Higher capacity utility would lead to propotionate margine: Dinesh Shahra

Q&A with managing director, Ruchi Soya

With record soybean output estimated this kharif harvesting season, Ruchi Soya is intensifying its procurement to optimize crushing capacity. Higher capacity utilization would translate ultimately into a proportionate increase in topline and bottomline says Dinesh Shahra, managing director of the company in an interview with Dilip Kumar Jha. Edited excerpts :

What is Ruchi’s plan for this season ?

We are planning to increase capacity utilization of both crushing units and refineries this year. Our average crushing capacity utilization remained at 52% last season of the total capacity of 4.1 million tonnes which we are planning to increase by 15-20% this year. Similarly, refining capacity of 2.2 million tonnes is set to achieve an average 70% utilization this year from 55 - 60% last year.

What is your estimate for crush margins?

We are bullish on the crush margins for two reasons – (a) larger crop will mean better capacity utilization, up by 15 – 20% from the last year; and (b) highest ever prices fetched by the soy meal at around $550 - 600. Current year appears to be better than last year.

How will you achieve this capacity enhancement target?

More output of soybean would mean more availability for crushing. We have intensified our procurement programme in Madhya Pradesh to have higher soybean stock. During lean crushing season normally, unavailability of soybean proves a major hurdle for running the plant. But, this crop year, we are stocking beans for crushing even during lean season.

What is your estimate of soybean crop for 2012?

Soybean crop should be over 11 million tonnes this year, a rise of around 10% from previous year. Better remunerative price at the time of sowing and erratic behaviour of monsoon in early stage forced farmers to move towards comparatively resistant crop like soybean and major shift towards early varieties which reduce time exposure towards vagaries of nature. With the revival of monsoon, farmers extended sowing resulting into 15 - 20% increase in acreage.

Soybean price fell by 35% between sowing and harvesting season. What is forecast for the rest of the season?

Multiple factors affect soybean and oil prices. Hence, it would be too early to forecast bean and oil prices. Besides, there are several international and domestic factors influence the price trends. The ensuing crop of soybean in South America, upcoming US soybean crop and also other output of oilseeds viz. rapeseed, sunflower etc. Change in the import duty in India and export duty in Indonesia and Malaysia, exchange rate, all affects market price. Soybean price has jumped to Rs 32 a kg now from Rs 24 a kg during the same time last year.

You had recently announced Rs 5 a litre price cut of refined soya oil. Do you see room for more such cuts going forward?

We consider reduction in price as healthy trend as it would reduce inflationary pressure in the agro products. The price of soya oil has gone down substantially in the last few months. If availability remains higher than consumption, one can expect further cut in the retail prices as well.

India lags behind developed countries in average soybean yield. What is the way forward?

There is a good reason for a lag in soybean yields in India. Our country undergoes seasonal changes at a much faster pace compared to developed world. The physiological maturity levels are short in India (60-90 days) which completes crop cycle very fast. Secondly, in good number of areas, soybean is grown as filler crop due to short duration and for taking advantage of Monsoon phenomenon, which also leads to poor inputs and less intercultural practice, ending into poor yields. Lack of R&D in the seed development is another problem in this regard. The other factors are very low size of holding and level of mechanism in India as compared to other countries. Additionally, we have post harvest losses (shattering, storing, etc) to blame for less produce.

Anything else you would like to add further?

Owing to higher prices, area under soybean has increased in almost all growing states. Potential for further growth in acreage stands in states like Karnataka, UP, Gujarat and AP. Soya meal export will increase due to good demand and fair availability.



We are focusing more on branded products as they fetch better margins.