Freshtrop Fruits Ltd

(sn123) #121

Could you name any other such players with the same kind of certifications? To keep the certifications, they have to meet quality requirements, and renew every three years. These are not easy to get. They are probably not listed is all I can say. Thus, quality is not a big concern as long as the certifications are renewed regularly.

I am guessing the horticulture and R&D expertise required for the entire supply chain (that also requires investments which Freshtrop has made) is also not easily available with run-of-the mill exporters in India at least.

In AR2016 they wanted to grow the fresh fruit segment at a cumulative 10%, while focussing more aggressively on the fruit processing segment. Will wait for the next AR to see where these stand.

Indeed India isn’t yet among the top exporters of fresh fruit and processed fruit to big foreign markets but therein lies the real opportunity for growth in the long term!

Disc: Views might be biased.

(Rupesh Tatiya) #122

As mentioned by @bheeshma, these certifications are available for other exporters as well.

Please note that, grapes are produced by association of farmers in India, primarily in Nashik, Sangli and Pune. The normal size of association is 500-1000 farmers. One of the major requirement for export to Europe and other countries is to have grapes which are “Pesticide Residue Free” and also farmers following “Good Agricultural Practices (GAP)”.

The way farmers adopt to this is as follows ->
Some big farmer in area (with capital) experiments with the requirements - residue free, new varieties, crop ahead of time, covering grape farms with material that regulates sunlight etc. This farmer also has second role of being an exporter or having some linkages with export houses. News of new things travels along with the tale of money made. After 2-3 years, majority of farmers adopt these new techniques. This is unlike corporate farming where one can continuously build competitive advantage.

So you can imagine that any one of the well-doing farmer can start collecting grapes from other members of farmer association, work with export houses in first few years and start exporting grapes. He will have to offer higher price to farmers and lower price to export houses in first few years but they will start.

On the buy side of things also, there are several players who are into import of grapes. Since there is relatively no difference in the quality of supplied grapes, it is a blessing for them when a new player emerges as he offers lower prices. The contacts get quickly developed and export starts. This process continues to happen on every bull phase of grapes export.

The real competitive advantages in this business are following - trusted farmer’s network and reliable importers/buyers.

Freshtrop is actually relatively weak on the procurement side and usually offer more price than the local exporter guys. They have been working on reducing the procurement prices but still there is some way to go. Following two players procure grapes at lower rates compared to Freshtrop and has committed supply of 250+ farmers, you can go through their websites below ->

Where Freshtrop really has competitive advantage is on the sell side. They have customers who can sell grapes at higher price than other customers. They also have removed a lot of middlemen and deal directly with superstore chains. They have been consistently supplying these grapes to these customers and hence also have Fixed price contracts as I have mentioned before.

Apart from quality, other major issue as to why share of India is not increasing in exports is varieties. India exports mostly Thompson seedless grapes. There have been some efforts by players to introduce new varieties but they are yet to bear fruit.

Disc - No investments

(hm0293) #123

As mentioned by @rupeshtatiya, what i can think of the company is like operating in the dairy industry. As the business gets its supplies from association of farmers it is very difficult to have a profitable enterprise. The entire case study of amul is a perfect example when farmers start operating as a cooperative under professionally run management, it is almost impossible to beat them.

Any business which does good for a large number of people is very tough to beat in the very long run.

However, this said it all depends whether they are under professional management and when farmers associations/Cooperatives will start exporting themselves.

Thanks for the added insights @rupeshtatiya these are very useful.

(hazariwalapu) #124

Transactions with related parties.
Related party disclosure Relationship 2016-2017 2015-2016
Ashok Motiani KMP 84,00,000
Nanita Motiani KMP 42,00,000
Mayank Tandon Relative of KMP 41,99,983
Priyanka Tandon Relative of KMP 41,99,783
Dipti Motiani Relative of KMP 41,46,383

This remuneration of Rs.2.52 crs to Management and its relatives looks very high against Rs.9 crs of net profit.


(krishna) #125

Q1 results are as good as every year Q1 with an EPS of 6.7rs.
Another good thing is company becoming complete debt free in the current year.

Business Update:
Company started plans entry to Ready To Drink (RTD) segment, if this category is succeeded long pending seasonality issues business can be avoided. Mgmt indicated 100% product will be launched by November end into the market. Chances are high for product success considering management domain experience and operational synergies in the processed fruit sector. This can be trigger point for PE re-rating from current 10 Levels.

Disclosure: Invested

(Krishnendu) #127

Confirmation on RTD

(Krishnendu) #128

Locked UC today I guess it is due to RTD venturing or is there any other reason ?

(Bheeshma Sanghani, PhD) #129

One of the reasons this has happened is because of a post in the aceinvestor blog that describes freshtrop now being reclassified as an fmcg business rather than a grape exporter. Since it is a widely followed blog its subscribers no doubt have believed it and purchased it without doing due diligence.

(django) #130

I view this rise as premature euphoria.
Just because the company has planned for ready to drink product does not mean it is already a hit.

There are many difficult steps to be completed before real benefits of this RTD start accruing to the company. E.g. Start of production, retail launch of beverage, setting up distribution and retail reach, acceptance by end consumers etc.

Even after that, when the beverage will be profitable as a standalone product and add to bottomline is a question.

Disc. Holding negligible tracking position

(Krishnendu) #131

But can simple blog make it a UC ? I don’t think so …I believe this company has been widely tracked since it was suggested back in 30 May 2016 by Mudar Patherya as one of his few dark horses… I agree with your points and specially q2 & q3 are generally having subdued earning being the cyclical nature of the business. But considering the company’s distribution network and even not reporting any losses during the grep export ban by UK it has proven it’s potential already. Though I am not yet sure of RTD earning expectation and the hardels related to it … can you please give some more information on this ?

(J2EE Professional) #132

i think its a lot to do with technicals. Yes the development is positive,but it think technically its broken with resistance of 110-121 with great volumes…i expect now this 100-120 zone to absorb any and every fall…

(J2EE Professional) #133

interesting…just saw the blog today after i read your comment… its strange if his followers dont even know that its an old stock of his and not a new recommendation… kind of funny actually if what you say is indeed true and was the reason of UC…:grin:


I think we are in the 3rd phase of bull market and every little bit of positive news results in such crazy moves.

(Chaitu) #135

Please see my comments below.

Request you to provide counter points to improve our understanding on business and make it as healthy discussion.

(Bheeshma Sanghani, PhD) #138

Not just aceinvestor , some other blogs (like platinumbulltrader) also seem to be reconstructing the narrative.

On the plus side - freshtrop is a well managed company and in fact, i think grape exports has a large enough opportunity internationally if india could move up a few notches up in the preference chain. Domestic RTD is a small optionality at present and it remains to be seen how well its executed.


(Krishnendu) #139

I have tried my level best to fit Freshtrop into MOSL’s SQLGP framework. Please correct me if I am making any mistake here Freshtrop SQLGP.xlsx (11.5 KB)

(J2EE Professional) #140

did anyone attend the AGM?

(J2EE Professional) #141

any update from AGM?

(rvetri) #142

The canadian government agency approves import of fruits from India. This is a positive development for the sector.

(grohal) #143

Canada is a big exporter of Agricultural products, this approval is to get favorable terms for their products!