White Organic Agro Ltd - Patanjali and organic food play

White Organics Ltd
Highlights of Q1 FY19
Key Highlights

  • It is only the company in organic farming and only listed company in organic space . Currently the company offer over 250 premium products in 12 major categories and 17 sub-categories through fully integrated portal and online store . Range of products include Grains , Pulses Edible Oil , Fresh Vegetable, Fruits , Ghee , medicinal herbs and Capsules , Organic Health supplement and many more. Company packaging area is at Rajkot Gujarat. Company sales under one single brand name called White Organics.

  • Company has tie up with farmers which completely eliminate the whole chain of suppliers, wholesalers and distributors.

  • Company get order for 65 Metric ton of Cluster Beans from Innovative Cuisine Pvt ltd. . This order get by checking the new organic farm quality and scrutinizing stringently followed organic farm practices.
    o Innovative Cuisine Pvt ltd
     Company manufacture products locally and distributes it internationally under the brand name deep foods . Deep foods offer more than 650 different products. The company have a giant customer base and distribution base in US , Canada and many other nations.

  • Company is planning for expanding in farms and also identified the farms which are suitable for the company . Currently company is farming on1360 acres of self-leased farms located in Rajkot Gujarat. Recently in May 2018 Company has added 160 acre in existing land. The additional 160 acre of farm is located in Chottali Gujarat . Land is fully equipped with completer drainage system and can grow many kinds of Plants. Officially Apeda Gavan regulatory body which runs for Organic farm inspect company farm.

  • For 2018 company has performed more than expectation domestically and globally . Same momentum will continue in the Financial year. Recently company has find a place in Maharashtra for farming for which company is confident that it will add further great value to organic farming. Key persons has visited to see the land in Maharashtra and they are confident to take it to next level. Company view is to diversify the geographical risk. Post Maharashtra company will enter in many territories of India for organic farming, Company is not looking for conventional crop but only looking for crop which are sturdy in nature.

  • Company had collaboration with Future Farms which strengthen the company horizon robust portfolio offering and establish strong presence across western region of India in the organic market. Company has attended the Global fest where there were more than 2900 participants. Company witnessed strong demand for Aloe Vera and Maringa for 40 different consumers. Company is extremely positive on the response from the fest.

  • Company expansion plan will be robust and focus more on due diligence to acquire more and more leased farms, Management is hopeful to achieve the target of 3000 self-leased land by the end of this financial year that is wholly 2019.
    Financials

  • Revenue grew by 327 % to Rs 74.75 Cr from Rs 17.49 Cr last year same quarter

  • EBITDA grew by 406 % to Rs 4.58 Cr from Rs 0.91 Cr last year same quarter

  • PAT grew by 211 % to Rs 4.66 Cr from Rs 1.50 Cr last year same quarter

  • EPS grew by 122 % to 2.66 compare to last year same quarter
    Q&A

  • Did company has already started the sales of 65 MT ton of cluster beans?
    o Plantation of cluster beans took place on 16th July 2018 and cycle is of 90 days and production starts approximately on 45-46 day so by 1st September production will start and last for another 45 days. Order worth Rs 40 lakh and it is just a Pilot project and every 3 months it can be repeating and company can expand it to the level company want.

  • What has change because revenue has decrease compare to last quarter same year ?
    o For Agriculture Company summer is not supported season and Q2 and Q3 will be highest in the figure.

  • What led the margins increase?
    o Increase in realization because company is working on some value addition products as well.

  • When an AGM can be expected?
    o In last week of September

  • What is the Tax structure for the company?
    o Self-Leased farming is a tax-free business but the ICS farming comes under normal tax bracket and in this quarter company had made some tax provisions

  • Is it just starting of International order?
    o Yes and by November 2018 company will fully converted to organic

  • What is the difference between trade income and agri income?
    o The trade income includes the buyout from the farmers and selling It to B2B market and this is the ICS farming that company do on the 2800 acres of Land from 530 farmers.

  • Is there any plan for expansion of Retail stores in Metro cities ?
    o Company is in finalization of retail stores in Mumbai as well as Pune there are various talk going on with vendors and company for expansion of franchisee outlet. Company is going to open 40 retail stores in FY19 so it is under observation and surveillance from company end and company will shortly update for it.

  • Whatever company produces is totally on own land or leased land ?
    o Totally on lease land

  • Is there any in-organic product also?
    o No company doesn’t deal in Non-organic product.

  • How much margins can be expected from B2C business and what is company’s road map on it?
    o Company is not much focused on retail side because company production is in tons and company don’t sell its products in tons in retail. EBITDA margin will improve once company reach the IC3 level. After reaching IC3 Company’s EBITDA margins will be 7-10 %.

  • What is the entire value chain of product?
    o Company expect topline of 2.25 lakh per acre and 1-1.5 lakh rupees bottom line per acre . Initially there is a land development cost than there is a plantation cost than labor cost , maintenance cost , organic fertilizers and pesticides , electricity cost , cost toward water, harvesting cost , few value addition cost

  • How expansion will occur in company?
    o Expansion will be in two ways one in terms of expanding the land under farming and second is whatever company produce how can company do further value addition on it . If company goes for a freezes Unit in Gujarat than company need a CAPEX of 40 Cr but unless company have any secured buyer for next 5-7 years company will not be installing any such capacity.
    o Currently company outsource it on job work for Aloevera Freezed powder right now and the company who is doing job work is having more than 20 years of experience and leader in India. Now company is approaching the buyers once company secure the buyers company will go ahead with the CAPEX that company need to do.
    o Company got the Lab reports for the Pilot project that company had done in the top 3 labs in India and very good result come out of it for company product. Now it is easier for the company to approach the International market.

  • What is the acceptance of product in Indian market and International market ?
    o Export market is far more better than Indian market because it goes from standard of living .

  • How company keep quality check in the farm during cultivation ?
    o Company have a team of 12 persons with MRS degree holder . 45-50 farmers are allocated to each of them . Each employee visit 5-6 farm a day with a farm diary which is a 40 page document suggested by APDA and Environment control in which they keep on watch everything that they do on farm.
    o Company also undergo a lab test for every batch that get finalized and that is the condition for the farmer that if they fail in that lab test then they will be deleted from company group. If farmer get deleted than farmer have to start entire deal from 0 with again 3 year of land conversion.

  • How much premium did farmers get extra for growing organic compare to conventional ?
    o It ranges from 5-30 % and depend on 1,2 or 3 year of conversion in B2B market.

  • Why promoter shareholding has been reduced from 27 % in December to 25 % in March ?
    o Promoter has taken 10 lakh share from the prefential issue for conversion in March 2018 so gradually the promoter stake has increased from 24 lakh share to 34 lakh shares and overall percentage wise drop down to 2 %. Promoter intend to increase its share by 5 % in this financial year.

  • In this quarter company had faced tax so this same trend is going to continue ?
    o Yes this trend will continue but it is blended type of tax for the company so the tax amount will come in Q4 this year.

  • What is the company plan for the land that company is going to take in Maharashtra ?
    o Company had identified the land near Mumbai and company have two options for it one is to go for agro-forestry which is easy to go or company should go for cultivation of vegetables or Flowers because Mumbai City is very close so company can reap heavy margins out of it . Company is just analyzing the amount of waterfall that is happening in that area and basis on that company will finalize the decision.

  • Did company is having any new products in the pipeline ?
    o There are mainly two products in the pipeline one is Aloe Vera freeze Powder and dry leaf powder . Company have sample ready and undergo with the best lab reports which are very much satisfactory and company has started approaching the buyers in the international market and company is focusing on it because it is creating the most value addition.

  • Company Receivable has been around 52 Cr against total sales of 190 Cr for FY18 so is it the General trend ?
    o Generally the cycle is of 50-90 days product to product . Company supply lot of product in March FY18 so that is reflecting in April and May. It will be normalized from June quarter

  • Does company have any plan to raise Debt in coming years ?
    o No

  • Kindly give some rough guidance on how will be the topline and bottom line in next 3-5 years ?
    o Company is expecting 25 % growth in top line and bottom line yoy going ahead. EBTIDA margin should improve from 7 % to 10 %.

2 Likes
  1. “the management is pleased to add one more feather in its crown by entering into the vast scalable business of Organic Basmati Rice.”
  • Have u ever seen respected business houses to describe themselves as if they are king or something? They are always humble in their presentations.

2.“First and Only Listed Company - First and only listed entity catering to entire organic product range.”

  • How much money does it take to float a company like this? Why there is no peer or competing company in this high potential business?

3.“Government Support To encourage Agro based activities Government supports through various schemes”

  • Loose words. Please give names of the Government schemes supporting farmers.

4.“Quality Control - Solely focused on quality assurance at every step of processes.”

  • Again loose words. Do they have any certifications like ISO 9000 or something?

If they are so agile to be only listed company in the organic food industry, why are they not able to maintain their web-site properly. I am trying since last 3 days and it is not opening. Why the profiles of the directors are not found in social media web-sites like facebook, linkedin etc?


Do watch this video. Do you think these boys are of any calibre to run a successful company.

Sorry for my harsh words.This platform has immensely helped many like me and out of this gratitude I dare to write here my views. This whole set up looks totally fake.

Thanks.
Dharmeysh Ashar

3 Likes

Was having a small doubt regards the revenue they are generating. Currently they have 1360 + 2800 acres (i.e in total 4160 acres) but revenue for TTM is 335Cr, i.e ~9 lakh revenue per acre.

Was just wondering how could it be possible, as the management clearly said that on 1360 they produce on their own and on 2800 acres they trade (they also specifically mentioned that they do not trade outside these 2800 acres).

Can anyone explain the above issue or the management is playing with numbers ? Eagerly waiting for some senior member to comment. Thanks in advance

1 Like

I am living in surendranagar …
Majority of land their land is situated near chotila sayla taluka which is 50km from my home…
So i have met with some farm owners who had leased their land for aloe vera plantation…
They said their contracts get cancelled and they have not paid the contract amount also…
Their contract with patanjali also get cancelled…

Some thing very fissy with company stay away from this…

If anyone need i will send pictures also…

5 Likes

Few of the red flags which I observed while going through annual reports of the company few months back :
Look at the balance sheet of 2016 ( AR 2016) :
• Non Current investment 4.1 cr ( investment in Charisma Jewellery)
• Short term Loans and advances : 20.7 cr
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The company shifted its business activity in 2016-17 from trading diamond to organic agro and the balance sheet of 2017 ( AR 2017) :
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• Non Current investment for the year 2016: changed from 4.1 cr to 21.3 cr ( investment in Charisma Jewellery, Bhagwati Developer, Bhagwati infra, Patel Enterprise)
• Short term Loans and advances for the year 2016 : changed from 20.7 cr to 3.4 cr.
• Non Current investment for the year 2017: 26.7 cr( investment in Charisma Jewellery, Bhagwati Developer, Bhagwati infra, Patel Enterprise)
• Short term Loans and advances for the year 2017 : 3.5 cr
• Trade receivable 2017:3.9 cr.
• Cash flow from operations: -0.09 cr.

So it seems the loan and advances from the year 2016 were converted to equities backdated. Company claims to have arable leased land of 530 acres in AR 2017 and equipment of only 3.36 lakh. How is company even managing to cultivate such a big mass of land!

As per Balance sheet of 2018 (AR 2018) :
• Non Current Investment : 23.54 Cr. ( investment in Charisma Jewellery, Bhagwati Developer, Bhagwati infra, Patel Enterprise)
• Trade receivable : 51.79 cr.
• Trade payable : 40.9 cr.
• Cash flow from operations : -10.9 cr.

The auditor in AR 2018 has given following statement : “We did not audit the financial statements of the subsidiaries, whose financial statements reflect total assets of Rs. 157,711,254 as at 31 March, 2018, total revenues of Rs. 612,127,660 for the year ended on that date, as considered in the consolidated Ind AS financial statements. These financial statements have been audited by other auditors whose reports have been furnished to us by the management”

So company has no cash flow from operations and net block of only 0.67 lakh. The book value of the company almost entirely is of trade receivable and non current investment into unlisted companies. The subsidiary has not been audited by the auditor who prepared consolidated statement. Company issues warrants to promoter which increase the issued share capital to 17.5 cr from 12.5 cr instead cashing out the investment, is the investment real!

Disclosure: Not Invested; Not interested.

2 Likes

The tone of the business update (https://www.bseindia.com/xml-data/corpfiling/AttachLive/dc884240-ca99-4f9d-ac74-abacb7cd9106.pdf) that the company has given clearly gives enough clues to be away from the stock. It talks about:-

  1. Good performance of Q1’19 instead of Q1’20
  2. IPO of Subsidy co?- yes you read it right
  3. Getting overwhelmed on leasing a warehouse
  4. Impact of subsidiary’s performance on the parent/promoter.
  5. expected growth of CAGR 25% from 2015-2020,when you are in Aug’19.
  6. byproducts,outsourced branded & un-branded premium quality organic food products
  7. e-commerce integrated portal with PAN India delivery
  8. sustainable sustenance, passion & commitment for growth
  9. virtues of owning a single brand
  10. Top 10 developments of the year gone by (incl bonus issuance)
4 Likes

Interesting (and hilarious) observations Mukesh. :+1:

I remember having read 2 years back that their retail division had 5 outlets then; one at mumbai and 4 in Gujarat. i also remember having read that they intended to open 40 such outlets over the next 2 yrs.

After the passage of 2 yrs today, they mantain their plan to open +40 stores pan India, while their existing store network seems to have collapsed to 2 (only in Gujarat). Their earlier store in Ghatkopar has been shut and the relocated store at Bhandup is also shut for renovation!!!

There is another listed company called White Organic Retail Ltd. There is no information available about the same. Is it anyway related to this company (Agro)?

Disc:
I am invested in White Organic Agro (unfortunately). Now that the price is at 8 rs, I am just holding on to it as there is nothing to be gained by selling :frowning:

White Organic Retail is a subsidiary of White Organic Agro. It is the arm, thru which the White Organic Agro, conducts all their retailing business. You can find some details in the RHP filed with the exchange. Attached herewith is a link to the RHP

White Organic Retail DRHP

1 Like

The forum is not active, I took entry after looking at so cheap valuation a few weeks back. Q2 numbers look pretty good and stock is in upper circuit since two days. It is going to do very well in future and management commentary post result is very bullish too

Check the history of this company and decide for yourself.

1 Like

Exited with loss, in future first thing to check is management competence, earlier research pointed to that but had not read into that. This may head to zero also

1 Like