At a time when most fast-moving consumer goods (FMCG) companies are still sceptical about a pick-up in consumption resulting in improvement in revenues and profitability, Baba Ramdev-promoted Patanjali Ayurved is eyeing 250% revenue growth in FY16, according to a recent Edelweiss Research report co-authored by Abneesh Roy, Pooja Lath and Tanmay Sharma.
On Friday, Patanjali Ayurved announced its partnership with Kishore Biyani-controlled Future Group and said it planned to sell its products through the latter's stores across the country. The development sent Future Group stocks - Future Retail, Future Consumer Enterprise and Future Lifestyle Fashion - higher by as much as 13% during intra-day deals, though most settled lower. CLICK HERE FOR THE STORY
According to Edelweiss Research, Patanjali Ayurved that operates in three broad business segments -- foods (foods, supplements, digestives, dairy, juices, etc), FMCG (cosmetics (shampoo, soaps, facewash), home care (detergent cakes, powder, liquid, etc) and ayurvedic products (healthcare products for blood pressure, skin diseases, joint pain, etc) - clocked a turnover of Rs 2,030 crore in FY15 with an EBITDA (earnings before interest, taxation, depreciation and amortisation) of around 20%.
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"The company targets to achieve revenue of Rs 5,000 - 6,000 crore in FY16 itself. Growth is being driven by the company's largest-selling product, cow's ghee (expected to be Rs 1,200 crore in FY16) followed by Dant Kanti and Kesh Kanti. Patanajali also has a robust pipeline of new products, which will help achieve its target. Besides Patanjali Noodles, the new launches pipeline includes Dant Kanti Advance, Sugar free Chyawanprash, PowerVita, Seabuck thorn dietary supplement and powdered hair dye," the Edelweiss report says.
"Over FY12-15, Patanjali registered revenue CAGR (compounded annual growth rate) of 64.7%. In FY15, of the total sales of Rs 2,030 crore, food and cosmetics contributed Rs 800 crore each, while healthcare products comprised the balance," it adds.
Patanjali's proactive moves in innovation have been crucial for its growth, the report says and cautions that the other consumer companies will need to step up innovations, particularly in the herbal and ayurvedic space (distribution strength will come handy) to counter competition.
Its key strength, apart from its superior product quality, Edelweiss says, lies in pricing. The company's products are priced at around 15% - 30% discount to competition, which makes it an attractive proposition for consumers. Moreover, it is able to offer such discounts primarily because of having negligible A&P spend versus other consumer companies that have A&P spends ranging from 12-18%, as a percentage of sales.
"PAL perhaps lacks most ingredients for building a large-scale consumer goods business, be its negligible A&P (advertising & promotion) spends or distribution network. Yet, the brand power of a yoga guru has brought PAL into the top league with topline reportedly in excess of Jyothy Labs and Emami," the report 'Indian Consumer: Taste of India' by CLSA's Vivek Maheshwari and Bhavesh Pravin Shah has said.
The reports has added: "The plans are even more interesting as the company is now looking at 'traditional' ways to expand and targets to more than double the top line in coming years. While competition must be keeping its fingers crossed, all we can say is - 'Wish you were listed'."