delivering health and prosperity
TRANSCRIPT
Delivering Health and Prosperity
© 2008 , KS Oils Limited. All Rights Reserved.
Disclaimer: The information contained herein is subject to change without notice. This material was used during an oral presentation; it is not a
complete record of the discussion. K S Oils Limited accepts no liability whatsoever with respect to the use of this document or its content. All
product names and company names and logos mentioned herein are the trademarks or registered trademarks of their respective owners.
KSOI.BOKSO@INKSOILS526209
Information Memorandum
Agenda
Section Slide No.
The Opportunity 04
Key Investment Considerations 04
Industry 09
Company Overview 23
Company’s products and markets 38
2
Company’s products and markets 38
Procurement 41
Manufacturing 44
Markets and distribution 52
Historical Financial Performance 54
Strategy & Growth Initiatives 59
The Opportunity
• K.S. Oils Limited (“KSO" or “K S Oils” or “the Company”) is in the business of
manufacturing, processing and marketing of branded mustard and other
refined edible oils.
• It is a listed Company which is desirous of raising funds through private placement /
preferential allotment of equity shares of the Company to investor(s). The funds are
proposed to be utilised for:
• Acquisition and development of palm oil plantations with Crude Palm Oil
3
• Acquisition and development of palm oil plantations with Crude Palm Oil
(CPO) mills overseas; and
• Setting up of processing and refining facilities in India.
• The Company offers an attractive investment opportunity in a rapidly expanding
branded edible oils market.
Key Highlights
Developing Palm Plantation in Indonesia
• Integrated operations and backward linkages in the Supply Chain
• Opportunity to invest into a pure play on Greenfield oil palm plantations
at a relatively low cost.
• Strong cash flow generating characteristics.
• All production will be covered by off-take agreements with KS Oils India and
4
/ or other subsidiaries.
• Plantations and mills are ideally located for high yields and low cost
production.
• Secured earning and margin sustainability
• Well-positioned to capitalize on favorable palm oil industry market
opportunities.
Key Highlights
Advantage KS Oils
K S Oils is well-positioned to capitalize on the edible oils opportunity
• Largest rapeseed crusher in India
• Presence in rapidly growing refined oil market
• Wide product range to suit local tastes and preferences
• Strong brands
5
• Strong brands
• Strong distribution network
• Increasing focus on retail packs and pouches
• Backward Integration into palm oil plantations
Key Highlights
Excellent Track Record
• Excellent sales and profit growth
• Revenues have grown at a CAGR of ~84% p.a.
for the last three years while EBITDA has grown
at a CAGR of ~ 190% p.a.
• Increase in EBITDA margins from 4.5% in FY06
to 11.3% FY08 on account of shifting revenue
composition in favour of branded trade packs
Strong Distribution Network
6
composition in favour of branded trade packs
and consumer packs
• Successfully transitioning to an FMCG
company.
• Increase in branded revenue 40.8% in FY06 to
60%
in FY08
• Highest margin earner in the industry
• Strong presence in mustard oil
consuming regions – 625 distributors
and over 60,000 retailers
• Initiated expansions into new
markets and organized retail formats
with refined edible oil product
Key Highlights
• Largest crushing capacity in India -2,675 MT/day located in
Madhya Pradesh and Rajasthan
• Integrated facilities with captive power generation and
in–house packaging unit
• Strategically located multi-site operations offer close proximity to
raw materials and/or key markets
State of the art
manufacturing facilities
7
• Part of an established business house belonging to the Garg
family from Morena, Madhya Pradesh dealing in agro based
products for the last 150 years
• Present management includes representatives from the fifth
and sixth generation of the family
manufacturing facilities
Strong management
with decades of
experience in
commodities
Project Palm
Project Cost USD million
Palm Plantations148
Edible Oil Refinery 40
Total 188
Means of Finance USD million
Equity 90
Debt 98
Total 188
8
Industry Dynamics
9
Industry Dynamics
World Consumption PatternWorld consumption of 17 Oils and FatsSource: Oilworld (www.oilworld.biz)
Other /
Animal
Fats,
26.2%Rape Oil,
12.0%
PKO &
CNO,
5.0% Sunflower
oil, 6.4%
2007-08 F: 158.0 Mn. T.
Other /
PKO &
CNO,
5.80%Sunflower
oil,
10.10%
1990-91: 81.8 Mn. T.
1010
PKO – Palm Kernel Oil (Laurics used in soaps and cosmetics)
CNO – Coconut Oil
Soya Oil,
24.7%Palm oil,
25.6%
12.0%
Soya Oil,
19.40%Palm oil,
13.80%
Other /
Animal
Fats,
40.30%
Rape Oil,
10.60%
10.10%
Edible Oil – Key Trends
Production Cost (USD/ton)
0
100
200
300
400
500
600
Palm Oil Soyabean Oil Rapeseed Oil
Type of Oil
US
$
11
• Palm oil has lowest production cost per tonne and is the cheapest oil available.
• Palm oil has grown at a CAGR of ~ 9% in last 6 years, rapeseed at CAGR of ~ 6.2% and
soyabean oil at CAGR of ~ 4.2% as compared to Indian edible oil market which is growing
at a CAGR of 6%.
• World Oil consumption has grown at a CAGR of ~ 5% in the last 6 years.
Source: United Nations Environment Program, LMC International, Oil World
Palm Oil – Demand for Bio Diesel
Palm Oil and Bio fuel 2006 MT (Actual) 2012 MT (Est.)
Oil seed production 302 344
For biodiesel 20 85
Share 6% 25%
Palm Oil Production 39 48
For biodiesel 1 10
Share 3% 21%
12
• Shift to renewable energy by developed countries that are keen to reduce their dependence on crude
oil. As the global petroleum diesel market is at least 5 times the size of the global oils and fats
market, a small shift from petroleum diesel to bio diesel is felt many-fold in the vegetable oils market.
• High oil prices could directly influence the bio fuel market, as bio fuels become more price
competitive
• All vegetable oil prices are supported, due to bio diesel linkage, regardless of which vegetable oil is
actually utilised as feedstock for the bio diesel industry.
Palm Oil StatisticsPalm Oil Consumption
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 CAGR Proportion
India 1.8 3 3.6 3.6 3.6 4.2 3.4 3.3 3.1 3.8 11.0% 9.9%
Indonesia 2.8 3 3 2.9 3 3.2 3.4 3.6 3.8 4.1 4.6% 10.7%
EU - 25 2.1 2.3 2.5 3 3.4 3.5 3.9 4.4 4.7 4.8 8.8% 12.5%
China 1.5 1.4 1.6 2.2 2.7 3.3 3.7 4.3 5.4 5.4 15.6% 14.1%
Malaysia 1 1.2 1.5 1.5 1.5 1.6 1.8 2 2.2 2.2 5.7% 5.7%
Pakistan 1.1 1.1 1.1 1.2 1.4 1.3 1.4 1.5 1.5 1.6 3.5% 4.2%
Other 7.3 7.6 8.3 9.3 10 11.2 12.5 14.4 15.6 16.4 8.0% 42.8%
Total 17.6 19.6 21.6 23.7 25.6 28.3 30.1 33.5 36.3 38.3 8.3% 100.0%
Palm Oil Output 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 CAGR Proportion
Malaysia 8.3 10.6 10.8 11.8 11.9 13.4 14 15 15.9 15.8 5.9% 41.6%
Indonesia 5.4 6.3 7.1 8.1 9.4 10.6 12.4 14.1 16.1 16.9 12.8% 44.5%
Nigeria 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 1.2% 2.1%
13
• Almost entire consumption of Palm Oil in India is met through imports, since India produces only nominal quantity of palm oil. • More than 95% of India’s palm oil imports are sourced from Indonesia • Difference in Output and consumption when measured at the end of the year are attributable to seasonal vacancies which balance
themselves out through market forces in the following year
Ivory Cost 0.3 0.3 0.3 0.2 0.3 0.2 0.3 0.3 0.3 0.3 0.0% 0.8%
Colombia 0.4 0.5 0.5 0.5 0.5 0.5 0.6 0.7 0.7 0.7 5.2% 1.8%
Thailand 0.5 0.6 0.5 0.6 0.6 0.7 0.7 0.7 0.8 1 8.7% 2.6%
Ecuador 0.2 0.3 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.4 6.5% 1.1%
Other 1.4 1.3 1.7 1.7 1.7 1.8 1.9 2 2.1 2.1 3.8% 5.5%
Total 17.2 20.6 21.8 23.9 25.4 28.3 31 33.9 37 38 8.0% 100.0%
World Export 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 CAGR Proportion
Malaysia 7.7 9.2 9.2 10.7 10.9 12.2 12.6 13.4 14.4 14.4 6.5% 48.0%
Indonesia 2.3 3.3 4.1 5 6.5 7.4 9 10.4 12 12.5 18.7% 41.7%
Others 1.4 1.6 1.7 2.1 2 2.3 2.6 2.7 3 3.1 5.6% 10.3%
Total Export 11.4 14.1 15.0 17.8 19.4 21.9 24.2 26.5 29.4 30.0 10.5% 100.0%
Export from Indonesia
14
More than 95% of the palm oil import in India is sourced from Indonesia.
20
30
40
50
60
KG/ per capita
Per capital consumption of oil
Global - Per capita consumption comparative
15
0
10
20
EU-27 US Brazil Mexico Russia Japan China Pakistan Indonesia Nigeria India Bangladesh
Countries
India has among the lowest per capita oil and fat consumption in the world (~ 12 kg per person versus the world average of ~ 20 kg per person)
India – Edible Oil Outlook
The demand for edible oils is expected to increase from current levels of 13.9 million tonnes to
15.6 million tonnes in 2010 and 20.8 million tonnes by 2015.“-- The Solvent Extractors' Association of India
Particulars 2008 2010 2015
Total Demand (Million Tonnes) 13.9 15.6 20.8
Domestic supply of edible oils (Million Tonnes) 8.5 9.1 12.5
Total edible oil imports (Million Tonnes) 5.5 6.5 8.3
16
Total edible oil imports (Million Tonnes) 5.5 6.5 8.3
Imports as share of demand 39.1% 41.7% 39.8%
Estimated Palm Oil Import 3.6 4.3 5.5
Estimated Soyabean Oil Import 1.8 2.2 2.8
India is expected to continue its dependence on imports to the extent of ~40% of its consumption requirement.
The improvement in yields and the increase in area under cultivation are expected to ensure that domestic
oilseed production is sufficient to meet ~60% of consumption requirement.
Source: The Solvent Extractors' Association of India www.seaofindia.com
India’s Edible Oil Consumption
4,000
6,000
8,000
10,000
12,000
14,000
Oil c
on
su
mp
tio
n (
'00
0 t
on
ne
s)
Consumption of edible oil in India
17
0
2,000
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Oil c
on
su
mp
tio
n (
'00
0 t
on
ne
s)
Oil year
Soybean oil Groundnutoil Sunfloweroil Rapeseed oil Palm Others
Palm Oil has the highest consumption and is almost entirely imported.
Rapeseed oil is the largest domestic oil and constitutes ~ 19.6% of total consumption.
Changing Consumption Pattern of Edible Oil in India
Nov. 06 to Oct. 07 - 11.9 Mn T Nov. 05 to Oct. 06 – 11.5 Mn T
India Consumption 2005-06
25%
10%25%
14%
India Consumption 2006-07
22%
7%
5%32%
14%
18
Share of palm oil in domestic consumption has increased from 25% of total consumption
to 32% of total consumption over the last year.
10%
5%
21%
Soybean oil Groundnutoil Sunfloweroil Rapeseed oil Palm Others
5%
20%
32%
Soybean oil Groundnutoil Sunfloweroil Rapeseed oil Palm Others
Imports of Edible & Non-Edible Oil by India
Palm Oil, 59%
Sun Flower Oil, 2% Refined Soyabean Oil,
0%
Soyabean Oil (Degummed),
Sun Flower Oil, 4% Refined Soyabean Oil
0%
Soyabean Oil
(Degummed),
28%
Nov. 05 to Oct. 06 - 4.42 Mn T Nov. 06 to Oct. 07 - 4.71 Mn T
19
• Palm and Soya Oil constitute more than 95% of edible oil imports.
• Proportion of palm has increased by 10% at the cost of soya underlining the
increasing importance of palm oil.
Source: SEA of India
Palm Oil, 59%(Degummed),
39%Palm Oil, 68%
COOIT’s Estimates of India Oilseeds Crop for 2007-08
Sr.
no.
Oilseeds/ Solvent
Extracted Oils
Oil
Recovery
%
Oil -
Seeds
Marketable Surplus
For Crushing & Oil
Availability
Total
Marketable
Surplus
Total Oil
Availability
Kharif (Summer)
Rabi (Winter)
I. OILSEEDS
1 Groundnut (in shell) 40 7.29 2.09 1.11 3.20 1.28
2 Soybean 17 9.46 8.46 - 8.46 1.44
3 Rape/Mustard/Toria 33 5.29 0.20 4.89 5.09 1.68
4 Sunflower 35 1.46 0.52 0.93 1.45 0.51
2020
4 Sunflower 35 1.46 0.52 0.93 1.45 0.51
5 Others 43 1.99 1.09 0.55 1.64 0.71
SUB TOTAL 25.49 12.36 7.48 19.84 5.62
II. OTHER OILSEEDS
10 Cottonseed 12.5 9.61 8.11 - 8.11 1.01
11 Copra 65 0.65 0.65 - 0.65 0.42
SUB TOTAL 10.26 8.76 - 8.76 1.43
III.SECONDARY SOURCE (Rice Bran, Oil Cakes and other Minor Oilseeds)
1.43
Grand Total 35.75 21.12 7.48 28.60 8.48
Indian Edible Oil Industry: Overview…
India accounts for 7.6% of world oilseeds output (2006-07);
6.1% of world oil meal production; 3.9% of world oil meal
export; 5.8% of world vegoil production; 11.2% of world vegoil
import; and 9.3% of the world edible oil consumption.
“ “
“DEMAND-SUPPLY OF VEGETABLE OILS IN INDIA” , B V
Mehta, as quoted in SCODEST ASIA in October 2007
21
India has ~ 15,000 oil mills, 711 solvent extraction units and over 585
refineries employing more than one million people.
Source: Public Information
Regional Consumer Preferences
Mustardnorth-east, central,
north and east
Groundnut west
Palm central and south
Soyabean north and central
22
Soyabean north and central
Sunflower
largely consumed in
urban India, in
relatively small quantity
Strategic Location of KS
Oils to address mustard
cultivating / consuming
belts
The Company
23
The Company
The Company
K S Oils Limited (“KSO" or “K S Oils” or “the Company”) is in the business of manufacturing, processing
and marketing of branded virgin mustard (rapeseed) oil and refined edible oils
Code: 526209
Listed Since 1994
Code: KSOILS
Listed Since 2007
Estd: 1985
24
Integrated Manufacturing Plants
Integrated capacities for crushing, refining,
solvent extraction and in-house automatic
packing unit, employing more than 2,800
employees over 6 locations
• KS Oils has reported exponential revenue
growth in last 4 years i,e from ~ Rs 6 bn
in FY 06 to ~ Rs 31 bn in FY09
• Strong distribution network comprising of 30 C&F
agents, 900 distributors and over 100,000 retailers
• Market share of ~ 25% of branded mustard oil market
• Market share of ~ 10% of entire mustard oil market
K.S. Oils – Where does it stand today!
Largest rapeseed crushing capacity in
India 2,675 MT/day
• Integrated manufacturing facility across
6,00,000 sq. feet in Morena.
• Substantial new integrated capacities
coming on stream in the current
financial year
11111111
25
financial year
Market leader ~ 10% market share of
mustard oil market
25% share of the branded mustard oil
market.
The Promoters
The Company is part of an old established business house belonging to the Garg family
from Morena, Madhya Pradesh dealing in agro based products for the last 150 years
Mr. Ramesh Chand GargChairman
• Belongs to the fifth generation of the
Mr. Sourabh GargExecutive Director
• Actively involved in green field project
26
The Promoters are currently engaged in the edible oils business only
• Belongs to the fifth generation of the
Garg family.
• A visionary and has vast experience in
business of oil seeds and other
agricultural commodities.
• Actively involved in green field project
implementation and new infrastructure
initiatives
• Also looks after the product expansion
initiatives
Awards & Recognition
Highest Processor of Rapeseed Oilcake
2004-05 | 2005-06 | 2006-07 | 2007-08For the year
The Solvent Extractors’ Association of India
a Premier Association of Vegetable Oil Industry & Trade
6th most Investor Friendly company
27
Emerging Company of the year
KS Oils Limited
Oilman of the yearMr. Ramesh Chand Garg
Fastest Growing Company
Industry Standing
K S Oils’ Management is
pro-active and enjoys high
reputation in the trade.
Sandeep Bajoria
Promoter, Bajoria Fats & Protiens Ltd and
President of COOIT
“ “
The Company is known
for its aggressive
approach to expansion
B.V.Mehta
Executive Director
Solvent Extractors Association
“ “
28
The Owners are progressive,
honest and honourable unlike
most players in the mustard oil
segment.
“
Dorab E Mistry
Director, Godrej International Ltd, UK
“
Corporate Social Responsibility
• The Garg family are founders of a school
teaching 1,000 students from nearby rural
areas.
• A not-for-profit organization, it is the only school
in Morena that has high education standards,
state of the art computers and recreational
facility like horse riding, swimming, gymnasium
etc. and hostel accommodation
2929
etc. and hostel accommodation
• The Company employs about 3,500 people,
directly & indirectly.
• It supports 50,000 families like farmers
supplying their produce and dependent
downstream industries like transporters, brick
factories, farmers, distributors etc.
Management Team
Name Designation Profile
Sanjay Agarwal Managing
Director
He has over 20 years of industry experience and is the
key driver of the Company’s expansion, growth and
backward integration.
P R Srinivasan Director He is nominee of the Citi Venture Capital.
30
Jimmy Mahtani Director He is nominee of Baring Private Equity Asia.
R GaneshExecutive
Director
He has been a strategic advisor to top companies on
policy issues. He is in charge of the Company’s HRD
policies.
Dr. R S SisodiaIndependent
Director
He is a Doctorate in agriculture and looks after quality
control areas and Research & Development.
Management Team
Name Designation Profile
Himanshu G
Global Head -
Business
Strategy
He has experience in edible oils international trade. He
drives strategic new business initiatives and international
foray of the Company.
P K Mandloi Independent
Director
He has extensive experience in the banking sector and
guides the Company in financial matters.
31
B N SinghIndependent
Director
He has wide-ranging experience in the field of industry
development and guides the Company in its new projects.
Sunil Alagh
Head-
Marketing
Advisory
Committee
Ex-CEO of Britannia and one of the most celebrated
Marketing Guru’s in India. He formulates the Marketing
and Brand strategies of the Company.
Management Team
Name Designation Profile
Dr. R.P. SinghIndependent
Director
He is Director of Harcourt Butler Institute, Kanpur. He is a
leading professor and academic authority in South East
Asia on oilseeds. He holds a Ph.D. in Oil technology
32
Shareholding Pattern
As on 31th Dec., 2008
33
Note: In 2007, the Company had allotted 49,837,710 equity shares of Re. 1 each in favour of the Custodian
underlying the two GDR's Issues of total USD 52 Million.
KS Oils Operations
• Sales through zonal C&F agents and Company owned depots
• North-East Region: goods dispatched to branches in Guwhati, Dimapur &
Tinsukhia, and sold directly to distributors.
• Mustard oil (Double Sher & Kalash brands)
• Refined oils (Kalash, KS & KS Gold brands)
• Vanaspati (KS Gold & KS Gold Plus brands)
• De-oiled Rapeseed Cake, Soyabean Meal
Products and Brands
Distribution
34
• Sourcing: mustard and soya seeds from Madhya Pradesh, Rajasthan, Haryana,
Uttar Pradesh and Delhi
• Bulk crude oil is either imported or sourced from Madhya Pradesh and Delhi
• Facilities located in Madhya Pradesh and Rajasthan
• Total installed capacity
• Solvent Extraction – 2,900 MT/day
• Vanaspati – 350 MT/day
• Crushing Capacity – 2,675 MT /day
• Refinery – 1,550 MT/day
Tinsukhia, and sold directly to distributors.
Sourcing
Manufacturing
Financial Performance Summary
15,000
20,000
25,000
30,000
35,000
6%
8%
10%
12%
14%
Rs. in
mill
ion
s
Ma
rgin
35
0
5,000
10,000
15,000
0%
2%
4%
6%
Revenues 6,086 10,716 20,572 31,601
EBITDA Margin 4.5% 8.8% 11.3% 11.6%
PAT Margin 2.5% 5.3% 5.9% 5.5%
2005-06 2006-07 2007-08 2008-09
Rs. in
mill
ion
s
Ma
rgin
SWOT Analysis
• Management experience of decades in this business
• Largest integrated solvent/ rapeseed crushing capacity in India
• Established brands in crude mustard oil and refined oil
• Efficient and flexible manufacturing facilities
• Captive power production (Sixty – Eight windmills – 58 MW)
• Loyal customer base
Strengths
36
• Established raw material supply
• Extensive distribution network
• One of the highest profit margins in the Indian Edible Oils sector
• Mustard enjoys the highest conversion rate of wholesale to retail packs
amongst all the edible oils, thus driving sales and margins.
SWOT Analysis
Weakness
• Currently no presence in South
and West India
• Absence of production facilities
in East India
• Ongoing consolidation in the mustard/
domestic oilseed sector and conversion
of unorganized (75%) to organized
market (25%)
• Continued growth in the Indian edible
oil industry (given India’s current low per
capita edible oil consumption of 12 Opportunity
37
kg/year, which is expected to increase to
15 kg/year in 2015)
• Backward integration (plantations and
power generation) and forward
integration (retail presence)
• Mustard is being increasingly regarded
as a premium edible oil based on health
and taste factors
Threats
• Weak regulatory environment in
India – spurious and adulterated oil
available in the market
Company’s Products
and Markets
38
and Markets
Company’s Brands
Mustard Oil(Kalash and Double Sher)
Kalash is the flagship brand throughout all mustard oil
consuming states
Double Sher has nearly 40% market share in the North East
and enjoys a premium over other brands. The brand has
high penetration and acceptance in the rural areas.
39
Leading brand with high customer recall and
loyalty across large parts of India
KS and KS Gold are well accepted brands in the
refined oil as well as Vanaspati segments.
Refined Oils (KS and KS Gold)
Vanaspati(KS Gold and KS Gold Plus)
International Standards in packaging
• Company has inhouse fully
integrated packaging units
• Double Sher is the leading
brands in North East
• Kalash caters to rest of the
40
markets of the Company
Procurement
41
Procurement
Procurement
42
• KSOL’s plants are located in the primary mustard and soya belts of the country, Madhya Pradesh and
Rajasthan. These two states together account for over 55% of the mustard seed production in the country
• The facilities are well connected to principal modes of transportation, viz. railways and road, resulting in
savings in transportation expenditure
• Over the years KSOL has streamlined and perfected its raw material sourcing and purchasing policies
and systems which gives the Company a competitive advantage over other players.
Product-wise Procurement
Product Raw Material Procurement
Crude
Mustard OilMustard Seeds
KSOL sources mustard seeds from major centres of mustard trade in
Madhya Pradesh, Rajasthan, Delhi and directly from the local markets.
'Mandis', as well as from the farmers of the local area.
Refined Oil
Soya solvented oil for
refined Soybean oil
Soya solvented oil is refined to make refined soyabean oil. Solvented soya
oil is sourced from KSOL's solvent division, domestic markets and/ or
imported from South America. Key suppliers for imported crude soyabean
oil include Bunge, Glencore, Kuok Oil, Wilmar, etc.
Mustard solvented oil is refined in this division. Solvented mustard oil
43
Mustard solvented oil
for refined Mustard oil
Mustard solvented oil is refined in this division. Solvented mustard oil
sourced from the KSOL's solvent division and/ or from local markets,
depending on requirements.
Vanaspati Crude Palm Oil Crude Palm Oil is sourced from Malaysia & Indonesia.
Solvent
Division
Oil Cake for Mustard
solvented oil
Solvented Mustard oil is extracted from Oil Cake (~ 7% oil content), which is
sourced from the Company's crude mustard oil division (by-products) and/
or purchased from other processing units in the vicinity of KSOL's facilities.
Soyabean seeds for
soya solvented oil
Soyabean seeds, which are procured from the local markets in Madhya
Pradesh, are crushed primarily in the months of October - January to
manufacture soya solvented oil.
Manufacturing
44
Manufacturing
Rapeseed and Soybean growing areas and
KS Oil manufacturing facilities
Minor growing areas
Soyabean
Rapeseed
Minor growing areas
Major growing areas
1
2 34
6
45
Major growing areas
1. Morena
2. Jodhpur
3. Alwar
4. Ratlam
5. Kota
6. Guna
7. Haldia
45
KS Oils Plants
7
ManufacturingStrategic LocationsThe manufacturing units are located in Morena,
Guna, Ratlam in Madhya Pradesh and Jodhpur,
Alwar, Kota in Rajasthan
Integrated Packaging
The operations of the Company are fully integrated with an in-
house packaging department which completely meets the
Company’s requirements of tin, HDPE jars, pouches and PET
Ability to process
any edible crude oil
46
Company’s requirements of tin, HDPE jars, pouches and PET
bottles
The integrated nature of the manufacturing units of the Company’s
divisions is a very important source of KSOL’s high profitability.
Significant operational efficiencies by reducing power and fuel costs,
chemical costs and increasing automation have been achieved
The facility is well
equipped to switch to
processing of any crude
edible oilOperationally efficient
Manufacturing – Integrated Process Flow Chart
47
Mustard Khachi Ghani (Crude) Oil
• Kohllu has been traditionally used in the manufacture
of mustard oil; during the process, fermentation results
in creation of an enzyme. This enzyme provides the
pungency to the oil
• Pungent mustard oil / Khachi Ghani is very popular in
the northern, eastern and north-eastern states of India
• The process of extracting oil using only expellers
results in high temperatures thus losing its pungency.
48
In the Kohllu process, temperatures are controlled to
maintain the pungency and hence, the Kohllu process
is critical from consumers need and preference for
pungency in mustard oil
• The process begins with the cleaning of the mustard
seeds which are then loaded through conveyor belts in
to the Kohllus (cold press crushers)
Mustard / Rapeseed
Mustard Khachi Ghani (Crude) Oil
• The Company has skilled labour trained in the art of
manufacturing pungent oil through this method
• Manufacturing Kachhi Ghani oil from Kohllu is
relatively less scalable, thus creating significant entry
barriers for new players.
• 22% oil is obtained in the Kohllu, which is extremely
pungent and inedible (pungency factor of ~ 0.38). The
residue oil cake is further processed in the expellers.
49
Kohllu - cold press crusher for high
pungency Mustard Oil
This results in 13% oil which has pungency of ~0.23.
• Both the oils obtained (i.e. from Kohllus & the
expellers) are blended to obtain the perfect blend of
edible oil with pungency of ~ 0.27 to 0.28
Other facilities
Solvent Extraction
The expelled cake in the extractor is sprayed with
Hexane, which extracts the remaining 7% oil. Through the
distillation method, the hexane is separated completely to
yield solvented oil. The deoiled cake is exported as cattle
feed to Vietnam, South Korea & China. The solvented oil
is sent for refining
Refinery
Refining of oil refers to neutralised, bleached and de-
50
Solvent Extractor Refining of oil refers to neutralised, bleached and de-
odorised oil. The process is carried out in vacuum at high
temperatures
Vanaspati
The process involves hydrogenation of refined oil.
Vanaspati obtained is filled into containers and taken for
cold room treatment where the temperature is reduced in
a controlled manner which facilitates the final finishing
required for the grainy texture
Other facilities
Packaging
In-house packaging department completely meets the
Company's requirements of tin, HDPE jars, pouches and
PET bottles. The equipment includes offset printers,
pouch filling machines, tin automatic filling machine and
automatic bottle filling plant
Power
Captive Power production capacity of 68 Windmills
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Captive Power production capacity of 68 Windmills
(58 MW)
Effluent Treatment
The effluent treatment plant handles the entire effluents of
K S Oils. The effluent treated water is completely recycled
in-house resulting in zero release of effluents
Quality Control (“QC”)
The QC lab does standardization as per
AGMARK, V.Q.P and P.F.A. parameters
The Company was awarded the ISO
9001:2000 certification for Quality
Management Systems for Manufacturing
and Supply of Edible Oils
Markets and
Distribution
52
Distribution
Markets and Distribution
Company’s markets are classified as;
• Company’s markets are classified
as; North East region & East (WB &
Bihar) where the Company is the
market leader and which contributes
~ 23% of Company’s oil revenues;
• Central & North India - Uttar
For each market mentioned, the Company has
a distribution network:
• For the NE and Eastern Region including
Kolkata, goods are transported through
railway racks. Guwahati, Dimapur and
Tinsukhia are the major railway arrival points
for the Company’s goods in this region. The
Markets Distribution Network
53
The Company has 900 distributors and over 100,000 retailers serviced by 30 C&F agents
and Company’s 100 member strong marketing team.
• Central & North India - Uttar
Pradesh, Madhya Pradesh, Delhi,
Rajasthan, Himachal, Haryana and
Jammu & Kashmir, from where the
balance sales comes from.
for the Company’s goods in this region. The
Company has its own depots in these
stations.
• For the rest of India, the Company has set up
a network of C&Fs and Depots to cater to
distributors and wholesalers.
`
Historical Financial
Performance
54
Performance
Historical Profit & Loss Statement
Particulars 2005-06 (A) 2006-07 (A) 2007-08 (A)
Total Income 6,086 10,715 20,572
Less: Raw Materials 5,290 9,083 16,901
Manufacturing Expenses - Direct 251 303 499
Gross Profit 545 1,329 3,172
Expenditure
Selling Expenses 138 238 499
Rs. Mn.
55
Administration Expenses 131 154 354
Operating EBIT 276 937 2,319
Depreciation 28 45 122
EBIT 248 892 2,197
Interest and Finance Charges 72 154 375
PBT 176 739 1,822
Provision for Taxation 24 166 615
PAT 152 573 1,207
Historical Balance sheetRs. Mn.
Particulars Mar-06 Mar-07 Mar-08
Sources of Funds:
Shareholders Funds
Share Capital 85 221 332
Equity Share Entitlement Warrants - 238 500
Deferred Government Grants 11 10 9
Reserves and Surplus 373 1,434 6101
468 1,903 6,941
Loan Funds:
Secured Loans 788 852 2,847
Unsecured Loans 86 150
874 1,002
Deferred Tax Liability 156 415
Total 1,341 3,060 10,204
Application of Funds
Fixed Assets
56
Gross Block 597 1,378 2,905
Less: Accumulated Depreciation 159 203 324
Net Block 438 1,175 2,580
Capital WIP 169 1,837
Investments 185
Current Assets, Loans and Advances
Inventories 1,552 2,479 4,414
Sundry Debtors 154 139 1,064
Cash and Bank 61 131 1,496
Loans and Advances + Deposits 57 454 2,068
Total Current Assets 1,824 3,200 9,042
Less: Current Liabilities and Provisions
Current Liabilities 875 1,272 2,826
Provisions 46 235 613
921 1,508 3,440
Net Current Assets 903 1,693 5,602
Misc. Expenditure 24 0
Total 1,341 3,060 10,204
K S Oils Ltd. – Standalone Unaudited Provisional Balance Sheet as on 31st March, 2009
Particulars Mar - 09
Sources of Funds:
Shareholders Funds -
Share Capital 356
Reserves and Surplus 8,844
Loan Funds -
Secured Loans 9,311
Unsecured Loans 0
Deferred Tax Liability 1,047
Deferred Government Grant 9
Total 19,567
Application of Funds:
Fixed Assets -
Rs. Mn.
57
Fixed Assets -
Gross Block 6,925
Less: Accumulated Depreciation 592
Net Block - 6,332
Capital WIP 3,513
Investments - 780
Current Assets, Loans and Advances -
Inventories 9,504
Sundry Debtors 1,273
Cash and Bank 665
Loans and Advances 1,967
Less: Current Liabilities and Provisions
Current Liabilities 3,658
Provisions 810
Net Current Assets 8,941
Total 19,567
K S Natural Resources Pte. Ltd., Singapore – Consolidated Unaudited Provisional Balance Sheet as on 31st March, 2009
Particulars Mar - 09
Sources of Funds:
Shareholders Funds -
Share Capital 17.82
Reserves and Surplus (0.46)
Minority Interest 0.38
Loan Funds -
Secured Loans 0
Unsecured Loans 2.94
Deferred Tax Liability (0.02)
Total 20.67
Application of Funds:
Goodwill on Consolidation 2.88
USD Mn.
58
Goodwill on Consolidation 2.88
Fixed Assets -
Gross Block 4.00
Less: Accumulated Depreciation 0.06
Net Block - 3.94
Immature Plantations 2.46
Current Assets, Loans and Advances -
Other Assets 0.27
Miscellaneous Expenses Assets 0.35
Cash and Bank 1.28
Loans and Advances + Deposits 9.81
Total Current Assets 11.70
Less: Current Liabilities and Provisions -
Current Liabilities 0.23
Other Liabilities/ Provisions 0.07
Net Current Assets 11.40
Total 20.67
Strategy & Growth
Initiatives
59
Initiatives
Global strategy for Corporations
Self Sufficiency - Backward integration
• Corporations are creating self sufficient (company owned) raw material
stock – plantations
• Currently Indonesia and Malaysia constitute ~ 90% of the world palm oil production.
• Investing in Indonesia which has young plantations and one of the world’s largest
suitable land which can be used for palm oil plantations
60
suitable land which can be used for palm oil plantations
Assured supply of raw material
Ability to adjust and absorb price volatility
KS Oils Strategy – Way Forward
Plantation
Crude Oil Production
Refining
Processing & Products
Final Distribution
Farms
6161
Secure raw material supply globally &
source it from best yield geographies
Farms
Global and Domestic Growth options
Backward and forward integration
De-risking strategy
Global de-risking strategy for raw material supply
- owning palm plantations across the globe
• Proof of concept Dec 2007
900 acres of palm plantations in Malaysia
• Fortifying strategy Mar 2008
50,000 acres of palm plantations in Indonesia
62
50,000 acres of palm plantations in Indonesia
• New acquisition June 2009
35,000 acres of palm plantations in Indonesia
Self sufficiency by global agri-companies in raw material
sourcing will help insulate against short supplies and
spiraling prices.
REPORT
“ “
Palm Oil Cycle
• Area Survey
• Land clearing and prepration
• Construction of roads and buildings
• Preparation of canals for irrigation
• Land and field
maintenance
• Fertilization
• Land and field maintenance
• Fertilization
• Harvesting and Processing
0 1 2 3
Year Year Year Year
63
• Preparation of canals for irrigation
• Preparation of seeds in pre-nursery and
main nursery
• Planting of polybags / Transfer of
seedings from nursery to main field
immature plantation mature plantation
World Oil Palm Growing Zone
64
Location – Why Indonesia?
Greater land bank
Indonesia’s plantations are still concentrated on the island of Sumatra, while significant hectares
Climate
Oil palms thrive in hot, wet tropical lowlands. The major production regions receive at least
1,500 to 2,500 millimeters (“mm”) of rain per year, evenly distributed, with at least 150 mm per
month with only a short dry season. Optimal temperatures are between 25 degrees Celsius to
33 degrees Celsius.
65
Indonesia’s plantations are still concentrated on the island of Sumatra, while significant hectares
of suitable land are in Kalimantan and Papua. Most of the available area suited for oil palm
cultivation in West Malaysia is already in use, leaving only East Malaysia (Sabah and Sarawak)
available.
Lower labor costs
Labor in Indonesia is much cheaper than in Malaysia, given the significant difference in
purchasing power parity GDP (US$3,728 per capita in Indonesia compared to US$13,379 per
capita in Malaysia in 2007).
Strategy – Why Indonesia?
Limited land available in India for oil seed cultivation
Oil World’s recent Monthly highlighted that in this planting season, global oilseed planting area
Proximity to Key Ports
Since CPO and PKO are traded in the international commodity markets and the products are
homogeneous, palm oil producers do not compete on price with each other but rather, on the
basis of delivery time.
66
Oil World’s recent Monthly highlighted that in this planting season, global oilseed planting area
will decline by 2-3m ha from 2006/07. This is a significant deviation from the average increase of
7.6m ha in the preceding four years. The shift is into grains (mostly wheat). Global planting of
grains has risen by 18m ha is 2007-08 and Oil World estimates the fight for acreage between
oilseeds, grains and other crops will intensify in 2008 and 2009.
Nursery
67
Several factors are taken into
consideration when deciding the location
of pre-nurseries to grow seedlings,
including a nearby source of water, flat
land, good drainage and proximity to
sources of labor.
On each plantation, the Company intends
to build the appropriate infrastructure to
bring water sources to seedlings and allow
smooth drainage.
Immature Plantation
68
Palm Tree
69
Palm Seed and Fruit
70
Immature Plantation
71
Mature Plantation
72
FFB harvesting
73
Thank You
74
KS Oils LimitedRegistered and Corporate Office
Jiwaji Ganj, Morena 476 001, Madhya Pradesh - India.
Phone: +91-7532-300000 • Fax: +91-7532-300 106
email: [email protected]