ADF Foods Limited (ADFFOODS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the ADF Foods Ltd. Q1 FY27 Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Sumit from EY. Thank you and over to you, sir.

Thank you, Sumit, and good afternoon, everyone. We welcome you to the Q1 FY27 Earnings Conference Call of ADF Foods Limited. To take us through the results and to answer your questions, we have with us today the top management of ADF Foods, represented by Mr. Bimal Thakkar, the promoter, chairman, managing director and CEO, Mr. Sumit Thakkar, the promoter, vice president in sales and strategy, and Mr. Srinivas Ayagiri, the chief financial officer. We will start the call with an overview of the business and recent updates by Mr. Bhimal Thakkar, and then Mr. Srinivas will give his comments on the financials. As usual, the standard safe harbor clause applies when we start the call. Over to you.

Thank you, Sumed. Good afternoon, everyone, and thank you for joining us today. We have comments. FI27 on a strong note, delivering our fourth consecutive quarter of strong double-visit growth year-on-year. In Q1 of FI27, our consolidated revenue from operations increased by 25.9% year-on-year to 167.3 crores. On a standalone basis, revenue grew by 20.5% year-on-year to 120.9 crores. This performance was driven by deeper shelf space penetration, continued category diversification, traction from product listings secured over the past few quarters, and strong execution across our key international markets. Importantly, we achieved this growth despite continued geopolitical uncertainties arising from the West Asia conflict. Supply chain and trade route disruptions, vessel shortages and elevated fuel, and increased ocean freight costs. Consumer demand for authentic, convenient, and value-added ethnic Indian food products continues to remain healthy across our markets. The increasing preference for ready-to-eat, ready-to-cook, shelf-stable, and frozen categories continues to support our growth strategy. Our diversified product portfolio, wide geographic presence, and established distribution capabilities are enabling us to address these opportunities across diaspora as well as mainstream consumer segments. Coming to our brands, Ashoka continued to deliver strong quarter-on-quarter growth. Supported by robust demand from South Asian diaspora and deeper penetration across our core and emerging international markets. The brand has delivered a revenue CAGR of more than 20% over the last five years, reflecting the brand strength, sustained marketing investments, continuing product innovation, and expansion across channels and geographies. Going forward, our focus remains on expanding shelf space, introducing new products. And strengthening engagement across retail and e-commerce channels. Truly Indian has also sustained its growth momentum. The brand is now present across more than 3,000 stores in the United States through marquee mainstream clients. Our investment in product development, refresh packaging, retail engagement, sampling, and digital marketing are helping us strengthen brand visibility and encourage consumer trials. The repeat orders received from several retail partners provide encouraging validation of consumer acceptance, and we remain focused on building deeper penetration with existing accounts while pursuing additional listings. Our domestic brand, Seoul, continued to strengthen its presence in India. During the quarter, our focus remained on expanding the product portfolio, increasing reach across e-commerce, quick commerce, and modern trade channels, and undertaking targeted in-store and digital consumer engagement initiatives. With a refreshed theme and a differentiated portfolio of better-for-you packaged food products, We are building this brand with a long-term perspective. On manufacturing, our Surat Greenfield facility, which commenced operations in Q4 of financial year 26, has now begun commercial deliveries and initial container investments. The facility expands our frozen food manufacturing capabilities and provides additional capacity to support future demand. We will continue to scale operations at Surat in a calibrated manner over the coming years, while maintaining our focus on quality, efficiency, and execution. We also received an important milestone during the quarter by receiving the highest AEO T3 certification from the CBIC. This strengthens our export operations by enabling faster customs clearances. Reduced inspections, and improved export efficiency. For a business with significant international presence, this certification further strengthens our trade and compliance capabilities. On profitability, consolidated EBITDA increased by 26% year-on-year to 29.7 crores, with the EBITDA margin at 17.7%. This performance was supported by an improved product mix, continued momentum in frozen foods, tariff refunds, cost optimization initiatives, and operational efficiencies, despite elevated freight costs and ongoing investments in our brand and organizational capabilities. The operating environment remains uncertain, particularly amid evolving geopolitical developments, tariff-related uncertainties, vessel shortages, and ongoing disruptions in global shipping networks. This continues to impact trade costs and transit timelines. Despite ongoing external uncertainties, we remain cautiously optimistic as we continue to expand shelf space, scale manufacturing capacity, further strengthen our brands, and introduce relevant products across markets. With strong business momentum, we remain well positioned to deliver revenue upwards of 900 crores in financial year 27, while maintaining Good morning, healthy, high-T in EBITDA margins. The resilience of our business reinforces our confidence in our brand, execution capability, and diversified market presence, strengthening our long-term growth objective. I will now hand over to Srini, our CFO, who will take you through the financial performance in greater detail. Thank you. Over to you, Srini.

Thank you, Bimal, and good afternoon, everyone. I will begin with the Consolidated Financial Performance for Q1 FY27. Consolidated Revenue from Operations for the quarter stood at INR 167.3 crores, representing strong growth of 25.9% year-on-year. This marks the fourth consecutive quarter of double-digit year-on-year revenue growth. Consolidated EBITDA increased 26%. Percent year-on-year to 29.7 crores with an EBITDA margin of 17.7. The performance was supported by a favorable product mix, a higher contribution from frozen foods, cost optimization initiatives, operational efficiencies, and tariff refunds were continuing to absorb elevated freight costs and ongoing investments. Consolidated profit after tax stood at 17.3 crores, up 13.4% year-on-year with a pat margin of 10.3%. Moving to the standalone performance, standalone revenue from operations increased 20.5% year-on-year to 120.9 crores, supported by a strong order book, continued brand traction, and deeper market penetration. Standalone EBITDA increased 22.6% year-on-year to 27.5 crores, with the EBITDA margin improving 40 basis points to 22.8%. The improvement was driven by a favorable product mix, strong momentum in our frozen brands, operational efficiencies, and disciplined cost management despite elevated freight costs. Standalone profit after tax increased 7.6% year-on-year. to INR 18.3 with a packed margin of 15.1%. From a segment perspective, processed foods revenue increased 28.5% year-on-year to 144 crores with segment EBITDA at 31.2 crores and a margin of 21.6%. Revenue from distribution segments stood at 23.2 crores with a margin of 11.5%. During the quarter, our wholly owned subsidiary The U.S. subsidiary received a tariff refund of USD 2.08 million, amounting to 19.69 crores from the U.S. government. The refund has been accounted for consistently with the original accounting treatment, with a portion of it in the P&L and the balance portion in the balance sheet for June quarter. We further continue to monitor developments relating to the U.S. import tariffs. Looking ahead, our focus remains on disciplined cost management, productivity improvement, and delivering operating leverage as our brand's distribution network and manufacturing capacities continue to scale. We will also continue to invest selectively in brand building, product innovation, and priority markets. While we remain watchful of geopolitical developments, vessel availability, and freight costs, we are confident that our diversified geographic reach, strong order book, and operational discipline position as well to deliver sustainable long-term growth. With that, I will hand the call back to Sumit to open the floor for questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rehan Syed from Trinitra Asset Managers. Please go ahead.

Hello, good afternoon, sir. And thanks for giving me the opportunity. So, sir, I have just two questions. First is on the Suraj side of the office. So, sir, you have to use the Suraj phase one now operational. What is the current capacity utilization level that's going on, and when do you expect the facility to reach an optimal utilization level capable of delivering the target to 75 per hour revenue per hour?

Sorry, you know, you were not very clear, but whatever I could understand, I'll try and answer. One is, as you know, the production, try-and production commenced end of March of the last fiscal year. We have made shipments of about 15-odd containers in the first quarter of this month. For the plant to reach its full capacity, it's going to be anywhere between two to three years.

In terms of the second question is around like you are present in the US market. So, truly, India is now present in our 3,000 US store. So, could you share any KPIs around same store, same store, repeat for either repeat percentage, repeat purchase trends, or same store that indicates the brand is scaling beyond distribution of person in this market?

So, I mean, you know, we are present in many chains, so I can't really give too much detail about the data for each of the chains, but the encouraging thing is that, you know, they are adding on new products, we are getting repeat orders consistently, which is showing in the growth of the business, we are getting new listings because of the performance of our products in other stores. So, these are all encouraging signs and we are very optimistic on the growth of this brand and feel fairly confident that this product, the brand will do very well in the mainstream.

Okay, okay, I understand. I think let's just one more last one question if you can allow to... The consensus company continues to maintain EBITDA margin in the high key, despite price disruption. So, as logistic costs, normalization, and digitalization improves. So, what is the sustainable EBITDA margin we should have to think in our minds?

So, I think the high teens is a good indication, and we will continue to be around that. And, you know, just now, even with, there are a lot of uncertainties, as you know. So, but we are still trying to make sure that we keep the high teens level. And, in fact, from this quarter onwards. We have started passing on the freight increase to the customers as well, so that will also help in improving the EBITDA margins.

Okay. Bye, and that's it for my time. Thank you.

Thank you. The next question is from the line of Saurabh from Tamiksha Capital. Please go ahead.

Hello. Am I audible? I just wanted to know on the part that since if we adjust the tariff difference which we had, so the agenda margins are 13.4% on a personal basis, if I'm not wrong. So what was the magnitude of three, if I talk as a percentage of say revenue, that the EBITDA falls to the 13.4 levels? And, you know, if you can share a number. Regarding what could be the going forward, sustainable numbers.

For your question, I'll take the first two. On the freight part, so if you look at our numbers, we had an impact due to freight because of the ongoing container issues as well as the elevated fuel costs. So on a consolidated level, our number is roughly around 3 percent, which is getting impacted because of freight. In terms of tariff, as you would have seen in our accounting note, we had received a $2.08 million of tariff refund. The balance is basically in our balance sheet, which will be further evaluated based on certain customer arrangements and commercial arrangements with the customers. So that will reflect in the few quarters going forward. In terms of the revenue upwards of 900, that's our goal. Thank you. If they are as per, if they ease out rather, we will be able to fail, we will be able to achieve this nine hundred upwards.

On the margins part, you got muted for a while. Can you just repeat on the margins part? What was the freight impact and the sustainable number?

Yeah, the freight impact was nearly 3%. Yeah, but as Bimal has just rightly pointed out, we have now started to pass on the entire freights to our customers from this quarter, and we are evaluating with every passing day with the shipping lines and getting better rates for our customers as well.

So, are we planning to pass on the entire freight or just a part of it?

No, so it depends market to market, but our major markets like the US, we are passing on close to 75% of the rate increase onto the customers. In some markets, strategically, we are not passing on any increase, but more or less, I would say upwards of 65 or 70 percent of our business, we are passing on the freight increase.

So, just one last question. So, currently, for this quarter, adjusted margins were 13.4%. If I remove the freight impact, it was 16.4%. So, going forward, as this Surat plan ramps up and we get a kick of the operating leverage, can I expect 17 to 18% margin being achievable starting next year?

Yes, that is what the goal is. But as I mentioned, the Surak plan to get to full scale is going to be at least anywhere between two to three years. It's just started operations. And, you know, the product needs to get into the market. People need to try it. And then we get repeat orders. So there is a cycle which is there. All of the new products which we've launched have just got into the markets a few weeks ago. So we are now starting to, and the acceptance has been fairly encouraging, so we've started getting repeat orders. So it's a process. It takes time. So this year, we'll probably see the plant at about 30-odd percent capacity utilization, and then as the second year and third year onwards, we'll see the ramp-up happening.

Okay, thanks. That is. Thanks.

Thank you. Reminder, anyone who wishes to ask a question may press star and one on the touchtone telephone. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on the touchtone telephone. The next question is from the line of Ravi Naredi from Naredi Investment Private Limited. Please go ahead.

Thank you to give me opportunity. Sir, my short question, line and the top line, we anticipate for financial rate 27. So, what percentage of margin we attain this?

So, Mr. Ravi, we are hoping to keep this high teens is what our goal is in terms of the EBITDA margins.

Okay. And second, this 19 crore refund, which we received from US government, how much you entered in quarter one?

So I'll take this up, Mr. Ravi. So in quarter one, we have basically booked up 0.77 million euro.

Dollars.

In dollars, sorry. 0.77 means roughly...

It's about roughly 7 crores, upwards of roughly 7 crores. And in spite of 7 crore income we added, our margin is 17 crore only.

It's not, so you, so as I just stated to you, that we had an effect of the freight cost, elevated freight cost, which ate away 3% of our margins.

Okay, so including this 7 crore, our top line is 17 crore, right? Ebitda market is 17.7%. Okay.

Thank you. Reminder, anyone who wishes to ask a question may press star and one on the touch door telephone. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on the touch door telephone. The next question is from the line of Sahiza Lagarwal from Desueldo Research. Please go ahead. Hello, Sajjal. Please go ahead.

Hi, I'm Sajjal. So, I've been able to ask about that your company will continue your PC certification and your identity benefits also about that. So, like, could you elaborate on, like, where we can expect the biggest operational benefits to involve and, like, what time frame we can expect for the benefits to become visible?

Yeah, so I'll take this up. So we received this AEO-D3, which is a milestone for all the exporters. So this is the best in class in terms of the customs giving us the certification. See, this helps us basically for faster customs processing, reduced examination requirements, and expedited cargo shipments, clearances. So, we received this in the month of May, and over a period of time, our new shipments, which are going from the month of June, they will basically benefit it from reduced. Thank you.

Okay, and about the two Indian brands, so you mentioned like over the last few authors, the brand expanded from around 2,000 stores to nearly 3,000. So, like, could you share whether the growth is now increasing to gain by the repeat customer purchases or a strong light and stronger uptake, or is it some incremental store addition?

No, so the growth, it's a combination of both. There has been growth within the same stores which were there, and also because of the new brand, I mean, new introductions as well, new store additions. So, it's a combination of both, and in terms of percentage, it'll probably be 60% old-store growth and 40% towards... The new listings.

Okay, just a last question. Let's about the subject activity. What are the assumptions around quantity? You could also present your contribution on FI 27. Like, what do you mean, broadly in task right now?

Can you repeat your question? Because you are not audible correctly.

Am I audible now?

Yeah.

Yeah, like about the total facility, the commercial revenues have now come in. So, like the assumptions which are on the financial and 27 revenue contribution of around 40 to 60 crores. So, are they broadly intact right now?

Yeah, we should be able to get to that number by the end of this fiscal year.

Okay, thank you so much.

Thank you.

Thank you. The next question is from the line of Ankur Gulati from Januity. Januity Capital, please go ahead.

Thanks. A quick question. The margin guidance that you guys are giving, that includes the tariff refund or that's excluding tariff refund?

No, the high teens is going to be without the tariff refund. But we've been impacted in the first quarter because of the freight increase. So that's why after adjustment, it said about a little under 14%. But now that we've started passing on the freight increase from this quarter, from this month onwards, we will start seeing that improvement coming in on the event there as well.

So, well, let's say nine months using broadly 16, 17, whatever the trajectory was earlier.

Correct. Correct.

Perfect. Any labor shortages that you guys are facing? Because when we did some checks with some of the private peers, there was a bit of a labor shortage due to West Bengal elections and so on and so forth. So any challenges on that side?

Nothing significant, but, you know, so you have some shortages if there is... Typically, maybe during the selection time or wedding season, there is some amount of shortage, but it's a seasonal thing which happens. But otherwise, no, there's no real major problem.

And any color on, there were some discussions happening with some of the bigger clients for large white labeling engagements, any progress on that side?

Well, we continue to expand our, see, as a company, our focus is our own brands, right? And the sales split is about 75% is our own brands, 25% is B2B and private label business. We continue to grow the private label or B2B business. And, but the focus always will continue to remain on our own brand. So, yeah, we are in discussions with new clients. There are some new accounts which we've got. So, that's an ongoing process.

One question on depreciation, there's 66 crores. This is now the steady-set depth with the new brand coming in, or is there more upside to it?

So, this is based on phase one of our Surat facility. Phase two is expected to happen quarter three. So, there will be some more depreciation which will come in in Q3 or Q4.

But, Ankur, just to add to what Bhimala said, it will be mostly for the lines because the major part of the depreciation in terms of the building and all has been taken care of.

The bill is done. Okay. I think sometime next year, your PLI benefits are dropping, which will be roughly 16 CR. So any plans to recoup, let's say 1.5% margin dip, which may play out?

So, you know, while we will continue to invest in our brands, as the years go by, and, you know, the amount of investment also reduces as the brands start getting more run on. So, we hope to strike a proper balance. Certain brands which are growth brands like Truly Indian will continue to require investment. Seoul will require investment. Ashoka, of course, will require investment, but as a percentage to sales, that will reduce. So, we'll try and balance it out that way, and we are hopeful that the government continues the PLI scheme. There was a meeting which happened recently where they are thinking of extending it, especially for Category 3, which is where we got our... So, we hope that this continues from the government side as well.

Thank you. Thank you. The next question is from the line of Bharat from Quest Investment Managers, Private Limited. Please go ahead.

Hi, good afternoon and congratulations. Thank you. But I mean, uh... I mean it for doing a performance in a very challenging time. So, I have one question particularly saying truly Indian as well as we have launched a soulful again a relaunch in domestic market and for which we continue to keep on soft expenses. So, how much, when do we expect that, that will really start, I mean, coming to hand and kind of opportunity that we have that we can, I mean, or otherwise, our top line growth or with gross margin, taking care of all those investments. So, our habit move, trajectory move positively.

So, Mr. Bharat, you know, building a brand takes time and it does require investment. Right. Truly Indian, as you see, as a brand, has already started showing good growth momentum. We are seeing more listings happening, but it's still at that growth stage, so it will still need that support. And as a company, we want to, I mean, the Ashoka brand continues to remain our flagship brand, but we want to target the mainstream market where there's going to be a lot more growth going forward. So we have to make that investment right now to reap the benefits later on. So, that investment on Truly Indian Brand over the last two years, if you see, I mean, we are already seeing signs of growth happening, well-acceptance. More listings coming up. On the sole brand, yes, it's been a little slow. It's not happened the way Truly Indian has grown, but we have made certain changes in our strategy and hope that this brand will also this year start showing the same kind of positive results like how Truly Indian has shown.

Correct. So what I understand that for truly Indian, our team is much larger than the Asoka that we have. So what's your aspiration from three to five years perspective? Say like Asoka was around 300 crore. So when do you think Asoka can be in the next five years as well as truly Indian? Your aspiration, not I mean any binding thing, but the kind of opportunity you are seeing.

So, you know, rather than putting numbers to it, I'll just give you what the opportunity is. The Ashoka brand caters to the Indian diaspora or the South Asian diaspora, right? Right. So, you take America, truly Indian is in America right now and in Germany, right? Now, the population of the United States is about 300 million people. Ashoka is only... See you next time. Servicing the 5.5 or 6 million South Asians which are there in the US. So if you see the opportunity on the truly Indian side, I mean, there is upwards of hundreds of million people, especially who like to try out the different kinds of international cuisines. So that's where the opportunity is. So we feel, I mean, truly Indian over the long term can be a much bigger brand than Ashoka. So it's just we need to make sure we are introducing the right products, making the investments. And all the things which is required. Having said that, Ashoka also has a lot of opportunity to grow, and we'll continue to do that. So, both the brands have a very strong, and Ashoka has been growing upwards of 25% over the last five years. This last quarter, it's grown upwards of 30%.

So...

We feel fairly confident. I mean, truly, Indian has grown. It's at a low base, but it has grown like 3-4x already. So, we just have to be patient. Building a brand takes time and investment, but we are going on the right path.

Even by taking that question, see, we have also presence in Germany and now as well as in UK. So how do we think expanding within a total European market or kind of our experience and what the same?

So, you must have read that we are setting up a step-down subsidiary in Ireland, which is… To basically address the European market, and so we want to put in more investments, I mean, put in more focus and investment in UK and Europe because we see huge growth opportunities there as well. So we will be, and you will see over the next few quarters and going forward. The, that region also growing at a high double digit for us.

Okay. And last question, that what kind of impact we saw on because of West Asia, which was roughly around 15% kind of a total size of the business. So, is there a break on still, I mean, we are struggling to reach to that 15% of the total size?

So, the good news is, I mean, March was a really bad month where we couldn't make any shipments. In this quarter, we started off shipments from end April onwards, and we have caught up quite a bit and are more or less coming back to that same kind of levels of 15%. The freight rates are high, but we've passed on, we've been passing on, like I mentioned, from this month onwards, we'll be passing on the freight increase as well to the customers.

Great. And thanks, Rimbabwe, and all the rest.

Thank you.

Thank you. The next question is from the line of Dhanan Jai from Al-Gami. Please go ahead.

Yes. A question, maybe a missus. When these tariffs were rolled on to us, were our customers sharing the tariffs with us, I mean, the increase in tariffs with us, or were they absorbing most of it, just for understanding perspective?

Yeah, so from a tariff perspective, Most of our customers, especially in the mainstream business, we had actually absorbed those tariffs. So, it's basically, that's why you see that we have counted all those things. The rest of the tariffs were actually shared throughout the chain, basically. So, here, that is what is the situation for the tariffs, which happened during September to March.

There would have been a bigger hit on the margins, right? Because we've done quite well, actually, in terms of keeping margins at such a strong rate, even with the tariff increase.

So, basically, we have a lot of structured programs in our manufacturing and supply chain operations. This actually gives us a lot of capability and automation and digitalization projects which we have done. Basically, help us in getting those efficiencies into the system and which basically pass on to the gross margin. We also have a very strong procurement program, which actually works very well and buys raw materials and packing materials when the rates are quite low. And we hedge all those, basically, prices. So that's how you see the efficiencies which are impacting positively in the gross market, even though there were tariff.

Kudos to you. And so now going ahead, now with the rollback in Paris, would we look to keep prices? At what level? Would you want to rollback prices or rollback margins or keep it both? And then we should expect a significant increase in margins going ahead.

So, you know, Dhananjay, depending on the product category, we are... You know, strategic about where we want to pass back the benefits to the trade or to the consumer. And certain products, we will continue to keep it that way. Because we've also been impacted by the freight increase, other input costs. So we're trying to balance it out and be strategic about certain products. Where we will, where we want to increase more market share, where we want to grow faster, those products, we would probably pass on some of the tariff benefits.

Okay, surely. So, superb, sir. You have done a very good job in this tough environment. Thank you so much.

Thank you. The next question is from the line of Saurabh from Samiksha Capital. Please go ahead.

Thank you. I would like to read a shift on the margin part. So, processed food margins did 21 odds here in this quarter, and while it was 24, like assuming the tariff impact affects processed foods more. So, we had revenue growth there, but EBITDA was almost flat, even if we remove the breed impact.

So, it's... Basically, there is the capability building which has come in, but that is not impacting anything in terms of the margins. The major impact, as I had said earlier, was on the freight part, which has eaten away our margins for Q1. What we will see going forward is the operating leverage to kick in, especially on the processed food segments, which will have our margins.

And just to add to this, Saurabh, you know, because of the container shortages, the supply chain disruption, I mean, our Q1 could have ended up with a much higher top line. We had a lot of goods ready with us, but we were unable to ship them because of non-availability of ships and containers. You know, our order book has been the strongest it has been in the company's history. Availability of the ships and containers. We're doing our best to... We are the largest exporters in this category. We have some clout with the shipping companies, but they also have their limitations in terms of a lot of vessels are skipping the Indian ports. So that's where the whole shortage is happening for them as well.

True. And on the distribution side, like what is the letter in the PPT is that we are at 11.5% margin. And while I mentioned it was 17.4%, so I might have missed out on something. Is it some reason due to which it is down?

Saurabh, you have to look at the overall margins on an annual basis. Quarterly, there are certain impacts which come in because of the seasonal cost, so you will have to really take the full year margins. So, as we have said, our margins will be fairly in line with what we have been delivering, high-teens EBITDA, and even between the segments like process and distribution, it will remain in those ranges of what has been historically.

The 10% duty, I guess, expired on 24th of July. So what is the rate getting applied right now, and what could be a possible scenario going forward?

So I think it's still continuing at 10%. We hope it doesn't fluctuate too much, and it remains at these same levels.

We passed on the entire tariff right now, right, to the head consumers?

We did last time, and as I said earlier, we are now passing back the benefits in certain product categories from a strategic point. So, yeah, some categories, we are keeping that price increase with us as well.

Thank you. The next question is from the line of Raghu, an individual investor. Please go ahead. Hello, am I audible?

Sir, firstly, I have three questions. Firstly, sir, we have been clocking around 190 crores of revenue and suddenly there is a dip. So, is it seasonality or are we expecting some bump up in next few quarters to achieve our target? Secondly, sir... May I ask all the questions or should I wait?

No, no, no, please, please ask all your questions.

Okay, sir. Secondly, sir, we, our bottom line has been infected this quarter, so, like taking into account present conditions. And we have also passed on certain rates. So how do you see the impact now? Given that we are also going to get some benefit from those tariff refunds, so will now the impact be balanced or will it still be impacted by it? And thirdly, sir, these new FTAs that we are having. New Zealand, Australia, EU, Britain. So, any strategies to, like, utilize them for our benefits? These are my questions.

Okay, I'll take the first question. Sriniv, take the second one, and third one also I can take. So, the first question, Mr. Raghu, is, you know, Q1 for us as a company, historically, if you've seen, has been the weakest quarter for us. Thank you. This year, I mean, compared to last year, first quarter, we've actually grown much better than the last year, first quarter, despite all the problems we've had on getting containers, getting shipments, all of that. As I mentioned, we could have done much better in the month of June in terms of top line. Our order book has been very strong, but because of the problems on containers, we were not able to make more shipments. But yet, we are upwards of 20% when you compare it to last year, first quarter. Shini, you want to take the other one?

On the margins, as I said, you have to look at it from a whole year perspective. Certain investments which happen during the quarters for our brand building plus the elevated cost of freight which have happened in the first quarter basically have muted our margins for this quarter. But when you look at... For a full year period, you will see our margins are. Putting our investments where our markets are growing and get that operating leverage to flow it into the EBITDA levels.

And as far as the FTAs go, yes, these are going to benefit us. And, you know, especially UK and when the Europe FTA comes into, when it's finalized, I mean, we are, as I mentioned, we are looking at investing more in these markets to grow our business there. So, yeah, this will definitely have a positive impact for our company.

And to add to Vipan's point on the FTA, especially in the EU, as she just reiterated that we are opening up a subsidiary in Ireland. to get those operational efficiencies and be very closer to the market. Now, we have teams there in UK and Europe who can really help us basically in getting new stores, new distributors, and new channels.

Okay, sir. That's just one follow-up. Since we could not ship some of our assignments, so are we expecting some bump-ups in Q2 and subsequent quarters?

So, Raghu, of course, that will be a carry forward which will come in Q2. But, you know, the availability of containers and the supply chain issues still continues to be a challenge. So, what could happen is your Q2 could get again further carried forward to Q3. So, it all depends on how soon this crisis gets over and we are able to make all our shipments. As I mentioned, the order book has been the strongest it's ever been for the company, but now the challenge is of getting it shipped out, which we are doing our best. I mean, our entire team is working, you know, around the clock to make sure that we get our containers, we're able to make the shipments out, and because We are a large shipper. We are able to get some leverage and put some pressure on the shipping companies, but it's still challenging times.

Okay, sir. So, the 900 plus top lines are still achievable, or if these disruptions continue, then we might have to,

again, look some down. So, yeah, Ragu, we are working to make sure that we achieve that, but, you know, there are certain things which are beyond our control, but we feel... You know, like I mentioned, we are cautiously optimistic and feel confident. From an order book point of view and from a market demand point of view, we'll definitely be able to achieve it. It's just the supply chain. It's not a problem for us if it continues like this.

Thank you so much, and best wishes.

Thank you. The next question is from the line of Bharat from Quest Investment Managers, Private Limited. Please go ahead.

Thanks for the opportunity for second time. We must have question if you can give some color competitive landscape for truly Indian, whether it is from the existing Indian player also there are or some other player are there. Of course, in this year, we can see this quarter, there is a bump up in a consolidated staff course. So how much new people are we adding and when do we expect further addition of the people?

So, the competition on the Truly Indian brand is not really from any of the Indian players at the moment. It's mainly local companies from America who are producing the Indian type of foods. Okay, so we are competing with them mainly. And, you know, we have added on more people in the team, and I think at the moment, we are now fully staffed as far as the Truly Indian team goes. So, we won't be seeing any more additions on the team size out there in the U.S.

Okay. Great. Second, I mean, question for our CFO. So, Mr. Srinivas. See, you said that there is a 3% additional cost on logistics, so that is on consolidated number or standalone number?

It's on the overall margin. Overall sales.

Okay. And spending this increase in depreciation because of capitalization, Surat. So, do we assume that this will be maintained or it may increase further?

So, as I said, Surat, the plan started in the month of March. The majority of the plant was done in terms of building and some few machineries, as well as the ETPs, as well as the utility facilities, which got capitalized in the month of March. There will be a few lines which will be coming in, as Mr. Bimal said, the phase two will be there. So that will be an add-on, but those will be only for the plant and machinery.

Okay, thank you. And which is roughly around 25 crore, correct?

Yeah, 25 to 30 crore. That's the range which we have given, basically.

Okay, thank you. And all the best.

Thank you.

Thank you. The next question is from the line of Ravi Naredi from Naredi Investments Private Limited. Please go ahead.

Sir, my one point again, any more such more U.S. Customs Department refund we may get in coming nine months?

No, Mr. Ravi, at the moment nothing. Whatever was there, we got. And we, as you are aware, we did win one case in the U.S. where We've been awarded $2.8 million, close to $2.8 million. So, now the only thing that we, I mean, we are now trying to get that money from the person who we won the case from. So, that would be any, no more tariff refunds, but this is another thing which could come into our books this year.

2.8 million we receive in 9 months, next 9 months?

Well, we are trying to, we are now in discussions, our lawyers are in discussions with the party because to see how we can recover this from that.

And one more, PLI benefit from Government of India, anything we have to receive in next 9 months?

Yeah, so, yeah, we have, this is the last year of our PLI, where we are basically enrolled for the CAD3 brand marketing and promotion expenses, which gets reimbursed. So, we are accruing the same amount of last year, basically, in terms of our PLI benefits for this year. And what is that amount? It's about 16 crores for the full year. Okay.

Okay. Okay. Okay. Thank you.

Thank you. The next question is from the line of Saurabh from Samiksha Capital. Please go ahead.

Just one last question. I would like to touch upon the PLI part. So, can you just quote me what percentage of EBITDA was supported by the PLI in F.26? And since this is the last year post that we would have an impact on that as well, right? We won't be accruing further PLI benefits.

So, it's roughly around 2% in terms of our margin. But as Bimal said in his speech, that, see, you have to look at PLI. PLI is a brand building activity, and we have been building the brand for the last 3-4 years. As a percentage to sales, this number will come down because as the brand becomes big, basically, it's... We will keep on investing in our truly Indian brand, but from an Ashoka perspective, that number will start to come down as a percentage to sales, which will help us basically maintaining our EBITDA margins.

And we are hopeful that the government will still continue with this PLI, especially for Category 3, which is for brand building.

You know, I think my question got wrongly communicated, what I meant was. So, in the previous years, we had the benefit of PLI in terms of our EBITDA margins. So, in the coming years, when the government is not giving the PLI benefit, so that incremental margin would be depleted, right? So even our margins would get below the current levels. So that is what I wanted to know, that what percentage of EBITDA margins can... Be depleted, so...

I think we answered the same. Maybe you didn't understand that, but I will again reiterate. See, when you invest in brands, you invest it as a percentage when you are at the start of building a brand. As the brand gets stronger, this number will be absolute. So, it will be balanced out in the next years so that it doesn't impact our brand building exercises also and doesn't even deplete our EBITDA margins.

So, the Ashoka brand, for example, the investment going forward as a percentage to sales will keep coming down.

Oh, perfect. That makes sense.

Thank you. The next question is from the line of Pritesh Chhatta from Lakki. Please go ahead.

Sir, can you comment on the depreciation figure post this expansion?

No, I didn't get your...

What will be the depreciation figure post the capitalization of the ongoing expansion?

See, currently, you see the depreciation figure for quarter one, which includes all our Surat plus brownfield activities, which have got capitalized in the month of March and some in the month of, in the first quarter of this year, basically. What you now will see is roughly around 20 to 25 crores of capex, which will be a residue capex of whatever the new machinery comes up in Surat and some small routine capexes, which will happen throughout the year. So, that will be the incremental depreciation which will hit your books at the end of this year once all the projects go live.

And the total capacity now on ground and the post-expansion which you lined up, what kind of revenue can it support, the manufacturing revenue? Obviously, not the agency. Exo agency, what it can support?

So the Surat factory, as we've mentioned, at full capacity, it'll be a little under 300 crocs in terms of top line.

So, then...

Utilization.

So, last year you were... Sorry, go ahead.

No, no, please, you may ask, then I'll control.

So, let's say last year you had 680 in which 100 was agency. So, you have 580 X of agency. To that 580, post-expansion, how much can you scale this 580 to?

So, from an expansion perspective, once, as we said, Surat gets ramped up with all the phases, we will have upwards of 1250 crores of revenue, basically catering with all these investments, and we won't need much of an investment, just the routine investments, which will take care of our new product innovations or line changes.

So, with the green field and the brown field, all that put together at full capacity, we could be about 12, we can go up to 1250.

Ex of agency, right?

Yes. Yes, yes.

Ex of agency, okay. Just one clarification. So now sum total on PLI incentives, let's say not being there, the elevated freight cost that you are seeing, currency depreciation, which is a favorable number, and the new capacity which has come up, which is a better automated capacity. So, what kind of margin, say you had a peak of about 20% margin, then some years you had about 17% also. So, what kind of margin reflection one should look at?

So, I think our guidance has been high teens, and we continue to be at that. That's how we would look at it. Because we are still going to be investing in some of our growth brands, right? Like Truly Indian. So, those investments will continue on. So, I would say in the high teens, we stand by that guidance.

Okay. And the last question is, you will fully utilize your capacity in FI 29 or in FI 30?

I think 30 would be a realistic year where we'll see.

Thank you very much.

Thank you.

Thank you. Ladies and gentlemen, that was the last question. I will now like to hand the comments over to the management for closing comments.

Thank you, everyone, for your participation, and look forward to catching up with you all in the next quarter.

On behalf of ADF Foods Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.