AJANTA SOYA SHARE: BUSINESS CASE STUDY

What is the BUSINESS of Ajanta Soya? 

Ajanta Soya is a company which is mainly engaged in the business of Vanaspati and different kinds of refined oil with bakery products like biscuits, pastries, puffs and other applications. 

Ajanta Soya is in the business of Vanaspati, Edible oils and Bakery products from the past two decades. 

The company is managed by a group of officials which have a good experience in the fields of edible oils. 

The focus of Ajanta Soya is on its in-house research and innovation for being a low-cost manufacturer with good quality products. 

The company has a good portfolio of brands which includes Dhruv, Anchal and Parv. Ajanta Soya has a good market share. 

Its state-of-the-art manufacturing facilities is following a strong standard for quality which emphasis more on the sustainability. 

Ajanta Soya has become one of the most admired and respected Edible oil company due to: 

1. Superior procurement. 

2. Trading skills. 

3. Innovation. 

Industrial pollution is reduced by the company as they are investing more towards energy saving solutions with appropriate technologies. 

SECTOR DEVELOPMENT AND OUTLOOK 

As we’re talking about the sector development, the first thing which comes to our mind is the negative impact of COVID-19 pandemic across the world. 

The major driving force for the negative impact is lockdown in various regions, quarantines and social distancing which were basically to reduce the out spread of the virus in the country. 

In 2020, the global economy experienced a degrowth of 3.5% as compared to a growth of 2.9% in the year 2019. This was the sharpest downfall since World War II. 

FDI reported a decline from USD 1.5 Tn to USD 859 Bn in 2020. 

India at the start of 2020 was among the 5 largest global economies and was showing the fastest economic growth rate among the major economies. The market size of India was 1.38 bn in the year 2020. 

Indian economy showed a degrowth of 23.9% in the 1^st quarter of 2020-21 which was the sharpest fall since the index was established. 

But later on, there was a good recovery shown by the Indian economy in following quarters. 

In FY20-21, India’s GDP had contracted till 7.3%. 

The major reason edible oil industry is in a good shape is because of the following factors: 

1. Rising population. 

2. Disposable income. 

3. Increasing demand. 

4. Different dietary habits. 

Largest producer and exporter of edible oil is India considering the entire globe. 

Oil seeds is particularly oil which is extracted from the seeds and the climatic condition in India is quite favorable for it. 

India is the 3^rd largest consumer of edible oil and majorly imports the edible oil from Indonesia and Malaysia. 

India is the 4^th largest oil seed producing country after USA, China and Brazil. 

There has been a good demand for vegetable oil but the current situation will lead to more import of the oil and hamper the trade balance and budget of the Indian economy. 

The sector looks bullish based on the rising disposable incomes, escalating population, urbanization and fast-growing health consciousness among the Indian communities. 

The opportunities and threats for Ajanta Soya share 

Ajanta Soya believes the continuation of growth in India Foods industry will help them in achieving a steady growth in revenues and profits. They also feel a good opportunity in rural India as marketers are interested in untapped market and are implementing modern retail philosophy. 

Lifestyle related diseases such as heart ailments and cardio vascular illness will drastically rise in India which will make the population more conscious over health and the consumption of healthy edible oil will increase. 

Ajanta Soya share feels that they have healthy competition from Indian as well as global markets. 

The major challenges which the company has dealt in recent times are as follows: 

1. Raw material price fluctuations. 

2. Exports and imports restrictions. 

3. Guidelines imposed by WTO. 

Environmental factors, crop diseases, etc., are the main reasons for fluctuating prices of raw materials. 

Ajanta Soya sees digitalization as an opportunity as well as a threat. Opportunity because it helps the company to communicate and deliver the products to the consumers easily. Threat due to the fact that small players can also connect with the customers and sell their products easily which was not possible in pre digital age. 

Risks and Concerns associated with Ajanta Soya share 

Ajanta Soya share has a direct relation with currency movement as edible oil is correlated with international price movements. 

The risks of Ajanta Soya can be classified into following categories: 

1. Strategic risks. 

2. Compliance and Governance risk. 

3. Financial risk. 

4. Environmental risk. 

5. Operational risk. 

6. Social risk. 

Specific key risks for Ajanta Soya share are as follows: 

1. Import-export regulations. 

2. Minimum support price (MSP) on oilseeds. 

3. Dependence on monsoons. 

4. Exchange rate fluctuations. 

5. Procurement of oil seeds at the right price. 

6. Optimum utilization of processing units. 

7. Strategic location. 

8. Brand name. 

9. Diversification of products. 

The key determinants which show the company’s good risk handling capability is as follows: 

1. Ability to overcome the regulatory risk. 

2. Agro climatic conditions. 

3. Market position. 

4. Raw material adoption. 

BUSINESS MODEL  

REVENUE MODEL OF AJANTA SOYA SHARE 

The revenue contribution for Ajanta Soya share is as follows: 

Vanaspati & cooking oils- 98% 

Bakery products- 2% 

UNIQUE SELLING PROPOSITIONS IN EVERY SEGMENT

SUPERIOR PROCUREMENT:  

Ajanta Soya share believes in buying the raw material at low prices with superior quality due to which the company is constantly making profits. 

TRADING SKILLS: 

The trading skills of the company is showcased by the number of oils, they sold in the year 2021 and 2020 which was ~1,02,000 MT and ~1,06,000 MT of oils respectively. 

INNOVATION: 

To get in direct touch with the customer they transformed themselves and utilized different technologies to implement the same. 

CONTRACT MANUFACTURING: 

The company primarily manufactures refined oils for third party/ contract manufacturing for various renowned brands. In total, it caters to over 100 different packing sizes for more than 10 brands. However, it also sells directly to customers through its own brands.  

FINANCIAL HIGHLIGHTS 

FINANCIAL KEY METRICS	VALUE
MARKET CAPITALIZATION	₹ 455 Cr
STOCK P/E	10.2
INDUSTRY P/E	88.1
ROE	37.2 %
ROCE	60.2 %
DEBT TO EQUITY RATIO	0.01

The market capitalization of Ajanta Soya share is ₹ 455 Cr which is a small cap company and has less competition in its respective sector. 

In Edible oil sector, Ajanta Soya share stands 2^nd in this segment. 

Currently the stock P/E is 10.2 which is quite lesser than the industry P/E of 88.1. This helps us to understand that the market is paying very less to Ajanta Soya share based on its past or future earnings. 

The return on equity is 37.2 % which is quite favorable as it directly indicates that the investors are getting 37.2% return on their equity in this stock. 

The return on capital employed is 60.2 % and shows a superb operating income is generated for every rupee of capital invested. 

Ajanta Soya share currently has 0.01 which is negligible and the company is focusing on reducing it further. 

BOARD OF DIRECTORS 

Name of the Director and Designation	Category
Mr. Sushil Goyal (Managing Director)	Promoter & Executive Director
Mr. Abhey Goyal (Whole Time Director)	Promoter & Executive Director
Mr. Sushil Kumar Solanki (Whole Time Director)	Executive Director
Mr. Harsh Chander Kansal (Independent Director)	Non-Executive & Independent Director
Mr. Hemant Bansal (Independent Director)	Non-Executive & Independent Director
Mrs. Sushila Jain (Independent Director)	Non-Executive & Independent Director

Note:  

Mr. Abhey Goyal was appointed as the Whole Time Director with effect from 1^st July, 2020. 

Mr. Sushil Kumar Solanki was appointed as the While Time Director with effect from 15^th October, 2020. 

INTERESTING FACTS ABOUT THE MANAGEMENT 

Mr. Abhey Goyal, Whole Time Director on the Board of Directors is the son of Mr. Sushil Goyal, Managing director of the company. 

MR. SUSHIL GOYAL 

In cooking oil industry, Mr. Sushil Goyal has a massive experience of 21 years and is the guiding pillar of the organization. 

He has served as the managing director of the company for more than 16 years. 

He is a commerce graduate and is proficient in financial as well as technical fields. 

Mr. Sushil Goyal is also the President of Indian Vanaspati Producer Association (IVPA). 

MR. ABHEY GOYAL 

Mr. Abhey Goyal is a post graduate in management and finance. 

He is been associated with Ajanta Soya since 2008 and recently was declared as the Whole-Time director of the company. 

He is young and has 6 years of experience in trading of oi, real estate and administration. 

SALARIES PAID TO THE MANAGEMENT 

Name of Director	Salaries & Perquisites (in Lakhs)	No. of shares held & %
Mr. Sushil Goyal (Managing Director)	38.19	513464 & 3.19%
Mr. Abhey Goyal (Whole Time Director)	22.50	613298 & 3.81%
Mr. Sushil Kumar Solanki (Whole Time Director)	5.06	50 & 0%
Mr. Harsh Chander Kansal (Independent Director)	Nil	Nil
Mr. Hemant Bansal (Independent Director)	Nil	Nil
Mrs. Sushila Jain (Independent Director)	Nil	Nil
Mr. Gagan Goyal (Non-Executive Director)	Nil	Nil

SHARE HOLDING  

Share Holding Pattern	Dec-19	Mar-20	Jun-20	Sep-20	Dec-20	Mar-21	Jun-21	Sep-21	Dec-21
Promoters	46.85	46.85	46.85	46.85	46.85	46.85	46.85	46.85	46.85
Public	53.15	53.15	53.15	53.15	53.15	53.15	53.15	53.15	53.15

The promoters in Ajanta Soya have lesser shareholding as compared to the retail investors. 

CLIENTS

Ajanta Soya’s clients include: 

Cremica. 

Godrej. 

Britannia.  

Bikano. 

Anmol. 

United Biscuits. 

Sungold. 

Harvest Gold. 

Parle. 

PriyaGold. 

PepsiCo. 

ITC. 

Haldirams, and others.