Kohinoor Foods – Leveraging its KOHINOOR
Printed From: The Equity Desk
Category: Investment Ideas - Creating winning portfolios!
Forum Name: Value buys - The intrinsic value is close to market price
Forum Discription: Companies that sit on a large amount of cash or investments or land bank plays or having high dividend yield can be categorised under this segment. These companies have lower downside risks
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=243
Printed Date: 19/Apr/2025 at 9:22pm
Topic: Kohinoor Foods – Leveraging its KOHINOOR
Posted By: basant
Subject: Kohinoor Foods – Leveraging its KOHINOOR
Date Posted: 30/Aug/2006 at 7:35pm
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Satnam Overseas – Leveraging its KOHINOOR
Satnam Overseas (CMP Rs 78.00) is India’s largest basmati rice producer. The company is known for its Kohinoor brand of basmati rice. Over the past two years Satnam has made concerted efforts in becoming a global food company. Over the years Satnam is cutting down on its unbranded sales and is increasing exposure to the branded and ready to eat market
Satnam exports its products to 57 countries worldwide The company entered into a tie up with TESCO, the largest retail chain of UK to sell various product lines like Kohinoor Basmati Rice, Rice & Curry, Cooking Pastes, Chutneys & exotic Indian spices and seasonings. Other associations include Tiger Foods (South Africa), Hankyu, Daimaru, Takashimaya, Mitsukoshi (Japan), Coles & Woolworth (Australia) and Seven Eleven (Singapore). The company also started its supplies to Malaysian Airlines.
KOHINOOR enjoys more than 32% share of the branded basmati rice market (US $ 100 million). It is the leader in the premium segment KOHINOOR Rice is also exported to high realization markets like North America and Europe.
Leveraging the Kohinoor brand the company has ventured out into in the Ready to eat market. The domestic ready to eat market is showing explosive growth and surveys suggest that this segment could grow at more then 200% CAGR the over the next two years
The company has set up basmati rice processing unit at unit at Felixtowe, UK with a capacity of 8MT per hour. This unit shall initiate supplies to the European retail chains.
The domestic market is witnessing significant expansion due to rising disposable incomes, changing consumption patterns, growing consumer class, organized retail and rising average realizations.
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Financial Snapshot |
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CMP |
Rs 78 |
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Market capitalization |
Rs 152.98 crores |
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Sales FY 06 |
Rs 541.08 crores |
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Book value |
Rs 54.07 |
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Dividend yield |
Rs 2.00 per share |
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EPS FY 06 |
Rs 10.97 |
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PE |
7.1 times |
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Market cap to sales |
0.28 times |
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Dividend yield |
2.5% |
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Price to Book Value |
1.44 times |
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RoE |
20% |
While the company has taken a lot of initiatives over the past three years the revenues growth has been lackluster. Satnam has been moving out of its commodity businesses and replacing it with branded food items The contribution of the high margin processed food business is quite low but growing very fast.
Three years down the line, the company is looking at a turnover of Rs 1000 crore. Out of that, 90% of the top line should be from branded variety.
The company has also tied up with Reliance Retail and is expected to initiate partnerships with other Retailers also. The advent of organized retailing will give a huge fillip to the branded and processed food market.
Recommendation: Satnam Looks like a value cum growth stock and investors who are willing to http://www.theequitydesk.com/india_story.asp - play the Great Indian consumer boomtake positions. However the only worry is the low proportion to processed and branded food in the company’s total business but that seems discounted in the price. At a PE of 11 times trailing and a market cap to sales of 0.28 times the downside seems well protected.
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Replies:
Posted By: Vivek Sukhani
Date Posted: 31/Aug/2006 at 10:35pm
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No doubt, but I was thinking more for KRBL. Has a more dynamic and suave head of organisation, in form of Priyanka Mittal.
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Posted By: basant
Date Posted: 31/Aug/2006 at 10:45pm
KRBL is also doing an expansion which shhould add to the profits this year but the Reliance deal will bring more stability and visibility to Satnam since it would create huge volume growth for the company. Pricing could be a bit lower then average because Reliance will not like to overpay but that will be made up with higher volumes.
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Posted By: Equity Buff
Date Posted: 31/Aug/2006 at 8:46am
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Dear Basant,
Is Satnam Overseas now called Kohinoor Foods ?
Rgds.
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Posted By: basant
Date Posted: 31/Aug/2006 at 8:49am
Yes. Fidelity has a reasonable stake in this company.
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Posted By: Ajith
Date Posted: 31/Aug/2006 at 9:14am
Yes, I too like the Reliance tie-up factor and Fidelity stake.Processed branded foods will be huge in the coming decade.Organized retail beneficiaries is good strategy,I feel because customers will look and feel and buy impulsively as well.
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Ajith
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Posted By: T-REX
Date Posted: 10/Oct/2006 at 2:34pm
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Management is "Very" bad......
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Posted By: PKB2000
Date Posted: 30/Nov/2006 at 4:05pm
Can I taste a little of Kohinoor Food at the moment?
Dear Basant saab
Its a quite long may be long time I have tested Satnam Overseas along with Ruchi Soya and KRBL.
Still those rae undigested part of my portfolio and I think those can not be digested in this year.
Is it little good time to average Kohinoor food, Ruchisoya or KRBL. Wish to digest them at least by begining of next year and to see some profit at my portfolio on them.
Can you tell whether the future will be little better for them and not as worse as Sugar sectors.
If you have some information please advise accordingly.
Though I personally have subscribed IPO for L T Overseas, merely just to keep the money with SEBI for the time being.
Meanwhile it is quite satisfactory to see that Action is constructed well and Parsvanath has just kept its promise and so do Torrent Power. But please send your views on Kohinoor food (if changed from earlier!) and also Ruchi soya and KRBL.
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I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso
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Posted By: Siddhartha
Date Posted: 30/Nov/2006 at 11:13pm
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The domestic ready to eat market is showing explosive growth and surveys suggest that this segment could grow at more then 200% CAGR the over the next two years.
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Basant ji great point. Could you suggest any company which is fully in ready to eat market.Vadilal industries is in frozen food business, which could be also big business. RJ also holds this stock.
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Posted By: basant
Date Posted: 30/Nov/2006 at 6:45am
Vadilal and ATFL are all hope but no delivery. Personally ITC is there but then the percentage of this to overall sales is very low. Satnam Overseas si a also a player as is Ruchi Soya but then there are no big leaders in the making as such where investors could significantly gain and create a big multibaggers.
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Posted By: basant
Date Posted: 22/Jan/2007 at 8:56pm
Results were in line or rather better. Company confirmed its plans to sell through Reliance FRESH. Kulmanji's pick axe theme would work here well.
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Posted By: jack
Date Posted: 26/Jan/2007 at 1:29am
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Basant ji,
how do you compare kohinoor foods with lakshmi overseas?
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Posted By: basant
Date Posted: 26/Jan/2007 at 7:30am
I have little idea on Lakshmi Overseas but broadly Kohinoor's tie up with the retail biggies should keep it in good stead and help it maintain its leadership potential.
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Posted By: kulman
Date Posted: 26/Jan/2007 at 7:35am
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1. Lots of Mungerilals are trading heavily in newly listed LT Overseas, which owns "Daawat" brand of basmati rice.
2. Lakshmi Energy & Foods (erstwhile Lakshmi Overseas) results are good. They are also into wheat. Some interesting project for converting waste (husk) into power is being implemented--Biomass Energy.
3. Two other players in this space are REI Agro & KRBL.
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Life can only be understood backwards—but it must be lived forwards
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Posted By: valueman
Date Posted: 29/May/2007 at 3:16pm
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I think it is good time to have an Initial exposure of Satnam /Kohinoor foods at current levels .
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Posted By: ganiga
Date Posted: 06/Jul/2007 at 1:11pm
Dear Basantji
Kohinoor foods is being discussed on various forums and has been recommended by various analyst , but the stock has not performed to the expectations, it is just trading above its 52 weeks low for quite some time now, what is your take on this
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Posted By: basant
Date Posted: 06/Jul/2007 at 1:15pm
One of my very knowledgable friends is invested into this one but in the food sector ITC is creating ripples for everyone also Kohinorr management were alleged to have been in links with the underworld.
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Posted By: nav_1996
Date Posted: 06/Jul/2007 at 2:17pm
I guess Kohinoor is in limelight after IDBI Cap report.
Major business for it is export of rice/food products mainly to USA and mid-east.
Now imagine what an appreciating rupee can do to the business with kind of margings they have. And to my surprise IDBI report did not even mention it.
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Posted By: jmehta
Date Posted: 31/Aug/2007 at 2:24pm
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I have been an investor in this stock since 2 years, nibbling at it on dips on hopes of price revival. But, the stock has disappointed.
The sales growth has been flattish to negative in the past few quarters. The bottomline has also been flat. The company has been paying dividends regularly. Also, price to book value has been close to 1. The PE ratio is comfortable. So, I can attribute the weakness in this stock to mainly the following factors:
1. Rupee appreciation - which makes the company's exports less competitive.
2. Highly leveraged - The company's debt to equity ratio is close to 3, whereby the company is spending a higher interest to service its debt.
3. Generally, the growth in prices of FMCG companies has not kept up with the broader market growth.
All in all, I feel that this stock is for long term invertors with a 3 to 5 years horizon, and the best strategy would be to nibble at this stock on dips.
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Posted By: geek
Date Posted: 01/Oct/2007 at 6:54pm
Following is my 5-minute pitch on Kohinoor Foods (which I give myself on why I should or should not invest in this stock). :
My reasons for staying invested in Kohinoor Foods:
1. Kohinoor is a Super Brand amongst consumer products (I think this was in 2006 annual ratings of brands)
2. Kohinoor Basmati gets a large shelf space in retail shops including Food Bazaar, Heritage, Reliance Fresh etc. I talked to the stor wallah and he tells me that Kohinoor is the fastest moving basmati rice product.
3. I am told that this product is available in interior Andhra Pradesh - this gives an indication on the distribution channels and brand recognition (Andhra Pradesh, except for Hyderabad, may not be a big basmati consumer)
4. Distribution channels overseas is unmatched for any Indian food product company - if you patiently read through various blog posts (courtesy of Google Search) - you would find that this product is sold in super markets of several european countries (not just UK and, US). There are also some non-Indians that have given favorable feedback on Kohinoor's indian food products.
5. Revenues have been stagnant for the most part as they are changing their product mix and are focusing only on branded sales & read-to-eat foods. The effect is between FY03 - FY07:
Sales:
FY03: Rs.
453.90 Cr
FY07: Rs.
589.84 Cr
PAT:
FY03: Rs.
9.49 Cr
FY07: Rs.
22.07 Cr
The PAT has consistently grown over the past 5 years, while top-line revenues have been erratic. The growth in PAT is presumably because of increasing branded sales and reducing commodity sales.
6. Margin of Safety - p/e ranging between 5 to 5.5. Company making a profit of Rs. 22Cr on a market cap of Rs. 110+ Cr
7. Company is not a fly by night operator .. has been in this business for long and has a well known brand.
8. Potential for re-rating - in the next 5 years I think (this is subjective assessment), Kohinoor will be more of a branded play rather than a commodity play. This will be a seller of a FMCG product in RTE, Frozen Foods and branded Basmati. P/e should expand.
Negatives:
1. No disclosures from Management. I have not seen their annual report for FY2006-07 till date, even after writing to them.
2. No idea on consolidated financials - how are the overseas subsidiaries doing? I have no idea on this, except that I know they are actively selling their products in overseas markets and have the distribution channels.
3. This company is amongst the companies that have least investor friendly management, a website that sucks!!!, least disclosures. But I can see from the web based research that they are working hard to build "their company" - which is a consolation.
4. Management is under investigation by CBI for rice exports when the exports were banned a few years ago.
5. The company has high debt (Debt-Equity of approx 3.25:1) and high-inventory Rs. 355Cr as on 31-Mar-07. But I am told that the rice business requires building up of rice inventory during harvesting season and the sales happen from this inventory for the rest of the year. Also basmati rice, when aged fetches a better price. If this understanding is correct, then this partly explains the reason for high inventory & debt.
6. FCCB Dilution - dont have the numbers handy but the stock would dilute by about 54% in a year or two due to FCCB conversions, which will dilute EPS significantly and make the stock priceier (hopefully it will not lead to further reduction in stock price).
7. Appreciating rupee wipes out thin margins - I think this being a low priced yet branded product, Kohinoor should be able to pass on some price increases to the consumer. Secondly, margin profile is constantly improving.
I think the net is - I'm convinced this stock will be a wealth generator and not a wealth destroyer. If all goes well, the brand & distribution network alone should be worth a lot lot more than Rs. 100 Crore
Any more inputs from boarders that researched into this company are most welcome.
I have summarized all my findings above and if you have any disagreements (supported by reason & additional information), please let me know.
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Posted By: shivkumar
Date Posted: 05/Oct/2007 at 11:24pm
so should one accumulate on dips? I am accumulating KRBL especially after reports of its diversification and land holdings.
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Posted By: value
Date Posted: 06/Oct/2007 at 1:10pm
KRBL's land is in some other sister company's name - as far as I know.
Kohinoor has been more of a sleepy group, with very low investments. Moreover their recent diversification into ready to eat segment and now into restaurants, is a bit odd. (1) Ready to eat segment can use their existing supplychains, but it doesnt have any edge over any other country globally - any other entrepreneur sitting in Morocco, or Sri lanka, can also produce the same stuff. With appreciating Rupee, KFL & India -cannot ask for increase in prices from the customers, esp if the customer can get the same commoditised readyto eat food from any other country
(2) Getting into restaurant biz is bit odd. One, chances of success is low, as in any business, Second, they dont have any expertise in that biz, Third, eateries are atmost bonds, with high fixed costs, and sporadic customers.
Overall, kohinoor should face threat from Re, as their 65% of sales is outside india.
KRBL on the other hand has done capex to improve their capacities and operations over past 1-2 years - only in their core line of operations. KRBL is bigger, better ROC, better operating profits, bigger asset base, low pe and pb and under temporary gloom of their previous quater results.
Basmati per se should not face threat from appreciating currency - as India is incumbent basmati player, controlling 75% of the market! Its a seller's market, and these guys should have power to maintain margins.
All said, I am worried on the cash flow front - both these companies, and other in the sector - produce inconsistent and unpredictable operating cash profits.
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Posted By: geek
Date Posted: 07/Oct/2007 at 11:53am
Hi Value,
Where did you get the info that Kohinoor Foods is diversifying into building restaurants? Was it in any press release? If this is true then I would be concerned as well.
On Ready-toEat, I do not think that it is a commodity business, because no one buys a RTE food product these days from an unknown player. Atleast I would not buy and always look for an MTR product or ITC product or Priya product or yes, a Kohinoor product. Anyway, I agree this is a matter of perceptions!
Can you please advice with the information you have on Kohinoors plans on restaurant business?
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Posted By: value
Date Posted: 08/Oct/2007 at 1:00pm
Regarding RTE business, I am makiing a point that indian guys - even known and branded ones - dont have any specific moat (country, or currency, or geography advantage - for ex- basmati is a geographic moat!)
They have mentioned about the restaurants in their latest annual report. Following are the excerpts -
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Launch of Kohinoor Chefree
Kohinoor Foods has undertaken a key marketing initiative and has launched 'Kohinoor Chefree' a chain of quick-service tiny restaurants. These quick-service outlets will stock and serve the entire range of Kohinoor food products. These outlets need very little space and are very hygienic and can be located easily in many places like malls, railway stations, metro stations and budget hotels. Your company is expected to roll out a number of such small to medium fast food outlets in the coming year.
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Posted By: geek
Date Posted: 08/Oct/2007 at 1:30pm
Hi Value,
Thanks for the info on restaurant business from the annual report. Did you get the annual report posted to you or did you find this anywhere on the Internet? I have written to the company requesting for the annual report and they have not bothered to respond to the request.
I am anxious to see their consolidated results including consolidated debt position and share of RTE as a % of revenue, share of exports etc.
Following are some thoughts on RTE business - we may not be agreeing on
this item, I am just stating my views here and not looking to argue:
1. Changing life styles & working couples imply that there is less
time available for cooking and people will increasingly eat out or look
for alternative options for quick food (junk food :) ) - this is the
trend that you see in most of the developed countries including the US,
where several families cook during the weekend and look for easy
options for the week days.
2. Increasing Indian population overseas - many of whom are bachelors - imply increasing demand for Indian food.
3. Distribution channels via an Web-Shop has low entry barriers (I
agree with you on this one) - but getting the products in stores like
Tesco, Walmart etc is a lot lot tougher.
4. MTR got a valuation of about Rs. 450 Crores on their RTE business -
their sales were approximately Rs. 150 Crore. This gives a revenue
multiplier of 3X for the RTE business of MTR. But MTR is much larger
than Kohinoor in RTE business - I dont know by how much.
5. Kohinoor has a brand name that is well known and has a distribution
channel to match. Atleast in Hyderabad market, Kohinoor products are
more visible as compared to competitors like REI, KRBL etc. Competitive moat in this business would be:
a) Brand recognition
b) Distribution channels
c) Quality of the product
Kohinoor scores good on the first 2 items - the third item seem okay.
Anyway those are my thoughts - please let me know if you think I am missing any key points here.
Can you please let me know if you got their annual report on the Internet or by post? I appreciate your help in advance on this one.
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Posted By: valueman
Date Posted: 24/Mar/2008 at 9:36pm
http://www.indiantelevision.com/release/y2k8/mar/marrel7.php - http://www.indiantelevision.com/release/y2k8/mar/marrel7.php
HT Media and Limited and Kohinoor Foods Limited enter the Guinness Book of World Records
MUMBAI: HT Media Limited, India's premier media house, and Kohinoor Foods Limited today marked a spectacular entry into the Guinness Book of World Records for creating the World's Largest Biryani weighing 14,060kgs.
The biryani cooking was flagged off by Honorable Chief Minister of the state of Delhi Smt.Sheila Dixit. 'I feel this is a great activity explored by HT and Kohinoor to revive the feasting and celebration associated with biryani in India. I'd say there's reason enough for Delhiites to rejoice - this is yet another platform for Delhi and moreover India to be noted and recognized throughout the world'.
The elaborate vegetable biryani was created under the supervision of 60 executive chefs and a head chef at the Outer Grounds of the Jawahar Lal Nehru Stadium. The activity saw 3000kgs of Kohinoor basmati rice, 3000kgs of vegetables and 6000 liters of water being used to prepare the magnificent biryani. Moreover, the magnanimous 16-feet handi used for the cooking of the biryani was set over a 3-feet high furnace with a base diameter of xx-feet.
Speaking at the occasion, Mr.Anand Bhardwaj, Business Head, New Media initiatives, HT Media Limited said, 'We are glad to be a partner for this event. Its truly a remarkable achievement to have carried off the task with extreme caution and finesse and I would like to congratulate all the people who have made this a success.'
Mr.Gurnam Arora, Managing Director, Kohinoor Foods Limited added, 'This event is a one-of-its-kind endeavour which is not only matchless with any other culinary activity ever done in the past but also truly magnified to the grandeur. We are very proud to be organizing an activity of such scale and magnificence'.
The event was set in a rich and colorful ambiance of heritage, festivity and fun with the grounds decorated in traditional Rajasthani theme with folk performances throughout the day. The highlight of the day was the elaborate lunch spread which was a choice of varied rice delicacies. Also displayed were different varieties of rice.
The event saw a huge public turnout which added to the cheer and the festivities.
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To achieve satisfactory investment results is easier than most people realize ; to achieve superior results is harder than it looks .
Benjamin Graham.
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Posted By: Hitesh Shah
Date Posted: 06/Sep/2009 at 11:10pm
http://web.kohinoorfoods.in/investors.html has the AR of 2007-2008 and older ones.
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Posted By: Hitesh Shah
Date Posted: 07/Sep/2009 at 12:44pm
Originally posted by basant
One of my very knowledgable friends is invested into this one but in the food sector ITC is creating ripples for everyone also Kohinorr management were alleged to have been in links with the underworld. |
Smartcatjee? How come you missed this one?
A request: since the name is now Kohinoor Foods, would Basantji be kind enough to change the topic title?
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Posted By: smartcat
Date Posted: 08/Sep/2009 at 1:56pm
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Underworld huh?
I like anti-heroes (Eg: John Abraham in Dhoom), not villains (Eg: Mogambo).
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Posted By: Hitesh Shah
Date Posted: 09/Sep/2009 at 10:56pm
Originally posted by smartcat
Underworld huh?
I like anti-heroes (Eg: John Abraham in Dhoom), not villains (Eg: Mogambo). |
Sorry, I got confused by this http://www.theequitydesk.com/forum/forum_posts.asp?TID=1001&PID=113171#113171 - over here :
I was also trying to convince Basant that companies promoted by fraudsters, land grabbers and cheaters (no account fudgers, Murderers or Kidnappers though - I draw a line here) create wealth with their chaar sou beesi, and hence make good investments.
This logic is quite unbeatable. |
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Posted By: Hitesh Shah
Date Posted: 29/Sep/2009 at 8:23pm
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03:21 PM http://www.moneycontrol.com/news/business/basmati-rice-prod-remains-unaffected-by-drought-kohinoor_417117.html - Satnam Arora of Kohinoor Foods says that drought had no affect on basmati rice production. “85% of K
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Posted By: anilrsonawane
Date Posted: 14/Nov/2010 at 2:39pm
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directors of company accumulating shares..from last few months...there is inside trading going on..
watch indian food sector and this sscript...
i m new to this forum , why cant i can create new topic in emerging company section?
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Thanks & Regards,
ANIL
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