FCEL - Kishore Biyani's FMCG Play

Stock Opportunities Untested - but worth a good look
1

This company was previously knows as Future Ventures, after restructuring, capital reduction and hiving off few business, this company is now sole FMCG play, having commissioned food park and started supplying packed snacks, juices and various other groceries thru KB fair price shop, Big Bazaar, Go Bananas, Big Apple, Aadhar wholesale store.

Fcel has in house brand such as:

Tasty Treats (packed ready to eat snacks, pickles, fruit juices, sauces, ketchups, etc)

Fresh & Pure : Tea, Ghee, Oil, Besan, Spices, Honey, etc

Premium Harvest & Golden Harvest : for all groceries, dry fruits, etc

Ektaa : Speciality flours, pulses, pickles, etc

Clean Mate : House cleaning solutions, detergents, etc

Care Mate : Personal Hygiene products

Sunkist : American brand, licensed from Growers Inc

Sach by Sachin Tendulkar : Personal Hygiene Etc

and host of other business including Unisex Salon, Amar Chitra Katha, etc

Financial numbers are not worth looking at this stage.

Please share your views.

Some links :

Last Years AR : http://www.bseindia.com/bseplus/AnnualReport/533400/5334000314.pdf

http://www.moneycontrol.com/news/business/aiming-for-rs-1-lk-cr-revenues-by-2021-future-grp’s-biyani_1560441.html

Disc : Hold stock from avg 12 rs, hence biased.

Amit

2

Succesfully creating a brand is lot more than simply having the intention to do. The mindset and culture of the entire organization starting from the leader himself should be customer focussed. Building 1 brand is difficult itself. Look at Marico - 30 years in the business - dozens of launches but it is really only 2 that have carried them from the start. And Marico is consumer centric organization at its heart. Starting 20 small brands and hoping one succeeds is just a futile attempt at bulding an FMCG business by Future I think. I dont have anything against future group but I just dont think that they have what it takes as an organization to successfully compete against organizations like P&G, Marico, Emami, etc. These companies are just giants and as Malcolm Gladwell says - you dont take on giants head on at their own game on their turf, you did it on yours in areas where you are strong. It doesnt look like Future is doing anything to build a differentiated position (without which they are basically going against these guys head on). I think this is an outcome of looking at valuations of FMCG companies and desiring to be part of the business thinking it would be good “backward integration.” I will stay as far away as possible and stick to the known names

1 Like
3

Viewpoints and comments:

  1. The branded food industry can be a multi decade story wherein I expect the market share movement from unorganised to organised sector, albeit slowly. Very few pure play branded food company in India.

  2. Kishore Biyani (off course there are various other perceptions also) is a great visionary and a very good consumer insights of Indian. He is an eternal optimist and have been able to pioneer the modern retail format successfully. I think he has publicly stated to build the food division to the size of Rs 20,000 crores in next 5 years.

  3. The food park and food processing industry in India is nascent and have seen the focus of govt. on food park and food processing. Can be a processed food player also. Need to see their progress on the TUMKUR food park.

  4. They have acquired Nilgiris Stores in South India. KB is known for inorganic acquisition. Tie up with Bharti retail (done by future group) and Godrej group (wherein they have purchased godrej agrovet stake) and the future group presence can provide a good ecosystem for their products. Nilgiris have dairy products also which has also a good growth potential.

  5. Does not see a very professional management or strong second line yet. Ability to attract and retain professional talent needs to be seen.

FCEL growth (with/without profits) needs to be monitored to see their success and have a large untapped potential.

Disclosure: I am holding the stock in the company

4

FY 15 Annual Report already uploaded at BSE Site, Below is the link : -

http://www.bseindia.com/bseplus/AnnualReport/533400/5334000315.pdf

5

Sad to see so many subsidiaries - all making losses and losing cash.

To top it, a diversification into ACK media - whose value will get masked in a business like this. Most brands developed by biyani save for big bazaar and pantaloons are flops :smile:

  • star and sitara beauty parlous
  • sach brand - paid sachin tendulkar a bomb for products which no one has seen
  • KB fair price - never saw a single shop succeed in bangalore

Interestingly the number of subsidiaries has increased by 13 to 19 (so much for focus on brands) and all of them are loss making.

Receivables has gone up 50 % , higher than sales - quite counter intuitive to any brand pull. Infact, with 86% COGS, it looks like trading outfit than brand outfit to me.

The company lost 248 Cr. of cash in their operations.

Kishore biyani spun a hyper growth story at the expense of profitability and landed pantaloons in trouble and got out by selling his better brands to aditya birla. Looks like he has not learnt his lessons.

In the whole AR, I did not come across any of these words

  • ROE
  • ROCE
  • BREAK EVEN
  • focus on brands
  • cash flow (except for the statutorily needed ones)
  • profitability/margins

It’s a money that’s losing money hand over fist with a reckless promoter trying to be all things and sundry to everyone. If this is a brands play, I do not understand where nilgiris fits in. if this is a retail play, I do not understand where amar chitra katha fits in.

Knowing KB’s track record of short attention spans and lack of focus on cash flows and bottomlines, I would be wary of it.

9 Likes
6

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/155CC0C0_4E6A_4BF1_8F3C_07DDF2F37C2C_153805.pdf

Quarterly result declared.

7

FCEL.JPEG1352Ă—741 176 KB

8

Lengthy but good read.

Disc : Recently sold out at higher levels.

Amit

9

Last week they held first con call for the Company. Does anybody has transcript of the same?

10

Please find the FCEL presentation for con call for the company.fcel-presentation.pdf (1.7 MB)

11

June Quarter : http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/0C091932_3332_4EE7_BEB1_935CC2945C8A_180150.pdf

Amit

12

its been moving in tight price range of 18-22 from quite sometime , do some senior boarders can throw some light on what are its future prospects and what are triggers for turnaround

13

Adding newer products/brands, increasing reach thru newer acquisitions are likely + triggers, bloated equity is - trigger

Discl - invested

3 Likes
14

http://economictimes.indiatimes.com/et-now/corporate/jv-with-khimji-group-is-beginning-of-our-global-journey-kishore-biyani/videoshow/58715510.cms

Video showing scaling sister company business. FCEL should enter that market soon.