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A3er peaking at 3.8%, global economic growth slowed down, especially in the second half, due to the imposition of reciprocal trade tariffs between the US and China, rising risks of protectionism, disruptions in the German auto sector, policy uncertainty in major economies and volatile crude oil prices. The US economy, however, performed well on the back of fiscal policy stimulus through tax cuts, a stronger dollar, lower unemployment vis--vis recorded in previous years and benign inflation. The Eurozones weakness was a significant drag on global growth, while China grappled with issues at home and overseas to bolster growth.
The IMF expects global economic growth to slow down further to 3.2% in 2019, with the first half expected to remain sluggish due to the spill-over effects of 2018; the second half could witness a broad-based recovery as central banks of major economies adopt an accommodative monetary policy stance. China has already ramped up its policy stimulus to counter the adverse impact of the ongoing trade dispute with the US. Global economic growth is likely to stabilise at 3.5% in 2020, though significant downside risks exist if the geopolitical tensions do not subside.
Growth continues unabated
Against the backdrop of a largely uninspiring global growth, the Indian economy has consistently performed well over the last five years. By opening multiple pathways for trickle-down, the government has ensured that the benefits of growth and macroeconomic stability reach the bottom of the pyramid.
Favourable policy reforms, credit rebound, moderate inflation, a gradual improvement in the private investment cycle and rising disposable income, coupled with policy-induced income support to farmers and increase in food grain procurement prices, contributed to buoyant demand.
The structural reforms conducted by the government in the past 2-3 years have gradually started to yield positive outcomes. The continued thrust on infrastructure creation bodes well for the economy in the medium-to-long term. In addition, a sweet spot of favourable demographics with a high working-age population, rapid urbanisation and formalisation of the economy, coupled with a manageable fiscal deficit, helped the economy remain largely insulated from intermittent global cyclical shocks.
Indias economy is expected to grow at around 7% in the foreseeable future. However, to achieve the ambitious target of becoming a US$5 trillion economy by 2024-25, the economy will need to grow at 8% (Source: Economic Survey 2018-19) over the next five years. The RBI is likely to maintain an accommodative policy stance, so long inflation remains within its comfort zone. Besides, the significant liquidity infusion into public sector banks to shore up their capital base bodes well for credit growth rebound.
The country will continue to reap its demographic advantage, with rising disposable income and aspiring lifestyle and consumption choices, further fuelling the domestic consumption-driven economy. Besides, several government initiatives are bolstering the indigenous manufacturing sector, strengthening a start-up ecosystem, and building on economic formalisation and a culture of inclusive growth.
Rice and its finest variety, basmati
Rice is a staple diet for nearly half of the global population. Asia accounts for over 90% of global rice output and consumption, led by China, India, Indonesia, Bangladesh and Vietnam. However, rice exports account for only 6-7% of production, owing to high domestic consumption and restrictive trade policies. Among several varieties of rice, basmati is considered among the finest.
India accounts for over 70% of the worlds basmati rice production. Of Indias US$38.49 billion exports of agricultural and processed food products in FY2018-19, basmati rice at US$4.71 billion and non-basmati rice at US$3.00 billion were among the top 5 contributors (Source: IBEF). The basmati rice industry has been traditionally dominated by unbranded sales in both domestic and export markets. However, in the past few years, branded basmati players, especially in the domestic industry, have gained significant traction with rapid growth in modern retail and changes in tastes and preferences driven by an aspirational lifestyle.
Food sector review
Indias domestic consumption (contributes to 60% of GDP) is likely to reach US$6 trillion by 2030, driven by the expanding upper-middle and high-income segments, from 25% currently to 50%. The countrys food sector is rapidly evolving on the back of lifestyle-induced changes in consumer preference towards convenience foods, health foods and organic foods.
Growing appetite for convenience food
Rising a3luence and urbanisation are changing consumption patterns in India. Consumer behaviour and spending patterns are shi3ing with evolving lifestyle and spending patterns. India has also been experiencing robust demand for branded convenience food products in the past few years, with its expanding middle and a3luent segments, new food retail formats and expanding e-commerce.
In addition, the changing role of traditional homemakers with increase in womens participation in the workforce, preference for nuclear families and migration to other states for education and employment are further driving this shi3. This is creating several opportunities for established food companies to significantly improve traction.
Health and wellness foods industry
Growing consumer preference for a healthy lifestyle is driving demand for natural, fresh and locally sourced foods, which are healthier and more wholesome than packaged foods with more shelf life. Several food and beverage (F&B) companies are expanding their offerings to cater to this segment by offering products with natural ingredients and minimally processed as well as natural, fresh food with limited shelf life.
Organic foods industry
Consumers are becoming increasingly aware of the benefits of organic foods that are produced without the aid of synthetic chemicals. Several factors like rising awareness and demand, the growth of e-commerce, government support and the emerging concept of sustainability play a crucial role in the growth of organic foods markets in India and around the world.
The global organic food and beverages market is expected to reach US$323.09 billion by 2024 (Source: Allied market research). North America leads the global organic foods industry, followed by Europe. In Europe, Germany is expected to lead in this segment, while the UK, France, Spain, Russia, and Italy are also likely to witness rapid growth. The Asian market imports processed organic food and beverages from Europe and North America, while Australia, New Zealand, Japan, Singapore, Hong Kong and South Korea are major markets for organic food and beverages in Asia Pacific. There is also an increase in demand for the products in developing countries such as India and China.
The domestic organic food market was estimated at 40,000 million, expected to reach 120,000 million by 2020, with similar growth in exports (Source: EY Report on Indian Organic Market March 2018).
A growing consumption trend across India
Rise in disposable income and global exposure: India has witnessed steady growth in disposable income over the last decade. With access to attractive instalment options, young and aspirational Indians are likely to push consumption spending to ~US$6 trillion by 2030 from US$1.5 trillion today (Source: World Economic Forum).
Indians with high disposable incomes and international exposure are likely to demand more food varieties. Besides, increase in brand awareness and focus on health will lead more people to opt for better quality and packaged food items.
Growing middle class and increased brand awareness:
The country is likely to add ~140 million middle-income and 21 million high-income households, nearly doubling the total share of these segments to 51% by 2030 (Source: World Economic Forum). This, along with enhanced brand consciousness, will drive demand for branded products across segments.
Rapid urbanisation and need for convenience:
Better infrastructure now connect semi-urban and rural areas in India, with new urban clusters growing significantly. This trend has led to increased purchasing power among consumers in Tier-II and Tier-III cities, driving consumption. Urbanisation is also inducing lifestyle changes, leading to a rise in demand for convenience foods and ready-to-cook meals. Besides, the increasing penetration of new retail formats is creating awareness about di3erent food options and brands, even for staples.
Digital inclusion and rise of e-commerce:
By 2030, over a billion Indians from rural and urban areas are expected to have internet access. Digital inclusion is likely to further propel Indias consumption growth trajectory (Source: World Economic Forum) while improving awareness about health, lifestyle and brands, among others. These factors, along with the countrys booming e-commerce, will offer new and exciting opportunities to organised Food & Beverage (F&B) players.
|Segments||Direct consumers||Revenue share in FY2018-19|
|Branded business||Established channel partners cross all segments||~59 %|
| Includes the flagship brand Daawat and Royal|
| Other brands in this segment, include Indus Valley, 817 Elephant, Heritage, Devaaya and Rozana|
|Private label||Large institutional consumers||~26 %|
| Deals with large institutional customers|
| Long-term partnerships across geographies|
|Organic||Institutional consumers and direct consumers||~9 %|
| Providing authentic organic ingredients to global consumers|
| Diversified portfolio, comprising cereal grains, flour, pulses, oil and oil seeds, nuts, spices, herbs, millets and sweeteners|
|New products||Leveraging brand equity and distribution strength||~6%|
| Innovative products for health conscious and convenience-seeking consumers (quick cooking brown basmati rice, rice-based sauces and rice-based snacks)|
LT Foods is among the key players of branded basmati rice in India. In recent years, the Company has benefited tremendously from the rising a3luence and evolving culinary preference among end users across the country. With its wide distribution network and diversified product portfolio that caters to various price points, LT Foods has enhanced its market share significantly.
Our India branded business saw a growth of 6% from 892 crore to 947 crore on a year-on-year basis. The realisation also improved from 51 per kg to 53 per kg, up by 3%. We have also started reaping the benefits of scale, which is reflected in the financial performance of the India business. Our India overall consumer pack business increased by 7% year-on-year in FY2018-19, driven by a higher o3ake of our key brands of Daawat and Daawat Chefs Secretz, among others.
We are a custodian of various brands that are synonymous with high quality. Our long-term objective is to build strong and resilient brands that are trusted by customers as a healthy addition to their day-to-day lives. We cater to diverse customer segments, spanning various income segments.
Our flagship brand Daawat is among Indias leading basmati brands with around 27% market share. In the fast-growing modern-trade segment, we enjoy 29% share and 35% in the premium segment. Additionally, we have captured 33% of the countrys rural market pie. In Indias highly fragmented market, our multi-brand structure is geared towards accelerating market transition towards branded basmati across all price points.
In India, Daawat continues to be a very strong brand in the self select environment of modern trade where the consumer makes a brand choice solely on his/her preference. Daawat has market share leadership in this channel. LT Foods has now also partnered with and built a commanding position in the fastest growing channel of online retail. LT Foods brands are available in more than 40 such local and national retailers and enjoy market share leadership with most, such as Amazon, Big Basket, Flipkart, Paytm Mall and Grofers, among others.
LT Foods is making investments in its brands to take them to the next level. Brand spends for FY2018-19 was 78 crore, which was 3.4% of the branded business. Various marketing initiatives were adopted such as a new TV commercial was rolled out which is gaining a lot of traction and resonating well with the consumers. Various activities were also undertaken to promote SKUs such as Biryani, Pulav and Brown Rice. Renowned celebrities such as Shilpa Shetty and Chef Sanjeev Kapoor were part of these initiatives. All these activities were also promoted on the digital platforms and gained positive response from the consumers. All these initiatives helped us to maintain our market share at 27% on a calendar year basis.
It is expected to have a better growth trajectory during the current year on the back of enhanced penetration of basmati across Indian households as well as in the HORECA segment.
During the year under review, we had expanded our reach across more than 150,000 retail outlets with a strong distribution network around 800 distributors in India. We have also strengthened our distribution network globally as well and around 100 distributors are helping us to take our brands in more than 65 countries.
The Company is also using technology for mapping and monitoring the outlet and distribution coverage through Sales Force Automation (SFA) and Distributor Management System (DMS) in India.
With consistent investments in brands, technology and initiatives, we aim to expand distribution to outpace the industry growth in the current year.
During the year, our overall international business generated a revenue of 2,103 crore, registering a growth of 11% year-on-year. This growth was mainly led by a 23% increase in realisation to 102 per kg.
LT Foods Americas (LTFA) US Business
LTFA contributes over 35% to the Group consolidated revenue. During the year under review, US business grew 26%, to 1,360 crore from 1,078 crore last year driven by robust progress across its core product lines of rice, specialty rice, wheat flour and grape seed oil.
LTFA aims at diversifying its portfolio and expanding its business channels across the US in the next five years. It is focused on consolidating its market position in basmati and other specialty grains in the US, with an emphasis on ready-to-heat which were launched during the year. LTFA plans to unlock its revenue potential through innovation in its widening range of value-added offerings in core convenience and organic segment and penetrating new, fast-growing business channels.
During the year, LTFA added 9,000+ distribution points through various focused marketing and brand building/strengthening initiatives.
LT Foods Middle East DMCC Middle East Business
LT Foods Middle East DMCC is driving growth in the GCC regions premium basmati rice category through active consumer engagement across all demographics. During the year, it expanded distribution in the food services segment. It also expanded its distribution in some of the key markets by appointing additional distributors which enabled it to deliver good performance during the year and will hold it in good stead in the coming years.
The Middle East economy witnessed challenging socio-economic factors and, as per AC Nielsen, the overall grocery market in several key countries declined.
LT Foods Europe (LTFE) Europe Business
LTFE continues to strengthen its position in the branded and private label segments in Europe, in the strategic geographies of Germany and
Scandinavia. Additionally, it is growing its ethnic business across various European markets. It added new supermarket customers for its private label and launched new avatar of Daawat in the UK and Europe across all price segments with enhanced focus on catering and consumer channels. LTFE is concentrating on making Daawat a household name across European markets.
The European operations are ramping up in line with our plan. Revenue in FY2018-19 more than doubled to 3258 crore from 3118 crore a year earlier. The business became EBITDA positive in the last quarter of the year.
Rest of World (RoW) Business
LT Foods RoW branded business grew 29% during FY2018-19, to which Australia remained one of the largest contributors. The Company acquired a major private label business for the Asia Pacific region. The Company enjoys leadership position in Israel and the Reunion Island as well.
LT Foods organic business Nature Bio Food (NBF) is an ingredient-based organic food company that is over two decades old. It is among the leading players in the countrys organic food space and enjoys one of the largest organic land banks (~110,000 hectares). NBF focuses on building enduring relationships with its suppliers and works with 80,000+ farmers, spanning 14 states in northern and central India.
NBF focuses on attaining the highest possible standards of food safety and hygiene and its offerings adhere to global organic quality benchmarks. It directly caters to Germany, the Netherlands, Italy, France, Austria, the US, Canada, Australia, New Zealand, the UAE and Israel.
The Company plans to widen its product portfolio by launching high-margin offerings such as soymeal. It is also looking to unlock potential in the global baby food and feed market as a key ingredient supplier.
The India Agri Business Fund, the private equity (PE) arm of Rabo Bank, partnered with us by investing 60 crore (the first tranche of its investment) in the growth journey of the Company.
During the year, the organic business achieved a revenue of 372 crore, up from 361 crore last year.
The Company deals with corporate consumers through this channel and has several long-term partnerships. During the year under review, it continued to progress in this business vertical as the club channel and the burgeoning foodservice operations offered significant growth opportunities. During the year, LT Foods entered into various long-term tied-ups with prestigious institutional businesses to supply quality food items.
During the year, the institutional business achieved revenue of 1,019 crore, in comparison to 962 crore last year, up by 6%.
Farmers spanning 14 states in northern and central India enjoy enduring relationship with NBF.
Financials Consolidated (K in crore unless specified)
|Profit & Loss Account||FY2018-19||FY2017-18||Change y-o-y (%)|
|Revenue from operations||3,890.43||3,613.70||7.7|
|Total income from operations||3,914.53||3,649.90||7.3|
|Gross profit margin (%)||24.9||26.8||-190 bps|
|EBITDA margin (%)||10.8||11.3||-60 bps|
|EBIT margin (%)||9.0||10.0||-100 bps|
|Profit before tax||213.64||217.56||-1.8|
|PBT margin (%)||5.5||6.0||-50 bps|
|Profit a3er Tax||137.47||144.42||-4.8|
|PAT margin (%)||3.5||4.0||-40 bps|
|Earnings per share (EPS)||3.96||4.80||-18|
|Debtors turnover (times)||7.32||7.80||-6|
|Inventory turnover (times)||1.55||1.55||1|
|Interest coverage (times)||2.54||2.48||2|
|Current ratio (times)||1.43||1.35||6|
|Operating profit margin (%)||24.9||26.8||-7|
|Net profit margin (%)||3.5||4.0||-11|
There has been no significant change in the key financial ratios of the company during the year under review compared to last year
LT Foods recorded 3,915 crore revenues in FY2018-19, up 7% and gross profit was 976 crore. The Companys EBITDA stood at 421 crore vis--vis 414 crore which translated to a 10.8% EBITDA margin. The Company recorded 137 crore in PAT in FY2018-19, resulting in an EPS of 3.96. The Companys net worth increased to 1,435 crore in FY2018-19 from 1,235 crore in FY2017-18 due to current year profits.
LT Foods recorded 2,210 crore revenues in FY2018-19, up 3% and gross profit was 411 crore. The Companys EBITDA stood at 183 crore vis--vis 157 crore, up by 17% which translated to a 8.3% EBITDA margin versus 7.3% last year. The Company recorded 54 crore in PAT in FY2018-19 up by 30%, resulting in EPS of 1.70, up by 14%. The Companys net worth increased to 842 crore in FY2018-19 from 781 crore in FY2017-18 due to current year profits.
LT Foods continues to strengthen its core growth enablers to deliver the finest products globally. The Company has consistently delivered consumer- preferred brands that has help enhance its market share to 27% in India and 50% in US and prominent position in other countries.
Integration across value chain
The Companys integrated operations provide several competitive advantages, including the ability to purchase large quantities of paddy at competitive prices, and effectively plan, schedule and implement production, storage and further distribute it pan-India and across geographies through its well-entrenched distribution network. This also enables the Company to exercise greater control over the quality of its products and ensure effective inventory and resource management.
LT Foods primary raw material for its rice processing business is basmati rice paddy. The basmati rice crop can be cultivated only once during the year.
The Company enjoys robust and vast procurement operations in the basmati cultivating regions.
Additionally, the Company continues to purchase paddy during o3-season to supplement its procurement requirements or to benefit from lower paddy prices.
LT Foods entered into arrangements with 270+ procurement agents, across 234+ mandis (procurement markets) established by various state governments. The Company trains the pucca artiyas, enabling them to identify quality products through regular monitoring.
LT Foods has also signed a Memorandum of Understanding (MoU) with Wageningen Food and Biobased Research (WFBR), Netherlands to promote co-operation in the field of research and education to strengthen paddy procurement.
The Company further engages in contract farming for procuring raw materials for its organic produce. It works with small-holding farmers and encourages them to practise organic and sustainable cultivation. The cultivators associated with LT Foods contract farming programme meet the farmyard manure requirements internally, sustain the soil fertility organically and follow crop rotation to maintain soil fertility. LT Foods has entered into arrangements with
80,000 farmers and 110,000 hectares of land is under organic cultivation for production of organic crops.
Processing and packaging
LT Foods operates five processing and packaging facilities in India. The Companys India operations are in northern and central part of India, with processing units strategically located in Haryana, Punjab and Madhya Pradesh. Besides, it owns three packaging facilities in the USCalifornia, Texas and New Jerseyand one processing and packaging unit in Rotterdam, Netherlands.
The Company aims to make Daawat a household rice brand in European markets and has therefore strategically established the packaging facility in Rotterdam, offering hassle-free access to its target markets. This unit also enables LT Foods to address the challenge of import duty on white rice.
LT Foods Houston facility houses the ready-to-heat (RTH) unit that manufactures two-minute retort rice and other products. This unit enables the Company to grow its convenience foods segment and further diversify its portfolio.
The Companys processing facilities are also accredited with food safety management systems such as International Featured Standard (IFS), Safe Quality Food (SQF) Certification as well as Laboratory Management system ISO 17025:2005, Environment system ISO 14001 and Social Standard SA 8000.
The processing units leverage advanced technology that facilitates the production of quality products with lower breakages, negligible losses and better sorting and grading processes. LT Foods uses processing equipment developed by established and leading companies, including colour sorting equipment by an esteemed Japanese manufacturer, cleaning and drying machinery by a German enterprise.
Distribution and sales
LT Foods operates in an organised yet fragmented market with numerous traders and various intermediaries. Its products are primarily sold by distributors to retail outlets and modern retain chains, while it also directly supplies to certain modern retail chains. The Company reaches 150,000+ domestic retail outlets through 800+ distributors and 36,000+ wholesalers. Its products reach 93% of towns (with over 2 lakh population) in India.
In India, the Company primarily sells its products under brands including Daawat, Rozana, ecoLife and Heritage, helping consumers live their finest, healthiest lives. It also caters to the Hotels, Restaurants and Caterers (HORECA) segment and is associated with 6,000+ food service outlets through Daawat Chefs Secretz. Also, it reaches catering houses and supplies products on a purchase order basis to modern retail chains across the country. The Company also serves medical retailers with its Quick Cooking Brown Basmati Rice. During the reporting period, the Company added more than 600 new customers to the HORECA segment.
LT Foods also has an extensive distribution infrastructure for reaching out to overseas markets. With distributors as the fulcrum of this system, the Company has developed enduring bonds with various customers in its key export markets, including East Asia, the Middle East, North America and Europe, leading to repeat orders.
The Company uses various marketing techniques across di3erent media platforms, including television and radio commercials, hoardings across major towns and conscious brand building exercises across social media, among others. LT Foods has celebrity Chef Sanjeev Kapoor for promoting its products in India and Internationally. In addition, it participates in trade shows and farmers markets to increase its presence across jurisdictions. Actress Shilpa Shetty is helping us promote our brand digitally.
Sustained quality focus
With more stringent food safety rules across international markets, LT Foods is focusing on quality and testing to ensure these safety standards are met across its value chain. Besides, this quality focus provides a competitive market advantage. The Companys dedicated quality assurance department ensures its products are tested at each stage of the process.
This begins right at the procurement stage, and continues through the di3erent stages arrival, storage, in-process inspection during processing, finished goods inspection prior to dispatch and detailed a3er-sales follow-up with customers on product experience.
LT Foods recently opened a multi-residue assurance laboratory, strategically located in the basmati growing region of Haryana, India. The laboratory brings all physical, chemical, multi-residue and biological tests under one roof. It offers the most comprehensive range of reliable analytical methods available in the world for testing the safety, identity, purity of its products. The newly developed methods and techniques will ensure stringent quality and safety standards.
The Company and its subsidiaries five production units have multiple certifications
|LT Foods Ltd.|| ISO 9001:2015 (Quality Management System)|| ISO 17025:2005 NABL - Laboratory|
|Bahalgarh, Sonepat (Haryana)|| ISO 14001:2015 (Environment Management System)||Management System|
| SA 8000 (Social Standard)|
| SQF (Safe Quality Foods)|| Halal|
| BRC Global Standard for Food Safety|| Kosher Certification (OU)|
| IFS (Food Safety)|| BSCI|
|Nature Bio-Foods Ltd.|| FSSC 22000 (Food Safety Standard)|| Kosher Certification from JK Kosher|
|(Organic Division) Kamaspur, Sonepat (Haryana)|| NOP (National Organic Programme) of USFDA Organic Standard|| Fair Trade|
| NPOP (National Programme for|| BRC|
| EEC 837:2007 (Europe Organic Standard)|
| IFS (Food Safety)|
|Daawat Foods Ltd.|| Rice Plant - FSSC 22000:2010|| Kosher - OU|
|Mandideep, near Bhopal (Madhya Pradesh)|| Food Plant - FSSC 22000:2010|| USFDA|
| Grain Plant - BRC Global Standard for Food Safety|| IFS|
| NPOP and NOP|
| Grain Plant - FSSC 22000:2010|| IOPEPC|
| Halal|| EIA - IPQC|
|LT Foods Ltd.|| FSSC 22000:2010 (Inclusive ISO:22000 &|
|Varpal, Amritsar (Punjab)||ISO/TS 22002-1)|
| BRC Global Standard for Food Safety version|
|Raghunath Agro Industries Private Limited|| ISO|
|Bhikiwind, Amritsar (Punjab)|
|LT Foods Europe,|| IFS (Food Safety)|
|BV, Rotterdam, Netherlands|| BRC Global Standard for Food|
|Safety version - 7|
| SKAL - Organic|
| GMP + (Feed)|
Future growth strategy
LT Foods strongly believes in the continued attractiveness of the basmati market, both in India and globally. It believes that India consumption will be driven by the rise in disposable incomes and increase in the aspirations of the consumers. It believes that the consumer will become more discerning and demanding of quality. All these factors will lead to growth in branded basmati. LT Foods with over two decades of investments in its brands like Daawat and pan-India availability across all trade channels has created a very strong platform to capitalise on the growth in the branded segment. The Company will thus continue to invest in brands through the conventional and emerging consumer platforms and develop its capabilities in both. Over the next five years, it will also invest heavily in technology-enabled distribution reach and sales management. It will further strengthen its leadership positions in HORECA, modern retail and e-commerce through investing in state-of-the-art technology of shelf management, customer business development and efficient consumer response.
Globally, basmati consumption is being driven by the growth of Indian cuisine and the discovery of the superior eating experience of basmati by the traditionally non- basmati consuming population. The growth of basmati consuming communities in Europe and the US through immigration is also fueling this growth. LT Foods with its facilities in Europe and the US and distribution in over 65 countries is very well placed to offer its brands to capture this growth. In the future, LT Foods will continue to deepen its presence in these markets and further strengthen its brand through marketing investments. It will also fully expand its portfolio across all the relevant price points.
We are also noticing a trend towards convenience and health. LT Foods has already started creating a portfolio of products that meet these emerging trends. To service these demands, LT Foods is investing in strengthening its supply chain and further automating and digitalising its manufacturing operations.
Cra3ing a high-performance and ownership culture
LT Foods offers an inspiring work culture to its teams, so that they can shoulder additional responsibilities and accelerate their career progression. The Company undertakes several employee-engagement initiatives and has put in place an attractive performance-based rewards and recognition programme for go-getters across the hierarchy. The headcount on a standalone basis is 897 and at a consolidated level is more than 1,500.
The Company uses a competency- based hiring framework with a systematic recruitment process. The hiring process involves tools such as psychometric evaluation across levels. In its pursuit of excellence, LT Foods recruits management trainees from top Business Management Schools.
The Company initiated special training programmes to build a core team of professionals through campus recruitments from leading business schools to develop innovative ideas and help them chart a strong career graph.
Reward and recognition (R&R) initiatives
The Company has undertaken multiple initiatives to steadily improve its reward and recognition programme during the year under review. The programme devotes greater attention to team accomplishments as against individual triumphs, which helps build stronger and cohesive teams.
Events and celebrations
LT Foods organises various events and celebrates festivals at the workplace as it believes that such events help strengthen the bond among employees and, in turn, enable them to perform better in the long run. During the year, the Company celebrated the Independence Day, Diwali, Christmas, New Years Eve and Womens Day with cultural events and much more across the Group.
Technology remains a key enabler
LT Foods is strengthening its business efficiency by embracing technology. The Company began its digital transformation journey last year and engaged Gartner as its IT advisor, which is helping the Company to evaluate various technologies according to its specific needs. LT Foods undertook several initiatives such as reduction of SAP time, implementation of QR code and Sales Force Automation.
Opportunities and threats
With rising global population, growing income levels and evolving consumer preferences, along with changing lifestyles, the opportunity landscape of the quality food segment appears promising. The Companys strategic alignment with aspirational consumer requirements such as brand, convenience, health and organic foods will further enhance the prospects.
For LT Foods, its primary future growth drivers are organic foods and value-added products along with basmati rice. Currently, the Companys organic foods vertical is among its fastest growing businesses. It is capitalising on the success of Nature Bio-Foods Ltd, dedicated primarily to organic foods. Given the strong global demand for organic foods and limited competition, it is expected to continue with a robust growth momentum.
The Companys value-added products division is still at its nascent stage; and is expected to grow significantly following the introduction of new and innovative products like fast-cooking brown rice (FCBR), convenience sauces, and blended rice which resonate with consumer tastes and preferences. With the success of FCBR, blended rice, successful launch of sauces and Kari- Kari, the Company is working on evaluating more such options to expand its portfolio.
Unfavourable weather conditions in basmati cultivating geographies, sudden fluctuation in exchange rates, and any adverse regulatory changes may pose a threat to LT Foods sustainable business performance.
Key risks and concerns
Risks are inherent to any business. Being part of the agro-based industry, LT Foods business is exposed to certain risks beyond its control, such as unpredictable and diverse weather patterns across its areas of operation, irrigation facilities, change in crop patterns, among others. Thus, the Company proactively identifies risks and implements mitigation measures to ensure a sustainable business performance.
Volatility in raw material supply and cost: Paddy is the primary raw material. The cost and availability of paddy is impacted by several factors such as inadequate irrigational facilities, unfavourable and extreme weather events, and cultivators preference. These factors could impact paddy production, and, in turn, adversely affect volumes and realisations.
Mitigation: The Company has a robust procurement process in place, which ensures timely purchase of quality paddy during the season. Moreover, the Company has its facilities at five locations in India which strategically gives an edge to procure particular quality of rice from the area of best quality available of that crop. Sustainable farming also help the Company to produce residue-compliant products to address the challenge of various MRL levels at the global level.
Disruption of supply demand dynamics could lead to price erosion: Import restrictions by key basmati rice importers (Iran, Saudi Arabia and others) may lead to price erosion, leading to subdued realisations.
Mitigation: The Company strategically decided to limit its exposure to politically y stable and growing countries. Further, we the dont have any exposure to Iran.
Exchange rate fluctuations: LT Foods derives more than 50% of its revenue from exports while cost is denominated in n the Indian rupee. Thus, any unfavourablee exchange rate fluctuations could impact realisations and profitability.
Mitigation: The Company has a well-defined and cautious hedging policy in place, wherein we hedge 100% of our confirmed orders and hedge 50% of the orders that we get in normal course of business.
Damaged inventory: Any improper storage, processing and handling of paddy and basmati rice may adversely impact the Companys inventory, and in turn, its business and operations.
Mitigation: The Company uses state-of-the-art storage and production facilities that ensure effective inventory management and preserves quality of the raw materials as well as products.
Internal audit control systems
LT Foods has a well-established system of internal controls and procedures, in line with the size and nature of its operations. The Company regularly conducts internal audit of operations, establishments and stockyards to ensure that the set processes are strictly adhered to.
The Audit Committee reviews the reports of internal auditors and evaluates the operational efficiency of the internal control systems. The Committee then suggests improvements in the Companys business processes, systems, and internal controls. Annual internal audit plans are prepared by internal auditors in consultation with the Audit Committee. The Company has implemented SAP, the worlds leading ERP system, to automate the internal control environment and keep track of processes and performance.
This document contains statements about expected future events, as well as the financial and operating results of LT Foods Limited, which are forward looking. Forward-looking statements, by their nature, require the Company to make assumptions and are subject to inherent risks and uncertainties. The risks include assumptions, predictions, and other forward-looking statements not proving to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as multiple factors could cause the assumptions and actual future results or events to di3er from those expressed. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the managements discussion and analysis of LT Foods Limiteds Annual Report, 2018-19.