Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated revenues increased by 8.1% year-on-year to INR121.6 crores.
- Strong demand across all brands, with flagship brand Ashoka adding new products and increasing market penetration.
- Strategic expansion into quick commerce channels and modern trade expected to energize the market in the second half of FY25.
- US expansion of the Truly Indian brand is on schedule, with new listings in supermarkets and on Amazon.
- Surat greenfield Phase 1 expansion remains on track, catering to both new and existing lines for frozen foods.
Negative Points
- Lost sales amounting to almost $1 million due to nonavailability of containers.
- EBITDA margin decreased to 16.1%, a drop of 340 basis points year-on-year.
- Agency distribution business saw a decrease due to supply chain issues.
- Higher freight costs impacted EBITDA, despite cost control and process efficiency measures.
- PAT for the quarter decreased by 2.1% year-on-year and 42.5% quarter-on-quarter.
Q & A Highlights
Q: What is the share of meat products in your sales, and can you provide a breakdown of the impact on margins due to freight and brand investments?
A: Currently, we do not sell any meat products. All our brands, including Ashoka, Truly Indian, and Soul, are vegetarian. Freight costs increased by almost 1% year-on-year, reaching around 8% for this quarter. Brand promotion expenses are approximately 7% of total sales, up from around 6% last year. (Answered by Shardul Doshi, CFO)
Q: What was the CapEx during the year, and were there any new listings in the USA?
A: CapEx in the first quarter was around INR5 crores, split between cold storage, greenfield, and normal CapEx. Total estimated CapEx between now and the next financial year is almost INR100 crores. Truly Indian has been listed in a few new supermarkets and on Amazon, with numbers expected to contribute in Q3 FY25. (Answered by Shardul Doshi, CFO and Sumer B Thakkar, Promoter, General Sales Manager, Sales and Strategy)
Q: Why is the distribution business not growing despite your efforts?
A: We remain confident in the potential of our brands. Post-acquisition, there were transition gaps that are now being addressed. We expect the distribution business to grow at 15% to 20% once these issues are resolved. (Answered by Sumer B Thakkar, Promoter, General Sales Manager, Sales and Strategy)
Q: What is the current capacity utilization, and how does it affect revenue?
A: Capacity utilization varies by line, with some lines at 80%-85% and overall around 70%. Our current capacity will meet demand until our greenfield project becomes operational. (Answered by Shardul Doshi, CFO)
Q: Can you explain the strategy behind having different brands like Ashoka, Truly Indian, and Soul?
A: Each brand caters to a different target audience and product portfolio. Truly Indian targets foreign consumers with toned-down spice levels, while Soul is positioned as a premium brand in India, offering a broader range of products beyond Indian food. (Answered by Sumer B Thakkar, Promoter, General Sales Manager, Sales and Strategy)
Q: What are the plans for the Camel and Aeroplane brands?
A: Camel and Aeroplane are legacy brands focused on the GCC market, growing at 10%-12% year-on-year. We are not making significant investments in marketing for these brands but will let them grow organically. (Answered by Sumer B Thakkar, Promoter, General Sales Manager, Sales and Strategy)
Q: What is the contribution of frozen foods to your revenue mix, and what is the capacity utilization for this segment?
A: Frozen foods contribute significantly to our revenue, with capacity utilization between 70% to 85% depending on the product. We are adding freezer capacity to store finished goods and distribute them over time. (Answered by Shardul Doshi, CFO)
Q: What is the growth outlook for private label and B2B businesses in the US?
A: We expect 20%-25% growth in private label and B2B this year. These segments have been growing at a similar rate and we are looking to add more customers in the US. (Answered by Sumer B Thakkar, Promoter, General Sales Manager, Sales and Strategy)
Q: What is the strategy for the Soul brand in India, and are you concerned about being late to the market?
A: We are targeting the premium segment with higher gross margins and a staggered approach to avoid burning money. We believe the opportunity in India is still significant, and our strategy is to capture a niche market with better-for-you products. (Answered by Sumer B Thakkar, Promoter, General Sales Manager, Sales and Strategy)
Q: Are there any plans to expand manufacturing capabilities outside India, such as in Africa or the Middle East?
A: Currently, we are focused on our new greenfield project in India, which will meet our capacity needs for the next few years. However, we are open to opportunities for overseas expansion if they arise. (Answered by Sumer B Thakkar, Promoter, General Sales Manager, Sales and Strategy)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
