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    Nadir Godrej on prospects of Godrej Agrovet this year

    Synopsis

    “Agro chemicals, pharmaceuticals and speciality chemicals have had an excellent year and agro chemicals exports were also excellent. Oil palm of course has been a very successful business for us. The palm oil prices are at an all-time high. This is likely to stay for sometime but in the long run, we expect prices to normalise.”

    Nadir Godrej-1200ETMarkets.com
    “There is a formula price for palm oil and as palm oil prices benefit, our contribution increases because we have a fixed percentage contribution. Of course our fixed costs do not change much but general inflation has a small impact on our fixed expenses. As our contribution is a fixed percentage of palm oil prices, the higher the price, the better off we are,” says Nadir Godrej, Chairman, Godrej Agrovet.

    In the crop protection segment what are you expecting for FY23 going forward?
    Last year was not very good for our crop protection business partly because there was a lot of disruption during monsoons. We think crop protection should do well if the monsoon is normal but our subsidiary Astec LifeSciences had a very good year. We mostly do B2B exports and India is a very good place for speciality chemicals.

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    Agro chemicals, pharmaceuticals and speciality chemicals have had an excellent year and agro chemicals exports were also excellent. Oil palm of course has been a very successful business for us. The palm oil prices are at an all-time high. This is likely to stay for sometime but in the long run, we expect prices to normalise. This boom is unprecedented and has to do with the rising prices of crude oil as well as the policies of Indonesia to try and protect their own consumers and now 30% of all palm oil is retained for local consumers.

    Obviously this has driven palm oil prices up to very high levels. Animal feed business also did extremely well in spite of high raw material prices partly because we have got excellent technology to substitute soya meal with other cheaper meals. We cannot fully replace soya meal but we do get some advantage from our technologies. Aqua feed, however, had a bad time because of price control in Andhra Pradesh and our food businesses did not do very well but we expect some improvement in the coming year.

    The palm oil prices have rallied quite a bit. They are surging further. What does this essentially mean? The spike was relating to the ongoing Russia-Ukraine conflict but what does this mean in the near term?
    As I said, there are two factors – both the Russia-Ukraine crisis and crude oil prices. Palm oil is used to produce biodiesel and as crude oil goes up, biodiesel also goes up and palm oil goes up. But there is also the Indonesian supply and that may play out for a longer time. I personally do not feel that crude oil prices will be so high for long. There will be some kind of easing of the situation in the Ukraine-Russian war or fresh supplies of oil or even demand destruction at these high prices. This is a big opportunity for green energy and biofuels. It takes a while for agricultural production to rise but overtime we can expect that.

    Can you tell us about the demand side of things as we discuss the supply side and how that is getting impacted?
    I would not like to comment on EBITDA and margins. They are fairly easy to calculate. There is a formula price for palm oil and as palm oil prices benefit, our contribution increases because we have a fixed percentage contribution. Of course our fixed costs do not change much but general inflation which we are facing now has a small impact on our fixed expenses but our contribution is a fixed percentage of palm oil prices. So, obviously the higher the price, the better off we are.

    I personally do not feel that prices can stay at this high level for very long. They would not fall to earlier lows and have been a secular trend of rising prices which will continue but we are right now well above this trend and some weakening of prices is to be expected, may not be for the next three months, but beyond that.

    Could you just talk to us about the AF business and how it is witnessing increased demand? Whether we talk about hotels, restaurants, catering businesses, have the sales volume in terms of demand already crossed earlier levels?
    Yes, in general, animal foods are picking up now as Horeca starts up and demand for those items has improved, which does not have such a huge impact on animal feed. Most of the benefits have come from our R&D progress and we are continuing to work on animal feed R&D and benefits will keep flowing.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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