Customers To Bear Burden Of Edible Oil Import Duty Hike: Bikaji Foods COO

The recent hike in edible oil import duty will result in higher costs for consumers, according to Bikaji Foods International Ltd.'s Chief Operating Officer, Manoj Verma. Speaking to NDTV Profit, Verma said that the hike could cause up to a 4% increase in the overall cost for the company and ultimately it will be passed on to the customers.

The government, last week, announced an increase in the basic customs duty on various edible oils to support domestic oilseed prices. The basic customs duty on crude soybean oil, crude palm oil, and crude sunflower oil has been raised from 0% to 20%, making the effective duty on crude oils to 27.5%.

"The import duty hike on edible oils will not only impact us but all the major players because this increase is quite substantial. Eventually, you will see that beyond a point, this cost would be passed to the consumer. We have to safeguard our bottom line. It will have somewhere between a 2-4% impact on our overall cost," Verma said.

Bikaji Foods recently acquired a 55% stake in Ariba Foods for Rs 60.49 crore. Commenting on the move, Verma said that the acquisition is to gear up the backend of the company in the frozen foods space.

"The frozen food business goes into the export market and there it is a cost-plus model. The export market contributes to 3.5–4% of our business. Of the export business, about 35% comes from frozen foods. Going forward, the contribution of frozen foods in the export business will move up to about 40% over the next six quarters," he said.

Talking about the company's growth prospects, Verma predicted that Bikaji Foods's revenue will grow around 15% over the next three years.

"Unless there is some catastrophe or something goes beyond our control, there is no chance of margin dilution. The kind of investments we have made and the readiness from the backend we have—a 15% topline is pretty much doable," he added.

“In terms of Ebitda, what we are working over and eyeing for is a gain of 50 basis points on a year-on-year basis,” the top executive added.

Bikaji Foods plans to deliver 20-25% growth in the export market, up from its current 3% share in the quarter ended June. The export growth will be pushed by the frozen food business, Verma noted.