We expect sales and margins to improve: RG Chandramogan, Hatsun Agro Products

In an interview with ET Now, RG Chandramogan, Hatsun Agro Products BSE -0.71%, speaks about the inauguration of the 1000th outlet and the company’s expansion plans.

Congratulations on the inauguration of your 1000 outlet of Hatsun Agro BSE -0.71%. Tell us a little bit about your expansion plans. 3000 retail outlets in the next 12 months?

RG Chandramogan: Actually we inaugurated 1000th outlet and all these outlets are hired by us. We used about Rs 5 lakhs per outlet and these outlets we appoint a franchisee to sell the product in retail range. Apart from that he is also distributing within his area and we intend to take it to the customer. And we already have some hired outlets and these outlets are getting positioned Hatsun BSE -0.71% Dairy outlets. We intend to have around 3000 outlets by another 12 months or maximum by March 2018 you can say.

Just to reconfirm with you. I think you did mention the amounts you put in on the opening on every outlet, but if you could just reiterate what is the kind of investment you plan to make in this retail expansion and how much do you think that this expansion in your retail plans will contribute to your sales and margins?

RG Chandramogan: Sales and margins both will improve because we are spending about Rs 100 crores. The visibility of all the products will be there – number one. Number two – we expect profit margin improvement by about 1-1.5% over the period.

So what kind of margin improvement? Could you put that into perspective for us in terms of…
RG Chandramogan: About 1.5% we can increase the margins.

I want to talk about the tier-2 and tier-3 cities because they seem to be your next targets. Don’t you think that with them being more impacted by demonetisation due to fewer bank branches that the demand would be a little bit tepid there?

RG Chandramogan: Demonetisation has not affected us. But last year we were affected heavily by the floods in Chennai. As far as we are concerned today probably we are not affected by demonetisation either in procurement or in the market.

So there has been no impact of demonetisation on Hatsun Agro in Q3 and Q4 as well it will be business as usual?

RG Chandramogan: I do not know about Q4, but Q3 which is going to be critical probably we are not affected because milk is a base commodity and people have to buy and probably people are buying. In ice cream probably we had a devastating storm last year so compared to that we are better off in this year.

One question on your brand expansion plans. It is big brand in the southern states of India so in terms of geographical expansion what are your next target states?

RG Chandramogan: We are actually entering Maharashtra and Orissa from the southern states and we have opened ice cream outlets in Pune. We also have entered into Orissa. So these are the other two states that we are contemplating. Gradually we intend to take it further.