Sawaliya Foods, founded in 2014 with a semi-automatic line, now exports dehydrated vegetables with USFDA approval and a diverse portfolio beyond onion and garlic. With cold storage, new product lines, and expansion plans, the company aims to be a one-stop solution for global FMCG ingredient needs.
Mubina Kapasi: Hello everyone and welcome to SmallCap Spotlight. I’m Mubina Kapasi and today the company that we are going to be speaking with is Sawaliya Foods. They started off purely domestic oriented but now have a USFDA approval to export dehydrated vegetables.
Let’s understand a bit more about the business I have with me Raghav Somani, the Chairman and Managing Director of Sawaliya Foods Products Limited. Hi Raghav, thanks so much for joining us and to begin with let’s walk through the journey of Sawaliya Foods. I think you guys started and accepted yourself in 2014 with a semi-automatic line and a small dryer back then and today fast forward you have capabilities to even export.
Could you walk us through this journey and some of the key mileages?
Raghan Somani: Yeah hi, good morning. So we started in 2014. I’ll basically start with my journey.
I did my engineering in computer science in 2008 to 2012. I’m a graduate from RV College of Engineering and I worked for a company for two years and then I belong from a business family so always had a mindset to start a manufacturing facility. So then I got the idea of starting this dehydrated vegetables processing line and in 2014 we started with a semi-automatic plant and from there on we are continuously expanding making ourselves improve on the production capacities also improving on the technology.
So we basically manufacture dehydrated vegetables and these vegetables are used as ingredients into ready industries. So every ready-to-eat industry requires dried vegetables like if I’ll give you an example of ready-to-eat soup, ready-to-eat noodles and ready-to-eat pasta their vegetable ingredients are dehydrated vegetables. So when you put the packet into the hot water it rehydrates again so that gives them increment on the shelf life and that’s how they use our products.
So initially in 2014 to 2016 our main motive was to get our samples approved in the all of the multinationals who are already into this field. So from 14 to 16 was trial and run developing the products and understanding the process and from there on we’ve been continuously supplying to some of the major FMCG manufacturers and continuously expanding our capacities. And in 2017 we received our US FDA approval so from there on our exports are also growing on regular basis and currently we are exporting to US.
So that’s my journey till now.
Mubina Kapasi: All right super. Understand what you know caused you to enter this dehydrated vegetables business in the first place? I mean was there some sort of family background in that business or is there a specific market opportunity you had identified?
Raghav Somani: Yeah so when we were doing our research for starting a new business we came across that most of the dried vegetables were imported from China though there were dehydration units in India but they were majorly doing only two products onion and garlic.
So we saw that all other vegetables like carrot, cabbage, french beans they’ve been imported from China and are pre-processed and sold it here. So we developed a line to process carrot, cabbage, and french beans. So that’s how we like developed these products over here itself.
So right now there are only few manufacturers who are doing this particular product. Rest of them are still doing onion and garlic only. So basically your product portfolio is a bit more expansive perhaps compared to others.
Mubina Kapasi: So is that where your competitive edge lies along with of course the fact that you have a USFD approval. I mean I just want to understand how what the competitive dynamics are like in this market.
Raghav Somani: Yeah so our competitive edge lies in the diversified product portfolio and also the thirst of developing new products.
So we are continuously developing new products exploring new markets. So that way we get like better margins for products that are niche like right now not many people are doing them. So that way we are continuously developing our new products and expanding our portfolio.
Mubina Kapasi: So could you share with us any other portfolio sorry any other products that you may be looking. I understand there’s something in the pet food segment as well that you’re exploring.
Raghav Somani: Yeah yeah yeah so for pet food right now we’re doing research on sweet potatoes dehydrated sweet potatoes.
We are also doing dehydrated fruits. We are doing dehydrated foods because we can see in the market right now the breakfast segment is going up see like drastically muesli segment. So all muesli products have dried fruits.
So that way the demand for dried fruits is going to increase substantially from here now and right now most of the dried fruits is still imported into India. So we are continuously developing our lines to produce them here itself in India. So that way we’ll have an edge over other competitors as soon as we get those samples approved into the multinationals.
Mubina Kapasi: Okay very interesting. Let’s understand a little bit about this food processing industry in India. There are just some facts that we have found online that says that it contributes less than 10 percent to total food output.
So how big do you think this market can be and how can you sort of play a role in that?
Raghav Somani: So I personally feel that as soon as the generation is growing up in India more of the people don’t have so much time of doing the complete cooking process and cutting and chopping of the vegetables. So right now our segment is still B2B but I feel like down the line in next four to five years this segment will convert to a B2C market because I’ll just give an example. Nobody wants to come to home first peel the onion, chop the onion, wash them.
So they want ready products. So that way dehydrated products will definitely go to a B2C market and once it goes there then there’s like I don’t know many people like me can’t fulfill the demand. So if that demand comes into play there is unlimited scope in future.
Mubina Kapasi: Yeah that’s true. There’s also this entire PLI scheme for food processing. So firstly do you come under that and secondly have you applied for it? Are there any benefits that you envisage your company enjoying from that?
Raghav Somani: Okay so right now we are not covered into PLI scheme but we definitely receive capital subsidies from the ministry of food processing and also we receive from the state government of Madhya Pradesh.
So any capital expansion that we do is subsidized. So that way we have a great support from the government and also from time to time if there is a particular crop that faces like extra production the government comes out with a scheme of giving production incentives on those particular crops like few years back there was a problem with onion there was too much production farmers were not getting money. So MOFPI ministry of food processing came out with a scheme like whoever procured onion the transportations was redeemed.
So that way we definitely get opportunities from the government schemes as well.
Mubina Kapasi: I want to understand a little bit about the source of your revenues right now of course you’re primarily concentrating on the domestic market and within domestic also I understand Madhya Pradesh is a big market. So what is driving this concentration and do you have plans for expanding domestic and also international beyond the US market?
Raghav Somani: Okay so our source of revenue is from multinationals and as well as local vendors like what our business model from 2023 we came up with a cold storage in-house cold storage.
So now what we have we have a benefit of storing fresh vegetables at the time of harvest and use them for production in the non-harvest period and that way the company gets an opportunity to maximize its profit if say I store carrots every year I store carrots fresh carrots into our cold storage. Now we have two options either to convert the fresh carrots into the dehydrated vegetables and use it as end product for multinationals or sell the carrots by washing and grading them to supermarkets. So if the carrot prices itself rises in the market what we do is we wash the carrots we sort and grade them and the undergraded carrot is used to produce dried vegetables whereas the superior quality goes to the supermarkets.
So that way in last two years we’ve increased our profits we’ve increased our revenue and most of the supply that is going to the fresh vegetables washed carrot is going through the vendors like I’ll say commission agents which are based in Madhya Pradesh so that’s why the concentration has increased in the Madhya Pradesh for last few years.
Mubina Kapasi: And any plans to expand beyond Madhya Pradesh and even to more international markets?
Raghav Somani: Yeah so we’ve also set up a new plant which is based on electrical heating so right now our old plant was based on a boiler which used to have bio coal as the fuel and we’ve set up a new plant which is completely electrical and in the IPO we’re coming up with a solar installation so that way that plant gets qualified for a carbon credit like greener product because the everything is renewable so that way we can tap the European market as well because the need for green products is far more in European market so once we reach there and we get those certificates we’ll be tapping the European market as well.
Mubina Kapasi: Okay super so we look forward to that meanwhile I want to understand what your current production capacity is like I understand it’s around 1500 metric ton so could you tell us a bit about what the plans are to scale operations?
Raghav Somani: So right now we have 1500 metric ton of capacity and we are almost utilizing around 85 percent of the capacity and in the capex in IPO we’ve shown capex of our packaging line so basically our manufacturing line is divided into two segments one is the dehydration line and one is the packaging line so dehydration line is a process where the material is dehydrated and all the dehydrated vegetables are stored into our cold storage in unsorted form and once we receive PO from our clients for dispatch we take the FIFO process we take the first in first out material and we bring it to the packaging and packaging line and we sort it grade it and then supply it to the vendors so in the capex we’ve shown our another capex for a secondary packaging line so that way our ability to process the already dehydrated material and dispatch them will improve and this will reduce the working capital number of days so that way even with the same even with the 85 percent of the capacity realization our product rotation and our sales will increase so that way we see a sustainable growth in future on the revenue side.
Mubina Kapasi: Okay got it let’s talk a little bit I mean you already shared some very interesting facts on how you essentially look at raw material sourcing and how you work on inventory I want to understand that during your entrepreneurial journey what were some of the most challenging moments that you faced?
Raghav Somani: Okay so when we started in 2014 our line was very like semi-automatic lines we used to have unskilled labors to take material from one of the machinery to the other and there on and to eventually we automized those lines we did a lot of research on the machinery we imported machineries from other countries and apart from that the since the process was new since everything was new to train the people to understand how that particular production should happen so that way we worked a lot on our process and I personally feel that the process that we are having right now is very unique and the production cost from our competitors is on the lower side because we’ve done a lot of R&D on machinery and I’ll write into saying that a lot of steps that we have taken were copied by our customers after we’ve done it so we continuously improvise on our production capacities production technology.
Mubina Kapasi: Okay super let’s talk a little bit about how you see seasonality affect you because see at the end of the day foods is a business which does get affected by seasonality yes you are doing your best to keep that consistent supply for your suppliers but your vendors in turn farmers from Adyar Pradesh would be you know subject to seasonality variation so I’d like to understand how you manage that bit and how you manage your costs over there.
Raghav Somani: So that is one of the biggest risk factor that our company faces because if there are certain years in which a particular crop just drastically damaged is damaged drastically so we don’t get any opportunity to process them so that’s the one of the risk factors that our company faces and to work on that what we’ve done it we’ve done is we’ve done a backward integration we do contract farming as well so for carrot one of our major products we’re doing contract farming so that way we are assured of a certain quantity that minimum this quantity will be sure for the processing so that way we are mitigating the risk on seasonality and apart from that it’s putting up a cold storage was also a decision to mitigate the risk of the seasonality because that way we can store excess raw material for further processing in the harvest period itself so that’s how we’re taking steps on reducing the risk of seasonality.
Mubina Kapasi: Got it okay all right I want to just talk a little bit on the financials if you could tell us what your last you know 12 months revenue has been and we were just looking at you know the revenue that you posted for the last two years the CAGR has been exceptional so I mean I think it’s more than 50 percent so could you tell us what has driven this and more importantly would this be sustainable?
Raghav Somani: Yeah so as I told you in 23 we started the cold storage the in-house facility so that way we had an our number of production days increased we had an excess raw material stored for processing in the non-harvest period like non-seasonal months if I’ll give you like in detail from July, August, September, October these four months are basically non-harvest periods of India you don’t get any vegetables to process in this particular four months majorly which are used in dehydration industry so what we do is we store the raw materials in our cold storage and then we use those raw materials those stored raw materials to process it into the non-harvest seasons and that way there are capacity utilization has increased in last two years apart from that the demand is also going up we’ve in the last four to five months there was a sustainable there was this issue in US regarding the tariffs so there’s a lot of new demand coming in from US new inquiries are coming in from US for further products and as I told you earlier like we are developing new products so that way also our revenue is sustainable because this revenue is particularly from our existing products but once we start commercially producing the newer products our revenue is going to increase further and as I told you again that the newer products will have more margins so that way margin is also sustainable because even if the margins and the competition increases in the existing product the new product will bring up that particular extra margin to cope up with that.
Mubina Kapasi: Okay, all right let’s hear from you on what your vision is for the company in the next maybe five or ten how do you imagine earlier would evolve maybe in terms of product portfolio also in terms of financial milestones a certain revenue or a bottom line target you have for the company.
Raghav Somani: So as you see the market right now there are a lot of new brands coming up with new FMCG products so they need a stable supplier for their ingredients need so what we see our vision of saulapur is to become one-stop solution for all the ingredient needs so right now we are into dried vegetables market we see ourselves further expanding into spices we see ourselves further expanding into frozen vegetables freeze-dried vegetables so that way what happens is if there is a manufacturer of a say noodles FMCG noodles so they need spices they need dried vegetables they need other flavoring additives so we want to become one-stop solution for all their ingredient needs so that’s our vision and we are working on continuously researching on newer products and we also have a project in mind for further expansion into potato industry we further want to expand into potato flakes market which is used in bakery which is used in pringles to make pringles and chips industry so so that’s our vision in growth plans and on turnover front i see myself with the existing facility in next two years by 2027 i see myself reaching at around 50 crores and if we undertake further expansions 150 200 crores
Mubina Kapasi: Okay all right let’s understand from you a little bit about the employees strength that you have and a little bit on who is your core team who’s helping you achieve the vision that you just mentioned.
Raghav Somani: Okay so on employee front we have around 25 employees and apart from that we hire unskilled employees also on daily wages so we need around 50 to 60 persons on daily basis for running our factory and we have our like my my wife and one of the directors of the company she looks after all the food safety and food hygiene because in food processing you need those are the priorities you need the hygiene you need the certifications there are regular audits from our vendors so she handles that and then our CFO Mr. Pankaj he looks after the financials and i myself i actually my nature is to research and develop new things so basically i am you can call me as managing director as well as the business developer who brings in the business who develops new business and has a vision like to grow continuous growth so that’s our team.
Mubina Kapasi: All right super Raghav. This was a very insightful conversation. Thank you very much for joining us today and all the very best for the future of Sawaliya foods.
Raghav Somani: Sure sure thank you.
Mubina Kapasi: Okay folks there you have it that was the story of Sawaliya foods Products Limited, a business in the food processing industry, but do remember this is not a stock tip or an good place for companies to tell their story do conduct your own research or consult your financial advisor thank you so much for watching stay tuned to SmallCap Spotlight