AgroTech Foods Ltd.

Price Data Stock Data Financial Data (FY10)

CMP (RS.) 355 Market Cap (Rs. Crs) 865.9 ROE (%) 17.93%
52W High (RS.) 379 Shares O/S (mn) 24.37 ROCE (%) 23.86%
52W Low (RS.) 205 EV (Rs. Crs) 513.2 PE Ratio 33.0

Company Profile
• Agro Tech Foods Limited (ATFL) is a company with a dominant market position in
the edible oils and branded foods sector, in India.
• ConAgra Foods Inc of USA, world’s third largest foods company, along with Tiger
Brands of South Africa holds a majority stake of 52.3 percent in Agro Tech Foods
Ltd, through CAG Tech Holdings, Mauritius.
• The company has two business segments namely Branded Foods Segment and
Bulk and Processed Commodities Segment.
• The company has well known brands like Sundrop, Health World and ACT II in
its portfolio.
• ATFL has a market share of 13.8 per cent in the refined oil market in India. It
mainly caters to the snacks and staples food market having a product portfolio of
wheat flour, edible oil, vanaspati, popcorn, French fries and green peas.
• As a strategy to focus on value-added high margin products, Agro Tech Foods sold
its vanaspati brand, 'Rath', to Cargill India, the deal does not include any
technology or infrastructure transfer.
• There are direct selling agreements in place with key accounts like Reliance Retail,
Subhiksha, Spencers, Food World, Big Bazaar, etc.

Sector Investment Argument

• The food processing industry is one of the largest industries in India -- it is ranked
fifth in terms of production, consumption, export and expected growth.
• With a huge population of 1.08 billion and population growth of about 1.6 % per
annum, India is a large and growing market for food products. Its 350 million
strong urban middle class with its changing food habits poses a huge
market for agricultural products and processed food.
• According to CII the food-processing sector has the potential of attracting US$ 33
billion of investment in 10 years and generate employment of 9 million person-days.
• The national policy on food processing aims at increasing the level of food processing
from the present 2 per cent to 10 per cent by 2010 and 25 per cent by 2025.
• The sectors which are projected to achieve excellent growth of 20% and above are –
Semi Processed/Cooked Ready to eat (22%), Ice-Cream(20%), Edible/Vegetable oil
(20%), Wine(22%).
• The government has allowed 100 per cent FDI in processing sector. Setting of
SEZ/AEZ and food parks for providing added incentive to develop greenfield projects
• The food park scheme is proposed to be modified into a scheme for an Integrated
Food Zone/Mega Food park
SWOT Analysis

STRENGHTS:
• A dominant player in the edible oil and branded foods sector, in India.
• Strong affiliation with ConAgra Foods Inc of USA, world third largest foods company.
• Market leader in Healthy Oil segment with 13.8% of Market share.
• Low Competition in niche segment due to low margins
• Multiple price variant product line ranging across income groups.
• It has also acquired a fairly strong presence in the mass market for edible oil through
its low priced brand, Crystal.

WEAKNESS:
• Limited market penetration in edible oil market.
• Rural areas are not approach of company.
• Limited distribution network

OPPORTUNITIES:
• Sharp increases in demand of branded oil.
• India has a wide-ranging and large raw material base suitable for food
processing industries.
• India has developed advance technology to support food processing industry.
• High market awareness in metropolitan city of branded oil.
• India’s comparatively cheaper workforce can be effectively utilized to setup
large base for domestic and Export markets.
• Liberalized overall policy regime.
• Rapid urbanization, increase literacy and rising per capita income, have all
cause rapid growth and changes in demand patterns.

THREATS:
• The treats of low price competition.
• Engine, Fortune, Dhara, Nature Fresh and Saffola are big competitor in edible
oil.
• A large number of domestic as well as multinational players.
• Highly competitive industry.

Strategies
• Expanding distribution network from current 150,000 outlets
• Outsourcing Manufacturing to reduce Fixed Cost Structure
• Launch of low-priced blended oils under Sundrop Brand to counter threat of low
priced competition.
• Optimisation of Brand positioning by launching peanut butter under roof of Sundrop
Brand.
• Launch of New bag of “mid-meal snacks” to target Urban & Semi-Urban consumers
from parent ConAgro’s basket.
• Umbrella Ads
Peer Comparison

Key Risk
• Higher Raw Material prices.
• Delay in product roll-outs
• Currency fluctuations