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Kriti Nutrients Ltd.

BSE: 533210 Sector: Industrials
NSE: N.A. ISIN Code: INE798K01010
BSE 00:00 | 26 Nov 38.75 -0.35
(-0.90%)
OPEN

39.10

HIGH

39.60

LOW

38.00

NSE 05:30 | 01 Jan Kriti Nutrients Ltd
OPEN 39.10
PREVIOUS CLOSE 39.10
VOLUME 55308
52-Week high 53.30
52-Week low 29.45
P/E 22.02
Mkt Cap.(Rs cr) 194
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 39.10
CLOSE 39.10
VOLUME 55308
52-Week high 53.30
52-Week low 29.45
P/E 22.02
Mkt Cap.(Rs cr) 194
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Kriti Nutrients Ltd. (KRITINUTRIENTS) - Chairman Speech

Company chairman speech

RISKS AND US

At Kriti Nutrients the comprehension of risk - known and unforeseen - has beenfundamental to our business.

Our business is influenced in the short-term by weather impact; bountiful rains canincrease the soya crop and moderate our bean purchase cost providing us with adequateroom in which to process and market refined soyabean oil; scarce rains do the reverse.

It is impossible estimating the nature of monsoons one can expect from year to year. Inview of this we have generally lived on the edge never fully assured of whether we arelikely to encounter a sharp increase or decline in raw material costs.

At Kriti Nutrients we recognised the challenge in building an institution withoutyear-on- year profit visibility. In this scenario no bank would be willing to fund us;besides the discounting provided to a weather-dependent business model would have been inthe low single-digits preventing our company from enhancing shareholder value.

In view of this the management of Kriti Nutrients took a decided call: the companywould focus on building a business model with a larger buffer against resource cost swingsthat would keep us profitable in good years and bad. There was another risk-based reasonbehind this decision; we realised early on that the larger we became as a mere processingconvertor the larger risk we carried on our books. At large volumes a commodity-basedbusiness model was always a few decisions away from insolvency. Besides it would havebecome progressively more difficult to grow the larger we became which explains why anumber of commoditised soyabean processing companies stagnate after they reach aparticular revenue threshold.

The outcome of this understanding was that the company extended from trading looseunbranded processed soyabean oil to building a credible processed edible oils brand arounda superior consumer proposition. We believed that if we got our mechanics rights therewould be a sustainable increase in the traction for our brand; our brand loyalty wouldmake it possible for us to pass on moderate costs increases as well; we would beoffsetting the volatility at one end of the business with stability at the other (off takeand pricing).

The initial years were challenging as the brand took time to be accepted. Themanagement of Kriti Nutrients responded with patience; it selected to grow intensivelywithin a moderate footprint instead of spreading itself thin across States; it focused onspreading word of mouth goodwill as opposed to spending precious accruals on brandbuilding; it focussed on building the business from the ground level upwards throughdeeper engagements with distribution trade partners.

The result of desisting from pursuing gains from commodity price swings (even thoughthey appeared realisable given our proximity to the trade and the scale of our soyabeanprocurement) was that our branded part of the business grew steadily in scale and scope.The business grew from scratch in 1993 to H692.51 Cr revenues in 2020-21. The companyenjoyed market-leading shares in the states of Madhya Pradesh and Rajasthan. The companygenerated a high revenue visibility from repeat sales to the same consumers in addition toongoing organic growth in the number of consumers. The proportion of revenues from ourbranded edible oils business was an attractive 68% in 2020-21; the proportion of EBIDTAgenerated from this business was a sizable 3.56% during the year under review.

PHASE TWO

A few years ago we asked ourselves again: is this what we want to keep doing year inand year out across the coming decade? The answers were yes and no.

At one level we felt that the branded edible oil business was profitable scalable andvaluable; on the other hand we felt that we had gained deep insights in protein-basedproduct development that could be leveraged to broad base the company's portfolio seednew revenue engines and transform the company.

When we embarked on Kriti Nutrients 2.0 a few years ago the challenges wereconsiderable. The protein-based product development that we targeted was complex; thecommitment that was required of us was multi-year; there was no certainty related toproduct breakthrough acceptance or revenues. The product development warranted sustainedinvestment allocation of precious management bandwidth and a leap of faith. In otherwords the management was taking a risk.

It has been four years since we began investing in breakout product development. Duringthis period we extended from the business-as-usual approach to setting up an InnovationCentre recruiting food technologists doctorates and specialists. By the close of2020-21 there was nothing for me to share from a Profit & Loss account perspectiveexcept to say that we were closer to a breakthrough than at any time in our existence.

Our pilot projects leveraged home-grown competence to report encouraging results. Theproducts under development are not available in India. These products address the healthand wellness niche which received a shot in the arm following the pandemic widening themarket and strengthening our relevance.

The big message that I wish to convey is that we moved from scratch to differentiatedproduct development in just four years which is a remarkable achievement for a companydeveloping a product for the first time. Besides we did so at a competitive cost withoutcompromising our debt-free Balance Sheet.

OUTLOOK

The big question: where does Kriti Nutrients go from here?

I will attempt to answer this at two levels.

One the branded edible oils business has been invested with sales force automationstronger retailer focus and utilisation of market data to build a stronger salesfranchise. This focus is the result of the company possessing a strong brand acceptanceand plugging market gaps to report higher revenues without incurring larger costs inproduct distribution. To drive business growth the company embarked on a three-year

Annual Operating Plan for the first ever time building clarity on how the consumer isbuying differently today and how the company needs to adapt to grow regardless.

Two we recognised we could grow faster if we graduated from being an edible oils brandto becoming a broadbased foods organisation. Our product development is likely to bemonetised starting 2021-22 marked by a successful first phase in product developmentfollowed by a validation in proofs of concept. We believe that this product - onceestablished - could prove to be volume-driven and margins- accretive enhancing value forour company. This success could endorse what we had set out to de-risk our company from:commodity-based price swings and enhanced organisational stability.

The result is that the company is optimistic of consistent growth on a YoY basis.

I must thank our shareholders for their sustained patience during this investment phaseand hope to emerge as an admired and evolved soya-based food products organisation.

Shiv Singh Mehta

Chairman

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