© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to Q3 FY '23 Earnings Conference Call for Godrej Agrovet hosted by Motilal Oswal Financial Services. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kumar from Motilal Oswal Financial Services Limited.  Thank you, and over to you, Mr. Juan.
Good afternoon, everyone, and thank you for joining us on Godrej Agrovet 3Q FY '23 Earnings Conference Call. From the company, we have with us Mr. Nadir Godrej, Chairman of the company; Mr. Balram Yadav, Managing Director; Mr. Subramanian Varadaraj, Chief CFO; and Mr. Anurag Roy, CEO of Astec Lifesciences. We would like to begin the call with the brief opening remarks from the management following which we will have the forum open for the interactive question and answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking and a disclaimer to this effect has been included in the earlier presentation shared with Amir. I would now like to invite Mr. Nadir Godrej to make the initial remarks. Over to you, sir.
Good afternoon, everyone. I welcome you all to the Godrej Agrovet earnings call. I hope and wish you are doing good. Godrej Agrovet continues to report a heady top line growth of 12% in quarter 3 fiscal year '23 and 17% in the 9 months of fiscal year '23 year-on-year. Most of our businesses maintained robust growth in volumes. However, profitability was impacted due to adverse sector-specific macro conditions, unfavorable commodity price movement and limited transmission of input costs in patient. During the quarter, we successfully sold land situated at under Tamil and the profit net of expenses of INR 6.4 crores has been included in other income for quarter 3 fiscal year '23 and nine months fiscal year '23. Coming to the key financial and business highlights of each of our business segments. In Animal fee, we achieved the highest ever watering volumes in quarter 3 fiscal year '23, recording a 7% year-on-year volume growth. The volume growth was mainly led by market share gains in the cattle feed category as we further cemented our dominant position in the Western region. On the margin front, also, the Animal Feed segment was able to sustain sequential recovery EBIT per metric tonne from INR 1,381 in quarter 2 to INR 1,507 million in quarter 3. Our vegoil segment registered 13% growth in fresh food bank volume in quarter 3 fiscal year '23. However, the average realization of crude palm oil and palm canalloy declined from last year's iBase by 24% and 26%, respectively, in quarter 3 fiscal year '23. As a result, segment profitability declined year-on-year. During the quarter, we signed an MOU, but the state government of Nagaland for development and promotion of oil farm calculation. The standalone crop protection business revenues more than doubled in quarter 3 fiscal year '23 driven by higher sales of in-licensed products, mainly Grassi and lower return as compared to the previous year. Profitability also improved in quarter 3 fiscal year '23 as compared to the previous year. This is maintained its steadfast focus on credit hygiene and achieve further improvement in working capital. For Asset Life Sciences, quarter 3 was a very challenging quarter as performance was impacted due to demand headwinds and pricing correction. Business was impacted on account of high inventories and reduced realization from last year's high base. Contract manufacturing performance, however, was in line with our expectation. The Poultry segment recorded strong growth in top line as well as profitability. Revenues grew by 38% year-on-year with EBITDA margin of 6.3% in quarter 3 fiscal year '23, led by robust volumes in branded categories, coupled with the recovery in live bird prices, real good chicken RGC and Yami achieved volume growth of 45% and 46% year-on-year, respectively.So the dairy segment sustained volume growth in both value-added products and milk volumes was offset by a continued drive in mid procurement prices. Revenues grew by 21% year-on-year in quarter 3 fiscal year '23, led by 22% growth in value-added products. Sales of value-added products portfolio was at 32% of the total sales in the 9 months fiscal year '23. Profitability continued to be impacted by limited transmission of rising procurement prices. Here there is joint venture in Bangladesh, ACI Godrej recorded revenue growth of 31% year-on-year in quarter 3, driven by a combination of higher realization and volume growth. That concludes our business and financial performance update for the quarter. With this, I close my opening remarks. We will now be happy to take your questions. Thank you.
We will now begin the question-and-answer session. [Operator Instructions] Participants are requested to your hand question. [Operator Instructions] We have a question from the line of Lokesh Maru from Nippon India Mutual Fund.
I just have one question on our fleet segment, wherein since prices are down year-over-year, what is in general hurting the margin recovery assets in the segment for us?
Your voice was not very clear. Can you please repeat the question?
I just have one question on margins within the feed segment. As the given that some prices have corrected quite significantly, what is hurting our margin recovery as such?
I must tell you that particularly shrimp and poultry feed both layer and broilers, there is a shrinkage in the market size, but we still are growing and our market share is growing just because there is a little bit of intense competition, the transmission of increased raw material costs had not been fully transmitted. So we can see a little bit of, I would say, price competition amongst the players. But my sense is that the margin recovery will start probably towards the end of this quarter when the rate seed, et cetera, et cetera, is available, and we see a further drop in raw material costs. So I think I don't see that happening in the next 3 to 4 weeks, but definitely in 6 weeks' time, things will start improving in the animal fleet business. And I must also tell you that we have a single-minded focus of going in for more and more volume growth, that is more and more market share. In several markets, we are -- where we were in 3 and 4 in positions, we have come to 1 or 2 in several sees. And I think we have the initiative in case we are able to wait for the margin for every quarter or 2, I can definitely say that we will register a double-digit growth in coming quarters in the animal feed business.
Sure, sir. Got that. And should be within few, let's say, [indiscernible] grain prices being again had national pressured zone, what are you from this blend of 3? How are you seeing the margins actually on each of them turning around coming along as of now.
The blended margin will continue to be close to about INR 1,500 whatever we got in Q3.
Sure. Understood. So within our palm oil business, you are seeing some shrinkage in our extraction ratio. Any particular reason for that?
So a lot of work has happened in production process in handling. And I think there is a lot of efficiency which has been built up across the supply chain. So starting with now we have supervisors who tell the farmer than to harvest. And that also helps us in scheduling the arrival of fruits in the factory so that they are putting the mill within a few hours unlike previous times when the fruit would have to wait on ramp for about 12 to 18 hours before being processed. So it is the entire supply chain efficiency, but some improvements in our production process, which have resulted in this improvement in OER. And I must say that the major improvement has already happened. So you won't see such quantum jumps in future. But marginally, there is a scope of continuously improving OER for next few years because of improved practices, improved germplasm and improved supply chain.
I would add that on a quarter-on-quarter basis, there will be some minor variations in OER because of oil content in the proved. So those minor variations would be there -- but overall-- Good luck to you.Given impact as such, got that. And sir, keeping the palm prices, global like palm prices apart, where we have seen that our volume growth has been quite hunting. How do you guide the volume growth going forward? And where do we stand today in terms of acreage? And any additions -- potential additions because of this Nagaland approval. So any light on growth part, volume part of the palm oil business. That's my last question.
Let me tell you something futuristic. In Nagaland MOU in place with Asam, Naval and Manipur, Tripura, Mizoram, and we have likely get more allocation in [Indiscernible]. Apart from that, Tamilnadu and Orica have also renewed their program. So we are in a massive expansion mode as far as our nursery is concerned, say, a year ago, we had a net of about 1 million feed link. Today, we have mercury capacity of 2.5 million selling that will result in area expansion of close to 10,000 to 12,000 hectares per annum, up from 3,000, 4,000 hectares, which used to happen in last few years, including this year. So I think NMAP scheme is doing whatever it is was required to do, and there is a huge focus of state and central government in this space. So that is point #1. Point #2 is that we are also very worried about this volatility of oil price. So there have been certain investments made by us to insulate this business as much as possible. So we have set up a 400-tonne refinery so that we are able to refine the oil and increase the shelf life of that oil, so that there is no particular pressure on us to sell on a daily basis because CPO develops SFA, which is that the CPU goes at a discount to the market price, if FFA is higher. And we have also set up a solvent extraction plant of 100 TPD, mainly for certain byproducts which come out of this process, and we will extract more oil and make them usable for the animal feed business. So I think that these initiatives will continue. There are several other initiatives where we convert wealth from waste, and I think that will continue. So our sense is that in a year's time, significant part, when I say significant part, almost 25% to 30% of our profits will come from allied activities other than oil sales. So I think that is the effort. Regarding the prices, I cannot say much. Mr. Godrej, would you like to give some guidance on CPO prices?
Yes, we do expect that CPO prices will rise a little bit, but not very much.
[Operator Instructions] The next question is from the line of Abhijit Akella from Kotak Securities.
So just a few from my side. One is on the crop protection business, including Astec, if you could please just talk about your outlook for how that business is expected to perform given the inventory glut that seems to be underway across a lot of tower.
I'll request Varadaraj to talk about sector, then I'll brief you about the crop protection business.
Yes, for check -- as you might have seen the numbers, we have experienced significant headwinds, particularly in Q3 because of the muted domestic demand and the price erosion in the export market. So that's how Q3 was. We are seeing some uptake in the market for supply-demand situation to balance out for most of our enterprise products. But that uptick pace is relatively lower than what we have seen last year. So we continue to have a very cautious next few months to get the volatility coming in from the macros, and we continue to focus on producing the VS efficiency product and strategic sourcing. So that thing we the outlook on Astec, at least for the next 3 to 4 months. I turn it over to Mr. Yadav to talk about.
So I think CPB has been a mixed bag this year. If you ask me our performance as far as this year is concerned, there is no problem in the top line growth, et cetera. And we have been extremely cautious not to get into that better and inventory trap. Now our big problem has been a little bit of hygiene, which is a, I would say, a handover of last 2 years of onto failure and covet during our main months, April, May, June, July in both the years. And I think that cleanup has been a significant part of the debt, which has come in profitability. So my sense is that from this quarter onwards, we will see things going up. I must also say that we are very encouraged by the good success of Gracia and between this year. And you can say what is the growth in Gracia? Yes. So in crores with 9 months, it in 8 wet Max last year, 9 months, INR 105 crores. It is now INR 183 crores. And 9 months Gracia last year was 47%. And we budget was 47 that we have done already INR 115 crores. I think that portfolio choices have been made, whatever was supposed to be provided and have been provided in spite of the fact that we believe that some part of it, we will definitely recover in the coming quarters. But from -- for good order intake, we have provided so that we don't continue with them. The team has also been changed. So I think all the things which were required to transform this division has been done. And you will see a very, very big improvement in the performance in coming quarters. And I think we should get back to our normal PBT levels, which used to be from -- for the last several years in this business.
Got it, sir. So on the stand-alone business, basically, I guess, we are implying that the upcoming year will be significantly better in terms of margins, particularly on Astec, if you could, I mean, share your thoughts on how you see the industry shaping up? Do you see these challenges persisting for some indefinite amount of time in the future? Or will it be more of a transient passing phase?
For tech, what we have seen, clearly, there were a host of factors that led to weakening of margins and volumes, particularly in Q3. One was the erratic weather conditions across the globe, which we spoke about in the previous calls as well. Then China has also become extremely aggressive, particularly in the export market, one, because of their dual control policy in China has also been relaxed, and they also have seen weakening in demand in the internal China market. So there have been 2 or 3 of these factors that has significantly contributed to weakening of volumes and margins. So for few of the product portfolio, which we have, we are still seeing an overcapacity or huge price competition from China. But for the other, we are clearly seeing that the supply-demand balance is about to be reached or we have already seen those old products reaching the supply-demand balance. So I would say that the situation is temporary. It should have turned around a little bit quicker. But as we currently see that it might take a few more months before some of the balance in the market, both from the supply and demand side would be achieved. And then hopefully, our margins and the profitability would be back on track...
Got it. That's helpful. Also, just on the oil palm business or fixed bookkeeping question, is it possible to share the volumes for this quarter as well as YTD.
Sure. So this quarter, we had an adverse the arrival of around 19,000 metric tonnes, it is almost a 10% growth over the same quarter last year.
And the area added is double up almost last year. We did about 1,800. Now we have done about 3,300 hectares.
Yes. And the OER remains in the range of 18-odd percent, sir? Is that...
INR 9 crores... OR for the quarter is close to 20%.
Okay. And just one last thing from my side is actually on the Bangladesh business, where also margins seem to have declined quite substantially. So expect these price controls to continue in the closeable future? And how do you see margins progressing in that business?
To tell you something about Bangladesh, they're import dependence on food is very high. And for our sector also, if you ask me, almost 70% of the feed ingredients are imported. And their currency is depreciating almost every month. So I think that the country is in a little bit of fixed. And that is why just to make sure that the are almost INR 80 crores, INR 19 crore population is secured. They have brought in price controls and a lot of essential food commodity. So I'm saying that, that is part of the game there. And I must tell you the kind of hit we have had is that if you see our contribution in FY '22 in poultry feed was about INR 2,375 INR 2,372. And 9 months of FY '23, it is negative of INR 1,120. And I must say that the call of the government, I think all the industries and including all seed companies have cooperated with whatever government has said. My sense is that now they are -- they have exceeded to most of the demand of IMF and they are likely to get, I think, a lot of relief from IMF. And we are seeing the first signs of removal of price controls in from commodities. So my sense is I think that not in next few weeks, but I think by April or May, I think it will be business as usual for Bangladesh underpin a global recession set an in, I think they suffer in the economy because a lot of their foreign exchanges because of governments to Western world and remittances from the Western world.
Got it, sir. Just to clarify the -- you mentioned the contribution has turned negative contribution margin. And yes, we are seeing positive income from associates. So how do we reconcile those 2?
No, it's negative only in a particular segment. et cetera, there is no control. It's almost 2/3 of our business, where we are getting very good. And if you see, if you see 9 months profit is about INR 26 crores. That is INR 52 crores because it's a 50-50 JV. So it is already there. But I'm saying that had there been no price control, we should have been close to almost INR 100 crores.
I understand, sir. And sorry, if you can permit just one last thing from me. It's on the portfolio management side. So we have indicated some sort of thoughts in the past of trying to restructure our overall business portfolio to sort of make it more efficient, et cetera. So if you could comment on that and maybe also particularly touch upon the crop protection side, whether you see both Astec and stand-alone business remaining separate? Or would there be some merit in considering a combination of the 2 at some point? What are your thoughts on that...
So I think if you see our past the group, investing in harvesting is part and parcel of our business. So I think buying and selling and noncore, core, et cetera, is something which we always continue to look at. So I think in case there is opportunity, which is not there right now because I think most of our businesses are under external challenges, and I think not a great time to probably look for any kind of consolidation. But I must say that definitely, we will be -- it is always on the table for us to review these things. Having -- since you have asked about the Astec LifeSciences question, I think we have put to rest the discussion that we will ever merge CPB and Astec. It is not going to be there. We are just going to commission in 6 to 8 weeks' time, a state of our R&D center, which will launch us into CDMO. And one of the requirements of CDMO is that it should it should have the ability of operating independently because I think a lot of confidential work happens and a lot of confidence of our associates and our partners will come from Astec being independent. So we have understood it very clearly. I think we appointed consultants to understand that in greater depth. And I can assure you that  Astec LifeSciences will continue to be an independent company.
The next question is from the line of [ Stephane ] from Unifi Capital.
My first question was to Anurag. Anurag, if you could call out a couple of things. One is CDMO, second half is usually better. How is that trending in this year? Also, if you could call out what kind of price solution has happened for the enterprise product? And more specifically for the 2 products that we have a good amount of revenues coming from tebuconazole and propane's all. If you could specifically call out what kind of erosion has happened. But is there inventories which is still built up by customers? And for the base business, what is the normalized margin range that we should think for '24?
Right. I think there are 3, 4 questions here. So I'll first talk about the CDMO business, as Mr. Balram was also highlighting for Astec Life Sciences, we clearly understand that in our current product portfolio on the enterprise side, there is a huge amount of volatility and a threat from China's aggressiveness quarter-on-quarter or year-on-year. So in terms of our future strategy, clearly, the focus has been on the CDMO part of business so that we can ensure sustainable and profitable growth year-on-year. And that we would start once our R&D is coming on board in a big way. In terms of our performance on CDMO, we stay very much on track. If you see our numbers last year, we were roughly around INR 84 crores or INR 85 crores on CDMO revenues, and we plan to almost double it this year. And that's the indication which we have given in the previous call as well. And year-on-year, we plan to maintain a healthy 30% to 50% growth on our CDMO business as we are seeing a strong pipeline of inquiries building up as our R&D is also coming on board. Coming back to the question on the margin deterioration. The last quarter has been -- we were expecting as we got into the quarter, significant margin operation, but it deteriorated by more than what we were expecting, there was some cancellation of some of the big orders from the customer beginning of the quarter, that also took us by surprise because there was broad of inventory buildup primarily because of the poor are in the domestic market, and you would have seen that degrowth in the domestic business in the last quarter. And then two, particularly on one of our key gold products, while we do not give product-wise indication on the margin. But as you talked about payload the goal on that product, if you just see the price erosion that has happened over the last 6 to 8 months, we are seeing the price erosion of almost $22 to $23 price of table console coming down to less than $9. And there has been an overcapacity situation from the China, there's been muted demand, which all is contributing to significant pricing pressure. So we are observing these trends and the aggression from the China relaxation of dual control policy, and we are going forward with the preparation that for some of our gold products will continue to see these margin trades and tenor strategy to quickly diversify and expand into CDMO business. So the sooner we get there, the more we would be immune to this kind of volatility in the margin. But talking specifically on these given products, we still feel that it's a temporary supply-demand in balance, the change in strategy or competitiveness from China. And there's been some high-cost inventories build up from our side as well, which will all start to ease out, and we'll start seeing some uptick in the coming months as we move forward even on these products. But at a broad level, our vision or our strategy is very clear that we want to immune from the volatility by quickly increasing the share of the CDMO business and our overall revenue.
That's helpful. Anurag, could you call out the 9-month number for CDMO and base business, what kind of margin range should we expect for 24 or it's too early to call it out?
People... We have 9 months CDMO numbers, revenue numbers as I think already there around INR 93 crores, that's the...
Enterprise is INR 407.
Yes, enterprise is INR 407. So as I mentioned, for CDMO, whatever indication for the year we have given, we are well on track on achieving that number.
Got it. But also one question. You mentioned at the start of the call that in the Animal Feeds business, you're expecting the INR 1.5 per kilo to sort of continue. You did quantify the duration for that. So are you expecting that for the subsequent quarter? And also in the AF business, you mentioned a point that there has been a shrinkage of market size for poultry and shrimp. Is that something which is just a temporary blip? Or is there something that we should read into further. And when do we expect to go back to that 5% to 6% range from an EBIT perspective in that segment?
So let me talk about poultry first. I think poultry has gone through some tough times, and that is why the population has come down. And it is a cyclical business. So I will not be very surprised this poultry market is back once the prices rise, which will happen in the next few months. So my sense is that we will be back to poultry growth by -- I'm not talking about poultry feed, I'm talking about poultry growth by, say, September, October this year because that is why this even will start. So having said that, but we will continue to go for more and more volumes in poultry segment and increase our share. As far as margins are concerned, I think that margins will continue at the same levels at least for next 2 quarters, Q1, Q4 and Q1. The reason being that these are off season for most of our raw materials and the kind of price competition we are seeing, it is highly unlikely that transmission of all costs will be possible and maybe some players going who want to go for volume may drop prices also. As far as shrimp is concerned, the problem is real. And as we are untreated by Ecuador from our #1 position as a shrimp exporter because of a lot of our quality issues, et cetera. Shrimp is going to have tough time under terms undo some correction with them. My sense is that this decline in the size of the market in shrimp is likely to continue next year also.
Got it. That's very helpful. And sir, just one last question on FFPs. What kind of volume should one be thinking about for FY '24? Because I think on last call, you had said that substantial amounts would come in from 25%. So could you just call out how volume should be for the...
So my sense is that next year also we will see a 10%, 12% growth. But FY '25 or FY '26. I think for in agriculture and particularly about fixture crop, things can change by a quarter or 2. And in your parallel quarter or 2 maybe a different financial year also. So the issue is that the time, definitely more and more acres are going to come into production. So we might see in FY '25, '26, another say, 14%, 15% jump. 272 all these increases of this year will start coming in. So you will see progressively the quantum of jumps increasing as we go along because from next year onwards, we are very sure that from 3 40,000, 5,000 hectares per annum, our expansion will go to something 10,000, 12,000 hectares per annum. And I've already told you that we have doubled the size of our bursary. And now we are going to triple it in next 6 to 8 months' time. So I think that is the opportunity, which has been created by the central longest government because of that NEP scheme. So I think that will continue. You must have also read that we have already got very good allocation in Telangana. We have asked for more. And Telangana itself in case the government support continues belated will be 10,000 hectares per annum in case everything come to pass.
The next question is from the line of Depesh Kashyap from Equirus Capital.
I just wanted to add one point on Aquafil. While shrimp looks bleak, the fish is the next big thing in this country because of renewed support. And I think the central government is so encouraged by that Madalony, Sampada on which was brought in 4 years ago and INR 20,000 crores were spent. You cannot believe the kind of growth in land which we have had, and that has encouraged them to put another INR 6,600 crores in the coming year. So my sense is that shrimp decline will definitely be also scheduled by the phenomenal growth we will see in fish. The constraints will be hedged. Okay. Go ahead, please.
Depesh Kashyap from Equirus Capital.
Sir, just on the Enterprise business in Astec, now given that we have spoken about the overcapacity in our flu products, is there any way that over the next 1.5, 2 years, we can look at diversifying away from these products, given that the competition in China will always be there and the margin volatility is likely to continue because of that?
Absolutely. So that is what I mentioned earlier, getting into CDMO is obviously one diversification strategy for having a sustainable margins. And within the goal or our product portfolio within the enterprise products as well. We are working on further diversifying, looking at fee of the products, which could serve us higher margins in the short-term duration. So absolutely, that's clearly one of the key strategies, which we would be seeing if we see these muted margins in the coming quarter as well.
Okay. Sir. And secondly, in terms of our land acquisition and NPP, which was supposed to be starting work in this year, what is the status on that?
So it's on that and on the right time, we'll make that announcement. So the review process is still on car... Due diligence has been conducted right now. And as soon as anything is finalized, we'll inform the take.
So what will be the CapEx amount this year because we had guided to INR 375 crores for FY '24.
So we already are implementing one more plant. So that will be commissioned in September, October.
So... Yes, let me -- so I think this is what we mentioned earlier also that there has already been a herbicide expansion plan, which has been taken in Mahad, which we have already started working on, and that should be up and running by this year, September or latest November, December. So that's on track. So the projections for the CapEx what we have given for this year, we are on taco implementing that.
The next question is from the line of Nitin Awasthi from InCred Equities.
Sir, wanted to know your views on 2 things, broadly with acting a changing cubic in the industry and the impact it would have on the company, if any. One is the use of DDPS. So now there's this move of ethanol plants coming up, economy on green and the backlog of DDGS is being going out there, which is not there available in all costs that previously. But what I understand from whatever is out there is that the synthesis of DDGS is not possible by buy require technology advancement by companies. So in Cores looking at it, it could it be able to synthesize it to use it to a great extent? Or does it matter to both...
So DDGS is going to be a very welcome thing for the feed industry in this country because it is a very good source of protein, and it's very competitive also. So we would welcome that. But I must tell you that when DDGS comes out of the system, it has almost 80% more share. And I think that there is the biggest cost in DDGS is the energy cost to drive. Now one of the issues which we are seeing with several ethanol plants is that they are not making efforts or not investing enough to drive DDGS. They just want to get rid of it in the neighboring area as a slurry, which can be directly set to cattle also, of course, not that it is the best way to feed DDGS. But we definitely will look for opportunities of collaboration where we can co-invest and get that DGF in right from available to us and feed business. But the bottom line is that in any combination, DDGS is a very welcome change.
Understood, sir. And is the part about sensitization true that the blending will increase only once the protein is emphasize that cannot be done in general tier?
No, it's not -- I'm saying once we put a dryer system on other things that other thing in handle, not a big issue.
Okay. And what percentage of DBS can you make to a normal or normal proportion?
I think it's the tip if I'm not wrong. No. I'm saying that fashion poultry and everywhere in high-quality tatted also this can be used. Now this can be -- it's a very good quality protein, definitely, it competes with other high-quality proteins like fishmeal and fish meal in aquafeed and so being in Aquafeed and poultry feeds. So I think at different levels and different prices, we run a linear program and include that. But according to me, easily anything between 5% to 10% in these feeds is easily usable, which is going to be a very substantial quantity as far as feed industry is concerned.
Understood, sir. Understood. Secondly, I want you to a little bit about the [indiscernible]
Such as the attractiveness of this product there about a decade ago, we had given an application to government of India to allow imports of DDGS into the country. So that pressure on protein inputs can reduce. But unfortunately, all the DDGS outside is GM, and that is why that permission was not given. So I think it's a wonderful raw material.
Understood. Understood. Sir, the next thing I wanted to understand was a little bit from the cost base front. We had a lot of agri companies let's call them that, startup and venture into kind of becoming a median between the farmer and the products. And now they have launched their own products. I'm talking about companies in particular, where they had now data mine the customers what they need, and now they have tried to fill that pipeline by themselves. One of these companies have started a direct animal-free product, which competes with you. Do you have any thoughts whether these agri tech companies will be able to make a dent in the market?
So we have been watching this space, but I think that it is still time to form a judgment on this. So I would not like to comment, but I think in case you have any specific questions, any specific company, any specific area you want to discuss, I'll be more than glad to enlighten you on what I know about that space offline.
The next question is from the line of Aakash Manghani from Unifi Capital.
Just want to get a sense of the port business specifically. So what was the contribution of life words and the branded business this quarter?
Hold on, let me just run the numbers. No, no, so if you see the branded business was about 51% and live bird business was 49%. Last year... [indiscernible]
No, no, sir. That's fine. I was just checking what -- can you call that out for 9 months as well because your trajectory.
Nine months, we are 46% live and 54% branded.
Got it. Got it. Got it, sir. And sir, could you just also just again validate that contribution margins for GC are in the low teens and James is quite high, right? But understanding is broadly correct, right?
Yes. So you're absolutely right. And it is close to about 8%.
Okay. Perfect. And sir, just wanted to get a sense that, again, the focus is -- could you speak a little bit on how the branded business distribution is playing out because your focus is to grow that part of the business to reduce volatility. So could you comment a little bit about that?
I think I must tell you that we have a very stable RBC business now. We are processing close to 60,000 birds a day in both our facilities. And I must tell you that every bird is used up profitability in both our plants. We are the biggest supplier to several QSR. We are also one of the big suppliers to B2C company, which is a very, very stable business. And I must also tell you that we are only part suppliers to these companies because we still have constraints and capacities because we have our own retail business also, and we also have to produce boneless ticking for our unique facility. So I can definitely say that margins are stable, and we have some of the line customers also, and we work very closely with them to improve quality as well as do a lot of value addition in our plant, what is needed by them. And I think one more round of upgradation of plants is likely to happen in the next 3 to 4 months, and we will increase our capacity by another 15%, 16%. And that will be the -- that will be the focus for next year.
Got it, sir. That's very helpful. And sir, just another recheck on the dairy business that at what levels of sales and value add does that business sort of breakeven today?
So I think it's an interesting question, but I have a slightly longer answer. Now last 2 years are very, very different from what it has been because we have data work for our Creamline Dairy business for the last 25 years. And we have never seen such low margin because you know, and it is known to everybody and results of every company a show that, that we are not able to pass through all the cost increases of milk in price, and that is because of cooperatives and several of our industry players are very reluctant to increase milk prices, milk prices regularly. So I think that has hurt the industry. So if you ask me, we will do close to about INR 1,500 crores at the current contribution, and we will make a loss.Had we done INR 2,000 crores, we would have been close to -- very close to breakeven -- and had we done -- today, we have already reached 40% value-added products in first 9 months, which is a big leap over last year actually. And now we have already invested in on SIG line. So we will have the capability of making multiple backing also. So my sense is that we'll try very hard to reach 50% value-added products. We will also try and take price increases wherever possible and value-added products because it is not that price [indiscernible]. And in case we reach the number I talked about next year with 50% value-added well, we will be, I think, room as far as profitability is concerned.
Got it. Sir, this was very helpful and the direct procurement, which was -- it's still that 14 range broadly...
I just want to tell you that where our confidence comes from. I'm saying that in first 9 months, our total value-added product grown by about 45%, 48%, sorry.
Growth in volume of annuity, 39%.
39%, but value growth is... [indiscernible] 43% value growth, 39% volume growth and salience has jumped to 41% already in first 9 months. The second thing is the direct procurement. Definitely, I think that has been focused, but it is a slow grind considering there is milk shortage, and I think everybody is holding on to their supply chain, but that has been a very, very important focus, and that will continue to remain focused. Some substantial results you will see in coming years. But I can't put a number because the current situation is a little bit grains far as milk supplies are concerned.
Got it, sir. And sir, could you finally just call out what has been the CapEx for the first 9 months? And what is it for -- expected for '23 and outlook for 24 on the CapEx...
Are they fund?
CapEx for 9 months full year '23 expected and '24.
This for Baglanis consolidated.
Yes, sir.
We'll give it offline to you. So I must say in that I think this year, we will definitely cross about I think we will capitalize close to INR 300 crores because there will be a spillover of some plants, particularly asset plant, which is close to more than INR 150 crores will be capitalized sometime in September, October. But I can definitely say that we are in the process of finalizing AOP for next year. So I think within 2 weeks' time, we will be able to tell you offline.
The next question is from the line of Harsh Mantri from [Fluth Gas Private Limited].
Sir, I needed to understand the breakup of the market share of all the subsegments in animal field business. So as you mentioned that in business is having some volatile time and the Aqua business may grow in future. So what would be the future growth aspect? And whether you would be further diversifying the 50% revenue share you are gaining from the animal feed segment, what is the future outlook on the same?
I did not understand...
I need to understand the breakup of the market share of all the subsegments and the animal feed business.
Very difficult. So what we do is that we connect this data once in Q4 when we discuss our AOP LRP. So I think that process is on, but I cannot give you a number, but in next -- definitely next time we have this, they will give you a segment-wise market share. And for that also, we make an estimation of the industry since the data is very, very scattered in this industry. I think the question is very good. The only thing is that we need some time to answer that.
Sir, any broader guideline on the same? Not to be precise.
So actually, we did not work that out for some months. So I don't...
You would have a decision under that...
No. I think in a few weeks' time, we will be able to share that. Just make a note of it.
Yes. Sir, the further question on the same, like as you are diversifying into different businesses and reducing your revenue share from animal feed business, getting more products on your top line. So would it continue in the future also? What is your outlook?
So animal feed business revenue share can even increase in case there is inflation in raw material prices. But in volume terms, as you see that the other businesses will grow much faster. So animal feed is likely to grow by 11%, 12% next year. But if you see crop production business will grow faster than that. OPP will grow complete and faster than that. CDPL dairy business will grow faster than that. So I think it depends on inflation numbers also. But my sense is that salience of animal feed business slowly will come down because other businesses are likely to grow much faster on volume basis.
The next question is from the line of Aman Individual Investor. I'm man is not in the queue anymore. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you. I hope we have been able to answer all your questions. If you have any further questions, I would like to know more about the company, we would be happy to be of assistance. Stay safe and stay healthy. Thank you once again for taking the time to join us on this call.
Thank you very much, sir. On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.