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Interface for FDI Through Public Private Partnership (PPP Mode): Crusade for competitive linkage by Edible Oil sector o

Interface for FDI Through Public Private Partnership (PPP Mode): Crusade for competitive linkage by Edible Oil sector of India. . Saket Kushwaha Professor R esource & Agricultural Economics, Institute of Agricultural Sciences, Banaras Hindu University, Varanasi-221 005, India

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Interface for FDI Through Public Private Partnership (PPP Mode): Crusade for competitive linkage by Edible Oil sector o

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  1. Interface for FDI Through Public Private Partnership (PPP Mode): Crusade for competitive linkage by Edible Oil sector of India. SaketKushwaha Professor Resource & Agricultural Economics, Institute of Agricultural Sciences, Banaras Hindu University, Varanasi-221 005, India E-mail: saketkushwaha@hotmail.com

  2. JVL Agro Industries Limited

  3. Vision & Mission Vision To delight the consumer through a complete vegetable oils solution, through continuous research and development in healthier oil varieties, leading to a single-stop convenience. Mission We expect to extend our leadership from saturated fats to the entire vegetable oil segment in the first stage and then to agro-based premium food products thereafter, from one region in India to a global manufacturing and marketing presence. 3

  4. Agenda • Company Brief • Company Overview • Industry Dynamics • Edible Oil Sector Overview • Palm Oil Positioning • JVL Positioning • JVL Capacity Expansion • Palm Oil Business Cycle • Summary and Way Forward

  5. Company Brief Identity • Established in 1989 • Over two decades of rich experience in the edible oil industry • Single largest producer of Vegetable Ghee in India Products • Refined Palm Oil , Soybean Oil, Mustard Oil and Vegetable Ghee Leadership • One of the Largest crude edible oil importer in India • Leadership in the most populous states of the country. Capacity • Facilities in Uttar Pradesh, Bihar, Rajasthan with an installed refining capacity of 1400 TPD and an upcoming facility in West Bengal with a capacity of 1200 TPD Commencing production in May’12. Presence • Available in all Indian states and 2 union territories through a strong distribution network of over 30 depots, 12 sales points and 1 lac plus touch points in India Brands • Jhoola, Payal, Joohi • Leading brands in Central, Northern and Eastern India

  6. Company Overview Revenues ( in USD’ Million) • Listed on the Bombay Stock Exchange since 1993 and National Stock Exchange • Trusted 2-decade relationship with credible Palm and Soyabean oil suppliers EBIDTA ( in USD’ Million) • Owns the single largest manufacturing unit for saturated fats in India • Revenues have been consistently increasing in the last five years and expected to reach USD 560 million in FY’12 PAT ( in USD’ Million) • ISO 9001-2008 certified

  7. Milestones and Achievements Commissioned an edible oil refinery/ Saturated fats unit in Bihar. Commenced the production of a new refinery UP Started the export of de-oiled cakes. Received govt. approval for a multi-services SEZ near Saranath/ Varanasi in UP on 100 hectare Become Listed in National Stock Exchange.Cotton Farm of 5000 ha at Dima Region of Ethiopia. Planned to expand up to 25000 ha Started work on the Haldia unit with refining Capacity of 1000 MT per day along with oleo-chemical section Acquired 40 hectare of land close to Mumbai for future expansion Acquired a seed crushing & refining plant in Rajasthan for mustard oil. Invested in Adamjee Extraction Pvt. Ltd., Sri Lanka for import of Saturated fats under the brand - ‘Jhoola’. Installed a 60-TDP unit for refined oil; introduced crude soybean and palmolein oil to the product mix Achieved 100-TDP production at Varanasi 2011 1990 1993 1995 1999 2000 2006 2007 2008 2009 2010 Achieved highest ever turnover growth of over 60% Commenced commercial production from the Bihar unit Introduced products in Northern states like J&K, HP, MP, etc. Commenced production with a 25-TPD capacity Increased Saturated fats production capacity to 200 TPD Switched from chemical processing to modern mechanical techniques Globoil India Legend 2011, award received by the Chairman JVL Agro Industries Limited Emerged as the first edible oil manufacturer in North & Central India to commission a 3-MW turbine. Formed a wholly-owned subsidiary in Singapore under the name of JVL Overseas Pte. Ltd. 7

  8. Addressing Wider Market Through an Intelligent Product Mix Leveraging its established Brand power to sell all its products One of the leading brands in Central, Northern and Eastern India • Jhoola • Refined Palm Oil • Refined Soybean • Saturated fats • Palmoline Vegetable Oil • Mustard Oil • Fatty Acid Product Mix In India Palm, Soybean and Mustard constitutes 75% of total edible oil consumption Addressing the varied needs of all income segment . Customised Packaging From 200 ml to 1 litre to 15 kg JVL’s complete product mix helps in addressing different sections of consumers in different parts of the country. 8

  9. Cost Efficient Production Facilities Single largest Saturated fats manufacturing unit in India One of the lowest per ton production cost In-house facility for packaging material production Reduced packaging cost A 3-MW captive plant in the Varanasi facility, fulfilling most of unit’s power requirement Reduced power cost compared with the prevailing grid tariff Lower overall production cost and better sales margin Northern and Central India’s largest crude oil importer Better bargaining power and logistical competitiveness Invested in ERP for transparency, enhanced scalability and accuracy Informed decision making Trusted 2-decade relationship with suppliers locally and internationally Uninterrupted raw material supply Over 80% capacity utilisation in Varanasi, Bihar and Alwar units Enhanced capacity utilisation 9

  10. Current Production Capacity Saturated fats and Edible oil production capacity Packaging material production capacity • 1,800,000 HDPE jars per annum • 4,200,000 tins per annum • Also manufactures the handles and caps required for the containers Oil Production Capacity of 1,400 TPD (as on March 31, 2010) TPA – Tonnes Per Annum; TPD – Tonnes Per Day 10

  11. JVL’s presence in India Mumbai Ludhiana Delhi Varanasi Guwahati Haldia Bihar Feeding point Alwar Marketing area Krishnapatnam Manufacturing location Proposed location 11

  12. Edible Oil Sector Overview Does India have enough edible oil? MMT MMT

  13. Palm Oil Positioning Incremental demand to be met by Palm Oil 73% • India is the world’s largest consumer of Palm oil • Palm oil available from Malaysia and Indonesia, will account for a large part of incremental import growth. • Indonesia better option due to higher production . • Palm Oil easily available • Palm oil plantation is not dependent on the vagaries of monsoon. • So being a crop that gives fruits for 21 years, it does not have the volatility of production.

  14. Palm Oil Business Cycle Indonesia’s Expertise India’s Expertise Plantation CPO Production Packaging and Branding Refinery Distribution

  15. Summary • India/Nigeria Opportunity: • India and Nigeria offer huge growth potential in Palm Oil space • (From consumption and Production Perspective) • JVL Agro Presence: • JVL Agro is expanding, set to become one of the largest • players and requires assured supplies of Palm Oil. • Currently sourcing through traders in Singapore. • Current import of Palm Oil: 500,000 TPA • Requirement in coming years: 2,000,000 TPA

  16. Way Forward • Strategic Intention • Step 1 • Start buying directly from Nigeria and / or Indonesia in association with a local partner. • Step 2 • Setup a Refinery of 1000 TPD and packing facility in Nigeria / Indonesia at a suitable location preferably in Joint Venture. • Step 3 • Setup plantation and crushing mill in Nigeria and / or Indonesia with 75 k hectare as cultivated land in the next 5 – 7 years preferably in Joint Venture (Public Private Partnership –PPP Mode). • Investment Required • 400-600 million USDin the next 3 – 5 years

  17. Prevalent FDI LANE • FDI in Retails • Service Sectors • Infrastructure • Agriculture

  18. Perceived Key Growth Driver under developing scenario Economic Growth : The per capita Income Expanding Middle Class : Most Popular income sector to be touched for vibrant share. Rapid Urbanization : Incremental Migration rate breeding varied problems. Investment in Infrastructure : Mainly in power, telecommunication, road, railways and oil pipelines. Rising Brand Consciousness : Globalization is fascinating 60% of the population is below the age of 30 have exposure to Western consumption

  19. Rationale for FDI in Retail • A. Competition : • Catalysts to spur competition & innovation in retail industry. • Ensure highly efficient-low margin business model. • B Consumers • Improved product availability, quality & reduce wastages. • Consumers to get best products and services at reasonable price. • C. Back End & Supply Chain Improvement : • Inadequate storage facilities cause heavy losses to farmers. • 25%-30% of F&V and 5%-7% of food grain in developing countries are wasted. • Chance to Strengthen agriculture infrastructures for Food Availability, Accessibility and Affordability leading towards parity in consumption. • FDI in retail to bring investment, technology, management know how etc. • Food inflation and fluctuation in food prices can be controlled.

  20. Rationale for FDI in Retail • D. Better Realization for Farmers : • Today, Intermediaries dominate the value chain. • Nigerian farmers realize only 1/6th of the total price paid by the final consumer against 2/3rd by farmers in nations with a higher share of partial organized retail. • FDI to ensure better realization for farmers & producers. • F. Economic Growth : • Sourcing from India will increase. Exports to get significant boost. • Nigeriacan also become a shopping destination for the world in Selected sector. • Expansion of stores and operations lead to employment generation . • Sectors like Agriculture, Textile and Handicraft will get a significant boost.

  21. Contribution Of Retail Industry to GDP of Various Economies

  22. OrganisedvsUnorganised Retail at Global Level

  23. FDIPolicy in retail opportunities

  24. What Are Global Retailers Saying?

  25. Consumer Class Shift • Increase in consumer class. • Consumer class will grow from 50 million at present to 583 million by 2025. • With more than 23 million people taking their place among the world’s wealthiest citizens.

  26. Challenges

  27. Lack of Skilled Workforce • Major challenge faced by Organized retail sector: In Retail, over 70 per cent of the labor force in both sectors combined (organized and unorganized) is either illiterate or educated below the primary level. • Labor Laws

  28. Benefits Envisaged To Agriculture Through The Opening Of FDI • Investment into warehouse and cold storage chain will result in significant efficiency on supply chain. • Farmers benefited through direct marketing and contract farming programme. • Improves farm production through modern techniques. • Increasing availability of low interest credit for farmers.

  29. Go SLOW • Environment • Lack of Historical data • Continuity • Poor Documentation • Fixing Liabilities • Dying Zeal • Trading Hub leaving no avenue to struggle

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