Interface for FDI Through Public Private Partnership (PPP Mode): Crusade for competitive

linkage by Edible Oil sector of India.

Saket KushwahaProfessor

Resource & Agricultural Economics, Institute of Agricultural Sciences,

Banaras Hindu University,Varanasi-221 005, India

E-mail: saketkushwaha@hotmail.com

JVL Agro Industries Limited

Vision & Mission

3

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.

• 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

Agenda

4

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

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.

Leadership•One of the Largest crude edible oil importer in India•Leadership in the most populous states of the country.

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

Company Brief

5

Company Overview

6

Revenues ( in USD’ Million)

148 154 257 307 274 485

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11

EBIDTA ( in USD’ Million)

4 4 9 10 14 19

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11

PAT ( in USD’ Million)

1.80 2.40 5.30 5.80 6.50 11.12

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11

Owns the single largest manufacturing unit for saturated fats in India

Trusted 2-decade relationship with credible Palm and Soyabean oil suppliers

Listed on the Bombay Stock Exchange since 1993 and National Stock Exchange

Revenues have been consistently increasing in the last five years and expected to reach USD 560 million in FY’12

ISO 9001-2008 certified

Milestones and Achievements

7

Commenced production with a 25-TPD capacity

Achieved 100-TDP production at Varanasi

Switched from chemical processing to modern mechanical techniques

Installed a 60-TDP unit for refined oil; introduced crude soybean and palmolein oil to the product mix

Increased Saturated fats production capacity to 200 TPD

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.

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

Commenced commercial production from the Bihar unit

Introduced products in Northern states like J&K, HP, MP, etc.

2011201020092008200720062000199919951993

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

Achieved highest ever turnover growth of over 60%

1990

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’.

Become Listed in National Stock Exchange.Cotton Farm of 5000 ha at Dima Region of Ethiopia. Planned to expand up to 25000 ha

Globoil India Legend 2011, award received by the Chairman JVL Agro Industries Limited

Addressing Wider Market Through an Intelligent Product Mix

8

Product MixIn India Palm, Soybean and Mustard constitutes 75% of total edible oil consumption

One of the leading brands in Central, Northern and Eastern India

• Refined Palm Oil

• Refined Soybean

• Saturated fats

• Palmoline Vegetable Oil

• Mustard Oil

• Fatty Acid

JVL’s complete product mix helps in addressing different sections of consumers in different parts of the country.

Customised Packaging From 200 ml to 1 litre to 15 kg

Addressing the varied needs of all income segment .

Leveraging its established Brand power to sell all its products

• Jhoola

Cost Efficient Production Facilities

9

Single largest Saturated fats manufacturing unit in India

One of the lowest per ton production cost

Better bargaining power and logistical competitiveness

Northern and Central India’s largest crude oil importer

In-house facility for packaging material production

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

Reduced packaging cost

Informed decision making Invested in ERP for transparency, enhanced scalability and accuracy

Uninterrupted raw material supply

Trusted 2-decade relationship with suppliers locally and internationally

Lower overall production

cost and better sales margin

Over 80% capacity utilisation in Varanasi, Bihar and Alwar units

Enhanced capacity utilisation

Current Production Capacity

10

• 1,800,000 HDPE jars per annum

• 4,200,000 tins per annum

• Also manufactures the handles and caps required for the containers

Plant Location Product Capacity (TPA)

UP and Bihar Saturated Fats 198,000

UP and Bihar Refined Palm Oil 231,000

UP Refined Soybean Oil 33,000

Rajasthan Mustard Seed Crushing 80,000

Rajasthan Solvent Extraction 90,000

Packaging material production capacity

Saturated fats and Edible oil production capacity

Oil Production Capacity of 1,400 TPD (as on March 31, 2010)

TPA – Tonnes Per Annum; TPD – Tonnes Per Day

11

JVL’s presence in India

Ludhiana

Delhi

Varanasi

Bihar

Guwahati

Krishnapatnam

Feeding point

Marketing area

Manufacturing location

Proposed location

Haldia

Alwar

Mumbai

MMTMMT

2005 2006 2007 2008 2009 2010 20110.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

012345678910

12 12.2 11.9 1315 15.6 16.6

6.5 7.0 6.2 7.2 6.6 6.5 7.4

5.55.2

5.75.8

8.49.1 9.2

Indian Edible Oil: Rising Demand-Supply gapConsumption (LHS) Domestic Production (LHS) Demand - Supply Gap (RHS)

Does India have enough edible oil?

Consumption

• Consumption has been growing at 5-9% annually

Production

• Domestic production lags at 2% p.a.

Gap

• Domestic production can’t keep up with the demand.

Edible Oil Sector Overview

12

Incremental demand to be met by Palm Oil

2007 2008 2009 2010 20110

1000

2000

3000

4000

5000

6000

7000

8000

Indian Edible Oil imports – Palm leads the way

Palm Soyabean Others

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.

Indonesia50%Malaysia

37%

Thailand3%

Colombia2%

Nigeria2%

Others6%

World Palm Oil Production 2011

Palm Oil Positioning

13

RefineryCPO Productio

n

Plantation

Packaging and Branding

Distribution

Palm Oil Business Cycle

14

India’s ExpertiseIndonesia’s Expertise

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

•

Summary

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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 USD in the next 3 – 5 years

Way Forward

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PREVALENT FDI LANE

•FDI in Retails

•Service Sectors

•Infrastructure

•Agriculture

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

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.

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. Nigeria can 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.

Contribution Of Retail Industry to GDP of Various Economies

USA

China

Japan

Brazil

India

20%

8%

14%

6%

12%

Contribution Respective to GDP

US

Sales: $374.5 bn 

Earnings: $12.9

billion 

Stores: 6,800

worldwide

France

Sales: $130 bn

Earnings: $5.2 billion

Stores: 87,422

worldwide

UK

Sales: $102.6 billion

Earnings: $5.5 billion

Stores: 3,729

worldwide

Germany

Sales: $101 billion  

Earnings: $1.5 billion

Stores: 2,221

US

Sales: $77.3 bn 

Earnings: $4.2 billion

 

Stores: 2,258

India

China

Indonesia

Thailand

Malaysia

Taiwan

US

0 10 20 30 40 50 60 70 80 90 100

OrganisedUnorganised

US Taiwan Malaysia Thailand Indonesia China India

Unorganised 15% 19% 45% 60% 70% 80% 95%

Organised 85% 81% 55% 40% 30% 20% 5%

Organised vs Unorganised Retail at Global Level

FDI POLICY IN RETAIL

OPPORTUNITIES

What Are Global Retailers Saying?

•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.

Consumer Class Shift

Upper class

Middle class

Lower class

ChallengesSKILLED

WORKERS

COMPETITION

REAL ESTATE

PROBLEM

MARKET POWER

SUPPLY CHAIN MANAGEMENT

PROBLEM IN RAISING FUNDS

TAXATION POLICIES

INFLATION

• 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

Lack of Skilled Workforce

• 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.

Benefits Envisaged To Agriculture Through The Opening Of FDI

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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