Financial Daily from THE HINDU group of publications
Thursday, Mar 17, 2005
Agri-Biz & Commodities - Rice
Satnam Overseas eyes Rs 800-cr sales in 2 years To increase focus on branded rice, ready-to-eat products
Sindhu J. Bhattacharya
New Delhi , March 16
SATNAM Overseas is eyeing a sales target of Rs 800 crore a 60 per cent jump within two years. The company plans to achieve this target by enhancing focus on the branded business and defocusing its twin businesses of basmati exports in private labels and trading in commodities.
At present, it exports Basmati rice to retailers in several countries abroad who then sell the rice under their own brand name. Also, the company trades in select commodities such as pulses, soya and corn.
The Joint Managing Director, Mr Gurnam Arora, told Business Line, "We are no longer interested in the private label business or in commodity trading. Both these businesses give low returns and do not generate any brand loyalty. We have instead decided to focus exclusively on our own branded rice and ready-to-eat products business".
The branded products business of Satnam, at present, accounts for only 35-40 per cent of the topline but its contribution will go up to 70 per cent over the next two years, he said. It comprises rice under several brand names, including Kohinoor, Trophy, Shahanshah and Darbar and the RTE range under brand name Kohinoor.
Mr Arora said that with enhanced focus on the branded business, plans are afoot to acquire an FMCG company that has an established distribution channel.
In fact, management consultant PricewaterhouseCoopers has been appointed for this deal and Satnam is looking at possible acquisition targets both within India and abroad.
Also, Satnam forged a 50:50 joint venture with a UK-based company last year, to set up a rice mill in that country. But the joint venture will be converted into a wholly-owned subsidiary by the end of this fiscal and the mill is expected to go on stream by May this year.
"We have decided to buy out the joint venture partner's stake for about Rs 1.2 crore. This mill will initially be used for rice, but we may put another line for atta," Mr Arora said.
Over the last few months, promoters have been offloading stake in the company. When asked about it, Mr Arora said that, at present, promoter stake stands at about 44 per cent.
"We have offloaded about 20 per cent of our shareholding in the company since October 2004. This has been done to increase liquidity and to get quality investors. Recently, Citi Global and Temasek have bought into the company so that the total foreign institutional investor holding is now 30 per cent."
He said there were no plans by promoters to divest any further shares of the company this fiscal.
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