Domestic & Global businesses are doing well: Ashwani Arora, MD & CEO, LT Foods

Ashwani Arora, Managing Director & CEO, LT Foods, talks about the September quarter numbers, future growth prospects, export market and strategy related to it, debt levels and the kind of support he needs from the government among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Congratulations! Your numbers for the September quarter are good and the margins have expanded and profit has grown by 65%. Firstly, we would like to know that was it related to the festive demand and do you think that the momentum will continue in future as well?

A: The sale that we have seen in October is due to the festive season and it happens every year. We have seen a growth of 25% year-on-year. Overall, till the time, we have grown at 16% year-on-year. During the festive season, we have seen that the HORECA (hotels, restaurant and canteen) business is also opening up, except fine dining, which has not improved yet. Besides, the HORECA business is happening even in the tier-II cities. Overall we are seeing good sentiment in the festive season.

Q: Going forward what is the outlook for the future. Do you think that the performance of H1FY21 will be seen in H2FY21, if yes, what are going to be the key growth drivers of your business?

A: As far as H1 is concerned then as you have said that we have grown 24% in H1 as compared to the last year and that is mainly as a consumer company that has been done because we have strong brands, strong distribution and strong supply chain. These were the three factors, which has given us growth and we have grown across the globe as we know that we will be present in India, the US, Europe and the Middle East and rest of the world. We have seen the growth across global. And, we have seen home consumption has increased although foodservice and HORECA have faced slight dent. Home consumption as I have said about October, we are expecting to be retained and we are seeing that we will be able to keep the growth momentum.

Q: LT Foods is a major exporter of basmati rice. So, can you brief us about the performance in the export market?

A: Export to the international market has been better when compared to India. Daawat is present globally. Royal, which is the number 1 brand in the US has a 55% market share. Our Ready to Eat business is also doing very good. So, the international business, for instance in Europe our business has stabilized and we have seen 170% growth in Europe also. Overall, across the globe, we have grown by 34% as compared to the last year.

Q: What are the prospects and which are the new markets where you would like to enter? Tell us about your strategy related to export and add new markets?

A: The strategy as a consumer food company we are focusing on basically increasing our distribution footprint and adding the new product portfolio. We have also launched new products in the recent past, like Daawat Sehat Rice, which is fortified rice and Daawat Cuppa Rice and we are getting good response in it. In America, we have launched Royal Ready to Eat rice, which is also giving us a very good response and we are expecting that we will keep this growth momentum.

Q: The company has a debt of around Rs 1,400 crore. What are your plans to reduce it going ahead and what can be the debt levels? Also, tell us about the current working capital requirement of the company? 

A: All of our borrowing and debts are working capital for us because the nature of our business is that we have to sell our goods after storing them for 12 months to two years. But year-on-year, the plan is to reduce our borrowing and strengthen our financial matters where debt to EBITDA should be in the range of 2:3 and as you have seen that in H1 on a year-on-year basis, we have reduced our borrowing by Rs 150 crore. And going forward, a part of our free cash flow will move into the reduction of the borrowings.

Q: There are reports that the government is mulling to provide an export subsidiary. So, what kind of incentives do you see there and how helpful is it going to be for your sector?

A: As far as subsidiary and export are concerned then there is no incentive in our category. We are requesting the government to increase the ambit of interest subvention from MSME to the industry because our competitor Pakistan is getting at a lower rate of interest. So, the request has been sent and I am sure that the government is considering that. But as far as an incentive is concerned then there is no incentive in our sector. Our Ready to Eat and Ready to Heat businesses will be benefitted under the newly launched production linked incentive scheme.

Q: Let us know about the visible order book that you would get in the remaining quarters of this fiscal year beyond the good orders that you have also bagged?

A: We are a consumer food company and our business is very stable and is led by our strong brands, which is Daawat and Royal. And, we have a very regular sales, it is not something order-based but a consume-based. So, we have a plan to grow year-on-year and we will keep growing year-on-year.

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