Hatsun Agro Products Ltd. — Call Transcript 2023

Apr 25, 2023

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GOPALAN
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SOMASUN
DARAM
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Digitally signed by GOPALAN SOMASUNDARAM Date: 2023.04.25 15:32:37 +05'30'

Transcript of the Interview given by Mr. R G Chandramogan, Chairman of the Company to BQ Prime on 18[th] April, 2023:

**Duration **	BQ Prime	**Mr. RG Chandramogan **
Slot 1	Thanks for tuning into this conversation. I’m Niraj Shah. The term ‘Milkflation’ has caught on atleast in Economist conversations and a fear around what milk prices and wheat prices could do and milk shortage and maybe wheat shortage could do to inflationary pressures in India is now starting to come about in the realms of the conversations. We thought it best to get in somebody who’s been in an industry at least in the milk industry in a dairy industry for a very long period of time one of the leaders of the Indian Dairy ecosystem Mr. R G Chandramogan. He is Chairman of Hatsun Agro Products joins us to talk about his thoughts on whether he is worried about the same or not. Mr. Chandramogan great having you thank you for joining in. Does, does the I mean do you sense or do you believe that there could be a prospect of there being a shortage of milk in India in calendaryear 2023?	See there was a shortage but it is not going to be the case in future. See last year we had different issues. After two years of demand destruction of covid, demand started picking up internationally including domestic. But the international fair prices went up beyond a reasonable level and it went upto 583 Rupees Indian value or something like 7100 US Dollars. That way India started exporting before stabilizing last year. So India exported over and above the normal quantity of key branded. They exported 20000 tons extra. That 20000 tons normally in a fresh period it is being built for the lean to protect. So we have exported with a better price and after that there was a shortage. Inflation started creeping in but one good thing about this particular inflation is the farmer was in shop for almost two years. So, this inflation is stabilized thing and I don’t expect any further inflation based on this. This has come to a peak.
Slot 2	Which is good to know sir. I was talking to a couple of economists and one of them actually both of them referred to this but one of them mentioned that there is there is a demand supply mismatch that is going to come up and there might be a case of importing milk into India which has prompted me to write a request to you to talk to us is that a fear you think or no.	No. See two things have happened. First crisis started on 20000 tons extra export of butter that has been the real problem. So they were talking about almost importing the same volume. This was the situation in January February. Going forward, Delhi had a comparatively cooler climate for quite some time with some rain hitting Delhi. So the flush of Delhi extended by a month. This is the good news. This is a blessing in disguise and our normal flush season in Tamil Nadu and South is supposed to start byMayand it has

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started now. From almost April first
week it has started. It is slowly gaining
momentum. By the time Delhi is
shutting off probably the South as well
as Maharashtra will start coming up
with milk. So the problem was acute in
the month of January February not
today and by June nobody will be
talking about probably milk shortage or
anything. The inflation may also
moderate to an extent of Three to Four
percent down by June, July. Not before
Slot 3 Okay. So so one is the inflationary I don’t think there is any need for it.
pressures two is the imports you Okay it’s important it must have been
reckon that importing milk is out of done by January February not now with
the question. Uh South and flush coming into this. Flush coming
Maharashtra will compensate what into southern part of India and also
Delhi might vacate and that together Maharashtra. It is too late and it will be
will ensure that we don’t reach a point only damaging the local Farm.
wherein India has to import any kind
of milk.
Slot 4 Got it um well but from a country No. I don’t expect any price increase
perspective that’s great to know. Mr. hereafter. See companies went through
Chandramogan so thanks for giving us a turmoil last year because inflatory
that insight. Um quick follow up pressures made them pay a higher price
therefore and I know you can’t talk to the farmer and in the consumer price
numbers but I’m just trying to they could adjust immediately. So that
understand I heard you say that even if particular year of disturbance is over.
milk prices don’t come off you see So we are basically under track of
that the peak prices we’ve kind of recovery. We don’t expect any price
reached the peak price levels. To your increase further and it can only
estimates sir um do prices stabilize at moderate after June not before.
the current level is before June July
when we see the first signs of
normalcy in demand supply or can we
start seeing some bit of a pullback
before that also because the markets
may discount the future.
Slot 5 Ok. Would there be a sharp No. Actually there will be gradual
moderation? I’m just trying to moderation but probably the old prices
understand based on what the prices will never come back. So it may be a
had increased by, would there be a from this present crisis it may be down
sharp moderation in prices or will it be by Three to Four percent in my opinion.
a gradual one sir?
Slot 6 Got it sir. So I don’t want to get into See. One major issue in our opinion is
numbers Mr. Chandramogan but just skimmed milk powder is taxed at Five
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	trying to understand what do what does a price increase of such a such a proportion in such a pace of increase due to business prospects for companies like yourself.	percent. Milk is separated into two parts. One is skimmed milk powder another is milk fat. So during the summer, we re-blend it to make milk to compensate the missing volume say may be Eight percent to Ten percent. On this particular note, our GST rates are Twelve percent for fat Five percent for SMP. This is getting added up on the reconstitution which is adding inflation and also pressures. Say for example, fat at Twelve percent and Five percent SMP is adding costs by almost Eight percent to the full cream milk and we have requested the Government to consider reducing the tax of Twelve percent to Five percent for fat also. Because in milk you can’t get the rebate back because there is no tax on milk but these commodities which are made out of milk is not allowed to get the compensation. Now a foreign farmer who is planting the edible oil grains and the edible oil is charged at Five percent, why we should charge a local farmer at Twelve percent? that is our contention. So the fat can also be at Five percent means. Government can moderate the inflation straight away by about Two to Two and half percent straight away we cannot wait.
Slot 8	Got it sir. Well I hope somebody is listening into this on that as well but I’ll just just one clarity that I need before we wrapupthis interview	Yes please
Slot 9	I’m trying to understand that when the prices have gone up at a particular pace that they have what does it do to business prospects for your company sir? Don’t let’s not get into specific numbers but just trying to understand the impact.	No, actually in the long run this is good for the country as well as the companies also for two reasons. So after two years of covid the farmer was under a shock whether to focus back into milk or not. This particular inflation though it has damaged to some extent of the economic side, it has given a pepper for the farmer and hereafter you will be able to maintain the animals well and though theprices may go down bythree to four

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percent still you will be in business and
you will continue to supply. I expect
probably the peak is already done and
we are only on the moderation of
gradually coming down but not to the
whole levels but some moderation will
definitely be there before June end.
Slot 10 Okay and and at these levels the Till March we couldn’t maintain the
margins get compressed or you kind margin because probably we were in a
of maintaining the margins because tremendous pressure. But in April we
you also have to pay the farmers are back into the pavilion and I think
accordingly. probably hereafter probably it will be a
normal year subject to no other volatility
coming in. Three years we have been
used to volatilities after volatilities.
Slot 11 Well. Hopefully it becomes smoother Thank you thank you
going ahead Mr. Chandramogan thank
you for joining us allaying some fears
around milkflation as the term has
being become popular of sorts for the
wrong reasons of course but much
appreciate your time sir.
Slot 12 And viewers thanks for tuning into Bye
this conversation.
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