Will AVT Natural Products be back in favour?

The low-key company with an established business model is banking on new ingredients to fire up its growth 


AVT Natural Products has at various points in time popped up on the radar of value investors as well as tipsters. For the most part, the company has been seen as one with great potential given the addressable market for food and feed ingredients. However, that potential has not entirely come to fruition. Part of the Rs 30 billion AVT Group, promoter Ajit Thomas also controls flagship AV Thomas and Co, AVT McCormick Ingredients, AVT Leather and Allied, and AVT Gavia among others. These private entities are not subsidiaries of the listed company.

Through its processing facilities at Vazhakulam (Kerala), Tiptur (Karnataka) and Sathyamangalam (Tamil Nadu), AVT Natural supplies marigold extracts for eye care, food colouring and poultry pigmentation, spice oleoresin and oils for food colouring and flavouring, value-added tea — decaffeinated and instant, and has recently entered animal nutrition products.

Less than 5% of the company’s revenue comes from the domestic market. It did try to grow its India revenue by launching health supplements under the Optim Health brand but nothing much came out of it. It was launched in December 2013 with a lot of fanfare but now only a few of their products seem available


Though the company is a leader in food-grade marigold oleoresin, it hasn’t really reflected in the numbers. In fact, over the years, the contribution of marigold oleoresin to overall revenue has been decreasing. In FY20, it stood at 40% compared with 60% in FY14 (See: Growth driver). Total revenue has increased from Rs 2.93 billion to Rs 3.96 billion during the same period.

“AVT Natural’s operating margins and return on capital employed remained at moderate levels in the recent fiscals (except in FY20) owing to the rising revenue contribution from the lower-margin spices and beverage segments and reduction in contribution levels from the marigold segment since FY15. Post the improvement seen in FY20, the operating margins are expected to reduce to the earlier steady-state levels (12-13%) with the withdrawal of the Merchandise Expor


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