Prataap Snacks Hopes To Stabilise Margins At 9-10%

Shift to the unorganised market is likely to expand Prataap’s margins to 9-10%, said Amit Kumat.

Isha Arora @IshaArora94

22 Sep 2017, 01:35 PM IST

Potato chips move onto a conveyer belt for the inspection stage at the Kettle Foods Inc. production facility in Salem, Oregon, U.S. (Photographer: Meg Roussos/Bloomberg)

Potato chips maker Prataap Snacks Ltd. hopes to achieve a “comfortable” margin of 9 to 10 percent with sales of around Rs 2,000 crore over the next few years, Amit Kumat, Managing Director and Chief Executive Officer said.

The company’s earnings before interest, tax and depreciation and amortisation (EBITDA) margins have been volatile in the range of 4.5-8 percent due to high input costs. “We hope to recover from this fluctuating margin growth post the IPO,” Kumat told BloombergQuint in an interview.

The snack maker’s Rs 482 crore initial public offering opened on Friday, with 51.4 lakh shares on offer at Rs 930-938 apiece. Kumat said that the demand so far has been “extremely good” for the issue, as the company boasts of “one of the best anchor books in the sector”.

Also Read: Prataap Snacks IPO: Here’s What You Need To Know

The previous fiscal saw Prataap’s profitability dropping 63 percent to Rs 10 crore due to potato crop-related issues. Kumat said that the company has carried out major corrections in the last quarter of last year, which should yield results soon.

As part of the changes, the company regulated the quantum of raw materials required for production and changed their procurement policies to keep a tab on profitability.

Among the policy changes was the abandonment of raw material purchases on spot basis and having in-depth knowledge of raw materials needed for longer durations, said Kumat. "For now, the company is well-stocked up for quite some time."

The company is running at a capacity utilisation of 120 percent for namkeen (salty snacks) and chips segment, said Kumat. Over the next few years, the company plans to double capacity for its namkeen segment and add 10 percent to its chips production at its Indore facility.

The current rural to urban revenue mix of the company stands at 50:50. As part of the expansion plan, Prataap Snacks will seek to increase its volume growth in the rural markets in line with growing demand, Kumat said.