Assessed by Edelweiss research
We visited Patanjali Ayurved’s (Patanjali) Food and Herbal park at Haridwar where we met Swami Ramdevji (Swamiji). We gained insights about Patanjali’s growth prospects, new product launches, R&D and distribution strategy from him. With a revenue target of ~INR100bn for FY17 (~INR50bn in FY16) and ~INR200-250bn for FY18, management envisages to grow at a swift ~100-150% CAGR over next 5 years. Smart innovation and new products pipeline, lower prices than peers, ayurvedic and natural propositions with strong brand equity of Swami Ramdev lend Patanjali’s products an edge over competition. We reiterate Patanjali is giving consumer goods companies a run for their money, especially in categories like toothpastes, honey, shampoos and hair oil, among others.
Aggressive capex underway to improve fill rates
To meet its aggressive revenue targets, Patanjali is setting up new plants in Guwahati (likley to be operational by March 2017) followed by plants in Nagpur, Jammu, Andhra Pradesh and Tamil Nadu. It aims to build an organisation which can create >0.5mn jobs and connect with >50mn farmers. Almost in retaliation, consumer goods companies have upped positioning of their herbal and ayurvedic products to not only counter competition from peers (Ayush by HUL, Colgate Vedshakti, etc), but also to counter Patanjali’s numerous fast moving offerings.
Scorching growth momentum to extend
Patanjali clocked a phenomenal 82% revenue CAGR during FY12-16, which we believe will remain strong going ahead propelled by an widening distribution network (targets to triple its retail presence from ~1mn outlets to 3mn by FY18 and now has separate distributorship for food and cosmetics), new product launches (dairy whitener, personal care (skin care range), edible oil and baby care), new users and superior pricing. The company proposes to record turnover of INR1tn plus over next 5 years. Plans are also afoot to export Patanjali products (PP) for which a unit will be set up at the Nagpur SEZ. Patanjali also plans to venture into the garments and apparel industry – from daily wear to track suit to yoga wear to jeans. It is also training focus on education and seeks to open ‘Acharyakulam’ schools in different parts of India; a large university is also coming up at the NCR with special focus on sports (will spend ~70% of its free cash flow on education).
Demonetisation: Structurally, a step in right direction
Demonetisation had a short term impact on Patanjali sales. But, as Swamiji mentioned structurally it is a step in the right direction to combatblack money, corruption and terrorism and bringing financial equality for the commonman. On his part, Swamiji has approached 5 banks to link up all Patanjali stores to make things easier for customers by enabling them to pay for goods through cards, e-wallets and other digital means. But, he averred implementation could have been better.
By Teennews1 Network Team