Gujarat Ambuja Exports

Attended the AGM today. Here are my notes from the meeting:

• Expansion –
  • Malda Plant commissioned in March 2023 and is operating at 50% capacity utilization which is expected to be ramped up to 75% by year end.
  • Would spend 700 Cr for reaching 6000 TPD capacity on the following plants:
    • Started construction at Sitarganj for 1000 TPD. Commissioning in January 2024.
    • Himmatnagar – Would start construction and Commissioning in Q3 2025
  • On schedule to reach 6000 TPD by 2025
  • Expansion to be funded by internal accruals
• Sales Target of 10,000 Cr for FY25 is largely on track
• Payback for New Projects – GAEL looks at 5 year pay back period.
• Exports
  • GAEL is exporting to more than 100 countries. Focussing on North and South America now.
  • Committed to increase our market share in International markets.
  • Export realization – keeps on changing basis the international corn prices and competitive scenario.
  • GAEL has required approvals from MNCs giving consistency in exports and therefore better able to export vis-à-vis competitors (both domestic and outside).
  • Industry is allowed to import corn duty free for production of starch.
  • China + 1 helping exports
  • China is not as strong in exports as earlier; neither exporting aggressively nor importing.
  • Target to keep increasing exports.
  • Not much of a difference in maize prices between domestic and international markets.
  • Corn prices are competitive wrt China. In China, the prices are regulated.
• Fermentation
  • First project to come in 2025.
  • Supply to Food, Pharma and Feed industry.
  • Total outlay at 1000 Cr for next 5 years.
  • Asset Turnover = 2000 Cr revenue expected on 1000 Cr capex.
  • One plant being setup in North while other in South India.
  • This would be an import substitution business.
  • Requires large amount of power – as far as power costs go, there is not much of a difference between India and China. Our power cost is comparable to that of China.
  • Incorporated subsidiary for this business.
• Ethanol Update – Two ethanol projects are on hold due to Raw Material uncertainty and one not started yet. Final decision would taken in few months.
• Raw Material fluctuations –
  • Most critical part for the industry.
  • Procure raw material on time.
  • Be connected to farmers directly.
  • India gets two maize crops (Rabi and Kharif) and Purchase is spread throughout the year.
  • GAEL has a large storage capacity equivalent to 3-6 months of grind capacity.
• Pricing depends not only on the Raw Material prices but also on the demand-supply scenario.
• Maize derivative capacity – 32-35%. Target is for 45% of grind capacity.
• Buyback and increase in dividends – no such plans in near future as company is on growth trajectory.
• Increase in power cost for FY23 was mainly attributable to fuel price increase.
• Spinning division – Have converted cotton yarn to polyester. If the profitability does not turn then a decision would be taken in this financial year.
• Operate at 5-6% margins for own brands [Total sale of 1000 Cr for edible oil branded business]
• Agro division expected to do better in this Financial year.
• Renewable Energy Capacity – 25%
• Import Duty on products manufactured by GAEL – 10 to 40%
• Impact of Malda plant on revenue would be seen in the next 3 quarters.
• Market Share
  • Sorbitol – 30%
  • Glucose – 40%
  • Dextrose – 45%
  • Starch 5 MT industry and our share is 25-28%. Expect industry to increase to 6 MT in next 2 years.
• Capital Allocation for next 5 years:
  • Maize – 1700 Cr
  • Expansion of Grind capacity – 700 Cr
  • Fermentation – 1000 Cr

Disclaimer: There may be some mistakes in these notes