SmallCap Spotlight speaks with Vimal Mishra, Promoter and MD at Prospect Commodities about the company’s journey so far and the outlook. Tune in to the conversation!
Rumela Banerjee: Hi, this is Rumela Banerjee and joining me today is Vimal Mishra, Promoter and Managing Director at Prospect Commodities, to talk about the company’s journey so far and the outlook. Thank you for joining. Before we talk about Prospect Commodities and the company that it has come to be today, I would like to know about you. How did it all start for you professionally?
Vimal Mishra: Well, firstly, Rumela, thank you so much for having me here on this interview and providing us this opportunity. Well, as you just mentioned, before starting Prospect Commodities, if I’ll just say about myself, I’ve started my professional journey from All Cargo Logistics Limited. I started working there in the logistics industry and I started in 2006, where I learned how imports and exports are getting done, how to handle the shipments, how to move cargo from one location to another location.
Following that, I joined AP Moller Maersk’s Group in 2008. I joined as an executive in AP Moller Maersk’s Group. I got five promotions there during my tenure of six years with AP Moller Group, where I learned how the networking is getting done, and how to connect with the people in other countries, other continents.
Whenever we are having some complex businesses where we need to move some cargo from Europe to Africa or probably from South America to Africa, so that’s where I was coordinating. For a few complex businesses where the customs are also involved in other countries, customers are having issues in that, so I used to deal with my overseas offices and handle those shipments. So that’s where I developed my network.
I developed my understanding about the international business and I moved forward actually handling from small, like one ton of the cargo to the single piece of 100 ton, like a brick bulk shipment, some big, huge machinery needed to be moved from one location to another. So I have learned my entire logistic journey during my Maersk’s days and that has helped me actually to build and to grow in international business. And from there, I started my journey with Fortune Exports.
That’s what we started actually. So in my professional career, as far as the jobs are concerned, I worked in the logistic industry and that’s where I gained this confidence, the momentum, which has helped me to go further actually for prospect commodities.
Rumela Banerjee: Can you just give us a bit of history on Prospect Commodities? We understand you started off as fortune exports.
Vimal Mishra: Yes, so during my days in Maersk’s, when I actually just left the AP Moller Group in 2014, we started with a logistic company as well. And same time in 2015, I just started a fortune export just to get into the international trade because of the experience what I had gained during my Maersk’s days, the networking what I have delivered, what I gained actually at that time. So that has helped me to, that has boosted me to grow in international trade.
I started my journey with Fortune Export in 2015 with agro commodities. We started importing agro commodities in India and we used to sell it in the domestic market. In 2017, we started with cashew husk imported from Vietnam and supplied in Indian markets.
Going forward, we enter into dry fruits as well for the local trading. We used to get cashew from South India and we used to sell it in the Gujarat market. Same way for almonds from Kashmir, we were actually bringing them here and selling them in the local Gujarat market and Rajasthan, Maharashtra.
So that’s where we learned international trading as well as the local trading, what we used to do in the cashew industry. And mainly we saw that actually there is a shortage of cashew, the good quality cashew in Gujarat market. And that’s where we just thought, why can’t we have our own manufacturing facility where we can have the raw material with us, we can process the material, we can make it ready for the market here and we can sell in the market.
So after COVID, we got the opportunity where we started our factory. We have started our manufacturing facility in Ahmedabad itself. It was very small capacity with a 500 ton capacity per annum.
So we started in Ahmedabad for a cashew plant. We found a very good response. And that’s where we decided we need to go for expansion in this.
Going forward, we have expanded our facility for 1200 tons. And as it’s a cash, it’s a capital oriented business. So we got into the opportunity for this IPO as well with some agencies.
We learned it and we converted Fortune Export into Prospect Commodities Private Limited, followed by Prospect Commodities Limited. And we got listed last year on the BSE SME platform.
Rumela Banerjee: Okay, so who are your key clients and what percentage comes from international markets?
Vimal Mishra: See, right now, actually, we are mainly because our capacity is quite small.
It’s a 1200 tons capacity which we had so far. Right now, we are going for the expansion as well again. So till now, whatever the material we are producing, it has been mainly sold in the B2B market in Ahmedabad itself, in Gujarat and few of the material in Maharashtra and Delhi as well.
So we are supplying mainly in the B2B market at the moment. We have entered into the B2C segment as well. You can, we are available on Amazon, Flipkart, Jiomart with a brand name of Dry Fruits.
So we already got the trademark of that brand name. We have gone for a premium packaging in that as well. And we are coming up with more flavored cashews in that and almond and pistachio as well.
And we also started our export market actually last year only. So right now we are exporting in the US market at this stage. But the volume is quite small at this stage.
That’s why we have gone for expansion and going forward, we are expecting some good numbers in the export market as well. But if you really ask me at this moment, roughly around 95% business is for the local in India market only. And somewhere around 5% is for the exports.
Rumela Banerjee: Okay, now if you could tell us where you source your raw cashew nuts from?
Vimal Mishra: There are different places as it’s a harvested product. It’s an agri product. So different geographical locations are having a different season.
Mainly the cashew which we are using, these are coming from the West African countries at the moment, like Ivory Coast is there, Benin, Togo, Ghana, Nigeria, Guinea-Bissau, Gambia. So all these are West African countries. So mainly sourcing is getting done from there.
Apart from this, we are buying Indian raw cashew as well, which is like the Ratnagiri belt, Maharashtra belt is there, Andhra Pradesh is there. So we are also buying our raw material from there as well. But mainly if you see the cost wise comparison is there actually, so then we have this import material at much lower cost compared to what we are getting in local Indian market raw material.
So mainly the material which we are using at this stage, we are having it from the West African countries itself.
Rumela Banerjee: Like you said, you are now looking at expanding your capacity. What is the investment you are looking to put in and how will this expand your topline?
Vimal Mishra: See, right now the facility what we have is having a capacity of 1200 tons per annum.
So the expansion of what we have done is for more than double capacity. So it will be a minimum like 2400 tons plus capacity, but this is what is about to start probably within a month or two months time. Actually, we are just waiting for government approval and the formalities to get complete.
So once we have that in place, we will have this double capacity running business actually ready with us. Last year we delivered somewhere around 24cr+ plus business revenue actually. We are looking forward to somewhere around a minimum 50% revenue increase because it’s already late actually in this season, in this financial year.
But whatever the time we have left with us, so still we are very much optimistic minimum 50% revenue growth on top line. This is what we are expecting. And if we are lucky enough to have approval early, probably so it may go further for 75% or 100% growth as well.
Rumela Banerjee: Okay, so tell us a bit about the industry, who would your competitors be and their processing size versus yours?
Vimal Mishra: See, cashew is a huge market. Probably we as an India, if we see as a market, India is the biggest consumer of cashew. Earlier, if you see, only cashew was used as a dry fruit only.
But nowadays, even restaurants, they are using cashew. If you see ice cream makers, they are also using it. Nowadays, cashew milk is also coming out, cashew butter is also coming out.
So there are multiple users now actually for cashew. So day by day, the industry is growing. We have seen right now the size of the market, what the cashew is getting processed in India is 21 lakh tons.
This is what it is being processed in India at the moment, which includes export as well and for domestic consumption as well. Out of this, our capacity is only 1200 tons at this moment. There are more than 4000 factories in India who are processing it.
But if you see size wise, there are hardly 10% of it who are having a capacity of more than 10 tons per day production capacity. If you see, hardly 20% of companies will be there which are having a facility of more than 4 tons per day. So we fall in that category at this stage.
Going forward, we will have a capacity of 20 tons per day. That’s where within the 10% limit, we will fall. So if you see a revenue wise market share, it’s more than 2.9 billion.
That’s what we are expecting in between ’24 to ’29 with a CAGR of 3.8% for the cashew industry. So it’s a growing market. The demand is growing. The consumption is growing. Harvesting is also increasing. The yield we can see in India is also growing.
And apart from this, neighboring countries like Bangladesh, have also started harvesting cashew at this stage. West African countries are also coming strongly for the raw cashew because of the demand. And we have seen government support as well.
As far as the cashew industry is concerned, they have restricted imports of finished cashew in India with minimum price and the duty that they are offering actually, which is helping the domestic industry to grow as much as they can.
Rumela Banerjee: All right. Now, what is the nature of demand like? What is the market size like? And is it seasonal, like say in Diwali or during the festive seasons, you see more demand?
Vimal Mishra: No, no, it’s not like that, actually. As I just mentioned, cashew is getting used everywhere nowadays. Even restaurants, ice cream industry are also using cashews as a dry fruit. It’s been used nowadays, as I mentioned, cashew milk, cashew butter are also coming out. So there are multiple uses of cashew at this stage, if you really see. So demand is for 365 days. We can see the demand is there.
It’s about having the raw material with you actually at the right time. So once we have the new crop coming, so whatever material we can store, that is helping us to have the production throughout the year. So that’s where different geographical locations are having a different harvesting season.
So we are focusing on each season, like probably for the first quarter, we will procure from the Indian market. Second quarter, we will procure from the West African market. Third quarter, we’ll shift to the Ghana market.
So something like that, actually, we are doing mix and match and we are getting the raw material. And it has been used everywhere nowadays. The main market in India, if you see, is Western India and North India.
So production is getting done heavily in South India. However, the demand actually is in West India and North India, which is helping us at this stage. So we are based in Gujarat.
So we are connected with the market at this stage. Logistically, we have an advantage here because of the raw material. We have a port here, Mundra Port, Pipavav Port, Nhava Sheva Port.
So whatever the import is coming, so directly it reaches our region. It hardly takes one day to reach material here in our factory. After processing, we need to deliver the material.
So it’s within our town only. Probably if we need to ship it to Maharashtra, probably one or two days. So we are connected with the market.
The demand is there for 365 days in a year for the different industries. And during Diwali time, it’s a big time for us, actually. So it’s moving like anything in Diwali. So whatever material we have, it is going to get used in Diwali, that is for sure.
Rumela Banerjee: Will it just be cashews for the company? Or are you looking into other products as well?
Vimal Mishra: In the retail market, we have already entered in almonds as far as the retail category is concerned. So we are supplying the almonds, pistachios, and raisins as well at this moment.
Going forward, we will expand our manufacturing facility for almonds and pistachios as well. Same time, cashews have multiple by-products. So like the shell of the cashew, it is a raw material to produce a CNSL oil.
So we will probably look to expand ourselves in the manufacturing facility for the CNSL oil as well. The cake, whatever the waste is getting actually remaining after having, after extracting CNSL oil, that is also being used as a charcoal. So we may have alternate fuel to have those waste material actually what is lying there after extracting the CNSL oil.
The husk, which basically I’m importing at this stage from Vietnam as well. So husk is also one of the by-products for the tanning industry, which we are importing in a big way at this stage so that we may have a use for that as well. And other dry fruits like almonds, pistachios, raisins. So going forward, we will add this product in our portfolio as well.
Rumla Banerjee: Okay, so what are the challenges you are facing at the moment for your business?
Vimal Mishra: See in cashew, the main business is about availability of raw material at a reasonable cost. Like suppose right now, the Indian market, as far as the raw cashew supply is concerned, is running very high at this stage.
But till the time you, if you are able to get the material from different locations in Africa, so you are able to plan your supply chain in the right way. So it’s about planning, how you plan the import of the raw material, how you want to stock the raw material, how you want to source the raw material. So these are the main, the biggest challenge is having the raw material.
Production, whatever production you can do, the market is always there. Even if I’ll go for 10,000 tons production, tomorrow actually I’ll say I need to expand further because the demand is there. Even if you see the corporates, nowadays corporates are also coming out in this business actually as customers.
So they are also coming with a big requirement because if you see, like I’ll give the example of Haldiram or Bikaji, they’re also using dry fruits in their products. So they are also having a big requirement. Exports, right now, Vietnam is one of the biggest processors of cashew in the world.
They are 100%, mainly dependent on the export market as well. So we can have their share as well, whatever export we can do because we are having a better quality than Vietnam. So as an India, we have good quality material available with us.
It’s about increasing the production capacity going forward, which we intend to do right now.
Rumela Banerjee: You have seen a great jump in your revenue in FY24 with healthy margins. What do you think contributed to that?
Vimal Mishra: See, we have expanded our manufacturing facility from 500 tons to 1200 tons by the time when we came for IPO. So additional capital has helped us to streamline our production cycle as well. So last year, we have actually done a revenue-wise almost 100% jump as far as the revenue is concerned and the part level, if you see, is roughly around 75 to 90% jump in the part level as well. The bigger the manufacturing facility we will have, our operating cost will be minimum because it’s mainly for its automization actually is a key factor in this that is helping us to increase our bottom line in that as well.
So from 500 to 1200 jump in revenue in the production capacity, same time additional capital, which has helped us to stock the raw material in the right way. Both of these things have helped us to achieve the numbers that we have delivered in the last year. This year we are doing the same thing. We are expanding our facility from 1200 tons to 2400 tons plus the capacity of what we are expanding at this stage. Going forward further, we will be able to expand the facility in production capacity in the same premises only. We have done backward integration as well.
Right till last year, we were used to buying raw material from traders in India. This year, we have gone and started buying the raw material from an African supplier directly, which is helping us to save on our purchase cost as well. And with the further expansion of what we are going to do right now, it will help us to increase our bottom line as well. Because our operational cost will always remain in the same range as we used to have earlier as well.
Rumela Banerjee: Okay, where do you see the company in the next three to five years?
Vimal Mishra: Well, when you have a market of 21 lakh tons, right in front of where you’re working, right now your facility is having only 1200 tons at this stage, which we are expanding to 2400 tons plus volume at this stage. Even if we target 10,000 tons or probably 15,000 or 20,000 tons, the market will be there.
So at this stage, if you really see action for the next three to five years, if you will ask me, the first target we have is to cross the 5000 tons production capacity. Going forward, probably again, we’ll look to expand the facility by 10,000 tons. We want to increase our presence in the retail category as well, because that’s the area where most of the manufacturers are not focusing that much.
So we want to increase our presence in retail market as well. We want to have our presence in corporate market. We want to expand ourselves in the export market as well.
The manufacturing facility, which we intend to cross 5000 tons in the next three years. So that is our first target, which will help directly in increasing our revenue from 1200 tons capacity to 5000 tons. So you can see the jump in revenue wise as well.
What we intend to do, we intend to have more products in our portfolio, like the almonds, having a pista in our portfolio as well, which will help additional revenue increase actually in our business as well. So the market is quite huge. We want to explore as much as we can.
We want to develop because of the demand in the market. Going forward, 3.8% CAGR, we can see easily in that. So the market is there.
We want to penetrate as much as we can. And we don’t want to just sit in Gujarat and want to have the facility here. We want to expand ourselves in India and across the globe as well.
Rumela Banerjee: All right, that’s all for now. It was great speaking to you. Many thanks for joining.