Case Study-

EGGSCELLENCE
SKM EGG
PRODUCTS EXPORT
(INDIA) LIMITED

SKM EGG PRODUCTS EXPORT (INDIA) LIMITED

Egg Market

• India is 3 Largest producer after China & US

• 20.2% share of Tamil Nadu in Egg production(16000 million ,2014-15)
• 74.6% of State production (12000 Million in Namakkal)

“HIDDEN GEM OF INDIA” IN EGG CAPITAL-

NAMAKKAL
About the Story

TiEcon (the Indus Entrepreneurs conference)

Journey of SKM
Challenges faced During the Journey

Operational •20-30 million/year losses

Efficiency

Interest rate
•20% Affected Profit
•Capital crises

Global Crises
•2015 Avian Flu, 20%Revenue drop
•Egg white consumption increase and egg yolk decreases
Challenges in FY 2016–17:
Navigating Global .
Turbulence
 Operational Efficiency
• Operational efficiency is primarily a
metric that measures the efficiency
of profit earned as a function of
operating costs. The greater the
operational efficiency, the more
profitable a firm or investment is.
This is because the entity is able to
generate greater income or returns
for the same or lower cost than an
alternative.
• Operating costs are associated
with the maintenance and
administration of a business on a
day-to-day basis.
What is Barter System?

https://www.investopedia.com/terms/b/barter.asp
Initiative for Operational efficiency
Purpose: To Reduce Damage & Breakage losses Rupees 20-30 Million/years

Supply Chain •Eliminating Warehouse & Farm to direct whole saler

•Barter System in trading
Mng-Distribution

Inventory Mng
•Replace 60 Small outsources truck to large Own truck
•Increases Turn around efficiency

Resource •CEO+ Sales Executive +Driver (T+M+L) team control system & Close monitoring
•Offer incentives/perk to crew for efficient work

Utilization
 EXHIBIT 2: SKM EGG PRODUCTS EXPORT (INDIA) LIMITED’S PROFIT &
LOSS STATEMENTS, 2012–2016 (IN ₹ MILLIONS)

Mar-16 Mar-15 Mar-14 Mar-13 Mar-12

INCOME 12 mths 12 mths 12 mths 12 mths 12 mths

Total Operating Revenues 2,695.8 2,713.4 2,393.8 1,933.8 1,265.3

Other Income 131.1 158.1 10.6 70 −21.8
Total Revenue 2,826.9 2,871.5 2,404.3 2,003.8 1,243.4
EXPENSES
Cost of Materials Consumed 1,804.4 1,946.4 1,589.2 1,358.7 1,038.5
Purchase of Stock in Trade 0 0 0.74 4.6 0
Operating and Direct Expenses 169.6 168.9 142.2 139.8 0
Changes in Inventories of FG, WIP, and Stock in Trade 12 −106.6 51.4 −101.1 16.6

Employee Benefit Expenses 159.6 142.9 84.6 72.1 59.9

Finance Costs 25.4 50.4 83.6 117.6 115.3
Depreciation and Amortization Expenses 120.8 133.1 126.3 184.5 90.1
Other Expenses 203.7 188.1 222.3 172.6 94.5
Total Expenses 2,495.4 2,523.2 2,307 1,990.2 1,414.9

Profit/Loss Before Tax 331.5 348.3 97.4 13.7 −171.5

Tax Expenses, Continued Operations
Current Tax 122.3 46.7 0 0 −1.3
Deferred Tax −17.3 49.7 29.3 3.3 −54
Total Tax Expenses 105 96.4 29.3 3.3 −55.3

Profit/Loss for the Period 226.5 251.9 68.1 10.3 −116.2

 EXHIBIT 4: SKM EGG PRODUCTS EXPORT (INDIA) LIMITED’S PRODUCT
SALES CONTRIBUTIONS

Product Group %

Egg Albumen Powder 21.500

Egg Yolk Liquid 11% SALT 2.980

Egg Yolk Powder 49.920

Food Stabilizer (MAY-O-MAX) 0.017

Whole Egg Powder 25.580

Source: Company documents.

 EXHIBIT 6: INDIA’S EGG PROCESSING PLAYERS, 1995

Existing Players—Project Capacity and Cost (at the time of set-up)

Year Cost
Player Capacity Location Established (₹ millions)

1.8 million eggs/day—6,500 tons

SKM Eggs powder/year Tamil Nadu 1997 355

Venkateswara Hatcheries 1.8 million eggs/day Andhra Pradesh 1995 370

Ovobel Foods 200 tons powder/year Karnataka 1993 175
Western Foods 772 tons powder/year Ambala, Punjab 1992 71

Note: There are few egg powder processing units in India. SKM eggs is the biggest player in the Industry. (Other players apart from the
ones mentioned above are Indo-Dutch Proteins, Hyderabad; Foods & Inn, Mumbai; and AG Foods, Ludhiana)

Source: Created by case authors using data from Government of Gujarat, Establishment of Egg Powder Unit, 11, 2017, accessed February 13,
2018, https://gaic.gujarat.gov.in/writereaddata/images/pdf/10-Egg-Powder-Unit.pdf
 EXHIBIT 7: SKM EGG PRODUCTS EXPORT (INDIA) LIMITED’S TOP 10 CUSTOMERS IN 2015–2016

Customers % Contribution
SKM Japan Co. Ltd., Japan 28.03
G.C. Hahn & Co. Ltd., Germany 30.61
SKM Europe Ltd., Netherlands 18.69
OVO Japan Co., Ltd. 5.53
Nippon Shinyaku Co., Ltd. 2.49
Connell Bersaudara Chemindo, PT, Indonesia 5.12
Jim’s Group Co. Ltd., Thailand 2.37
Sumimoto Technology Corporation, Vietnam 2.04
Gem Font Corporation, Taiwan 2.54
Mondelez Indonesia Manufacturing PT, Indonesia 2.58
Total 100.00

Source: Company documents.

 EXHIBIT 8: SKM EGG PRODUCTS EXPORT (INDIA) LIMITED’S COST STRUCTURE—5 YEARS (IN %)

5-Yr.
Fiscal Year 2015–16 2014–15 2013–14 2012–13 2011–12 Average
Cost of Materials Consumed 66.93 71.73 66.39 70.26 82.08 71.48
Purchase of Stock in Trade 0.00 0.00 0.31 2.38 0.00 0.54
Operating and Direct Expenses 6.29 6.22 5.94 7.23 7.47 6.63
Changes in Inventories of FG,
WIP, and Stock in Trade 0.45 −3.93 2.15 −5.23 1.31 −1.05
Employee Benefit Expenses 5.92 5.27 3.53 3.73 4.73 4.64
Finance Costs 0.94 1.86 3.49 6.08 9.11 4.30
Depreciation and Amortization
Expenses 4.48 4.91 5.28 9.54 7.12 6.26
Other Expenses 7.56 6.93 9.29 8.93 7.47 8.03
Total Expenses 92.57 92.99 96.37 102.92 118.94 100.00
Profit/(Loss) Before Tax 12.30 12.84 4.07 0.71 −21.04 1.48

Note: FG = finished goods; WIP = work in progress

Source: Company documents.

Corporate Background and Make in India
Initiative
• "Make in India" Connection:
• SKM, a family enterprise rooted in poultry farming in Tamil Nadu, embodies the "Make in India" initiative launched in
September 2014 by the Prime Minister.
• Positioned as an example of India's national-building efforts, SKM contributes to the nation's economic growth.
• Market Presence:
• Listed Since 1995: SKM has been publicly listed on the National Stock Exchange and the Bombay Stock Exchange.
• Small-Cap, Export-Oriented: A small-cap firm with a focus on exports, reflecting a market capitalization of ₹4 billion on an
equity capital of ₹263.3 million.
• Product Portfolio and Global Reach:
• Processing Capabilities: SKM processes eggs to manufacture diverse products, including egg powder, liquid egg, and bakery
items.
• Global Markets: Exports to advanced international markets, including Japan, the European Union, the Middle East, Korea, and
Russia.
• Overseas Subsidiaries: Presence in Tokyo, the Netherlands, and Moscow with subsidiaries SKM Japan, SKM Europe, and SKM
Egg Products.
• Operational Capacity:
• Processing Capacity: Capable of processing 1.8 million eggs daily.
• Annual Production: Can produce 6,500 tonnes of egg powder annually.
Corporate Background and Make in India
Initiative
Financial Performance and Leadership:
• Phases of Turnaround: SKM, under Shivkumar's leadership, navigated challenges, including
severe debts.
• Stock Performance: Stock peaked at ₹174 per share in February 2015.
• Financial Overview: Refer to Exhibit 2 for the company’s profit and loss statements from
2012–2016.
Strategic Outlook and Company Philosophy:
• Market Presence: Sells five main products in 15 international markets (Refer to Exhibits 3
and 4).
• Shivkumar's Message: Outlining the company’s approach and prospects on the firm's
website, emphasizing a strong value system, drive for excellence, and a commitment to
innovation.
Conclusion

SKM Egg Products stands as a testament to resilience,

innovation, and success within the dynamic global market,
showcasing a commitment to "Thinking out of the shell."
As outlined by Shivkumar, the future looks both exciting and
promising for the company