Never recommend ‘A Series of Unfortunate Events’ by Lemony Snicket to someone from the agri-commodities or poultry sector in India. It might just hit home too hard. Just like the Baudelaire siblings cannot shake off their evil shadow that comes in the form of Count Olaf, the agriculture sector has seen more than its share of setbacks. Be it swine flu, SARS virus, bird flu or chickungunya — related to meat consumption or not — the event has usually led to sharp fall in consumption in the sector. And the latest villain seems to have hit the industry the hardest, especially due to rumours of infection and supply chain disruption. At one point in March, broiler prices fell to Rs.4/kg against production cost of more than Rs.75/kg. The impact of the COVID-19 crisis is so widespread that a player such as Godrej Agrovet, which was described as “an agro behemoth in the making” in a Motilal Oswal Securities report last year, didn’t see what was coming. With animal feed segment being the largest contributor to its revenue at 51%, the company reported 16% growth in its topline in Q4FY20, but higher expenses weighed on net profit (See: Not Immune), which fell more than 42% to Rs.692 million. Meanwhile, its stock price hit a 52-week low of Rs.265 in the last week of March. Though it now trades at Rs.350, it is far away from its 52-week high of Rs.598, hit in January.
Despite the prevailing uncertainty, the well-diversified agro-chem player is confident that it will overcome this crisis without much damage. During their Q4FY20 earnings call, chairman Nadir Godrej mentioned that the market has started improving as the price of poultry increases and raw material cost softens. He added, “Our balance sheet remains strong with low gearing levels