Patanjali Ayurved Limited Company Analysis - New Product Pipeline and Brand image to Drive Company Growth: Ken Research

Patanjali Company Overview

Patanjali Ayurved Limited (PAL), registered under the company’s act 1956 with itsregistered office at New Delhi and three manufacturing units at Haridwar, Uttarakhand.The manufacturing units in Haridwar have the capacity to process ~ ton of raw materials,rolling out ~ products in medicine, food, cosmetics and toiletries. As part of thecompany’s future strategy to increase supply and target a larger customer base, PAL plansto set up manufacturing units in each State with an investment of about INR ~ million toINR ~ million. Patanjali products were available only in Patanjali branded stores andarogya kendras. However, since ~% of FMCGs are bought from mom and pop stores, theyhave appointed around ~ distributors to penetrate these outlets. In addition to this, PALhas also tied up with modern retailer Future Group in order to further Plan to roll outmore in Uttarakhand, Uttar Pradesh, Bihar, Jharkhand, West Bengal, Chhattisgarh, Assamand Rajasthan.

The setting up of this food park helped them source raw material directly from thefarmers and cut out the middle men. The food park is estimated to give healthy life to400 million people and the propensity to reach 700 million people. The main objective ofthis park is to ease the supply of products to people in a way that farmers earn profit. Itis swami Ramdev’s dream that farmers and labourers become self reliant and self-sufficient.Patanjali has the aim to expand pan India due to which the company will be tapping onthe franchise model to grow its network. As of February 2016, Patanjali has 5,000franchise outlets and hopes to add another 1,000 more by the end of FY’2016. To open afranchise outlet of Patanjali, one has to invest INR 0.7-1.5 million, depending on whetherthey open a Arogya Kendra (health and wellness centre) or Swadeshi Kendra (non-medical outlet). The area prescribed for these centers would range from 300 to 2,000square feet.

Financial and Operating Performance of PatanjaliThe revenue from the sale of PAL products increased from INR ~ million in FY’2010 to INR ~ million in FY’2015, achieving a CAGR of ~% during the same period.Personal Care segment contributed the highest to PAL’s revenue (~ %), amounting to INR ~ million in FY’2015. Nutrition and supplements came in second with a percentage of ~% and added INR ~ million to PAL’s overall revenue.

PAL’s budding grocery segment accounted for a share of ~% of total revenue, amountingto INR ~ million in FY’2015.Home care (~ %), Ayurvedic medicines (~ %) and Health Care (~ %) contributed INR ~million, INR ~ million and INR ~ respectively, to the overall revenues of the company. Thesale of books, CD’s, Mp3, DVD’s and VCD’s are classified under the ‘others’ category andaccounted for ~% of PAL’s overall revenue, amounting to INR ~ million in FY’2015. PALreceived one of its highest revenue from the city of Mumbai, accounting for ~% of overallrevenue, amounting to INR ~ million in FY’2015. Delhi accounted for ~% of PAL’s revenue,amounting to INR ~ million in FY’2015. With a strong population base of 62.7 million(2013) and a rising per capita income, Gujurat has managed to contribute ~% to PAL’srevenues, amounting to INR ~ million in FY’2015. Bangalore and Pune had contributed~% and ~% respectively, to PAL’s overall revenue, accounting to INR ~ million in FY’2015.

A major portion of online sales come from north and west India and PAL’s online websiteaccounted for only ~% of total revenue, amounting to INR ~ million in FY’2016. A largenumber of Patanjali products are still available on the website of online retailers andhence their contribution to overall revenue accounted for ~%, amounting to INR ~ millionin FY’2016. Offline stores have accounted for ~% of PAL’s overall revenue in FY’2016;amounting to INR ~ million Offline stores include Patnjali owned retail outlets, franchiseestores, modern retail outlets and kirana shops (mom and pop stores)

A surge in demand for Patanjali’s personal care products amongst the young femalepopulation has resulted in the company generating revenues of INR ~ million fromindividuals aged between 25-50 years.

Market Share of Patanjali Products in the FMCG SegmentThe revenues from the honey industry increased from INR ~ million in FY’2010 to INR ~ inFY’2015, achieving a CAGR of ~% during the same period.Dabur has the highest market share in the honey market, accounting for ~% of overallhoney revenue in India. For the financial year 2015, Dabur’s revenue from honey totaledto INR ~ million. On the other hand, new entrant PAL has managed to seize ~% of marketshare, with revenues been evaluated at INR ~ million in FY’2015. The unorganizedmanufacturers accounted for a share of ~%, amounting to INR ~ million during the sameperiod.The revenues from the toothpaste market increased from INR ~ million in FY’2010 to INR~ million in FY’2015, accounting for a CAGR of ~% during the same period.The market offers huge potential as penetration and per capita consumption of oral careproducts are very low in domestic market. Colgate-Palmolive has emerged as the leaderin the toothpaste segment with a market share of ~% and revenues evaluated at INR ~million in FY’2015. PAL’s toothpaste offers both dental protection and dental beauty.

The company has managed to clutch a share of ~% in the toothpaste market, which is aformidable achievement for PAL since its entry into the market in late 2012. It hasmanaged to attain revenues amounting to INR ~ million in FY’2015. The unorganizedmanufacturers accounted for a share of ~% in the overall toothpaste market, accountingfor INR ~ million in revenues.New and innovative product launches have successfully catered to the consumerschanging preferences which have helped the face wash segment propel from INR ~million in FY’2010 to INR ~ million during FY’2015.HUL has the highest share in the face wash segment and accounted for ~% of the overallface wash industry in FY’2015. The revenues generated by HUL for their face washsegment amounted to INR ~ million. Himalaya Drug Company trails behind HUL with amarket share of ~% and revenues totaling to INR ~ million. With less than two years sinceits entry in the personal care segment, PAL has managed to garner ~% market share,accounting to INR ~ million in FY’2015. The unorganized manufacturers garnered a shareof ~% share in revenue in the face wash segment and accounted for INR ~ million inrevenue.Revenues from the instant noodle market dropped from INR ~ million in FY’2015 to INR ~million in FY’2016. The revenues of the instant noodle segment grew at a CAGR of ~%from FY’2011 to FY’2016.

Nestle’s Maggi noodles obtained a market share of ~% in the overall instant noodlessegment in FY’2016, with revenues of the company decreasing to INR ~ million inFY’2016. ITC’s yippee noodles market share increased to ~% in FY’2016, with revenuestotaling to INR ~ million. PAL had managed to acquire a share of ~% in the instant noodlemarket and this can be attributed to its late entry into the market. Hence, it hasmanaged to attain INR ~ million in revenue from the instant noodle market. Theunorganized players in the instant noodle segmented accounted for a share of ~% in theinstant noodle segment, accounting for ~ million in revenues.The revenue from the biscuits and cookies market increased from INR ~ billion in FY’2010to INR ~ billion in FY’2015, achieving a CAGR of ~% during the same period. Parle hasmanaged to remain the market leader for many years with a share of ~% in the overallbiscuits and cookies market. The company has earned INR ~ billion from the sale of itsbiscuits and cookies in FY’2015. Britannia trails behind Parle with a market share of ~%,amounting to INR ~ million in revenues in FY’2015. PAL accounted for a mere ~% marketshare, which generated INR ~million in revenue in FY’2015. The unorganizedmanufacturers of biscuits and cookies accounted for ~% of the overall market,amounting to INR ~ million during the same period.The revenues from the hair oil segment increased from INR ~ million in FY’2010 to INR ~million in FY’2015, achieving a CAGR of ~% percent during the same period. Marico hasbeen the most dominant player in this market due to its famous coconut oil that hasappealed to a vast majority of Indian customers.

Due to this, it has seized a share of ~% in the overall hair oil market with revenuesamounting to INR ~ million in FY’2015. Marico has not faced much competition in thissegment as its competitor Dabur and Emami have only garnered a shared of ~% and ~%respectively. PAL’s late entry into the hair oil segment has resulted in its ~% share in theoverall market and revenues amounting to INR ~ million in FY’2015. The unorganizedmanufacturers of hair oil accounted for ~% of overall market revenue, amounting to INR ~million during FY’2015.The revenues for PAL is projected to increase from INR ~ billion in FY’2016 to INR ~ billionin FY’2018 and will further double to INR ~ billion by FY’2020. While the revenues from theFMCG market is expected to grow at a CAGR of ~% to~%, revenues from PAL is anticipatedto grow at a CAGR of ~% from FY’2016-FY’2020. PAL’s personal care and grocery productsare expected to contribute approximately ~% to overall revenue by FY’2020. While therevenues of PAL continue to achieve formidable growth, its increasing expenditure onmarketing and advertising (INR ~ million) coupled with its rising administration expenseswill result in lower growth rates in the future as compared to the previous five years. PALhas proposed the launch of 250 mega stores in tier-1 and tier-2 cities which will also sellonly Patanjali products.Cow Ghee, Shampoo, Biscuits, Noodles, Honey, Dental Cream and Aloe Vera cream areprojected to be the best selling products and contribute the most to the overall revenuesof the company.

The increasing demand for cow ghee is expected to continue in the future, especiallyfrom the north and west region of the country. It has been forecasted that cow ghee willcontribute ~%-~% to PAL’s overall revenue in FY’2020. Future projections indicate theincrease in revenue contribution by honey to PAL’s overall revenue to ~%-~% by FY’2020.The rising demand from metropolitan cities and new variants of honey is expected toboost the revenue from the sale of honey in the future. Patanjali plans to increase theirproduction capacity of amla juice from 6,000 to 8,000 liters per hour in order to meetthe increasing demand for their fruit juices. It has been projected that the fruit juicesegment will contribute ~% to Patanjali’s overall revenue by FY’2020. Future estimatesindicate the share from the sale of chyawanprash to PAL’s overall revenue to range from~%-~% by FY’2020, due to the narrow target population and the low consumption perindividual (1-2 tablespoon per day).It has been estimated that the biscuit and cookies segment will contribute ~%-~% toPAL’s overall revenue by FY’2020. The cream biscuits will be priced higher than the non-cream biscuits in order to target the middle and upper class population. It has beenestimated that ~% of PAL’s overall revenues will arise from the sale of candies byFY’2020. Future estimates indicate the growth in this category, however, it has beenforecasted that toiletries will contribute ~%-~% to Patanjali’s overall revenue. Hair oil andPatajali’s shampoo are expected to boost the revenues generated from the hair caresegment and is projected to contribute ~%-~% to Patanjali’s overall revenue by FY’2020.

Companies Cited in the ReportList of Companies Companies Covered in the Report Dabur Major Players Kashmir ApiariesApis Group Colgate-PaloliveHULP&GHimalaya Drug CompanyJohnson and JohnsonL’orealZydus WellnessNestle ITC Nissin Capital FoodsParle BritanniaKraft FoodsSurya Food and Agro LtdMaricoEmamiBajaj

Key Factors Considered in the ReportCompany Overview of Patanjali Ayurved LimitedValue Chain Analysis for Patanjali Ayurved LimitedFinancial and Operating Performance For Patanjali Ayurved Ltd. (PAL)Consumer Profile for Patanjali Ayurved LimitedBest Selling Products and Market Share for Patanjali including Face Wash, Honey, Toothpaste, Instant Noodles, Biscuit and Cookies and Hair OilCompetitive Landscape for Patanjali Online SalesFinancial Performance of Patanjali Ayurved LimitedExpected financial Performance of Patanjali Ayurved Limited

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