing. And do people stay or do you need to recruit fresh for this?
08:18They are extremely good team at all levels, be it at operation, be it at sales. They are
08:23very good team. So we don't need to hire any good people on board. And what about the balance 45?
08:28How does that work? Do you have a call option for that? Eventually, are you going to acquire that?
08:33How does that work? So it depends on future, right? So next 3-4 years, how this partnership
08:38goes on. But yeah, we have a call option we can acquire. Well, just wanted to understand a bit
08:44more about the product mix, because for quarter one specifically, we have seen the ethnic snacks
08:49to 75% of the business, while package investors are also picking up their share of the 8 and 9%
08:56specifically. If you could just let us know, where does the frozen category currently sit
09:01in which particular category? And do you see that going forward, you have mentioned that
09:06for frozen snacks specifically as an export market is one of the main product pushes and sweets,
09:11especially something that you're targeting. If you could just walk us through the export picture of
09:16how are you seeing both for the ethnic market as well as the sweets? What has been the demand
09:20picture specifically and which geography specifically are doing very well? So in export
09:26lens, so largely this year, we see a reasonably good export growth overall. So we see 20-30% growth
09:32in export market this year. And overall, frozen segment is doing reasonably good for us. So US,
09:39UAE, these both countries are doing well for us in overall. And you will see from because the lens
09:45also. So in first quarter, we grown at around 17% plus volume growth in our ethnic snacks category.
09:51Bhujan, sweets and this sweets, papadol are growing at a reasonably good speed. And we
09:56have entered into festivities. So from Diwali, there's a big festivity and we normally produce
10:02all have full capacity running in sweets category. So we are looking at good business in the next
10:07three months. And in terms of margins, how does it add up? So currently at 40 crore top line,
10:13what are the margins that Ariba brings in? For viewer context, you're in your late teens in
10:19terms of margins. So what does Ariba bring in in that sense? And how does it go going forward as
10:26you scale? Because you'll go very quickly from 40 to 150 is the sense. You will triple very quickly
10:33or maybe even 4x very quickly. So when that happens, where do margins lie?
10:39So it will be same in line with the company's what we are doing. So currently, currently,
10:43see it is a factory that largely underutilized. And so it was marginally doing extremely good
10:48for us. But yeah, it's underutilized. So there's big tech scores which is sitting in their books.
10:52So once it utilizes capacity to 70-75%, it will be in the line of same margin what we are doing now.
10:58Okay. Thank you so much. It's good perspective. The takeover, of course, in focus as well as the
11:04two to three year, you know, sort of glide path with regard to Ariba Foods. Thank you so much
11:11for joining us. And that is Bikaji Foods. We have another couple of management. So let's quickly
11:17breeze through them. We have Pratik Srivastava, founder and MD Dronacharya Aerial Innovations
11:23to talk to us. Now, sir, first off with regard to the traction in demand as well as in B2G orders,
11:33is that going to be the larger focus of the company going forward? Because you've won
11:38an order recently. Give us context. How large is it? How quickly will you execute? And what's
11:44the traction like? So the overall business is manufacturing services and training. The order
11:51you're talking about is for training. And basically training comprises of around five
11:56to six percent of our overall top line. The main focus is always on defense, agriculture,
12:02line order, and mapping drone manufacturing. But the order that we have got with Government of
12:09Punjab, total there are 150 candidates who are going to be trained. We are going to train all
12:15of them in six months. And the total size could be anywhere around 2000 to 3000 moving forward.
12:22Well, Mr. Srivastava, good morning and thank you so much for joining us today. I just wanted to
12:27break up what you said earlier that you have three particular divisions. Last year's revenue
12:32for the whole financial year was around 35 to 40 crores. What's the split between these three
12:37verticals? And if you could give us a slight margin range also for each of them. Yes. So
12:42training was around four and a half to five percent. We are doing a lot of export business
12:48as well. So we are serving to some of our European, Middle East and Southeast Asian clients.
12:53So that comprised almost 65, 70 percent of export sales and rest of the remaining was from Indian
12:59services market. And the margins are anywhere around 18 to 20 percent. And going forward as
13:05well, we would like to continue the 200 percent year on year growth on top line as well as on
13:11the back. Understood, Mr. Srivastava. Now, I just wanted to get into this particular MOU that you
13:16signed with Cessar Radar to sell their particular products. Now, you will be, of course, becoming an
13:22exclusive reseller of this particular product going forward as well in Southeast Asia as well
13:26as African regions. Talk us through this particular opportunity or how do you see this particular
13:31market and what is the revenue potential that you're expecting over the next two years for this
13:35particular transaction? So a bit about the company. This company is fairly new, but the founder, Dr.
13:43Tapan Mishra, who was ex-director of Space Application Center and Physical Research
13:48Laboratory, both comes under ISRO. So he's the it's his brainchild. And the product or the
13:55technology that they're bringing is the first time in India somebody is using this particular
14:00technology on a drone. So this will be widely used in military areas, in combat
14:07applications, in agriculture and so on and so forth. They also have some more technologies
14:13in terms of ground penetrating radar on drone. So all the underground utilities on all the IEDs,
14:19all the landmines, landmine detection, all of that can be done using this particular technology.
14:25So we have signed up with them for India, Southeast Asia, Middle East and Africa. We
14:30would be working with B2B and B2G both for the services. The potential is huge. Once, let's say,
14:38any defense ministry picks it up, then it may just go into a few thousand crores.
14:47That's going to be very massive. And how are you seeing the particular
14:50margins? Do you see it maintaining around the 18 to 20 percent range for you specifically?
14:55And also, I wanted to understand what's the current royalty that you'll be paying for
14:59the products in this particular segment? So we will be co-building the products.
15:06We are not just taking the product. We are going to co-build in terms of the new product,
15:12not only for this market, but for other markets as well. And there's no royalty paid on that.
15:17There will be more of a partnership on a project level. And specifically, do you see adding any
15:23kind of geographies apart from these as well going forward? And what is the current export
15:28percentage for the company? As you mentioned that it's a very big export opportunity as well from
15:33the Southeast Asian as well as African geographies. What's the current company's
15:38export percent to revenue and margins? Are they similar or much higher than the domestic margins
15:43as well? So last year, export business was around 50 percent of the overall revenue. Margins are
15:51almost on the similar lines. But going forward, initially, we were going for somebody else's
15:58products. But now we'll be having our own product. And after that, the margins will go way high.
16:06One final question, Mr. Srivastava. You also recently bagged another order for the first
16:13person you've drawn from MB Darwells, if I'm correctly saying the name. Now, I just wanted
16:18to understand how you mentioned that the export order is valued at around 15 odd crores. What's
16:24the particular timeline of this particular order? And you will be approximately supplying
16:295000 odd drones. Just talk us through this particular order as well. What's the timeline
16:33for recognizing this particular revenue and execution for the specific order? So FPV is
16:39fairly new technology. And there are very, very few players, at least in India, who are working
16:45on it. But if you see all the wars between any country in the world are being fought using FPVs
16:51massively. So this is one of the largest orders that we have got. But this is, again, just tip
16:57of the iceberg. There's a total contract of 125,000 drones. The overall time period to give
17:04the components of these drones is going to be 90 days. And moving forward, we are looking to around
17:0910,000 drones per month to be supplied to this particular client. And Pratik, if I can ask,
17:17you've guided for 200% growth both on revenue and pad. How sustainable is that? How long
17:25do you believe that that kind of a number is something you will continue to clock you're
17:29comfortable with looking at? The reason why I gave this number is because we are not only
17:36confined to the Indian market. We are also exporting a lot. And once you open the horizons,
17:43not only to the Indian geography, then the top line goes really high and so is the pad as well.
17:49So we are very comfortable next two to three years, we'll be able to sustain this figure
17:53and maybe surpass this as well. Okay, thank you so much, Mr. Srivastava for coming in,
17:58speaking with us, giving us that overview. Very interesting business, of course, one of those
18:03new age businesses, but operating out of India, making India the entire team playing out.
18:09Anyway, thank you for that. You know, we'll switch focus. We're going to speak with Mr. Pratik
18:15Jawahar, who's the MD and head of Infra and Real Estate Assets at Avendis Capital, to talk to us
18:23about, of course, the big theme, which is the other new age tech theme, which is at play
18:29with regard to data centers. Pratik, just for viewer context, if you can help us with how large
18:36is this opportunity? How quickly will India try to tap into it and scale, especially on the Indian
18:45player front? Very interesting. Thank you guys for inviting, Harsh and Puneet, good morning.
18:52No, so this is one of the plays within, I would say, the folds of infrastructure, real assets,
18:57which we are seeing kind of becoming larger by the day. We have seen almost India today is around
19:04800 megawatt capacity, and we expect this to double in the next three to five years. A lot
19:09of supplies coming in. In the number terms, if I have to kind of quantify, we see almost close
19:13to around $5 billion of investment, which will go in, which includes building out of data centers
19:20and also the servers and racks. So the investment is expected to be around $5 billion in the next
19:27three to five years. And if I take a 10-year view, probably around a $25 billion investment
19:32can really go in data centers in India. And from a customer or a sector-centric standpoint,
19:39what's really driving this growth? Because you're essentially looking at nearly a 25%
19:45CAGR over the next three years, if this were to double in the next three years is what you're
19:50suggesting. I think the three or four drivers, if you look at everything that's getting digitized,
19:55all your payments, processes, online shopping, internet, entertainment, a lot is going online,
20:04all requires data. And we're practically kind of doubling data usage every year, year on year.
20:10The thing is that we have always been serviced by hyperscalers. And a lot of that being done,
20:1780% of the processing was done in US and other geographies, which is getting localized. So
20:22government is coming out with norms of kind of storing data and processing it in India.
20:26That is one big driver of shift of our creation of this infrastructure within the country.
20:32So hyperscalers continues to remain a big tenant who are moving their data storage to India.
20:37Then we have big, large enterprise clients who have their own data storage requirements.
20:42Plus we have obviously kind of seeing newer segments like e-commerce and entertainment,
20:46which is driving this growth. So in a way, it is a bedrock of all the digital transactions and
20:51digital interface, which you see, where the processing gets carried out. Most of our businesses
20:58are kind of moving to one cloud and that's where the backend data centers plays a role.
21:04All right, Prateek. Hi, Anushi, joining in. I want to understand the CAPEX requirements now.
21:09What are the current CAPEX size of the industry at? Where should this CAPEX number be heading
21:14towards in the next four to five years? Do we see a significant shift for the players involved in
21:20the field over here? Yeah, interesting question. See, we had been mostly being serviced by telcos.
21:27There was a captive requirement with the entities of the world. Very few limited players were kind
21:33of meeting the requirement. There were smaller Indian players who are meeting the requirement
21:38of local enterprises. But given the size and the potential of opportunity, which we're talking
21:43about, say 25 billion equivalent, we're seeing large institutional investors as well as large
21:50operators who are working globally are getting interested in India. So last five or six years,
21:55we have seen almost 8 to 10 international players entering India and kind of have logged in very
22:01early stage positions in India where they are creating their first data centers. We have seen
22:09announcement with large groups like Adanis and Reliances who have partnered with Brookfield
22:14to kind of set up large scale data centers. So potentially there is going to be a surge
22:19of institutional capital and institutional players who will come in and you'll see the
22:23sector getting, it is in a way, I would say dominant by the institutional players any which
22:27ways. But increasingly over a period of time, you will see more and more institutional capital
22:33coming in here. Right. And in terms of players leveraging on this opportunity, what's the
22:42profile like? What do you see as some of the key two, three largest players in India who are
22:48leveraging this opportunity? Yeah, I think there is intrinsic advantage or I'd say benefit with
22:55the hyperscalers have who are ultimately the operators and biggest consumer of data center
23:01capacity who are putting up their own captive centers as well as obviously kind of being the
23:07biggest tenants for the real estate developers. There is a lot of buzz with players in India who
23:14are into infrastructure businesses, players who are into real estate businesses to kind of really
23:20dovetail and see if they can kind of take a pie of this opportunity. So we will see few of the
23:27real estate developers, large institutional size real estate developers getting into data center,
23:32large conglomerates are looking at it given the size of the opportunity. So we'll see some
23:36conglomerates joining in the play. There are pension funds and institutional investors like
23:42we spoke about Blackstone and Brookfield. Warburg has a platform in the region which has also
23:48started playing in Bain. That platform called Bridge Data Centers had created a data center in India
23:54five years back. So practically, I would say it's a wide field open which is pretty much
24:04for to be taken and we're seeing an interest from across board to kind of create data centers
24:10and operators are also kind of coming in and playing into it. So Pratik, the one aspect that
24:15you mentioned was on the real estate developers which will continue to gain traction from year
24:20on onwards. But I also want to understand what about the capital good industries even they are
24:25making strides in data centers be it a company like Cummins or ABB. They're all wanting to capture
24:31and have highlighted the importance over here. What's the growth aspect coming in from the
24:35companies like ABB or Cummins going forward for in India and do you think the power requirements
24:40that are currently there is sufficient for the kind of data center requirements that are
24:46presently needed for the road ahead? Yeah, so I think you raised two points. One on the vendor
24:53supply chain for data centers. Yes, a lot of vendors are obviously going to get benefited
24:57when you're going to kind of create or invest around 25 billion dollars of CAPEX which is
25:02predominantly I would say one-third going into real estate, two-third going into equipment. So
25:07equipment suppliers are obviously going to benefit immensely from the supply. It's a new segment
25:12which is opening up for them and suppliers like ABB which were earlier focusing only on power
25:17equipments would look at more specific requirement which is coming from this space. So the vendor
25:22ecosystem is certainly going to benefit. Another question which you raised was about the investment
25:28opportunities which are coming in from the real estate investor side. So that I covered
25:34in the earlier point which you mentioned. Right and Prateek just from a vendor perspective I want to
25:39cap this off. You've got ABB and Siemens of course but any of the finer niche vendors in terms of
25:45product or service which will benefit from some of these large CAPEX setups
25:54that are going to be coming through over the next three years?
25:58Frankly I don't want to name specific companies here. They're listed stocks and we're not going
26:04to kind of take a view but broadly if anyone in the ecosystem which was supplying to being
26:08suppliers of equipments primarily on the electronic equipment side and anyone who's in the power
26:14equipment side is being covered here. The power requirement point which you mentioned earlier,
26:20right now the data centers are consuming around one and a half percent of the power which India
26:25is generating. US consumes almost, the data center consumes almost 9% of power requirement.
26:31So yes it is going to be extremely power hungry segment and there is going to be a
26:37benefit which the power companies can also kind of take from data center. They are
26:41large consumers of power. We believe and if we maintain the growth momentum which we are talking
26:47about we still have like almost the power requirement of data centers will go on all
26:52the way around say three to four percent of overall power generation is expected by 2030.
26:58So green power generators and the companies which are focusing on renewable energies
27:04does look at or do look at data centers as one of the big and key client segment for them.
27:10All right. Thank you so much Mr. Jawahar for breaking this down for us. Of course a very
27:15interesting space this one and one to watch out for for the future. But with that we're
27:21completely out of time on this edition of The Smith Show. From myself, Puneet as well as Anushi,
27:27everyone who puts the show together, thanks so much for watching. Stay tuned to NDTV Profit.
27:32On the other side we'll have more action.