Mumbai, March 4 - Paddy processor Lakshmi Energy and Foods Ltd plans to spend 8 billion rupees over the next four years to more than double its processing capacity, and invest in retail and power plants, a senior official said.
The company, which is predominantly a non-basmati rice producer in the wholesale market, would increasingly push its products to retail shelves to cash in on the high margins, I.S. Gumber, director, told Reuters on Tuesday.
"Change has come to India over the last three years because of the mall culture," Gumber said, adding retail sales would contribute 20 percent in 2008/09 from 7 percent to 8 percent in the year to March.
Large firms, which account for less than 3 percent of India's $350 billion retail market, has been setting western-style superstores, expecting the market to double in size by 2015.
"We will enter wheat flour, pulses, spices, coffee, tea and sugar under our brand name (Lakshmi Foods)," Gumber said.
It has set up a wholly-owned subsidiary for procuring, trading and marketing agri commodities. The subsidiary, Punjab Greenfield Resources Ltd, has started exporting cotton and rice.
Lakshmi Energy, which has an annual paddy processing capacity of 1.35 million tonnes of rice, expects to increase it to 3 million tonnes by 2009/10, he said. The 8-billion-rupee spend would be funded through an equal mix of debt and internal accruals.
Revenue contribution from rice is expected to decrease to about 71 percent to 73 percent in 2008/09, from about 85 percent now, Gumber said. The balance would be from power, edible oil, cattle feed and wheat flour.
RICE TO POWER GROWTH
The company expects to report a net profit of 1.80 billion rupees on revenue of 12 billion rupees in the year beginning April 1, I.S. Gumber said.
"Rice gives highest margins among all commodities especially when packed and branded," Gumber said. Rise in the price of rice and crude rice bran oil would also boost its revenue growth.
It expects to close 2007/08 with a net profit of 1.10 billion rupees on a revenue of 9 billion rupees, he said.
Lakshmi Energy expects price of rice to increase by 15 percent to 20 percent and crude rice bran oil price to increase to 50,000 rupees a tonne in 2008/09 from 45,000 rupees now, he said.
To support its operations, the company has bought more than one million tonnes of paddy from October.
Work on its proposed power plants, with an envisaged capacity of 30 megawatts, has not been completed due to delays by the power equipment supplier and civil contractors, he said.
The two plants, which were expected to be commissioned in 2007, would start functioning by May and would achieve 140,000 certified emission reductions annually, helping it earn 100 million rupees at current rates, Gumber said.
Shares in the company ended 0.45 percent higher at 235 rupees in a weak Mumbai market.