Hindustan Foods advances 41% in 4 days on Rs 125 crore capex plan

Shares of Hindustan Foods hit a fresh record high of Rs 1,459, rallying 12 per cent on the BSE in intra-day trade on Monday, after the company announced capex of Rs 125 crore to set up a manufacturing facility in north India as part of its goal to more than double its revenue to Rs 2,000 crore by fiscal year 2021-22. The company is one of India’s largest fast moving consumer goods (FMCG) contract manufacturer. In the last four trading days, the ctok has surged a massive 41 per cent. 

On December 22, the company announced that it will undertake a capital expenditure of Rs125 crore in Northern India via its wholly-owned subsidiary (‘WOS’), HFL Consumer Products Private Limited.

"The WOS will be setting up a food & beverages manufacturing facility for a leading FMCG brand. The work for the said facility will commence from Q4FY21 (January-March) and commercial production is expected to begin from Q4FY22," Hindustan Foods said in a statement.

The new facility is part of company’s consolidated plans to expand its footprint in contract manufacturing space for the FMCG products. The capex by the WOS is likely to be funded through combination of internal accruals and debt, it said.

The management said the demand for contract manufacturing in FMCG industry is growing rapidly. “We are in continuous discussions for new projects with our customers which include some of the leading brands in this space. We are committed to our goal of achieving, Rs 2,000 crore of  revenue  by FY2022 and believe all  the capex  projects will  play a key  role in  helping  us  reach  this milestone,” it said.

“Through the Make in India drive, the Government aims to increase contribution of manufacturing sector to the Indian GDP from 16 per cent to 25 per cent by CY 2022. With various efforts dedicated towards improvement of the country’s stature on different counts, like in resolving business issues, lowering corporate taxes, ease in payment of taxes, labour regulation, contact enforcement and land clearance, the business sentiments for Contract Manufacturers in India remains positive,” Hindustan Foods said in 2019-20 annual report.

At 11:19 am; the stock was trading 11 per cent higher at Rs 1,448 on the BSE, against 0.56 per cent gain in the S&P BSE Sensex. A combined around 60,000 equity shares changed hands on the counter on the NSE and BSE.