With higher growth of businesses like poultry feed, soya extract and processed chicken, the vulnerability of the company to suchfluctuations will progressively diminish.

Maize & soya cake prices have been escalating over the past few months. What will be the impact on margins?

Feed cost is the most important element of poultry cost. Maize and soya cake are the main feed ingredients and the prices of these have gone up by 20 per cent and 10 per cent respectively over the last few months. The margins are bound to be squeezed thereby negatively impacting the bottomline in the short term. However, with normal monsoons and subsequent arrival of the new crop, the prices of maize are likely to soften.

What is Western Hatcheries' current exposure to group companies?

Western Hatcheries Ltd's (WHL) investments are Rs 3.76 crore as on March 31, 1999 of the total assets of Rs 127.6 crore ie, three per cent. All the investments of WHL are in group/associate companies which are involved in poultry related activities like pureline breeding, feed and poultry equipment or egg processing etc.

As a prudent accounting policy, thecompany has marked to market investment in equity shares of Balaji Foods & Feeds Ltd but has not accounted for appreciation in other investments in unlisted companies. WHL along with Venkateshwara Hatcheries Ltd (VHL) has given corporate guarantee for loans taken from ICICI export of egg powder and has incurred losses as a result of depressed egg powder prices in the international markets.

BFFL with the help of VHL has infused Rs 11 crore in BFFL. ICICI has subscribed to preference shares of Rs 3 crore of BFFL, which have been guaranteed by VHL and these funds have been used to bring down the borrowings from ICICI from Rs 24.50 crore to Rs 10.50 crore. As a result contingent liability in respect of corporate guarantee given to ICICI has come down substantially. Our company will not be called upon to honour its corporate guarantee in any case.

What are the current debt levels?

The total debt as of March 31, 1999 was Rs 49.03 crore as against Rs 56.37 crore in the previous year. During the year1998-99 there has been a reduction in debt to the tune of Rs 7.34 crore. The company has paid off costly loans resulting in reduction in interest of 25 per cent over the previous year.

The debt to equity ratio for the year 1998-99 at 0.65:1 is quite healthy. The company however, does not envisage any major increase in debt in the near future. The internal accruals would be sufficient to meet the proposed capital expenditure and incremental working capital requirements and therefore, the company expects further improvement in debt:equity.

What about merger with group companies...

The poultry business needed to be geographically dispersed and the existence of many companies was due to the need to have participation of local entrepreneurs who would get the necessary permissions. Though this is no longer necessary, amalgamation and mergers of all group companies will not be easy for legal and taxation considerations.

On market valuations, mergers would involve massive indirect-tax outgo in the formof stamp duties besides generating controversies regarding valuation of closely held companies and fixing share-swap ratios. This is better avoided since there is really to conflict of business in different companies though they are all in `poultry'.

In fact there is a misconception that VH group has closely held companies in the same business as that of WHL, which would result in conflict of interest. This really is not the case. In fact as for as the poultry and feed operations are concerned, WHL's operations are geographically distinct from other VH group companies.

What about performance for the quarter (April -June'99)?

The performance in the first quarter of the current year is likely to be affected due to rise in feed costs and lower realisation of broiler due to excess production and price cutting.

What will be the current year's performance?

Based on the current estimates it appears that the company's year-on-year profitability is likely to remain subdued. The long-termoutlook, however, appears to be encouraging as mentioned above. Despite one bad year in 1996-97, the company's profits have grown at CAGR of 16 per cent over 1994-95 to 1998-99.

What are the company growth targets for various segments?

As far as the poultry and hatchery operations are concerned the company's growth is expected to be in line with the industry growth. Feed business, SPF eggs, Venky's chicken would grow faster than poultry industry over next few years.

Are you venturing into processed foods business?

The company, a leader in the poultry industry, has decided that as in the past it will stick to the knitting. Poultry would continue to be the core business.

It has plans to give a major thrust to the processed food business as the company is confident that with increase in income levels, the consumers will prefer and pay premium for convenience, quality and hygiene which are the hallmark of Venky's chicken. This has been the trend in the developed countries aswell.

However, the weak infrastructure prevailing in the country (lack of cold storage chains, refrigerated vast deep, freezers etc), is making it difficult to make the products available at all the places in the country. The company has therefore, targeted certain selected areas and the distribution is being strengthened.