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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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Ladies and gentlemen, good day, and welcome to Godrej Agrovet Limited earnings conference call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mit Shah from CDR India. Thank you. And over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on the Godrej Agrovet Q4 and FY '22 Earnings Conference Call. From the company, we have Mr. Nadir Godrej, Chairman of the company; Mr. Balram S. Yadav, Managing Director; and Mr. S. Varadaraj, Chief Financial Officer. We would like to begin the call with a brief opening remarks from the management, following which we will open the forum for an interactive Q&A session. Before we begin, I'd like to point out that certain statements made in today's call may be forward looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would like to invite Mr. Nadir Godrej to make his initial remarks. Thank you. And over to you, sir.
Good afternoon, everyone. I welcome you all to the Godrej Agrovet earnings conference call. I hope and wish you are doing well and are staying safe. The financial year 2021 -- '22 turned out to be a strong financial year for Godrej Agrovet in terms of top line growth with strengthening profitability. We recorded a total income of INR 8,385.7 crores in financial year '21 -- '22, growing at 33% as compared to the previous year. Our quarter 4 growth in total income was also excellent at 44.9% year-on-year. The consolidated profit before tax grew by 92.4% and 22.4% for quarter 4 and fiscal year '22, respectively. Please note, that the above numbers are excluding exceptional and nonrecurring items and the breakup of the same has been provided in our earnings presentation for the quarter. Our consolidated balance sheet remains strong with net debt to equity in a ratio of 0.57 as on 31st March 2022, largely unchanged from the previous quarter. Now I will discuss the key financial and business highlights of each of our business segments. In Animal Feed, we achieved 20% growth in volumes in quarter 4 as well as in financial year '21/ '22. The volume growth was achieved across 3 feed categories and was mainly led by new products and market share gains. In quarter 4, the segment results were impacted due to the continued drive on input commodity. However, for the full year 2022, segment results grew by 22.2% year-on-year. There were several factors driving growth in segment results such as standard price hikes during the year and R&D benefits and strategic stocking initiatives. The Vegetable Oil segment witnessed the most remarkable year, the combination of improvement in new levels and all-time high oil prices led to almost 2.9x year-on-year growth in segment results in fiscal year '22. For the fourth quarter, segment results were higher by 6.2x as compared to quarter 4 fiscal year '22. The average prices of crude palm oil and palm kernel oil increased by 51% and 90%, respectively, in fiscal year '22 versus fiscal year '21. Improvements in the oil extraction ratio in fiscal year '22 was driven by R&D and operational efficiency. For the stand-alone Crop Protection business, it was one of the most difficult years in terms of operations. The monsoon turned out to be extremely erratic and uneven limiting application opportunities while input cost inflation continue to impact profitability. In the second half of the year, we focused on improvements in channel hygiene, which led to higher sales returns and increased provision for doubtful debt in the third quarter. Consequently, fiscal year '22 stand-alone Crop Protection revenues and profitability were below our expectations. Moving to the performance of our subsidiary, Astec Lifesciences delivered its best quarterly and annual performance in quarter 4 and fiscal year '22. Revenues grew by 58.2% in quarter 4, while it closed the year with a growth of 21.9%, reaching INR 676.6 crores in fiscal year '22. The robust performance was mainly driven by higher export realizations and a favorable product mix. Astec achieved EBITDA growth of 82% and 38% in quarter 4 and fiscal year '22, respectively, with higher realization supported by backward integration benefits. Our poultry subsidiary, Godrej Tyson Foods Limited registered a revenue growth of 45.8% in quarter 4 fiscal year '22, led by strong volume growth in Real Good and Live Bird categories. EBITDA for the quarter also jumped to INR 16.2 crores as Live Bird prices rose sharply on a demand rebound. For the full year, top line growth of 30.1% was offset by falling EBITDA on account of elevated feed costs throughout the year. Our dairy subsidiary, Creamline Dairy Products Limited, continue to gain market share in value-added products such as curd, buttermilk, ghee, milk drinks, et cetera, in its key markets. As a result, revenue from value-added products grew by 16% in quarter 4 and 27% in fiscal year '22 over the corresponding 3 years. This further translated into CDPL's total revenue growth of 20.2% and 13.8% in quarter 4 and fiscal year '22, respectively. However, unprecedented inflation in the entire basket of input costs had a severe impact on CDPL's margin so far, while quarter 4 EBITDA growth was higher at 29.7% into product mix, an increase in end product cycles, that was a degrowth in margins for fiscal year '22. GAVL's joint venture in Bangladesh, ACI Godrej, recorded another quarter and another year of strong performance with revenue growth of 41% and 24.5% in quarter 4 and fiscal year '22, respectively. All feed categories, that is, cattle, poultry and aqua feed with strong demand and market share gains in Bangladesh. That concludes our business and financial performance update for the quarter and the full year.
With this, I close my opening remarks. We will now be happy to take your questions.
[Operator Instructions] The first question is from the line of Nitin Awasthi from InCred Equity.
The first question would be, just as per my understanding, it is the aqua division in the feed category, which is the most profitable among the other feeds, which is poultry and cattle. Is my understanding correct, sir?
Yes. Aqua is part of the feed segment.
Yes. But is it more profitable than the cattle feed segment and the poultry feed segment, which includes broiler and layer?
No, not this year because…
Traditionally, that is the case?
I beg your pardon.
Historically, that has been the case. I believe this year, there has been disruptions?
So because of 2 reasons. One reason is that high soya meal prices and fish meal prices ate into the profitability. And the big problem is that there are certain price controls being exercised by government of Andhra Pradesh. So a full pass-through has not been possible in aqua feeds, particularly in the state of Andhra Pradesh, which is the main state. And this is not only for us, but for all fish feed and shrimp feed players.
Understood, sir. Also in your presentation, you have not mentioned the growth or degrowth in the aqua segment compared to cattle, broiler and layer in which you have shown impressive growth. So if you could just give us that figure, if possible?
So we can give you that offline. This maybe just close to 10%.
Mr. Awasthi, is there any other question? Mr. Awasthi, we cannot hear you. Please confirm. Due to no response, we'll move to the next question. [Operator Instructions] The next question is from the line of Saral from Indsec.
Sir, our Q4 volumes in the animals feed were lower than Q3. So was it only because of aqua? Or are you witnessing at a higher prices of realization, there has been some demand restructure?
So I think Q4 normally is a weaker quarter anyway because it is off-season for Aqua, both for fish and shrimp. And there was a little bit of demand destruction also particularly in broilers because of low prices, the broiler population really went down in January and February. And it is only in March, the placement started. And so these were 2 reasons why Q4 is lower than Q3.
Sir, any guidance in terms of the volume growth for next year?
So I think it was a amazing year for us in animal feeds last year where we grabbed lot of market share because the market in different segments was either flat or decreasing, but we grew -- totally, we have grown almost 20.3% last year. But I must tell you that this is a opportunity, which does not come our way every time. So I would be very happy if we register anything between 13% to 15% growth in volume in the coming year or this year, current year, and that is what the trend of April is also showing. Hold on. Having said that, just wanted to also put one more perspective in terms of Q4 performance. Q4, the volumes of most of our product categories has grown. On an overall basis, in animal feed, we had a growth of around 20% in Q4, led by cattle feed, which grew by almost 25% and layer feed, which grew by almost 28% vis-a-vis quarter 4 of the previous financial year.
Sir, now coming to the pricing. So now we are seeing some pressure on the margin. So have you taken a further price hike or how is the inventory situation in terms of the -- for the meal price or the inventory on the animal feed segment?
So I think -- but for shrimp feed and fish feed in Andhra Pradesh and for the obvious reasons of government interference and the pricing. And all the other states and segments, we are taking a continuous price increase because the inflationary conditions continue. And whether it is de-oiled rice bran or corn in spite of it being a season, the prices are at least 10%, 12%, still higher than last year. The only respite has been that government has again allowed import of soya meal, and the soya meal prices have dropped by about 10%, 12% in last 1 week. So I think as and when needed, we are taking price increases, but I must also qualify that this price increases with the time lag. So this takes us about 2 to 3 weeks after the raw material prices have risen to probably take a price increase. So you must always keep in mind that time lag will remain.
Okay. Sir, the next one we…
But on the whole, I think 90% to 100% pass-through is possible.
Okay. Sir, next on your Crop Protection business. So FY '22 was bit challenging for the stand-alone Crop Protection business. So how should we see for the next season and also new launches that is signed up?
So I think everybody knows that what happened, and I think we are not out of place because most of the other companies also are reporting returns and a little bit of challenging better situation. But having said that, we bit the bullet in Q3. We have taken back the raw material. We have made extra provision also just to clean the balance sheet for future and not to punish last year -- punish future because of last year. Of course, that money will be recovered and most of the stocks which have been taken back will be, I would say, redispatched because all of this stock had almost 1, 1.5 years of expiry remaining. Having said that, we have been extremely careful with new processes and systems that had been set so that we don't get into a jam like this. We also took consultants help who are working on this project for last 6 months to set processes and set checks and balances so that in case there is a COVID wave or drought, we should not get into a similar jam. In fact, this division had a very good track record for almost a decade, but monsoon failure and consecutive waves of COVID, definitely threw us off balance. So I'm very sure that with lot of discipline, we will regain our lost glory. We are not very aggressive in going for top line this year, but we will come back to 13%, 14% PBT on sales, which has been normed, but this will be much cleaner sale. And we will maintain the hygiene in the market.
Okay. Sir, lastly, on the oil, palm oil business. So if you can provide the area under total palm oil. So last time, we had number of about 72-odd thousand hectares. So has it increased? And also the total FFB for FY '22 and oil extraction ratio?
So I think palm oil, I think a lot of good work we have done has been masked by high prices. So I need to tell you that last year was an amazing year from the point of view of improved efficiency, whereas OER improved significantly from I think 17.5% to 18.75%, which was a very, very big improvement, which came in because of a lot of procedural changes, better management, new equipment and some R&D initiatives, which we took in oil recovery by using several physical and chemical methods. So I think that has been there. The overall increase in FFB profits last year was 9%. And 9% because we lost a few 2,000 tonnes to Telangana because of price differential. The Andhra Pradesh government was very sluggish in revising the formula. Telangana government was very, very proactive, just because we have contiguous area, this light of fruit keeps on happening. And it was a significant number we lost last year, but not anymore. That's point number one. Point number two is that, yes, I would say that we are close to about 70,000 hectares already. And this year, again, we are going to do 4,000 to 5,000 more expansion. But I must also tell you that net increase is only about 3,000 hectares because uprooting keeps on happening. And now that NMEO-OP scheme is there, once we get a location in Northeast and in other states, we might increase the number to 7,000, 8,000 hectares a year from next year onwards.
Okay. And sir, this OER, can it be sustained now at 18.75% or can it be further improved?
So definitely, the target is because I think better analysis, better equipment, better technology. A lot of work has happened for last 3, 4 years in that because more OER is more profit for us because we pay on fruit rate. So I have a feeling that definitely, this is sustainable this year. But most probably, we will take more steps to improve it further next year also. Going by April and May to date, it is sustainable.
[Operator Instructions] The next question is from the line of Aniruddha Joshi from ICICI Securities.
Yes. Sir, just one question. Has Godrej Agrovet gained market share across segments, considering this has been a very tough time for the -- most of the unorganized players? So obviously -- and if true, can you indicate the market share gains also in past 1 year for the company?
So look, animal feed, I can definitely tell you that we have had unprecedented year and when the market has not grown or degrown in most of the segments. So I must tell you that we have 20.1% growth in cattle feed, 32% growth in broiler feed, 26% growth in layer feed. Then we had almost 21% growth in shrimp feed. Unfortunately, fish suffered because for fish, the first quarter, that is April to June is very important. And April to June was wiped out in rural India because of COVID II. So I think there, we degrew almost about 18%. But overall, I would say that there is a big stride in our market share. And definitely, I'm not talking about basis points. I'm talking about at least 2% to 3% improvement in our market share in each of these segments. We believe that we have got into dominant position in several states, particularly in cattle feed and layer feed. And we are very, very hopeful that not only we will be able to maintain that leadership, but also add 1 or 2 more states in this list. I must tell you that even though we are the largest cattle feed player in the country, we were not #1 in any of these states. Now this year, we have regained our #1 position in Maharashtra and most likely 1 or 2 states will also be added in the next few quarters in this list. I think since we talked about market share, I also need to tell you that in several categories of Creamline Dairy, particularly the value-added products, as per Nielsen, we have had major gains in market share in Andhra Pradesh and Telangana.
[Operator Instructions] The next question is from the line of Vidit Shah from IIFL.
Sir, just some -- could you provide some color and outlook on the vegetable oil business and prices and availability, demand of the palm oil and palm kernel oil? I mean, where do you see this going, given the volatility in the market?
So today, the CPO price is close to about INR 150 a kilo. And the CPKO price is close to about INR 220 a kilo, which are totally unstable because at these levels, there will be huge demand disruption. Now the 2 big variables at this are the Indonesian government's policy because Indonesia is one of the biggest suppliers of palm oil, almost they produce about 48 million tonnes. And they have banned exports for some time just to cool off their domestic prices. Now they have to withdraw that ban because the season is coming. They're going to produce good quantities of palm oil, and they have storage of 6 million, 7 million tonnes only, which will get filled in next week or 2. So ultimately, this ban is going to go. And definitely, the CPO prices are likely to come down in next few days. my sense is that they will come down, but they will not come down to last year levels of INR 90,000 or INR 100,000 at this time because there is another variable, which is the Ukraine, Russian conflict where almost 22 million tonnes of sun oil has been out of the market for some time. And I think the palm is the only substitute for that sun oil. So I believe that even though the prices will come down, they will continue to be at least 10% to 15% higher than last year. And let us see how the season progresses because I think regulatory environment is also very, very important in exporting countries. So we have our fingers crossed. We believe that the prices should come down because demand destruction is disaster for the industry in the long run. So we are also waiting for the Indonesian government, some policy decision have not been in touch for last 3, 4 hours because today, there was a meeting supposed to happen in Jakarta. So I don't know. But my sense is that these are the 2 big variables.
Balram, I would like to add that apart from sunflower oil, the Ukraine war has also impacted crude oil and gas prices and biodiesel is made from vegetable oils and therefore, the demand for biodiesel is immense. And as long as crude oil is high, there is no chance for vegetable oil prices to fall.
Got it. That's very helpful. And my second question was, sir, if you could just provide some outlook on some of the margins of the hit businesses. So animal feeds and stand-alone Crop Protection had an unfavorable margin movement this year. And I mean, do you see this recovery in FY '23? I mean both commentary is fairly positive with prices being passed on an animal feeds and less provisions being taken in stand-alone. But what extent of recovery can we expect to see in -- to margin?
So one thing which I need to clarify that whatever I'm talking, I'm talking about the whole year. I'm not quoting or talking quarter-on-quarter because definitely, there will be lots of macro environmental factors, regulatory factors, monsoon factors, et cetera, which will affect Q-on-Q margins. But I can definitely tell you that -- will the margins of animal feed business being maintained? The answer is yes, we will be able to maintain the same level of margin and register 12% to 14% growth in volume. So that I can definitely tell you. I can also tell you that most of our problems are behind us in the agri business. We may see a 15% to 20% top line growth, but we will see the profitability going back to 13%, 14% PBT of sales what it used to be because last year, the biggest hit was sales returns and just to maintain hygiene in the market and just to make sure that we don't have any upsell unnecessarily, we took back the material, which is not the case every year. So my sense is in this, the margins will be maintained. In case the turmoil in [ OPP ] business continues, definitely, I would say that margins will be better than last year in [ OPP ] business. And if you ask me Bangladesh, definitely, it will follow the same trend as our animal feed business and slightly better because Bangladesh is mainly import dependent, and I believe that they will have some kind of position advantage, which they have been taking for quite some time in last 2, 3 months. As far as our food businesses are concerned, I must say that dairy, I think I'll speak later in case there is a specific question. In chicken business, you will see improvement in margins because I think that the prices which were lagging for some time have definitely increased and measured up. In our business in everywhere, there is a time lag between cost increases and price increases and that's hurt us in January, February, but you must have seen our smart recovery in the chicken business in March and that still continues. So in the milk business, the big problem is that we are unable to pass through the continuous increase in cost of milk because the cooperatives in South India are just not increasing prices. You'll be really surprised that last year, 8%, 9% was the cost increase to as milk and because of petroleum increase, the back-ending products went through the roof. The whole industry is going through this trauma, even though we have a higher unprecedented growth in value-added products, which are more profitable than milk. But this cost -- our inability to pass on the total cost has definitely hurt us last year. Price increases have come, albeit a little late, but the cost of milk continues to increase. And this is a very rare phenomenon in the industry. I have been here 32 years. I have always seen that prices definitely go down in the flush season starting August. And for last 2 years, we haven't had a flush. Prices have been moving northwards and cooperatives are losing money, but still supporting the farmer. So there, I think the profitability and the margin rest on the fact that in case there is a flush, we are going to get very good margins because the prices are very high of poultry products. In case INR 2, INR 3 reduction in milk price happens, you can imagine that for last 7 months, we can even make 7% PBT on sales in milk business because it is a scale business and INR 2, INR 3 is a big amount, but we are collecting almost 8 lakhs, 9 lakhs liters of milk per day. So I'm saying that this is the margin profile, so far so good. But I definitely feel that the year will again present lot of challenges every year, and we are just keeping our fingers crossed and waiting for first one, which is the monsoon.
Got it. That's helpful. Sir, can I just request on data points in terms of the share of value-added products such as milk [ business ]?
Yes. So I think last year, we have reached about 28% from -- of total sales from 23%. But this year, it is going to be big. And let me just tell you one more thing that you should not look at FY '21 and FY '22 to judge our performance because quarter 1, which is the April, May, June, in both years were COVID quarters. That in the time, the value-added products, the ice creams, the lassis, the buttermilk, the flavored milk shakes, et cetera, move because of summer season. And unfortunately, this business has lost both the summer season to COVID. So my sense is, this year, we are likely to end up more than 1/3 at least value-added products.
The next question is from the line of [ Aman Vora from Premier Capital ].
Congratulations on a great set of numbers. So I had 2 questions. First was on the palm oil segment. You mentioned that we'd be adding net 3,000 to 4,000 hectares per year, and we see Ruchi Soya and other companies also adding a lot of capacity. So like, do we have that endeavor of maintaining the #1 position in country?
So the allocations we have in -- I'm not talking about states which we have exited like Maharashtra, Karnataka and Gujarat because of lack of government support because farmers also had other opportunities. But we are re active in the states of Orrisa, Telangana, Andhra Pradesh and Tamil Nadu. I can definitely tell you the kind of allocations we have, a 4,000 hectare per annum definitely can be done for next about 7 to 8 years. Telangana and Orrisa, both are likely to give us further allocation. We have also applied in Northeast, Arunachal Pradesh and Assam present a good opportunity for expansion. And the government schemes are also extremely favorable. We are already present in Mizoram, though we know the layout land, and we know the challenges of that area. In case we get some allocation in Assam, we can definitely increase it from, say, 4,000 per annum to about 6,000 to 7,000 hectares per annum.
Right. Got it. And second question is like we've been investors in this company for more than 3 years now. I want to understand from you more on a longer-term basis, like there are a lot of moving parts because we are a agriculture-based company, and it's affected by so many things in the macroeconomic environment. As a investor over 2, 3 years, how should we look at on a consolidated basis? How should we look at the company, whether you want to talk about top line or bottom line or margins, anything, like on a consolidated basis as Godrej Agrovet shareholder?
So let me just tell you the portfolio is the strength and it is the weakness also. And I'll tell you why it is trend. If you see our track record, I think the kind of turmoil the sector has gone in, but we have still maintained our profitability growth, and we are still very solvent. Debt equity is 0.5. We are continuously investing and we are upping our investments in the businesses we are in. So I think this -- that way, I would say that the business is solid. And lot of businesses hedge each other. I'll give you an example. Now we had through R&D initiatives, we had substitute for soya meal in our poultry feed. And the soya meal went up -- and as we were so happy that soya meal is very high because we were able to substitute it with other raw materials, which were much cheaper. And that was through our R&D initiatives and due to amount of money we had invested in last 5 years in that direction. And that resulted in unprecedented growth in our poultry feed, unprecedented decrease in our market share and unprecedented increase in our profitability. But on the other side, it hit our aqua feed business significantly because we don't have any substitute in aqua feed for soya. It also hit our Godrej Tyson Foods business because the cost of production went up and we were left with a huge amount of long-term contracts at lower prices with QSR. And these international multinational QSRs because of our global relationships at Tyson levels, it was not possible to renegotiate in the middle of the year. Of course, we have broken out of that tradition. And we have now negotiated processing chicken contracts on quarterly basis. But I'm saying just see the hedge here. Definitely, I think long term, we will continue to invest. Astec will be another big vehicle because the opportunity is very big because China plus one opportunity in India becoming a very big hub for chemical. So you will see lot of investments going in Astec Lifesciences. CPB business once comes back on track. Every year, we have something or the other to launch either on products or in-licensing, so we can maintain the 15%, 17% growth in top line and bottom line. And GRACIA is the one molecule which we have got from Nissan. It has a INR 200 crore opportunity in next 3 years. And we will score significant improvement -- significant capture of that potential in first year itself. So having said that, our 2 underperforming businesses are milk and chicken. I think chicken is work in progress. And this quarter, you will see much improved numbers in chicken, and that will also give you some confidence that this is a game which we can play profitably and sustainably. The problem with milk business is that either the prices have to go up, which are going to be excruciatingly slow. The reason is because the cooperatives will be very reluctant to raise prices at consumer level or the flush has to come and the milk cost have to come down. I'm very, very hopeful for the second because flush has been missed. We are seeing lot of improvements happening in rural India. People are taking care of animals. So eventually, the milk will definitely come down by August or September. So the way to look at it is from the positive side, hedge. From the negative side, some business is underperforming. And if we are able to fix them, definitely return on equity, return on capital employed, et cetera, will go up. So we are just keeping our fingers crossed. We have done whatever is in our control. And I think a little bit help from macro environment will definitely propel us into a 15% to 20% top line, bottom line growth on a steady state basis.
Right. Balram, I would like to add 2 points to that. One is we are doing a lot of R&D, and we've increased our R&D spends in all the businesses. And in businesses like animal feed and oil farm, we don't see others doing R&D at high levels. Of course, in agrichemicals, there are lot of Indian companies doing a lot of R&D, but we have also stepped up our R&D spends, and that will help in the future. And the other thing is the great commodity boom is affecting a lot of economies, but it's wonderful news for Indian agriculture. Indian agricultural productivity is very, very low. So there is very little opportunity to produce more anywhere in the world other than in India. And this is a big opportunity, and Godrej Agrovet can take benefit from it and India can benefit from it.
Thank you.
Right. And just I would just like to mention this point here, like what Mr. Godrej mentioned. I'm extremely proud of that as a shareholder also because the R&D benefits -- and the R&D that Godrej Agrovet as a company is doing, actually, you don't see on ground other companies doing when I talk to people around. So that is something that I'm really proud of and all the very best.
Just to give you the good news that our agrochemical R&D center, which will cater to Astec mainly and also Crop Protection business is almost 75% through. We might just inaugurate that R&D center in October or November this year. And I must say that we have not left no stone unturned in sophistication as well as capacity to create a world-class and top of the line R&D center at Rabale in Mumbai.
The next question is from the line of Falguni Thacker from Jet Age Securities.
Yes, sir. Sir, pardon me for asking basic questions, I'm new to getting into, I mean, understanding your company. So a basic question I had, what is the basis for allocation of plantation in palm oil business opposed to companies were to apply at the same time?
So there are 2 things I must answer. First and foremost is that in the existing areas, where we have been allocated, every year, government gives us a target, which is controlled by the government to cover that area to motivate the farmers and convert them into oil palm. And this target is based on the fact because the central government and the state governments have to support the farmer for next 3, 4 years. So they see their budget and they say that let us do only 10,000 hectares in Andhra Pradesh. And based on our performance in past several years, the different companies get different shares. And we have been getting a lion's share out of that in both Andhra Pradesh and Telangana, including Tamil Nadu also. Now the other interesting question which is very difficult to answer is the new allocation, right? Today, Northeast has opened up, opened up this National Edible Oil Mission -- Oil Palm. There is a big outlay in Northeast. Northeast has become suddenly attractive because not only the government is going to support for a year or 2, the farmers and the companies will be supported till 2035. So that is the first time central government has made such a long commitment to any project. Now there, the most important states are Arunachal Pradesh and Assam. And I must tell you that how they are likely to allocate is a black box because all the documentation has been done, and we are just waiting that what allocations we will get because I think all the information has been given to them. So I do not know whether we'll get any allocation or somebody else will take it because of some other reasons. So I don't know. But there was a small pocket in Manipur, which was closer to our Mizoram facilities where we have already got allocation. We are the only company who are operating -- and will be operating in Mizoram in future. But I think that, as I said earlier, that we have at least a 10-year runway of 3,500 to 4,000 hectares per annum in the core states where we are already operating.
Okay, sir. And sir, this is a genuine question. What if in your allocated area only if the farmer was to decide to cultivate some other crop? Is that allowed? I mean, if you were to get some…
The farmer -- so I think that has been the history because one of the big problems with this crop is that it is a plantation crop. So the big problem is that the first 3, 4 years, even though the farmer is supported by the government in cost, but it does not have any income. So at least 10% to 15% of area, which is planted is approved within 1 to 2 years because the farmer is not able to get any income out of it. Now the new policy addresses that. So that's point number one. Point number 2 is that my sense is that inflation has done wonders for oil feed industry, including oil palm in this country. And I always believe no amount of government or private sector initiatives can deliver a result, what inflation can deliver. It is a pulses moment for oil feeds in India. About 5 years ago, pulses price went up by 70%, 80%. It became very, very attractive for farmers and farmers are businessmen. So suddenly from a pulse deficit state, we became a pulse surplus state at least till last year. So I'm saying this is going to happen in oil feed. Of course, import dependence will be there. But we are seeing lot of conversion to oil in not only oil palm, in the country. In oil palm also, you will be really surprised that in FY '22, this will be the more -- FY '22 and FY '23, this will be the most profitable crop for farmer, and I can bet on any crop because normally, farmers have made in Andhra Pradesh, Telangana, where farmers are doing very well between INR 4 to INR 5 lakh per hectare in these 2 years, per hectare per annum in these 2 years. So my sense is that because of this reason, there will be a lot of acceleration in growth of palm and other oil feeds in the country.
Right. Balram, you should stress that the oil palm use are higher than any other crop, and oil is the commodity that has inflated the most. In addition, the oil palm produces a lot of biomass, and that has become very valuable because petroleum prices are so high. So the oil palm trumps any other crop today.
So normal traditional oil seeds like mustard, soya, cotton seed, groundnuts, et cetera, they produce about 350 to 700 kilos per hectare of oil for a hectare. Oil palms produces between 3.5 to 4 tonnes in Indian condition per hectare. And apart from biomass, you won't believe that the kind of biomass we produce in our factories produces 8 megawatt of electricity per day. So we don't buy any electricity in our oil palm factories, which are very, very energy-intensive. And we have a stream of revenue from biomass, which is converted into briquette.
Okay. And sir, one more question related to this. Also a basic one. On what basis do we pay the farmers? I mean, it's linked to what?
It's a fair formula. So it is a formula which has been given by the central government and implemented by state, unlike sugarcane. We pay as a percentage of oil price of that month. So when the oil price is increased, the farmer gets paid more. When the oil prices is decreased, farmer gets paid less. And it comes to something like 78.5% of the oil price goes to the farmer, which is a very fair formula. Now we don't have many marketing expenses, et cetera, because we are sellers of crude palm oil and palm kernel oil to the refiner that [ gets that ] or -- fixed costs are low, whatever variable costs are there. So our profitability is very high in inflationary conditions. So that is one big advantage we are having right now.
I would request Ms. Thacker to rejoin the queue for follow-up questions. The next question is from the line of Depesh Kashyap from Equirus.
Sir, again, on palm oil segment, you talked about pricing and the profitability of our farmers. But given that palm oil tree takes around 4 years to give the fruits, right? So I just wanted to understand how -- what is the volume growth outlook for this year, FY '23? And do you see any disruptions like the whitefly attack that we saw in FY '21 to happen this year?
Whitefly attack, if it had to happen, it would have happened because whitefly attack, the peak comes in March. And I must tell you that I think certain amount of drama from nature as well as government has brought the industry together. And one of the best examples have been our whitefly control because the industry -- it's because if one company, it has whitefly, it does not help because from my plantation, they go to the other plantation and then they grow there. So I think it was done on community basis, total private sector effort, and we eliminated 99% of the problem of whitefly as of now. That is point number one. Point number two, we are expecting a growth of almost 17%, 18% in oil production this year. About 75% because of volume increases and about 25% because of OER year improvements and other efficiency improvement.
Great, sir. And above there, will there be pricing growth that we already seen, right?
That I think, we'd have to consult Indonesia and then other countries.
Right. And sir, the other question I had was on the ACI JV that you have, right? So that has been doing very well for the last 3 years. So if you can call out what is happening in Bangladesh. Is the underlying market also growing at that rate or you are gaining market share? And which particular segments are doing well for you there?
So we were #3 last year. That is FY '21. In FY '22, I think that market also degrew because Bangladesh also had a very severe COVID. And unfortunately, they did not have the kind of vaccine capability, et cetera, that what we had. So there was a big drop in their industry, particularly in the first quarter, that is April, May, June, and they took some time to recover. One of the things is that we still grew about 13% in volumes, which have increased our market share. We were #3 and I can definitely tell you that we are just knocking the doors of becoming the #2 animal feed company in Bangladesh. The margins dropped because of logistics issues because 90% of the raw material in Bangladesh for animal feed come from outside and you knew the container situation in the first half of the financial -- last financial year. So there were lot of ups and down, cost increases, freight issues, et cetera. But as 13% growth, maintaining the margin at the last year level was a great show by the team, and it has definitely put us at a different level in that country.
Right, sir. And sir, which segment are you doing well, sir? Cattle, poultry or aqua, which [ so in ] segment?
The segments which has not done well, and this is something which is very interesting learning for us is that fish was under pressure in India, also in Bangladesh also. But poultry, we did very well. Cattle, we did very well actually. These are the significant part of our business there, almost 1/4.
Got it. And lastly, sir, you talked about the margin pressure in the shrimp feed segment, but I believe the industry took a price hike in the month of March and again in April. So can you please confirm that Godrej Agrovet also took a price hike and by how much? And do you see the margin pressure easing now?
So not at all. The cost increases was about INR 9 a kilo. The price increase was about INR 5 a kilo. And the problem is that the price increase has to be negotiated with Andhra Pradesh government. And that was a very big problem. Soya meal had come down in last 1 week because of imports coming. So my sense is that even though the cost increase comes down to about INR 7, INR 7.50 a kilo, we still have to go about INR 2, INR 3 a kilo to cover the raw material cost only. So I'm saying that I think that has become a very tough place to do business. I only can say that.
Got it. So only INR 5 hike that you took in March, that was the hike recently you have taken?
Yes. Yes. So one of the things is that hike happens on the MRP, and then discounts are central. So what we get is little lower than what we take. Hike was more than INR 6 and our NRB got -- will get about INR 5 or something.
The next question is from the line of Kashyap from Broadview Research.
Mr. Balram, just one quick question on the capital intensity in the business. The working capital has kind of moved up while obviously, you have seen good earnings growth, but compared to pre-COVID where our working capital to sales was quite under control, the working capital has been moving up. So just wanted to understand your thought -- what are your thoughts on working capital going forward? And what are the levers we can use to pull it back to what it used to be earlier?
So the only places we don't like working capital is debtors in aqua feed and debtors in CPB, which we are trying to control desperately. But we love increase in receivables and Astec Lifesciences because definitely, our exports are growing rapidly, and we have currency benefits as well as margin benefits there. We love working stocks and we are carrying lot of stock in animal feed, very good positions on certain raw materials. Same in aqua feed. We are sitting on enough SMP and fat to tide over the milk shortage time of -- in the milk business. So definitely, I think movement in working capital northwards is largely because of stocks, which we are carrying and less because of debtors. So I'm saying that I think if we do mark-to-market, we are in good situation as far as stocks are concerned. The only place we are very, very -- we have to be very careful is debtors in CPB and debtors in aqua feed.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Sir, with the management, you may go ahead with the closing comments. Would you like to give any closing comments? Or should I go ahead and close the call?
Thank you. I hope we have been able to answer all your questions. If you have any further questions or would like to know more about the company, we would 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. On behalf of Godrej Agrovet Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.