Growth Strategy
- Diversification Across Business Segments
- The company is expanding its footprint across multiple agricultural sectors, including animal feed, dairy, crop protection, vegetable oil (palm oil), and poultry.
- Each segment is being refined to enhance profitability, with a focus on premiumization and value-added products.
- Strengthening the Animal Feed Business
- Improving EBIT per ton, which increased from ₹1,338 in Q3 FY24 to ₹1,925 in Q3 FY25.
- Expanding product innovation through R&D initiatives to ensure cost efficiency and enhanced product offerings.
- Expansion of Palm Oil Business
- Significant investment in new palm plantations in Northeast India, Odisha, and Telangana.
- Capitalizing on favorable government policies, including higher import duties on palm oil, to improve margins.
- Shifting Focus in Poultry Business
- Reducing live bird sales from 41% to 26% while increasing the share of processed chicken under Real Good Chicken (RGC) and Yummiez brands.
- Targeting higher profitability and lower volatility in poultry margins.
- Advancing the Crop Protection and CDMO Business
- Astec LifeSciences, the company’s subsidiary, is focusing on Contract Development and Manufacturing Organization (CDMO) growth despite current headwinds.
- Expansion into new markets and molecules, particularly in the European and US segments.
- Enhancing the Dairy Segment
- Increasing direct farmer procurement to reduce costs and improve margins.
- Expanding the value-added products (VAP) segment, which currently accounts for 34% of sales.
Future Outlook
- Animal Feed Business to Maintain Strong Margins
- EBIT per ton is expected to sustain around ₹1,800 – ₹2,000 per ton in FY26.
- Increasing focus on cost control, R&D-driven product innovation, and efficiency improvements.
- Palm Oil Business to Benefit from Government Policies
- Higher import duties on palm oil support domestic extraction and pricing.
- Projected growth in palm plantation area, ensuring long-term supply stability.
- CDMO Business Recovery Expected in FY26
- 30-40% revenue growth expected in the CDMO segment in FY26, driven by demand recovery in Europe and the US.
- Expansion of R&D pipeline and partnership development with global players.
- Dairy Business to Improve Profitability
- Direct procurement from farmers is expected to reach 75-80% in the coming year, reducing costs.
- Expanding premium dairy products (flavored milk, yogurt, curd, and buttermilk) to enhance margins.
- Poultry Business to Shift Toward Processed Foods
- Live bird sales will be capped at 20%, focusing more on Real Good Chicken and Yummiez.
- The company plans to increase capacity utilization in processing plants to improve efficiency and margins.
Key Challenges
- Volatility in Raw Material Prices
- Animal feed segment faces commodity price fluctuations, especially in corn and soymeal.
- Government policies on ethanol blending and exports affect feed input costs.
- Delayed Recovery in CDMO Business
- Customer order postponements and inventory corrections in Europe and US markets affected growth.
- Prices for key molecules remain uncertain despite an increase in demand.
- Poultry and Dairy Price Volatility
- Milk procurement costs increased sharply in Q3 FY25, impacting margins until consumer price adjustments were made.
- Poultry segment remains exposed to fluctuations in live bird prices.
- Climate and Agricultural Uncertainties
- Crop protection segment is highly dependent on monsoons and pest infestations.
- Lower demand for pesticides due to favorable weather conditions for crops resulted in declining sales volumes.
Key Advancements
- Strategic Expansion in Palm Oil Business
- Significant area expansion (13,000 – 14,000 hectares) in FY25, up from 5,000 hectares in FY24.
- Enhanced oil extraction ratios and yield efficiency.
- Innovation in Animal Feed
- Strong R&D focus on improving nutrition efficiency and reducing dependence on volatile commodities.
- Developing premium and specialized feeds for poultry, cattle, and aquaculture.
- Digitalization and Supply Chain Optimization
- Strengthening direct procurement in the dairy segment to lower costs and improve traceability.
- Expansion of supply chain capabilities in processed poultry products.
- Reinforcing Market Presence in Crop Protection and CDMO
- 12 new CDMO projects under development, targeting innovation in herbicides and fungicides.
- Strengthening relationships with global agrochemical leaders.
Conclusion
Godrej Agrovet is well-positioned for long-term growth, leveraging diversification, R&D, and value-added products. However, commodity price volatility, climate-related risks, and global demand uncertainty in the CDMO segment remain key challenges. The company’s strategic shift towards processed poultry, premium dairy products, and expanded palm oil production will play a crucial role in sustaining profitability in the coming years.