Hindustan Foods Limited (HNDFDS) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Q4 and FY26 earnings conference call hosted by Hindustan Foods Limited. As a reminder, all participant clients will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during this conference call, please signal an operator by pressing star followed by zero on your touchstone telephones. I now hand the conference over to Mr. Sameer Kothari, Managing Director from Hindustan Foods Limited. Thank you, and over to you, sir.

Thank you, Farah. Good morning, and welcome to our Q4 F526 Earnings Conference call. I am joined on the call by Ganesh Argekar, Executive Director, Mayank Samdani, Group CFO, Vimal Solanki, Head Corporate Communications, and SGA, our Investor Relations Advisor. I hope everyone has had a chance to go through our updated earnings presentation uploaded on the exchange and our company website. FY26 was a milestone year for HFL, a culmination of various initiatives taken over the last few years. It was a year in which we undertook an ambitious CapEx goal of investing more than 700 crores, And in spite of the macroeconomic and geopolitical headwinds, we were able to deliver capacities across geographies and product categories, laying a strong foundation for a continued compounding growth across revenues, profitability, and manufacturing capabilities. This year marked also the successful pivoting of our business to a more broad-based manufacturing platform. This was achieved by deepening relationships with existing customers. Bringing in new customers, and scaling up of new product categories. All of this resulted in record numbers across profitability parameters, including EBITDA, PBT, and PAT, and also laid the foundation for the future growth of the company. The company continues to maintain a strong project pipeline, with new projects worth approximately 150 crores that have already been signed up for FI27. These include investments of around 50 crores in beverages, another 50 crores in HPC, and a similar amount in the ice cream capacities. With such a strong pipeline and onboarding of the new management leadership across the verticals, HFL remains confident in its ability to sustain profitable growth and deliver on our FY27 PAT guidance. With that, I will now hand over the call to Ganesh Aagekar, our Executive Director, to brief you on the operational highlight.

Thank you, Swameer. I will now walk you through the operational highlights for Q4 and F526. Q4 and F526 capped a year of strong operational execution across our manufacturing network. All our divisions performed well, posting robust performances, with some of the seasonal business like beverages and ice creams delivering record volume growth. The smooth commissioning of the newer factories and the integration of the acquisitions further added to our performance. The company was able to successfully manoeuvre the restrictions caused by the geopolitical conditions through strategic build-up in inventories, working capital investment, and continue to serve our customers which are really good. Although our factories are temporarily affected by LTE shortage, and while we have been able to pass on the increased cost of our raw materials across all our verticals, our footwear division displays the brunt of rising petrochemical prices in this quarter. Coming to specifics, the home and personal care business maintains steady momentum during F-26, supported by investments across home care, personal care, and allied categories. The Aurangabad personal care facility has now been successfully integrated into the network and strengthens HFL's ability to cater to emerging B2C and premium product categories requiring flexible and small production batches. In addition to this, the Siddhivasa liquid detergent project and Laclau detergent bar facility are also progressing well and expected to become operational during FY27. The company delivered a strong performance during the fourth quarter, aided by a favorable seasonal demand and ramping up of the newer capacities. The company took an important step in capturing a bigger share of the value chain through backward integration. The acquisition of the cone manufacturing facility and the commission of the slick manufacturing facility will enable the company to better serve existing customers and also develop new relationships. PANIFAS plant was commissioned in April 26 in a record time of less than 10 months. Within food and beverages, the company continues to scale operations across beverages, dairy, snacks, and other fast-growing consumption categories. Several facilities recorded peak production levels during the summer season, reflecting strong customer demand and improved operational efficiencies. HFL is also entering the Greek yogurt segment as a part of its strategy to expand into higher-value and wellness-oriented dairy categories. The company is examining its beverage platform through a new bottle capacity in Aurangabad and South India, both of which are expected to be commissioned during FY27. The healthcare business continued to strengthen its manufacturing quality and product development capabilities during a fight by disease. The division added new customers during the year and successfully completed several domestic and international regulatory audits, reinforcing its credibility in the regulatory and export-oriented market. The company also continued to increase Is it present in wellness and ayurudah? Focus. and is currently establishing a dedicated Ayurvedic wellness manufacturing facility at Baddi alongside modernization initiatives at the existing facility. The UK division also made steady progress during the year with continued focus on operational strengthening and manufacturing efficiency improvements. The last quarter saw elevated raw material costs and external market disruptions due to the ongoing geopolitical conditions. But our customers have been supportive and appreciate the inflationary impact of this variable. The company is now currently expanding capacities across North and South India facilities while also strengthening relationships with existing customers and engaging with new brands across lifestyle, leisure and comfort footwear categories. As we look ahead, our manufacturing network is now better equipped, more diversified and more capable than any point of time in our history. Our focus for Aquat 27 will be on accelerating utilization ramp-up across recently commissioned assets, continuing to judiciously invest in new capex, and ensuring that this translates into sustained improvements in earnings and return across all platforms. With this, I will now hand out the call to Mayank Samdani, our group CFO, to take you through the financials results for the quarter and year ended, 31st March 26.

Thank you, Ganesh, and good morning to all. I would like you to run through the financial performance for Q4 and FY26. FY26 has been another year of strong financial performance for the company. With Hindustan Foods delivering its highest annual profitability, during the year the total income increased by 17% YOY to Rs. 4264 crores, while EBITDA grew by 20% YOY to Rs. 377 crores. Profit after tax for FY26 stood at the record high of 149 crores, registering a growth of 29% year-on-year, and reflecting a healthy operating leverage, improving utilization levels, and disciplined execution across business verticals. Importantly, the company achieved the guidance communicated despite operating through a dynamic external environment. For Q4 to FY26, the total income grew by 17% year-on-year to Rs. 1120 crores, while EBITDA increased by 28% year-on-year to Rs. 104 crores. PBT before exceptional item grew by 40% year-on-year to Rs. 58.2 crores, and PADs increased by 32% year-on-year to Rs. 41.5 crores, making it the strongest quarterly performance in the company history. From the balance sheet and capital allocation perspective, FY26 marked the commercialization of one of the largest investment cycles undertaken by the company. Gross block including capital work in progress and capital advances increased to Rs.18 and 8 crores as of March 26, reflecting the scale up underway across multiple growth categories. Even during this peak investment phase, the company continued to maintain a prudent mix of internal accruals and debt while maintaining the balance sheet discipline. Overall net debt to equity as on March 26 stood at 0.84x, which is well within the company's internal comfort level of 1x. Additionally, during the peak investment phase, we have continued to generate healthy returns with adjusted ROCE of 18.9% after normalizing the newly commissioned and underutilized assets. Those during the year were impacted by the higher working capital deployment, primarily on account of GAC rate changes under the inverted duty structure, effective September 25, as well as proactive inventory built up undertaken to safeguard supply chain continuity amid the prevailing geopolitical environment. As communicated in the past quarter as well, owing to the inverter duty structure, we are in discussion with our customer to transition certain businesses from the gross to net revenue recognition from Q3 FY27 onwards. This will be an accounting reclassification and will not have any impact on the absolute profitability or cash generation, although the reported revenues for those businesses will show a reduction in numbers. Backed by improving the utilization across newly commissioned capacity, rising operating leverage, and the healthy execution momentum across business verticals, we remain confident in sustaining profitable growth and delivering FY27PAT guidance in range of Rs. 200 to Rs. 220 crores. With this, I would like to open floor for questions.

Thank you, Raiya Math, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may enter star and one on the touchstone telephones. If you wish to remove yourself from the queue, please enter star and two. Participants are requested to use only 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 Abhishek Mathur from Systematics. Please go ahead.

Yeah. Hi, team. Thank you for the opportunity and appreciate the enhanced disclosure on the presentation. Just wanted to check on the footwear business. We would have likely crossed sales of 500 crore and FY26. You can correct me if that's wrong. But any call out on the profitability of this division for FY26 and what is our target for FY27 in terms of sales and profitability here? That's my first question.

So, Abhishek, I'll address the question in terms of the macro outlook of the footwear division. So, the footwear division, as we've been talking about it for a few quarters now, we finally got a grip on the business, and we've started performing well in terms of delivery to the customers as well as profitability. However, this last quarter, the footwear division is the one which has seen the maximum impact as far as the war and the geopolitical conditions affecting petrochemical prices is concerned. As you are aware, a large part of the raw materials of our footwear are imported. Though they are imported from the Far East, freight rates have gone up substantially. And in addition to that, all the polymers which are used in the manufacturing of the soles, the prices have increased by nearly 50 or 60 percent. From that perspective, given the nature of the footwear business as opposed to our other businesses, as just to refresh your memory, in our other businesses, price increases in raw materials, packing materials are immediately passed on to the customer. However, in case of our footwear business, that's not instantaneous. We, as a team, have been in touch with various customers, and customers do understand the changes which have happened in the price of various confidence. Indulging us in terms of changes in the pricing. However, that's the one division which has been affected in this last quarter and continues to be affected in Q1 as well as far as the P&L is concerned.

Right, Sabir. I appreciate the color that you gave, but any quantification you can give on the sales and profitability and on the targets here?

In terms of the sales, we continue to be as bullish. We have an order book, as you are aware, the way the seasons are for the shoes. We have an order book visibility for the end of the year. We do believe that we will be well above the growth rates that we had targeted last year. So we should be about 700 to 800 crores of turnover as far as shoes is concerned in this FY27. Profitability target is something that I would much rather not talk about, especially for this division right now, because there's just too much variability in terms of the raw material prices, and our discussions with the customers are still ongoing.

All right, Saviv. Secondly, this 50 crore investment in ice creams in North India, this is separate from the Panipat facility, or is it an extension of the same? Is it a separate location? Just to clarify.

So, this is a brownfield expansion, which will be both in Lucknow and Panipat.

All right. Got it. Got it. Thanks. Thanks and all the best.

Thank you, Vishen. The next question is from the line of Virat from Skyridge Wealth Management. Please go ahead.

Congratulations on a great set of numbers. My first question is, upon completion of the announced CAPEX by FY27, how will the gross block of approximately 2150 crore be distributed between dedicated facilities and shared facilities?

We believe that currently we, the gross log is distributed as mostly around 61 and 32. We believe it will be on the same range in 2150 also.

Okay, that was helpful. And could you elaborate on which business segment is transitioning from gross revenue model to net revenue model? And could you help us quantify how will it impact the reported revenue and EBITDA margins?

Now, this is mainly for foods, Virat. That's where we are seeing the maximum impact of the duty inversion. As you are aware, most of the food categories have been shifted to 5% duty. And that's the place where packaging material as well as some of the raw materials continue to be coming in at a much higher GFC rate. So that's the basic category where we are trying to... See the effect of GSA. In terms of quantifying it, unfortunately, while discussions were on and we did say that this quarter will be able to give some light around it, all our customers and us have been busy with... Fighting battles on stocking inventory, especially because of the geopolitical conditions. And this particular discussion of changing the way of doing business has gone to a little bit of a back burner, which is why we've shifted the goalpost in terms of when we will be making this transition. We were hoping to be able to make this position starting from Q1 and finish it by Q2. Now it looks like it will start in Q2 and finish by Q3. We will, unfortunately, have to come back to you in the next investor call and give you an idea of how many customers have agreed to move to the new business model and how many have not.

Okay, got it.

I'm sorry, Virat, I just remembered that there was a second part to your question, which was, what will be the effect on EBITDA margins and PATH margins? Obviously, like we've maintained, and this is something that we would like to reiterate again. This will not affect our bottom-line numbers, whether it is of EBITDA or whether it is of the PAT in absolute way. So as a result, the margins will definitely look much better because the denominator, which is the sales, will reduce.

Yeah, yeah. Lastly, just one more question. While I understand the management does not provide capex guidance prior to the closure, could you share which business segment is currently witnessing the strongest traction in terms of client inquiries and pipeline activities?

We've tried to give some forward-looking statements for all of our businesses in our PPT, in our presentation. Currently, we continue to see a lot more engagement in home care, in beverages, and in ice creams. Best of luck for the future. Thank you so much.

Thank you. Participants with questions, may please enter star and one on your handset. The next question is from the line of Mayur Park Area from Wealth Managers. Please go ahead.

Good morning to the management and Samira, to all of you all, and congratulations on recent set of numbers and also for a better clarity on the presentation and some of the disclosures. Having said that, I would request some of the clarifications on the numbers a little bit more so that, you know, we also on our own are able to understand how the numbers are moving. While many of the details are much, you know, in your, with you are much more detailed present, but with us, it is very difficult to reconcile some of the numbers. And when I look at the presentation numbers in terms of ROC, capital employed, you know, everywhere, two things becomes very common. We are unable to go back to the reported balance sheets and able to reconcile any of the numbers, firstly, and secondly, all of the numbers have got some kind of asterisks, hyphens, adjustments, which makes it very difficult for us to understand that are we also able to, you know, compute the numbers without your help and without your clarification so that we also are in a position to project that, understand that. And, you know, reconcile them. So if you can help us reconcile, you know, it may be slightest, it will take five, seven minutes for everybody. But if you can help us understand, and last time also I requested, you know, capital employed is not getting reconciled, the fixed assets, the gross fixed assets commissions, which is there for the year is not getting reconciled with the cash flows. Can you help us reconcile all of that because it becomes very difficult apart from operational guidance and the positive outlook that we have a clarity of numbers part also.

Absolutely, Mayur. I'm happy to take that question, and I'll request Mayang to pitch in whenever I think I am being wrong. So let me start off with all those hyphens, etc., and let me start off by talking about…

I'll just request to start from slide number 9, where you start with net capital employed for FY25, 26, 1476 crores in 2003. That's not getting reconciled from the balance sheet. Firstly, if you can help us understand which are the numbers which are getting plugged in there, and how are you calculating those numbers? And then we can move on, you know, just slide by slide, just two or three slides are there because on one side you say strategic investments, on other side you say gross blocks, then it is capital employed. So just wanted some clarity on those. Yeah.

Sure. Mayur, I think Mayank did try to explain this last time, and maybe we didn't do a good enough job the last time. What we said is that if you look at our reported numbers, because of the India's in terms of the acquisitions, and we've been very aggressive in terms of acquisitions, the cost of the asset, which is recorded in the books, is probably different to the amount of money that we've paid on it. As management, we continue to look at it in terms of how much money we've paid for it, not the accounting entry of having a higher gross block and then having a higher depreciation. So when we look at capital employed, we look at how much money has been paid, because as a business and as management, we would like to maintain and measure our returns based on the capital that we've actually employed and not as an accounting entry. So, the reconciliation between the net capital employed written in our slide, as compared to the one mentioned in the annual report, has got to do with the India's disclosures, mainly for the Bharti acquisition. The Bharti acquisition, as you are aware, we purchased it from, you want to get the details?

So we have, but the acquisition we have purchased from Racket, and it was a little older plant where the gross block and the accumulated depreciation was high. And the recorded numbers in the books, gross block is gross block, original gross block and accumulated depreciation till the time we have taken it over. And the net difference is what we have paid, and that is what we are capturing in our CAPEX numbers.

And that was a difference of about a couple of hundred crores, about 220 crores, so that will probably explain a bulk of the discrepancy as far as that is concerned.

So the net capital employed, we need to, what is the net capital employed as per balance sheet, when we look at very simple definition of equity plus borrowings, which is there, that number needs to be, why should that be different?

So, two things in that. One is the net capital, the equity is the average equity for the average of two years, and that is the net debt which is reduced by the cash in the balance sheet. So, these two numbers are those.

So, even the net capital employed on slide number 9, which is 1476 crore in 2003, is the average?

Yeah, has to be average. Okay.

So if you look at it, Mayur, from, and I would request you rather than.

But our total balance sheet size itself, based on, if we look at it, net current asset, is it possible to take this little offline and can I call and get this more.

Mayur, if I may request in the interest of everybody else as well. Yeah. Making this question more about accounting, housekeeping, which I think we can take it offline, let me explain to you how as a business we look at these numbers, right? And let's understand why are we disclosing this and what's the idea behind these disclosures. The idea behind the disclosures is that as a business, we evaluate each and every expansion, each and every investment on the basis of an ROC threshold. And we've internally decided that any project that we invest, any acquisition that we do. should give us an 18% IRR over a longish period of time. When we tried to look at it this way, we said we would also like our shareholders to start evaluating the performance of the management on that basis. The idea of this slide was to try and reconcile the difference between the reported ROTE and the adjusted RSOE. And the difference there is...

I appreciate, Samir, but the problem is this underutilized capacity of underutilized assets of 508 crores.

I was just coming to that.

Yeah, yeah.

Right? So the difference between the reported ROCE and the adjusted ROCE, my word, is that as a company which is investing substantially in capex growth year after year, It is very important for shareholders to understand that at any given point of time, some of our projects, some of our assets would either be in a ramp-up stage, some of them would be in capital work-in-progress, some of them would have started production but would not have contributed for the whole year. Let me give you a tangible example for this particular year. We've invested close to 200 crores in our Panipat facility, which actually started commercial production. In April, while the bulk of this money would have been recorded as capital work in progress in FY26, the actual earning for this number will start only from FY27. So if you look at it, if you look at it from a perspective of To be commissioned, this is a classic example. If you look at another couple of our investments, we acquired the Aurangabad facility as well as we acquired the Kohn facility, which have contributed for barely a couple of months in case of the Kohn. And in case of Aurangabad, it hasn't contributed at all because it got integrated from 1st of April. Now, that's the other reason why you would have to take average capital employed in the beginning and the end of the year. Some project which we would have started production or which we would have gotten recorded only for part of the month. When we are giving our guidance, we are assuming that these assets will contribute for the whole year once they have ramped up to their entire capacity. That's the reason that to be commissioned stroke underutilized assets, the reason that number is so large is because we've invested a very large sum of money in this financial year. And over the course of the years, most of these projects have actually not been working for the whole year.

I understand. So I'll just take the last one so that I can come back in the queue. When we give our guidance of FY27, S200, 220, broadly we are talking of anywhere between 40% to 50% kind of growth. I just wanted an understanding that based on, so is it that the sales because of the commission and underutilized assets which have already been there and what is going to come, even the sales jump, directionally, I am not asking for a number, but directionally, is it that there is going to be a significant, we understand operating leverage because of the businesses, but is it going to be significant delta or because the growth in the FI26 has been 17, 18 percent, so is it, does it mean that the growth revenue, Top-line growth is going to be significantly different or is it that the operating leverage part will be significantly higher?

So, in terms of the sales, we've been voice-referently articulating that that's not the right number to look at. Especially now that with the GST inversion, etc., we've said that we might actually consciously go back to…

No, like-to-like basis.

There won't be a like-to-like basis, no, because some of our existing factories will get converted into a job-work basis model where sales will drop. Now, if you look at volumes, just purely volumes and do not attribute value to it, obviously, if we have about 500 crores of assets which are going to get fully ramped up in the coming year, the total quantum of production that we do will see a huge and significant jump between FY26 and FY27. If I give you just one example, the Panifa facility has a capacity of about 20,000 tons of ice cream. Given that we made about 35-40,000 tons of ice cream in FY26, that facility alone is a 50% jump purely in our ice cream facility. Now, whether it contributes in terms of the turnover value or not has got to do with our discussions with the customers in terms of GFC inversion, etc. But sheer in terms of the number of sticks, cones, cups of ice cream that we've manufactured, we will probably see a jump of more than 50%.

Do we, Reliance has also come with this, you know, ice cream facility now. I know customers, but are we also planning to have, you know, make for them?

We generally don't like to comment about specific customers, Mayur, but be rest assured we are in touch with all customers who are either in the ice cream business or are trying to launch new brands in the ice cream category. Not only in ice cream, actually, in all categories.

Thank you, and I'll come back to the questions. Thank you, Mayur.

Thank you. The next question is from the line of Ankit Dharamshi from RNM Capital Trust. Please go ahead.

Yeah, thanks for the opportunity and congrats for the great exhibition being here. I understand this was a crucial work for us because the last case was coming on board, but I just want to go back to the initial guidance that was given that we are facing some cost pressure in terms of show business, considering FY27 was anticipated to be a year where a Your bottom line is going to be driven by the operating leverage that will come in. Just wanted to understand how this cost pressure in two businesses is not going to impact the pad guidance because we have reutilized that pad will remain same while we are seeing that we are seeing a significant impact Some of the prices of the raw materials have gone up by 50-60%, and still, we are very... Confident to achieve the guided pressure. I just wanted to understand.

Thank you. As far as one of the main things that we've been able to achieve in FY26 is that as a company, we have diversified in so many categories that we do expect that there will be some headwinds in some categories at any given point of time. And yet, some other categories should be able to help compensate for that. Your specific question about shoes is absolutely right. Shoes is facing the headwind in terms of the inflation, etc. But in spite of that, we continue to and we have reiterated our PAT guidance because we believe that we will have more than compensatory growth in some of the other categories. For the time being, we are extremely confident. Obviously, we do not have a visibility any more than anybody else about what is going to happen in terms and how long this uncertainty will rise. Maybe by next quarter, if we have anything else to say, we will come back. But as of now, we remain confident that we should be able to deliver the path.

Got it. Just one follow-up question. I mean, we just broke even across the two business in Q3. Do we foresee that we will be able to operate at an optimal level or there is a possibility of burning cash over there?

We actually broke even earlier. Q2, as Mayank tells me. Second, it was never a cash loss. We were EBITDA positive for, I think, more than that then. So from that perspective, I don't see the business going to a situation where it will be in a cash loss situation. The only reason we pointed out is because of the questions around how geopolitical uncertainty will affect us. This was the only segment where it is affecting us, and we just wanted to ensure that shareholders understand that. Is it significant enough for us to change our guidance? I already answered that earlier, saying that it isn't. Do we expect the volatility to actually end up affecting the shoe business in such a way that it will start making cash losses? Again, the answer is no. All of our customers also understand what is happening in the market. Engagement and discussions have already started. We are quite confident that within the next month or so, we will be able to work with them in terms of passing on some of these costs to them and then onwards. Thank you, Ankit.

Thank you. Parismith, if you have any questions at this time, you may enter star and one. The next question is from the line of Karan Gupta from ACM. Please go ahead.

Yeah, hi. Good afternoon. An audible, right? So, my question regarding the segment-wise, if you can just directionally or broadly comment on the segment-wise contribution to the profitability part or the revenue side. So, going forward, what you are seeing that 200 to 220 crore of profitability, which segment is contributing more in terms of margins over the growth part, and the second one is, again, on the chart you've shown, the Performance, operational performance side, so your shared, shared facility parts is increased, right, in terms of EBITDA, in terms of gross block. So how the margin is improving, because your EBITDA proportion is doubled from 25, and your gross block is also, you know, increased quite a bit now. So, how the asset is improving, how the profitability margins, EBITDA margins is improving, that's a typical thing I want to understand here, the shared and dedicated part.

First thing is, from a segment-wise EBITDA or profitability perspective, we don't give out those numbers. We promise that towards the end of this year, we will start giving out that number. And the rationalization of why we are not giving out that number is because in some of those categories, Our numbers would be very, very... Indicative of our customers' performance. We don't want our numbers to be used as a proxy for some of our customers, and as a result, we don't do that. But in terms of the significance of the segment, we started disclosing the cross-block which is invested in that particular segment, and that data is available in the PPT. Which would give you some kind of an idea in terms of which is a segment which is growing, where are we putting in more money. We've also given capital allocation decisions in terms of where we are investing money, which categories, etc. And let me just answer a question which you haven't asked. We are agnostic as far as those five categories are concerned. We will invest wherever we see growth in any of those five categories. So from that perspective, we are not... Going after one particular category or we're not focusing after one particular category. The organization has been broken up into five divisions. We've got a new leadership, which is heading all of these divisions, and all of them have been given a simple mandate, which is to grow the EBITDA at 20% and to continue delivering 20% ROE numbers. So from that perspective, we are agnostic as far as the categories are concerned. Now, in terms of the second part of your question, let me... I'll be able to give you the exact split, but let me explain to you the mechanics of how that works. In case of shared manufacturing business, as you are aware, operating leverage plays a larger role in it. So EBITDA percentage, again, I hate to use EBITDA as a percentage of sales, but let's say ROC for shared manufacturing businesses on the assets which have been deployed. Shared manufacturing should be much higher than, let's say, a dedicated manufacturing. That's the simple thumb rule. Since we are taking on a higher risk in terms of shared manufacturing, we expect a higher ROCE number. Now, that's the expectation. Sometimes our expectations are met, like we did in the guidance this time. Sometimes we might not be able to meet it. So, like the shoe business currently has not met our expectation of delivering a higher ROCE number for this quarter for reasons which are completely beyond our control. However, in case of the dedicated manufacturing business, the ROCs are more humble but they are very, very well predicted. And as a result, we don't see any variability in those numbers. Not sure whether that actually answers your question, but that's about the extent of what I can give you in terms of information.

Okay, okay. Fair enough. But, you know, just trying to understand the capital allocation part on segment-wise, right? So blended ROC is fine. But the segment-wise, if you are saying that the gross block, or you are giving you capex numbers, so we can just take a proxy of capex number as a revenue gross file, right? You can also share some asset numbers. It will be directly correlated to your revenue part, but still the efficiency of the capital that you are using. That's how we can get, you know, segment-wise, that you're putting more capex on, in which segment. The other thing is, what...

Sorry, was there a question that you needed me to address there, or was that just a comment? Because you're right. I mean, at some level, as an analyst, you can definitely look at our capital allocation across segments. What I urge you to do is think about the fact that in case of the ROEs, ROCs, you would have to multiply or take into consideration the fact that in our various five BUs, we might have a separate percentage in terms of shared versus dedicated. What you see as a consolidated, which is 60-40 approximately for the company as a whole, may not be true for a particular segment of business. Specifically, if you look at the shoe business, 100% of that business is shared manufacturing. It's not 60-40. So, from that perspective, our ROCE expectation for the shoe business would be much, much higher than the blended ROCE for the company as a whole. Okay.

So, for FY27, what's the ROCE you are targeting? And what is the expectation of growth clock and boom in shared and dedicated size?

So, I think Mayank already answered about the fact that when we, the indication that we have given so far is about 2150 crores of investments. We expect the split to remain the same, which is about 6040. In terms of ROCs, The individual project level, the minimum threshold remains the same, which is about 89%. However, again, since we will be undertaking a substantial amount of capex in this year as well, we will come back to the same discussion that I was having earlier, which is some projects would have commercialized, let's say, in the first quarter, like Panipat, some would probably commercialize in the second, third, or even fourth quarter. And as a result, the blended ROCE number is not a guidance that we are currently giving. At an individual level, we strive to maintain the ROCE at 18%, which is why what we've done is we've given an absolute number of the guidance of that.

Okay, and what was the ROC numbers in dedicated site earlier before starting the shared or increasing your shared, basically, share? So, what was earlier the target of the ROC in the dedicated site? So, I just wanted to gauge how we have improved from dedicated to shared facility in terms of ROC. Sorry.

We were just trying to remember your name. Karan. Hi, Karan. So, as we told you that our discussion in dedicated manufacturing revolves around the ROEs which we make on our equity contribution. I'll eat. It depends on the product category, and it also depends on the location of where we are putting our money. So, the range is between, you can say, between 16 to 22 percent.

Okay, 16 to 22 percent. Okay, okay.

Okay.

So next, just one last question. On the next two to three years, if you assume what's the... Basically, the strategy on the shared part or the dedicated part. I mean, to increase the shared part to, let's say,

60-40, 60 will be shared or dedicated will be

40, or what's the strategy from here on to increase the profitability and the ROC part? Just a broad question.

Difficult to say. I think the market is evolving in all of these segments very, very differently. I would be hesitant because all these five businesses have very, very different contours of the new businesses which we are signing up for. If I give you a specific example, in case of beverages, our strategy now is to set up multiple units across the country. We will probably at the end of FY27 become the single largest independent bottler of beverages in the country. And by independent, I mean we do not have an affiliation to any brand. We are manufacturing for multiple brands, and we will be the single largest independent bottler in the country. Now, that business is growing in such a way that it will be shared manufacturing. As I mentioned earlier, the business is definitely that of shared manufacturing. In case of home and personal care, we continue to see a lot more emphasis on dedicated manufacturing or what we are beginning to see as a hybrid, which we call as anchor tenant model, where a part of the capacity is dedicated and a part of it is shared. In case of OTC Pharma, we continue to see a lot more traction as a shared manufacturing capacity as well as dedicated, so it's evenly split. Like Mayank said, we have visibility only till FY27, which we believe that it will be 60-40, 60 dedicated and 40 shared. Beyond that, How we announce new projects coming in.

And you can also share the customer acquisition numbers over the years, if you can, in your equity. And maybe you can share the brand names.

Generally, try not to give out the brand names of the companies. Just as a sweeping statement, I can tell you that if you are consuming an FMCC product, the chances are that it has been made by us across all of the segments that we are in. We are working with the largest brands as well as some of the emerging D2C brands. Due to client confidentiality reasons, we generally avoid giving this, but I take your point in terms of... Bringing in new customers, I think maybe we will put in some information of how many new customers have come in over the year.

Thank you. Thank you very much. Thank you.

Thank you. The next question is from the line of Ridan Shandak from Unify AMC. Please go ahead.

Hi, Samuddin. Congrats on a great set of numbers. I actually broadly have three questions, if you could help me, the healthcare side, if you could give us a more color on what's happening over there and what our outlook is, because I think the capex that we've done on that over the past year has also been fairly minimal. That's question one. Question two is, I think our target for FI26 was 2000-odd years. And we're about 190 short, which I can see that you guys have said that is in progress and it will get done over the coming year.

My question is broadly, this 150

crores of additional drop that we're adding over the course of FY27 is a, if I can venture so far as to say, a fairly small number, because considering the 590 crores we did in FY26. If you could give us some color there. And the third bit of the question is that since I think inventory is consuming more of our cash flow, our thoughts on how we're planning to finance this cash flow from operations have fallen, not fallen, but I mean, as a percentage of our data has gone down given working capital constraints, how the financing for increment in capex looks like.

Ritanj, let me address the second question. First, because we had a similar discussion in our board meeting yesterday. Let me give you some color around that 150 cross. So, the 150 cross is new contract which have been signed since April. That's in the last 45 days. Just to be sure, that's not the guidance for the entire year. We do have a strong pipeline of projects that we are discussing. We generally, as a policy, do not give out the number unless the contracts have been signed and we are I'm reasonably confident that that number of 150 crores, I forget the adjective that you used, but will not be as small as you think by the end of this year. I think we will make announcements as time goes by, which should hopefully satisfy demanding board of directors and shareholders. Second, in terms of, you know what, actually, I don't remember your first question, but I'll address the second question, and then we can come back to your first question. As far as the second question is concerned, you're absolutely, sorry, the third question is concerned. In terms of working capital, I'm going to request Ganesh to just kind of highlight, because that's an important point that you raised, and I'll ask Ganesh to give you specific examples of what is happening in terms of the inventory buildup, what is happening in terms of the geopolitical situation. But broadly, I think I should spend a couple of minutes on explaining that because you are absolutely right. And we ourselves as a company did put this out in our presentation as well because we think it's an important parameter as shareholders to monitor that while we met the guidance in terms of the profit, the cash flows have been less than satisfactory. I'm going to request Ganesh to explain why they have been less than satisfactory.

Hey, hey, hey, sorry, my line got disconnected in between, but can you guys hear me now?

Did you hear what Hamirat said?

I heard that there's being, you guys are going to address the cash flow bit first, and I think he missed out on the second question. Did I get that out?

No, I did not miss out with that. I just said that you are as demanding as our board of directors.

I'm sorry, sorry about that.

So let me go back to the second question and I'll summarize it, not to waste everybody else's time. The 150 crore announcement that has been made are projects which have been signed up in the last 45 days, which is starting from April. The year is still young, and what we confirm to the Board of Directors is that we do have a strong project pipeline. Discussions are ongoing with a bunch of customers, so hopefully before the end of the year, we will be able to make announcements which will satisfy shareholders as well as Board of Directors in terms of new CapEx signing on. As far as the working capital is concerned, I said that yes, it's a very valid point. I think we need to elaborate on this. Ganesh was just about to give you some examples and anecdotes of why our working capital situation is what it is.

Sorry, Ganesh. I fully understand why the working capital situation is the way it is with the GST. I follow through on that. My question is more to do with a plan for financing incremental capex, assuming we're not able to keep inventory on customer books.

Assuming I'm sorry, what?

Assured that we don't transition to job development.

Ah, okay. So, there are two things, right? So, as far as working capital is concerned, yes, Mayank and I spend a lot of time on the GST duty inversion, but there is also an increase in terms of our inventory. I was letting Ganesh talk to you about that, but it looks like you don't want to hear Ganesh talk about it at all. So let me just rest it at saying that Ganesh and his team have tried hard to ensure that we are able to service our customers. And one of the things that they have had to do is stock up on inventories to ensure that there is no production loss. In terms of funding these inventory, as well as the GST duty inversion, I think Mayank and his team have done a phenomenal job in terms of getting working capital credit across all our product lines. And as a result, the working capital investment is currently not limiting or constraining our investment in the capex. Secondly, if you look at our overall debt equity ratio, it is currently at about 0.84. And we have some amount of cash on our balance sheet as well, which gives us enough buffer or runway to be able to take on the investments that we are talking about. So we are well seized of the fact, we are also well seized of the fact that in terms of the uncertainty around GST duty inversion as well as the inventories, we need to be a little bit more cautious and not go out all out in terms of our investments. I think Mayank does a stupendous job in terms of ensuring that we don't fall short of money.

Got it. Thanks for that. And sorry, last bit was a comment on our healthcare segment.

Can you please repeat that question with us?

I basically wanted to know more about what's happening in the healthcare business because I think broadly what we're seeing in pharma as a whole is that the pack is doing well and exposure on the move. I just wanted to get a sense from you on how that's progressing on your end.

Sure. Okay. So, the healthcare segment actually is doing well for us. We've made some announcements about how we've signed on a bunch of new customers. We've signed on three or four new customers for that facility, and as a result, I think that segment will start contributing very well for us. We've been lucky to inherit a facility which has got all the regulatory approvals, whether it is the U.S. FDA or the Russian FDA. Vicky here is also being nominated as the head of exports, and he's going to talk about, hopefully in the next couple of quarters, about what we are doing on the export front. You're absolutely right that exports is definitely something This is something that we are focused on, though this is probably not the best time. For us to go out and get new customers, there seems to be a lot of uncertainty around global supply chains, etc. But we've taken a contrarian approach, and we recently started talking to a bunch of customers, including modern trade, large, big box modern trade players in the U.S. And hopefully in the next couple of quarters, we should be able to come back to you with some tangible data around it.

Good. Thanks for answering my questions, Prasla.

Thank you. The next question is from the line of Rajat Parap from Systematics Group. Please go ahead.

Yeah. Hi, team. Rajat Parap here from Systematics. Thank you for the opportunity.

Sir, can you please help me with FY26 sales number

for the footwear division and any comments, if possible, on the profitability of this division for FY26 as well? Yeah. Thank you.

Hi Rajat, as Sabhi told you that we generally don't give the number BU-wise, but sales-wise, we have reached 500 crores in turnover in the shoes division, in the footwear division, but we generally don't give the... Number of profitability, but I can say that we have broken even in Q2, and now we are pack positive. But the strain on the prices because of the geopolitical issue will surely have some impact on the shoe in this quarter. While we are talking with the customers to get some of it back, but these are not the contacts, just like our dedicated, where the RMBM cost is directly passed through.

Yes, got it. Thank you, sir. That was it. Yeah, and best, Vishen. Thank you.

Thank you. The next question is from the line of Jai Prakash Kumar from Korman Capital. Please go ahead.

Hi, sir. So, this one, I think you targeted 4,000 per year revenue, and you met the target. When will you come up with this guidance or a few years vision? I think earlier you had a question.

Yeah, Prakash, we cannot hear you clearly.

Am I audible now?

Yeah, better.

Yeah. So, Jandy, you come up with this guidance earlier. There was a 2K target of the revenue 4K target we recently met, right? Is there any long-term, three years, four years kind of a target you have in mind which you want to meet? That's the first question. And the second question is, given this change, kind of a bit of a shift in the business model to share, which will be making up 40% at the gross block? Can we see 10% margins? These are the two questions I have.

So, Jai Prakash, currently we are avoiding giving guidance on the sales numbers because of the various things that we've mentioned, both in terms of the discussions with the customers to change the nature of revenue recognition, which will have downward pressure on the sales. The second, of course, is inflation, where given the pass-through nature of most of our contracts, you will see an increase in the sales as far as those businesses are concerned. Actually, do not affect the performance of our company. And as a result, we avoid and are currently definitely avoiding giving any kind of a guidance in terms of the sales number. We will stick to the guidance of the pack, which next year we've given a very clear guidance even last quarter and we've reiterated it in this quarter, which is we are confident that we should be able to get to a pack of between 200 to 220 crores for FY27. Second, in terms of the margin, and I'm assuming you're talking of margin as a percentage of sales, if all of the customers that we are speaking to actually agree to change to conversion cost model, your wish could actually be realized where the path margin will go to 10%. But frankly, that's not because of anything that we do. It will be purely an accounting entry because our sales would have fallen by that margin.

No, no, I'm just talking in terms of night-to-night basis, of course, yeah.

On a like-to-like basis, as a contract manufacturer, I would be really surprised if we deserve 10% Pat Martins.

No, I'm talking about current EBITDA margin, which are like close to 9%, yeah, 9%.

Ah, at the EBITDA level. I'm sorry, I thought you were talking about that. Oh, I'm sorry, EBITDA 10% is definitely achievable, Jai Prakash. I mean, that's not even a question, actually. I'm sorry, I was thinking you were talking about that.

Yeah, yeah. No, no. Another question I have is now that you have five vertical sites, and each of these verticals is huge in terms of the opportunity. So, I think you mentioned you are, I'm not sure if I heard correctly, you are giving the target of 20,000 growth to each vertical site, right? I'm not sure if I heard that correctly, but anyway, so how do you see business panning by, let's say, after 2030, and each category, if you can just talk about?

So, you didn't miss here. The mandate given to the management is very clear that we should be able to grow at 20% in each of our BUs, and as a result, the company as a whole should definitely grow at 20%. There will be intervening periods of time where one of the BUs may not perform at that number, but on a whole, and that's the reason why the SGA team has taken a lot of effort in putting that slide out there with the industry opportunity size. That's growing at 20% in spite of all the macroeconomic pain at our level, where we are such a small player of each of those segments, is not an impossible target. Is it easy? It definitely is not. As a manufacturing company, I can tell you that pushing even a smallest factory to start manufacturing and ramping up is not an easy job. But is it achievable? That's what we get paid for. So, yes, it is definitely achievable to be able to get to 20% growth across these BUs. So, that's something that, yes, that's where we see. So, if you extrapolate that to 2030, assuming that by 2030, consumption numbers for the country as a whole are also back up. If anything, I think it should be easier for us if we get some tailwinds from increasing consumption and lower inflation, Which currently we are having to fight as a headwind. Thank you. Thank you, Jai Prakash.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Vimal Solanki, Head of Corporate Communications and Emerging Businesses, for closing comments.

has been an important year for HFL, with the company delivering record financial performance alongside strong operational progress across business verticals. And over the course of the year, we continue to expand capacities, strengthen manufacturing capabilities, and deepen customer relationships, while maintaining a disciplined approach towards capital allocation and execution. As we move into FI27, our focus remains on scaling up newly commissioned capacities, commercializing the ongoing project pipeline, and further improving utilization and operating leverage across the network. Thank you once again for joining us today and for your continued trust in Hindustan Foods. Trust you are taking care in the summer heat. Stay hydrated, eat some ice cream, drink some beverages. And should you require any further information, please feel free to reach out to us or connect with Strategic Growth Advisors, our investor relations partners. Thank you so much.

Thank you very much, sir. On behalf of Hindustan Foods Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.