India’s poultry market might sound like a niche investment market. Think again. India’s bird industry itself is massive: an industry estimated to be worth around $3.1bn. Put it another way, that’s 30,000 million eggs and 1,000 million broilers. Food for thought indeed. This sector is also, more significantly for investors, poised for take-off.
Hester Biosciences boss Rajiv Gandhi started his poultry vaccination company back in the late 1980s in Mumbai. “Business was good. It quickly made sense to have my own proprietary company and then use distributors.” The business has grown fast since that time. The ex-Mumbai university graduate now employs more than 450 from his new base in Ahmedabad, 500km north of Mumbai. And impressively, his business has grabbed a massive 30 percent of the Indian market. Yet the potential for more growth is still massive.
Why the need to vaccinate? Simple. Vaccination prevents or reduces the effects of disease in poultry (and, of course, in other animals). Disease-causing organisms can be classified as viruses, mycoplasma, bacteria, fungi, protozoa, and parasites. Commercial poultry are usually vaccinated to protect them against a variety of these diseases.
In other words it’s a business that has sound long-term legs. Once largely a back-yard activity, India’s poultry sector is now a major commercial concern and quality has soared as a consequence. The vaccination industry is also a money-saver for the industry, protecting it from the unexpected – not to mention making a significant contribution to animal welfare itself.
Quality up to scratch
Gandhi predicts his own industry could grow by 15 to 20 percent during the next few years. Additionally, Hester Biosciences can leverage off that growth by expanding into the manufacture of animal diagnostic reagents. “Registrations for our poultry vaccines is on-going in over 10 countries,” which when completed, should convert into business he thinks.
India’s economy too is growing at a staggering pace that dwarfs all Western growth hopes in comparison. Recently it expanded at its fastest clip for more than two years: GDP soared by almost nine percent in the second quarter of 2010. Not chicken feed.
Meanwhile India’s own domestic population is increasingly buying white goods, specifically fridges and freezers. That means the chilled food market is also expanding quickly.
As any entrepreneur will tell you, keep your business model simple; make sure you and your investors understand it. It’s glaringly obvious advice but it’s also often ignored or lost on aspiring businessmen. But Rajiv Gandhi learnt the lessons early on.
“Our strategy of providing good quality at a reasonable price has been very successful. We pitch our products against all the competition, including international ones. It’s then up to us to prove that our products are technically superior. Then we negotiate on price and try to get the business.”
In fact, India’s poultry market has generally been very small-scale on the international stage, despite its huge potential. But strong bioscience and export-driven infrastructures are key to change here – and this change is what Gandhi is after.
Prudently, he is now diversifying the business into other livestock. The poultry industry has been hit periodically by bird flu worries. So it makes sound business sense to diversify. It also gives Hester Biosciences more opportunity to expand internationally.
This means, increasingly, strong links and partnerships with both Nepal and Africa. “Africa, in particular, is a very big market and has much potential for us,” he says.
Nepal on the other hand is also highly interesting for Hester – but not for its home market. Nepal is an increasingly useful conduit to China. “We want to exploit this link, definitely,” says Gandhi. “Currently we do not have enough leads with China, but that will change in future.”
He goes on: “Currently almost 100 percent of our sales are from inside India. We want to change this, obviously. Having a broader client base is also a hedge against the volatility of international markets.”
For now, the company is looking closely at cattle and sheep vaccines. This kind of diversification is also being backed strongly by the Indian government, which increasingly wants to encourage a high value, high∞tech bioscience industry – a fit for Hester.
Gandhi has always made it a priority to keep overheads low – and to always improve the quality of Hester’s products. “We’ve relocated to Ahmedabad where the costs are lower, particularly for real estate. It’s not too far from Mumbai,” Gandhi explains.
He has also been able to improve the quality of his products. “Our quality is just as good as any international company you care to name. It’s also a lot more cost-effective.” That’s because the poultry vaccination industry is devoid of all emotional ties. “All poultry vaccinations,” Gandhi goes on, “are basically a service or raw material to the poultry industry. The poultry farmer wants more eggs out of the bird. He wants a better yield. It’s a very simple business objective for us and the client: excellent quality at a reasonable price.”
Current unutilised excess capacity is also an unused – and large – strength for Hester in this growing market. “Discussions with international companies are on-going to manufacture animal vaccines for them for their own markets. There’s a lot of opportunity.”
Gandhi’s achievements are recognised by India’s premier ratings agency, CRISIL which ranks Hester Biosciences as ‘Stable’ B+ on three crucial points: Cash Credit Limits, Proposed long-term bank facility and Term Loan facilities. An impressive achievement.
Lean but not mean
“We’re a very lean company, says Gandhi. “We’re efficient, well-run and we make decisions fast. Our corporate governance is also of a very high order. We do a lot of training programmers around our workers.”
He goes on: “We go well beyond normal practices, such as conducting classes for families of our workers. The idea is to enhance the quality of life for our employees and also take Hester to a higher base.”
That’s also good news for the increasingly large ethical investment market – particularly in the West – whose investors entrust them to place their resources only in companies which operate to high ethical standards.
Gandhi remains confident that his business approach is focused squarely on the key growth drivers. Looking at the evidence, you would be hard-pressed not to disagree.
Started proprietary company Rajiv & Associates with the main business objective to distribute poultry health products around Mumbai
Grew the company into a distribution house for poultry health products covering whole of India
Became the number∞ one distributor for poultry vaccines in India
Setup a joint venture with MBL, USA to manufacture poultry vaccines in India
Expanded Hester Biosciences’ manufacturing capacity to four times
Further information: www.hesterbiosciences.co.in