Farm commodity exporter Lt Foods is planning to create a supply base in Africa either through tie-ups with local firms or by purchases of farm land, according to a senior company executive.
The exporter joins a growing list of domestic firms looking for opportunities to expand abroad as uncertainties in India’s commodity trade and lack of investor-friendly policies have discouraged private investment in the agriculture sector ? in some instances, land acquisition turning to be the sore point. The country has imposed periodic curbs on the exports of farm commodities, including rice, wheat, cotton and sugar to keep domestic supplies steady.
However, the government is in the process of firming up a long-term export policy for several farm commodity and processed food items to lend stability to trade and set right the country’s image as a reliable supplier.
Edible oil manufacturers Ruchi Soya Industries and KS Oils have bought palm plantations in Malaysia and Indonesia, while leading cut-rose player Karuturi Global has set up bases in Ethiopia to do farming.
Similarly, rice exporter Amira Foods is also looking at cultivable land in Africa, and a consortium, led by Mumbai-based Pravin Agro, has also been planning to buy land in Latin America to cultivate oilseeds.
“We intend to be a fully integrated global farm commodity player. So we will be tapping the African market to expand our supply base. It will also help us reduce risk related to trade uncertainties in India,” S Venkatesh, head of International Trade at LT Foods, told FE.
The company is vigorously participating in global tenders floated by various countries, including Iraq and Indonesia, to supply rice and create a supply base in Africa would help in this regard.
Moreover, farming in most parts of Africa is, by default, organic and any base there will enable the company to leverage that edge. The continent is also expected to double its grain imports by 2025, which explains why so many companies are looking to cash in on the opportunities.
“The western countries are entering Africa through the aid route, China is entering through the infrastructure route and some Indian companies are taking the farm route to set up bases in the continent. And ultimately, the agri route would remain the most sustainable,” he said.
With expanding sales, Lt Foods is aiming to raise its turnover by 61% to R2,000 crore in the current fiscal through March 2013, Venkatesh said. The company doubled its sales to R1,020 crore in the first half of 2012-13, compared with R487 last year. The firm?s net profit, too, jumped to R22.20 crore between April and September from a loss of R20.2 crore a year earlier.
Many grain exporters struggled to achieve profitability in the first half of the 2011-12 fiscal as the government lifted a nearly four-year ban on non-basmati rice shipments in September last year.
