Corporate: Spreading The Aroma
India may boast of all kinds of exotic rice varieties, but none sit on the dinner tables with as much pride as the Basmati, which is prized for its exquisite form and fragrance, not just in India but the world over.
In fact, Basmati for long has been a major constituent of Brand India, and one of the country’s key exports, thanks largely to the efforts of companies like LT Foods (LTFL), a leading rice exporter. "We are a leading Indian-origin global FMCG company," says Ashwani Arora, Managing Director and Chief Executive Officer, LTFL.
Arora’s claims are not exaggerated. The company has seen high growth
due to growing consumption of quality Basmati rice in both domestic as well as global markets. At the current rate of growth, the company’s revenue is projected to cross Rs 11,000 crore over the next 48 months.
Sitting in his large meeting room on the second floor of his Gurugram headquarters, Arora exudes confidence. "We are generating 84 per cent of business from brands like Daawat, Royal in the US. Over 70 per cent of our revenue is coming from exports," he says.
At the group level, LTFL clocked revenues of nearly Rs 7,000 crore in FY23. Before FY27, it is aiming to add another Rs 4,000 crore, for which Arora has all the plans chalked out.
Experts Take
Analysts at HDFC Securities describe LTFL as "one of the most successful Basmati rice players in the US and EU markets". According to a senior analyst, "The company is amongst the few players in this space to invest in a rice processing facility in Europe (Rotterdam) and a packaging unit with ready-to-heat facility in the US. It has a dominant market share of over 50 per cent in the US.”
HDFC Securities, in its latest report, has given positive recommendations based on current and past performance. "LTFL’s earnings grew at a CAGR ~16 per cent over FY19-23. Going forward, we are positive on the future growth prospects of LTFL which is mainly on the back of its robust distribution network, strong brand equity and constant endeavour to enrich their product portfolio by expanding into newer categories," says H. Sheth, Fundamental Research Analyst, HDFC Securities.
LTFL is also looking at enhancing its product mix with higher focus on margin accretive premium Basmati export business and plans constant scale-up of new launches in value-add segment. "In our view, LTFL’s revenue and PAT is likely to record a growth of 14 per cent and 32 per cent CAGR over FY23-25E," says Sheth.
Ventura Securities, in its report August last year, also supported a healthy growth outlook for LTFL. "On the back of growth triggers, we expect LTFL’s revenues to grow at a CAGR of 10.9 per cent to Rs 9,464 crore over the period FY23-26," it said. Rs 10,000 crore revenue does not look difficult, after all.
International Expansion
LTFL’s growth plans across markets are riding on the strong brand equity of its flagship brand, Daawat, which has over 30 per cent market share in India. "The number of Daawat consuming households in India has risen to nearly 5 million. It is one of the most loved and consumed Basmati brands in India and in more than 80 countries," says Arora.
But what are the steps LTFL is taking to strengthen its position in key international markets? "We focus on geographies that are politically stable and with high growth potential for all our business categories. Aligned with this strategy, we pursued global expansion through a mix of both organic and inorganic routes,” Arora says. He points LTFL’s Royal ready-to-heat brand that has emerged as the fourth-largest brand in the US clocking over 37 per cent sales growth in FY23 over FY22.
Besides, Arora talks about the sustained expansion of products in the modern retail channel like Walmart. "Last year, we acquired a 51 per cent stake in Golden Star Trading Inc., which sells Jasmine rice in the US. Through this acquisition, we have gained a strong foothold in the jasmine rice market, which is more than three times the size of the Basmati rice market in the US," he informs.
In 2016, LTFL acquired the Rozana and Indus Valley brands from Hindustan Unilever (HUL), making its entry into the Middle Eastern markets of Oman, Qatar, and Bahrain. This move not only fortified LTFL’s presence in traditional export hubs like Saudi Arabia, UAE, and Kuwait but also resulted in a 16 per cent year-on-year revenue surge in FY23 from this region.
LTFL also entered the Canadian market through the acquisition of 817 Elephant brand. “Our journey with Walmart's private label Basmati and the 817 Elephant brand has been nothing short of splendid, boasting a remarkable 59 per cent increase in FY23 compared to FY22,” says Arora.
In Europe, LTFL successfully implemented a greenfield strategy, establishing LT Foods Europe in the Netherlands in 2017. The investments in packaging expansion yielded significant returns, with this region contributing 19 per cent to the total revenue in FY23.
Globally, LTFL is focused on strengthening distribution networks and expanding product reach, which resulted in an impressive 34 per cent growth in FY23. Notably, 6 per cent of total revenue comes from diverse countries, including the Far East, Israel, Mauritius, Fiji, Australia, Singapore, Maldives, Hong Kong, and New Zealand.
| ‘We are working towards exceeding Rs 11k Cr in revenue’ |
With a sustained outlay of Rs 700-800 crore over the next three years, LT Foods is eyeing a consolidated revenue exceeding Rs 11,000 crore, Ashwani Arora, MD & CEO, LT Foods tells Ashish Sinha: Excerpts. How was the last three-years for you? How do you plan to meet the target of Rs 11,000 crore in revenue in next few years? Why are you diversifying the revenue streams? Tell us about your recent JV, acquisitions? |
Promoting Sustainability
Notably, LTFL is a founding member of the United Nations-backed Sustainable Rice Platform (SRP) in India. The SRP is a multi-stakeholder platform co-convened by the United Nations Environmental Programme and the International Rice Research Institute to promote resource efficiency and sustainable trade flows, production and consumption operations, and supply chains in the global rice sector.
“We work with farmers to grow sustainable and residue-free basmati rice as per the SRP standards. All farmers taking part in our outreach initiatives are given training and exposure to every aspect of SRP,” says Arora. By 2025, LTFL aims to train 50,000 farmers in sustainable farming methods. So far, more than 16,000 farmers have already been trained, the CEO informs. Now, LTFL is making efforts towards bringing 2.5 Lakh acres of organic farmland under sustainable cultivation by 2030. The company claims to have already done so with 1.64 Lakh acres of farmland, paving the way for healthier agricultural methods and a greener future.
Peer Challenge
KRBL, the world’s largest rice miller and promoter of India Gate Basmati rice, saw its domestic revenue grew 27 per cent in H1 FY24 on y-o-y basis. For the full FY23, its total income stood at Rs 5,456 crore with 26 per cent coming from domestic, and the rest from overseas. Between these two giant rice exporters, the India success story is shining bright in the overseas market.
ashish.sinha@businessworld.in
