A grain of ambition

Summary: LT Foods has built a strong business around basmati rice, but its next phase depends on diversification. The success of new segments could redefine its growth trajectory.

Summary: LT Foods has built a strong business around basmati rice, but its next phase depends on diversification. The success of new segments could redefine its growth trajectory. Will it puzzle you if a business made handsome returns from just selling rice? After all, how rewarding can this ordinary, humble staple really be? For LT Foods and its shareholders, it has been quite rewarding. Over the past five years, the company has steadily grown revenue by 16 per cent per annum, with profit after tax outpacing it by 19 per cent. Return on equity and return on capital have also averaged at a healthy 17 and 19 per cent, respectively. That is the sound of a good business, even if unglamorous. The company’s flagship brand, ‘Daawat’, is among the most popular basmati rice brands in India. It also has a sizable global presence with the Royal basmati rice brand in North America. This region is the most important market, accounting for nearly 46 per cent of revenue. Overall, the country supplies basmati rice to 85 countries. At first glance, the company looks like any other commodity business, a category that doesn’t find takers easily, given its limited margin profile. But it will be wrong to dismiss LT Foods as a mere commodity pla