Hindustan Foods Limited (HNDFDS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Hindustan Foods Limited Q1-FI27 Earnings Conference Call. As a reminder, all participant lines will be in the lesson only now, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during the conference call, please signal an operator by pressing star 10-0 for the touch door open. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Samir Kothari, Managing Director from Hanustan Foods Limited. Thank you, and over to you, sir.

Thank you. Good morning, and welcome to our Q1 FY27 earnings conference call. Joining me on today's call are Ganesh Aagekar, Executive Director, Mayank Samdani, Group CFO, Vimal Solanke, Head Corporate Communications, and SGA, our Investor Relations Advisor. I trust all of you have had an opportunity to review our earnings presentation, which has been uploaded on the stock exchanges and our company website. We are quite pleased with the performance of the company in this quarter. In spite of the headwinds in terms of the macro environment, especially around the elevated inflationary pressures and the geopolitical risks, The quarter's performance is a vindication that the long-term opportunity for FMCG contract manufacturing in India remains compelling. Increased outsourcing by consumer brands, rising consumption, premiumization, and the growing preference for asset-light manufacturing continues to expand the addressable market for HFL. Coming to the financial performance, we have started FI27 on a strong note. While our footwear business faced temporary cost pressures during the quarter, due to higher raw material prices arising from the Middle East crisis, and the implementation of the revised wage rates, the underlying performance across our other businesses remained robust. Leveraging the strength of our diversified manufacturing platform, we delivered our highest ever quarterly patch with a growth of nearly one-third, 33% over last year. Testing the continued confidence of our customers and the robust demand outlook across our businesses, we have already signed on various projects totaling to around 340 crores in this financial year. Including these investments and the projects already under implementation, we expect to commercialize manufacturing capacities exceeding 500 crores during FY27. Additionally, we continue to engage with our customers for various new projects, which gives us the confidence not only to reaffirm our FY27 path guidance of 200 to 220 crores, but also makes us optimistic about sustaining this growth in FY28 and beyond. Ganesh, who will take you through the operational highlights of the quarter.

Thank you, Samir. I will not take you through the slides for the first quarter of FY27. We have started the year on a strong operational footing with healthy executions across our manufacturing networks and encouraging progress across all of our business segments. The capacities commissioned over the past few quarters continue to ramp up well, while our teams remain focused on improving operational efficiencies, onboarding new customers, and strengthening existing customer relationships. Our home and personal care business remains at maximum capacity, supported by consistent demand and efficient manufacturing operations. We are seeing some traction in demand for these products across all categories and across all sites. Based on this, the division delivered record performance this quarter. The integration of the Aurangapaz personal care facility has now been successfully completed with production, stabilize, and the plant operating seamlessly within our manufacturing network. The brownfield expansion at Chilabasa is expected to commence production during the second quarter, while the greenfield, Lucknow facility continues to progress as planned for commissioning later this year. Our food and beverages business continues to witness healthy momentum across multiple categories. The Coimbatore, Nasik, and Mysore units continue to operate at record production levels, supported by efficient operations and sustained demand. The beverage division had an excellent season and validates our belief that beverages will be one of the major revenues of growth for this division. We are also expanding our manufacturing platform with addition of a Greek yogurt facility in Goa, marking our entry into another high growth category. The ice cream business delivered another strong quarter supported by robust summer season and record production volumes across our manufacturing facilities. During the quarter, we successfully commissioned our state-of-art municipal facility and continue to expand our ice cream manufacturing capacities. This capacity expansion will enable us to cater to growing customer demand and support the long-term growth of the category. We also continue to improve asset utilization at our NASIC operations by adding new customers across both the ice cream and cone manufacturing facilities. We continue to strengthen our capabilities by adding new customers across syrups, tablets, and lozenges while progressing our aerobatic wellness expansion at Badji. We also initiated the certification process of Class III medical devices at our Chennai facility, which will support our expansion into regulated international markets over time. We are actively pursuing new export opportunities for our personal care product portfolio, Manufacturer of Budji Facility. With scalable production capabilities and a strong focus on quality, we are engaging with international customers and partners to expand our presence in global markets. Our footwear business continued to make steady progress during the quarter by expanding its manufacturing footprint and strengthening customer relationships. We added new customers while continuing to expand our manufacturing capacities across North and South India. Our order book and capacities starting from Q2 of 27 onwards are full for the rest of the financial year. We have witnessed strong demand from some of the reputed brands in the industry. We experienced temporary challenges during the Middle East geopolitical crisis, resulting in short-term disruptions due to loyalties and supply chain activities. To continue uninterrupted production, we had to procure material at higher prices and increased freight. The division was also hit by a large increase in the minimum wages in Iran. We are confident that our customer will support us in mitigating the losses incurred due to these causes and that the division will return to profitability in the coming months. We continue to remain bullish about the long-term business outlook for all our divisions and remain focused on improving operational efficiencies and enhancing our manufacturing capabilities to support future growth. On the back of the emerging demand across various product categories, we have announced a series of investments. The board has authorized additional investments towards new expansion projects of 190 crores bringing the total for effect 27 to 340 crores. This is in addition to the Rs.150 crores worth of projects carried forward from F526. The break-up is as follows. Food and beverages, 210 crores at Coimbatore, Mysuru, Goa, Aurangwa and Haidabar plant. Now, before I conclude, I would like to briefly update you on the disruption at our Silvasa manufacturing facility following the record rainfall witness in the region during July. Production has already been partially restored and we expect the facility to be fully operational by the end of August. The facility is adequately insured and we do not expect this incident to have any material impact on our long-term operations or growth plans. Overall, we believe that the investments made over the past few years together with the expansion project announced in F527 have created a diversified manufacturing platform that is well positioned to capture future growth opportunities. As we move through F527, our focus will remain on ramping up utilization across recently commissioned facilities, executing our expansion pipeline with discipline, and continuing to enhance operation efficiencies across the industry. We remain confident that these initiatives will support sustainable growth in FY27 and create a strong foundation for FY28 and beyond. With that, I will now hand over the call to Mayank Samdani, our group CFO, who will take you through the financial performance for the quarter.

Thank you, Ganesh, and good morning, everyone. I will now take you through the financial performance for the first quarter of FY27. We have started the year on a strong financial footing, delivering healthy growth across key financial parameters. Total income for the quarter stood at 1207 crores, resisting a growth of 18% over the corresponding quarter last year. EBITDA increased by 26% year Year-on-year to 106.3 crores. Reflecting, improving operating leverage and better asset utilization across our manufacturing platform. Profit before tax grew 33% year-in-year to 56.6 crores, while profit after tax also increased 33% to 42.8 crores, marking our highest ever quarterly packed. This performance is a testament to the resilience of our diversified manufacturing platform, disciplined execution, and improving operating leverage across our businesses. The quarter numbers were impacted due to cost pressure faced in our put-wear business arising from higher raw material cost and revised wage rates, which totalling to around 6 crores impact for Q1 FY27. We have been proactively addressing these challenges by securing alternate source of raw materials, working closely with customers on appropriate cost-pass-through mechanism. And driving operational efficiency across the business, we expect these initiatives to progressively mitigate the impact of these temporary headwinds and support margin recovery over the coming quarters. In spite of these headwinds, the quarter performance is satisfactory and encouraging. From the capital allocation perspective, we continue to follow a disciplined and customer-led approach to investing, with clear focus on returns, capital efficiency, and timely commercialization. As Samir highlighted earlier, we have planned approximately 340 crores for new project during FI 27, in addition to the project carry forward from last financial year, bringing the total for this year to nearly 500 crores already. After having executed the required capex in financial year 26, it appears that FI 27 will be larger than the previous year. Supported by improving utilization of recently commissioned capacities. With healthy execution across our project pipeline and sustained operating leverage, we remain confident of delivering our F527 profit after tax guidance of 200 crores to 220 crores. We present with a healthy growth of 34 to 48% over F526. On the accounting related matter, the duty invasion in GST continues to affect our cash flows of some of our business units. As the steps we have taken to address these issues, we will continue to see a higher growth in our profitability numbers as compared to revenue numbers. With that, we would now be happy to take your questions.

Thank you very much, sir.

We will now begin the question and answer session.

Anyone who wishes to ask a question may press star and one on their touchrope telephone. If you wish to remove yourself from the question key, you may press star and one. Participants are requesting you and test while asking the question.

Ladies and gentlemen, we will wait for a moment while the question comes.

We have a first question from the line of Faizal Hawa from HG Hawa and come. Please go ahead.

So, Samir, with the GST inversion problems and even manufacturing becoming more difficult by the day, do you feel that we are now in a position to negotiate better terms from our customers? With regards to ROC, ROE, or even some kind of equity funding from them so that it reduces the risk of our business. And second is, to what extent we will try to do some backward integration like we did for the cones in the ice cream. And third question is whether we will do any kind of revaluation of assets because many of our factories are very old and depreciated. So, but their actual value on the books must be much more. So, is there anything of that also in your planning?

Good morning, Faisal. So, three questions. Let me try and address all of them. The first one being about backward integration. You're absolutely right. We did start this journey with the acquisition of the Kuhn manufacturing facility for ice cream and the setting up of the stick manufacturing facility in Lucknow. We've had actually very good experience in the last one year, where not only have we managed to... Get our existing customers to start sourcing from these two units, but we've also been able to seed new customers who are currently not the customers of our contract manufacturing business. So I think backward integration for us will be an interesting avenue for us to explore, not only to increase the wallet share of existing customers, but also to be able to cross-sell to some other customers. So, we are actively looking at this, how we can grow in terms of the backward integration, and we'll come back to you in the near future of specific plans along that line. Second, in terms of the GST inversion and manufacturing becoming difficult in general, yes, you're absolutely right that the GST inversion is leading to some amount of cash flow getting stuck across food industries. I'm not so sure whether that can be the only driver for people to outsource contract manufacturer products. However, given the diversity of the products that we have and our relationships with some of these brands, we are hoping that we are a little bit better placed than some of the other players in terms of handling this GST inversion. And as far as your third question... Faisal, help me with your third question, please.

Revaluation of assets.

Yes. So, Faisal, obviously, there's been no revaluation of the assets. And yes, you're right that a lot of these assets have been procured over a long period of time. Our business model is not contingent on that revaluation. But yes, that money definitely sits on the balance sheet and will get unlocked at some point of time.

So, my question with regard to inversion of GST was more leaning to the fact that can we have now better terms from our customer because we are dealing with many more intangibles now, and plus competition is also weakening.

So, yes, Patel. The second and the third part is right, which is that we are dealing with more intangibles and competition is weakening. But is GST inversion the cause of that? That's where I am not agreeing with you. Definitely, as we improve our scale, as we diversify our customer base, as we look at various products, we should start seeing some amount of improvement in terms of our profitability margins, etc., especially on the capital-based ratios, which is ROE, ROCEs. That is a given. I'm still not sure whether GST inversion is going to be one of the tailwinds for that.

I appreciate you answering my question so well, and this time's investor presentation has also been done very well. A lot of changes in it, and much more easier to then go through. Thank you so much.

Thank you, Faisal.

Thank you. We have our next question from the line of Amnish Rai from Obama. Please go ahead.

Yeah, thanks. Congrats on good numbers. My first question is on the cost and wage headwind. So, X of the footwear do you have in contract in terms of pass-through of the new labor code or the cost inflation because of the Middle East crisis? Because you have mentioned on the footwear area.

So, Amish, hi, good morning. As you are aware, most of our contracts, other than shoes, we have a path-through mechanism. And as a result, whether it is the changes in the labor code or whether it is the changes in the inflationary aspect of Middle East crisis, etc., we've been able to successfully pass on those costs. In case of shoes, the arrangement is slightly different, and that's the reason why we've been saddled with not being able to pass on those costs. I also want to just delineate the fact that this particular quarter was not affected by the new Labour Code. It was affected by a very local problem, which was that in the NCR and especially in Haryana, the minimum wage rates were changed. And as a result, the rates were increased by nearly 30 odd percent. And since the quantum of increase was so high, it was very difficult even in a normal business to be able to pass this on. In case of a shoe business where purchase orders and prices are confirmed nearly six months in advance, it was virtually impossible for us to be able to pass it on. However, we've been successful, our customers are understanding this, and starting from this quarter, we have been able to successfully pass on the effect of both the increase in material as well as the base increases.

One follow-up here. So, in your contract going ahead, can you build this structurally in your footwear contracts or there the industry works on separate contracts in separate terms?

So, it unfortunately works in a separate paradigm, Avneesh, because these products are made at least six to months to eight months in advance for the season, and the MRPs and orders are taken by the brands that much earlier. So, any kind of change in the middle of the season is just not part of the industry playbook.

Understood.

Second question is on this 340 crore new project twin. So if you could elaborate which of the four or five segments which you have, the bulk of this is. Is this largely ice cream and food feds?

Abneesh, Ganesh is the one who answered that.

Yeah, Abneesh. So the breakup that I told you would be for food and beverages is going to be 210 crores spread across five units. Coimbatore, Mysore, Goa, Aurangbara and Hyderabad. This, this would be for the beverage part. In ice cream, we have, it would be 80 crores at Panipat. And in home and personal care, it is 50 crores at Lucknow. This would be again for a bar and a liquid line coming up in Lucknow. This is the breakup of the pre-body course.

One small follow-up here. Recently, what we have seen in Foods is the regulator has been clamping on some of the terms, like 100% pure, natural, etc. I wanted to understand, as a manufacturer, do you face any risks from this? Because they have set a deadline also, by which time this has to be withdrawn from the market and stopped also. Any risks to your numbers because of this?

Our arrangement with most of the brands is that any kind of label claims, any kind of marketing is under the purview of the brand, and as a result, while we are definitely party to any of these notices, there are no risks that we assume for any kind of claims made by the brands. So the short answer is that no, it doesn't affect us at all. The slightly longest answer is I think the FSSAI cleanup of the food sector will lead to some amount of disruption in terms of the brands. But I think in the long run, it will help all of us because the product and the production will move towards the organized market more, and that should help us.

That's all from my side. Thank you.

Thank you, Avni. Thank you. We have our next question from the line of Surbisomi from Bell by the Capital. Please go ahead.

Yeah, hi, Samir. Congrats on great execution. My first question is on the shoes business. Wanted to get a sense of where are our capacity utilizations there right now? And since you've mentioned that there's a strong order book for H2, can you give some color on, you know, is this coming from the existing logos that we have or have we won any new logos and post this order book, where will our capacity utilization and shoes business would be at?

Hi, Surabhi. So, capacity utilization in the first quarter was obviously not up to the mark. I think it was affected by a couple of things. One, because of the availability of material. Across all the imported components and the disruptions in terms of the freight, etc., we had very poor capacity utilization in the first quarter. However, I'm happy to say that starting from something like August onwards, we have nearly 80 to 90 percent capacity utilization. I would like to say 100 percent. But since you know that in case of shoe manufacturing, it's a labor-intensive industry, so we are already trying to ramp up our capacities by employing more people. We have a full order book. This is on the back of a couple of things. One, yes, there have been new customer wins, both on the domestic front as well as multinational companies who have now started working with us. I think that's a very increasing sign for us. We've been able to broad base our customer base in the last one or two quarters, and I think that's going to play out in the next six months. And I know that there's a lot of unease about the shoe business, and especially what we've been up to in the last one, one and a half year. And I think what we've done is we've been able to consolidate our operations well, and I think the customers have also recognized that, which is why order books from each of our customers, the existing ones, has increased. Some of the customers who had stopped doing business during the transition when we took over the company have now come back. Even our south units, which we had started and were going up the learning curve, we now have a full order book there as well. So I think, yes, the journey has been long. It has taken us nearly two years to get to where we are. But I think the shoe business should finally start paying off in the second half of this financial year.

Got it. Very clear, Samir. Also, if it's possible, can you give us a sense of how much of the employee cost that we've reported in this quarter is related to shoes business? This bottle pop?

Okay, so we have about 5,000 people working in our shoe business. However, I do not have the number. In terms of quantification, the number that we came prepared for the discussion was that the effect of the minimum wages is 3 crores for this quarter. But, okay, Mayank is trying to do a back-of-the-envelope calculation. Hang on, Surbih.

Around 35-40%. So, Surabhi, the labor, the labor, the employee cost of shoe division will be around 35 to 40 percent of the total number of human.

Got it. Very clear. And congrats on the new project wins in the beverage facility. Just wanted to run by a math by you and, you know, if it makes sense. So, of the 210 crores that we're going to come on stream by Q4FI27, one, is it fair to assume that we will expect 100% of the capacity utilization of the same in 2028? And given our ROC threshold of 18%, is it right to say that 40 crores of, out of this 200 crores, like 210 into 18%, 40 crores is the bottom line addition that can happen over FI28 for us from this additional CAPEX?

So, I will address the operational issue, and I'll let Mayank give you a guidance in terms of the numbers. From an operational perspective, we expect all of these beverage units to come online by December, Jan, and that's the understanding of the customers also because, obviously, the season starts in Jan, and it would be stupid of us not to be able to catch the season. In terms of the overall capacity utilization, some of these projects, and I would like to say most, But let's say some of these projects are on an anchor tenant basis, which means our capacities are underwritten by those principles. So unless we screw up and we actually are unable to start the project in time or we are unable to produce. I think capacity utilization should not be a problem for any of those units. In terms of the extrapolation of the number,

Surbhi, the roast number, the numerator is EBIT, not the PET. So EBIT will increase by 18% on the investment which we make.

Okay, understood. Got it. Very clear. Thank you for taking my question.

What I'm trying to highlight is that we will continue to maintain a 1 is to 1 debt equity ratio, even for these projects. And as a result, there will be some outflow on account of interest.

Got it. Very clear. Thank you so much.

Sure. Thank you. A reminder to all participants, if you wish to ask any questions, you may press star and 1. Anyone who wishes to ask a question may press star and one or get it through film. Next question is from the line of Ankit Dharmashi from R&M Capital Trust. Please go ahead.

Hi, Samir. Thanks for the opportunity. Yes, thank you. We can hear you. Yeah. I think we have made significant changes in the presentation. So, again, this is not a question. Just a suggestion, if we can kind of break out utilization. I mean, like you just mentioned about the true business, how it was impacted. I mean, it will give you a better visibility and... A great amount of clarity for us. Also, you can see that KPEX and Grossbrook has been detailed out, but that's a suggestion. That can be implemented in next quarter.

So, let me address that right away, Amkit, that in terms of capacity utilization, the reason why we were so forthright in case of the shoe business and why we are so reticent in terms of giving out the information for the others is because in case of the shoe business, it's a completely shared manufacturing site. So, as a result, when we give out capacity utilization numbers, we are not making a commentary on which of our customers is doing well or which is not. On the other hand, when we start giving out capacity utilization numbers for some of our dedicated factories, it then ends up becoming a proxy for how our customer is doing, or it ends up becoming a way of gauging the number or the production volume of our customer, and that's why we tend to avoid that. I take your suggestion, but I really am not sure whether we will be able to give any more detailing as far as capacity utilization is concerned.

Got it.

Thank you.

Thank you. We have our next question from the line of Abhishek Mathur from Systematics Group. Please go ahead.

Yeah. Hi, Samir and team. Thank you for the opportunity, and congrats on the strong business expansion. Just on this, again, on this shoe business, the raw material cost impact, which you have talked about, just wanted to understand this better. So, you said that, you know, shoes are made six to eight months in advance, and so mid-season changes are a bit difficult, and we are negotiating. But just for my understanding, how does the mechanics work here? Have we not contracted for the raw materials for that six to eight months in advance? And if there is a lag, then is it a difficult negotiation that has to happen for us to get that amount with a lag, at least? So just wanted to add, also, thirdly, is it that whenever in the shoe business there is such an event which happens, which causes our raw material cost to suddenly fade, it will be similarly equally difficult for us to maintain profitability in the business? So just these two, three questions around this, please.

So, Abhishek, Ganesh will address the question in terms of how, what prices got affected and what's the overall buying process in terms of shoes.

Yeah. Hi, Abhishek. First of all, let me tell you that the shoe industry works on a fixed pricing for the season. That means the prices for the shoes are fixed almost a year in advance. The development starts a year in advance, the prices are fixed almost a year to six months in advance, and the rates of the raw material and packaging material are also fixed. However, if there is a change in the rates, the brands do not, you know, do not change the prices of the finished goods. I mean, the impact cannot be passed on to the brands, like what we do in our other business categories. This is prevalent in the shoe business. However, what we are trying to do, for example, in shoes, let me be specific about this, a lot of material we import. We import almost 50% of our raw materials. Fabrics, laces, eyelets, you know, soles, a lot of, you know, incoming labels also we import. Here, because of the hike in raw material cost, because of the changes in ship rate, the brands are not in a position to absorb the cost. What we are doing now, we are in discussion with the brand. For the coming season, to tell them, to convince them to absorb some of the cost, and which they are agreeing. Maybe going ahead, we might be able to pass on the cost to the branch. What was your next question, Abhishek?

And Abhishek, just in terms of the normal process, this will work both ways, right? So, the inertia for not changing prices will work in our favor when, hopefully, at some point of time, the Middle East crisis gets resolved and prices start coming down. And in that case, we are hoping that the inertia works in our favor as well when the commodity prices come down. In terms of the overall negotiation, we do build in some kind of inflation which is expected in any of these pricings. However, obviously, these kind of black swan events where the freight rates nearly doubled or the Middle East crisis led to polymer prices increasing by nearly 50 or 60 percent, these kind of scenarios are not baked into the pricing ever.

Right. So is it fair to say that out of all of your business segments, probably shoes is the one unique segment which requires that 8 to 12 months of preparation time is labor intensive, and so therefore, this kind of impact would happen mostly in the shoe business and not in the other divisions?

Absolutely, Abhishek. In fact, I would go as far as saying that only in the shoe business and not in any other business.

Got it, Samir. Thanks. That was very clear. Thanks and all the best.

Thank you. The next question is from the line, Akhil Pare from 361 Capital Markets. Please go ahead.

Yeah, thanks for the opportunity, and once again, many congratulations for the entire, for the sharp execution, what we have been seeing for last many years. My first question is slightly broader, right? I mean, we have seen the scaling of a company from 500 crore of top line to probably 4,500, 5,000 crore this year, and from bottom line of 12 crore to 200 crore this year. How has the perception of our customers and clients changed over the years? How it stands now, and how do you see that, say, from next three to five years perspective? That's my first question.

Till, this is an interesting question. I mean, I would be hard-pressed to understand what the customers think of us. It's a better question to ask of them. But broadly, I think what has happened is that I think we definitely define the FMCG contract manufacturing industry in the country. We are the largest and the most diversified contract manufacturer. I think with all humility... I think SFL is the one which brought FMCG contract manufacturing into some kind of a limelight, and I think we are very happy and proud about the fact that we did. From a customer perspective, I think we've been able to establish ourselves as a partner who is able to sustain, as a partner who is able to take, if you look at the shoe experience, who is able to maintain in the short run to be able to service the customers. If you see what we've done with our Silvaca facility, in spite of having nearly 10 feet of water in the factory, our teams have worked overnight, and we've been able to partially resume the production within a week, and we'll be completely on board within August. I think the customers have gotten to a stage where they realize that when it comes to execution, when it comes to execution at scale, Whether it is in the south, east, west. Not whether it is in product categories as diverse as liquid detergents to ice creams. We bring some amount of skill set. I think the customers are beginning to realize that. I think we are beginning to build on it. The fact that in the last couple of years, we've actually tried to build up domain expertise by establishing five different views, hiring chief executive officers who come with a lot of experience and a lot of domain expertise in each of these businesses further strengthen this confidence with the customer that we know what we are doing and hopefully we won't screw up their brand and the trust that they have placed on us.

So, then if I want to just extend this, right, I mean, from a scale and pricing perspective, how things have changed, like, would you be able to kind of give some broader, a few examples without probably not naming the customer, how our wallet share has increased, has increased from, say, last three, five years to date with, say, some of our top two, three clients? And is it fair to assume that from a pricing perspective, we are slightly in a better position in terms of negotiation with our customers than what we will say five years back?

From a scale perspective, I think it's evident from the fact that after having invested close to 500 crores last year, we have already signed up on projects of about 500 crores. In terms of our pipeline and the discussions that we are doing with customers, I think the pipeline itself is nearly about 1,000-odd crores of projects that we are discussing. So from that perspective, I think our customers now have the confidence that we can execute projects across various geographies as well as scale. In terms of the significance of us for a customer, I think just yesterday in our board meeting, we were discussing about the fact that we are beginning to mirror one of the national airlines, where if we end up shutting down for a few days, you would definitely have trouble in the SMCG industry.

Yes, I don't know if I should be saying that, but that's good to hear from the company's perspective and the dependency of customer on us. So my second question is, from CES perspective, what are some of the categories where we think we will have huge dependence? Like ice cream beverages are two of the categories which have been doing phenomenally well for us. Would we share some light at least? Not exact numbers, but broadly, like what are some of the categories where our contribution to the sales will be relatively higher.

Obviously, from a customer perspective, I cannot give out that detail, but let me tell you that across all the five BUs, we are significant partners for most of our customers, right, across all the five BUs, whether it's HPC, whether it's food and beverages, especially beverages, whether it's ice cream, whether it's shoes, and even in case of OTC Pharma. So, depending on the product category, we could be the only manufacturer in the country, and depending on some of the product categories, we would probably be one of the largest manufacturers accounting for a significant percentage of the customer's sales.

No, I'm sorry, just to clarify, what I meant was, how does our category-wise product sales mix look like, basically, broadly, which would be some of the categories for us, which would be contributing on a higher side?

Your question is, so let me, let me, let me take a, let me,

okay, let me, sorry, sorry, let me simplify this is what I'm trying to understand from a category perspective, how it will look like say from next few years perspective.

Oh, okay. So from our, our, our perspective, right?

Yes, yes, yes. Okay.

From our perspective, we continue to see a lot of traction in, in, in at least. And Ganesh has referred to this in his opening remarks. I think beverages continues to grow rapidly for us. In terms of ice creams, we've had a fantastic season. Obviously, the weather gods smiled on us as well. And we think that ice creams will continue to deliver growth in the coming few years as well. In terms of HPC itself, I think there's been a lot of press recently about how the liquid category of the home care is growing across the country and witnessing nearly double-digit growth. As far as volumes is concerned, and that's becoming a tailwind for us as well. In terms of shoes, I spoke about that at least from the H2 of this financial year, we have a full order book, and that's something we've kind of started expansion in terms of the capacities for shoes as well. And lastly, in case of OTC Pharma, while we are not announcing any new CapEx, just because of the gestation of the customer itself, we have finally reached the situation where our site has been approved. We've started commercial production for two more multinational companies in addition to our existing customer. And I think in the next six months to a year, I think the Bardi facility itself should be working at 100% capacity utilization.

Great, that's great to hear. And lastly, in last point, Paul, if I recollect, you had mentioned that we are in talks with some of the large box repealers in US. Any further update on that particular segment?

So, the discussions are on, Akhil. Unfortunately, the ambiguity on the tariff continues. We, in fact, Ganesh also mentioned this in his opening remarks that we've got some, I would like to say, orders, but we've actually... The potential orders for personal care products to be shipped to the U.S., all the development for those products have been done, all the trials, investments in the mold, et cetera, have been done, but based on the tariff situation and also based on the freight situation, those orders are currently on hold. So I think it will take still some more time. As far as shoes are concerned, we also have begun some discussions to try and leverage the UK FDA as well as the EU FDA. So we are hopeful that some of these will start translating into action soon.

Sorry, just clarification on this front. So, when you say U.S., do you have to talk to U.S. consumer brands or the retailers for the private label?

Both, actually. The order that we've received is from a U.S. personal care brand, which we had mentioned, I think, two quarters ago. We've made all the product development. We've made all the packaging development. The product is ready to be shipped as soon as Mr. Trump allows us to.

Fantastic. Good to hear that, and thanks a lot for answering all my questions, and best luck for coming quarters.

Thank you, Akhil.

Thank you. We have our next question from the line of Riddhya and Shrandak from Unify AMC. Please go ahead.

Hi, Tim. Thanks for taking the question. I just had one question. I think we discussed this earlier on. Part of it was answered with Akhil. On international clients that we were planning to add, Apart from the U.S., which you've already answered, can we just get some commentary around that? And also, with regard to the shoe prices in terms of raw materials, we've seen some softening in our raw materials there. And the third question is a little bit of a longer-term perspective. Other categories where compact manufacturing takes place, like textiles, pharma, EMS, any thoughts on entering newer categories over the medium term?

Okay, Ritansh, In our opening remarks, we mentioned that one of the steps that we are doing is we are getting ourselves registered for Class III medical devices registration in South. This will enable us to be able to export to the EU as well as the UK as far as medical devices is concerned. So that's one initiative that's going on. In terms of our exports, other than the U.S., just to bring to your notice and to the rest of them, the entire Dr. Scholl portfolio is currently being exported to U.K., EU, Australia, New Zealand, and Japan. Our IBD, our international business team, is working very strongly to open up the Middle East. In fact, we had extended discussions with companies in UAE and Saudi Arabia. Unfortunately, that's been put on hold again because of the current Middle East crisis. So while efforts are on, I think exports is something which has taken a little bit of a backseat in the last couple of months. In terms of the raw material prices for shoes, I'm going to ask Ganesh to answer that.

So, Vidanch, as I already mentioned that we work on a fixed pricing for shoes. So, the development is done one year in advance, and the prices are fixed at least six months in advance. For the shoes, which are going to be manufactured in the fall, for... January 27th, the prices are fixed in June. Right. The raw material prices are also fixed. And as compared to other business categories where there is a pass-through, we won't be able to pass these prices to the customer. Right now, we have seen an increase of almost 50 to 60 percent in raw material prices. Polymer prices, you know, fabric prices have increased. Even the freight rates have gone up by 4x. Hopefully, once the situation comes under control, the prices will again go down, and we will go back to the customer, I mean, we can go back to the vendor, and issue purchase orders at the decreased prices. This is for the raw materials, and what was the other question?

Thanks. The other question was a medium-term perspective on other categories like EMS, formulations in pharma, textiles for government, because these are the categories where contract manufacturing is very prevalent.

Right now, I would have to say no. We have a huge order book, as you can see. We talked about nearly 500 crores of capex for this year. I did mention briefly that we have a pipeline in terms of inquiries of nearly 1,000 crores. I really don't think, I mean, our management bandwidth, our hands are completely full for us to be able to look at new categories right now.

Got it. Thanks, Tom, for the questions. Best luck for the coming quarters.

Thank you. We have our next question from the line of Virat Pansurya from Skyride Wells Management. Please go ahead.

Hi, Samir. I had two questions. Can you quantify the absolute EBITDA and EBITDA impact the SHU business currently has for Q1 FY27 on the consolidated business? And also, what will be the ROC for the shared facility?

So, in my opening remarks, Virat, I have told that the peroxide number of it is around 6 crores for the shoe business, considering both the things. So, RMPM and both labor-related costs, with the labor-related cost is around 3 crore for the quarter, which is increased during the quarter. As far as the category level EBITDA, we are not giving that right now, and

Virat, the question was about ROE, ROC level for shared manufacturing. Is that what your question was? So, our, and obviously we can't, if you look at our numbers, we do declare the EBITDA number at the shared manufacturing level and the gross block at the shared manufacturing level. That, in the last few quarters, of course, has been heavily affected by the shoe manufacturing business. The past is no indication of the future. Our endeavor is that shared manufacturing facilities should deliver a much higher ROC number than the threshold number of 18%, which means that they should deliver much higher. Unfortunately, if you see the numbers which are published in our investor presentation, they are not there yet, which is mainly because of the shoe business.

I just have one more question. Given that the football business is under stress, so should we consider that a pack level for the year should be towards the lower end of the guidance?

Thank you to say that, Virat, we have continued to reaffirm our guidance. We have continued to keep the same range of 200 to 220. Let's come back in a couple of quarters and give more granular details in case we have to revise that guidance. Right now, we don't feel that we need to revise that guidance.

Okay, that'll be all. Thank you.

Thank you.

Thank you. We have our next question from the line of Mayur Parkaria from Wealth Managers India Private Office. Please go ahead.

Mayur, is my voice audible?

Yes.

Yes, Mayur, we can hear you.

Yeah, hello, Samir and Mayank, and congratulations on a set of numbers as you had guided earlier. So, you know, so that's a great thing. And also, the recent release around disruptions, and we are seeing that across India, and especially for, you know, outsourcing companies like us, where the manufacturing plants are multiple, the geographies are multiple, products are multiple, wishing the entire team all the best. And great, great work and, you know, take care during these natural disruption periods. So, with that, I had two questions. One is on the shoe side, you know. So, while near-term, you know, there have been impacts on the margins and this, but I think, you know, the certification issue from the government, the BIS and other things, are that in place and now, I mean, you sounded, you're sounding quite positive as a, you know, in the outlook from the, you know, on the shoe business now relative to what we have heard in the past. So, has anything changed in respect from a policy perspective and from the perspective of, you know, customers' outlook towards, you know, the shoe business?

So, first of all, Mayur, thank you for recognizing the grim details of manufacturing, and you're absolutely right that it's... I think the teams have done an excellent job in terms of being able to deal not only with these natural calamities, but a bunch of other things. I think while Ganesh was talking about this, I didn't want to interrupt him, but I think I'm going to take a minute just to give you one anecdote. Ganesh is currently importing one machine from China, which is supposed to be installed in our Silvata factory, and that machine, thanks to the Middle East crisis, has been stuck at an Iranian liner ship for the last two and a half months. And that's the kind of disruption that has happened that we've had to deal with in the last few quarters. It is heartening to see someone acknowledge it. So, thank you, Mayur. Coming to the shoe business, I think a couple of factors which is giving us some amount of confidence. I mean, I know that I have been... I was less than bullish about the shoe business in spite of the fact that I personally believe in the business, but I think the commentary that we made didn't come across and didn't convey our commitment and conviction. I think what has changed is that the market dynamics are changing. I think in the last two years, we've been able to position ourselves much better. I think the last one quarter especially where Ganesha's team and Girish and our operating team did a fantastic job of being able to deliver in spite of all the uncertainty, all the lack of material, etc. I think that has really helped in developing customer confidence, and that's translated into additional orders for us. Part of it is because of BIS, but I would like to think that a large part of it is because of performance of the teams and the confidence that customers are getting on our ability to service.

Oh, actually. Another thing was, you know, an observation and a related question to that is after very, very long periods of time, you know, we are seeing some green shoots on the core HPC category, you know, the numbers which OEMs and companies have started to report in terms of volume growth. And you also partly mentioned in terms of the outlook that HPC is also looking up. So does this accelerate now the fact that if there is a new capacity requirement and new outsourcing requirement which may come up? No, does it, what I wanted to understand, relative to where we were, let's say, three months or six months back, has that material changed or is it just at the margin which we are seeing and nothing great in terms of the core HPC category?

So, Mayur, I think it would be safe to say that it has materially changed. I think in our commentary as well as I think both from Ganesha's perspective and my perspective, I think both of us have mentioned one, he's also talked about the amount of investment that we're doing. Mayank has talked about the fact that FI27 will probably be a record capex, even higher than FI26. And I have mentioned that we have a project pipeline, not. We are definitely seeing an increase in terms of the traction, in terms of the demand, etc. I am a little hesitant to go out there and thump my chest as yet because there's still a lot of... I mean, I understand that, again, while the oil prices fell yesterday, again, there have been some flare-up in the Middle East. And that's one of the reasons why we are being a little circumspect. But if you ask me a direct question, are we more bullish than what we were, let's say, three months ago in the segment of HPC, the answer is a definite yes.

That's great to hear. Finally, last one suggestion. The market was worried about the CAPEX for FY27. I think it is now put to rest. It was worried about the profits not coming through ROCs. That is also now put to rest. The numbers have started to play out. There was also, even including me, we had a lot of things around the disclosures. So that has also started to play out. So wish you all the best with all these things. Just one small suggestion over here, with respect to outsourcing, and when we look at other companies, and when we look at slightly larger ones in other segments, I think it may be important and think of an idea to create a risk management committee from the perspective of, you know, various kinds of risks which are continuing to increase, whether it's natural calamities, one thing, this time, something else may pop out some other time, whether those are people risks, attrition risks, Sourcing risk, geopolitical risk, team and personal risk, many things on that, and because of the diverse, again, products, geographies, natures, categories, to create that setup so that we are much better positioned in the process and at a company level to be able to manage the situations which are ever-changing in this sense. With that, wish you all the best. Thank you.

Thank you, Mayur. I think that's an excellent suggestion.

Thank you. We have our next question from the line of Rahul from Ambit Investment Advisors. Please go ahead.

Yeah.

No. No. No. You need to speak a little louder, Rahul.

Is it better now?

Yeah, a bit better.

Yeah, first of all, congratulations on an excellent number to Samir, you and your team. Just one question, as you always see highlighting about the pipeline, and that's one of the lead indicator for the entire company. So, can you give some elaboration that how we should look at the gross block from a three, four, five, three to five year perspective? Because in the past, we have seen that the last five year, the gross block has grown at a 28% trigger, whereas the top line has grown at 20% trigger. So, should we expect the same to continue as a run rate? A plus or minus is a different thing, but just from a direct standpoint of view.

Rahul, thank you for asking that question. Actually, we've been very reluctant to give out our project pipeline number. The policy of the company has been to announce CapEx only after we've signed it. And as a result, I think in the last quarter, like Mayur was referring, there was some confusion about whether for F527 we have projects only worth about 150 crores. And I think we were not able to explain that properly, that the policy is that we announce CapEx only after we've signed it. And, however, at any given point of time, our project pipeline, the discussions that are going on with customers, the various teams who are interacting with customers, or even working on feasibility across BUs, the number of that is much higher than what we have announced. And I kind of gave some indication this time around, which, of course, my team was not very happy about, but the pipeline is about a thousand odd crores. And that's the kind of investment that customers are looking at. Whether we will be able to successfully convert all of those inquiries into orders, your guess is as good as mine. But what we will do is we will continue to give out a number of the capex as and when we are in the projects. The second point that you raised was the difference between sales increase and the gross block increase. I think Mayank and the company have kept mentioning this for a few quarters, for a few past quarters, because of the GST inversion and because of the way the customers are looking at the contract manufacturing business, we are encouraging some of our customers to work with us in a methodology where they supply us with raw material and packing material. As a result, in our revenues, we will recognize only the conversion cost. And as a result, I think Mayank in his opening remarks also mentioned that you will continue to see a disproportionate rise in our EBITDA and PACT as compared to revenues. If I can extend that, you will see a disproportionate rise in our gross block, EBITDA and PACT, and our sales growth may not be growing at the same rate.

And just extending that's very helpful, Samit. Just extending that if you want to maintain the internals in terms of your threshold ROC, etc. Among the pipeline, what is your hit ratio? Means how much is your rejection and how much is your approval rate? And has it improved if you look at it in the past?

It's difficult to say that, right? I mean, the hit ratio varies from customer to customer, varies from BU to BU. Difficult to say that, and which is why we made the policy that we will announce. There was no point in hyping up the fact that we have a 1,000 crore pipeline and then coming back and saying we converted only 100 crore out of it. What we do and we will continue to do is we will make announcements as and when we sign the projects. If you look at our track record, we've invested about 500 crores last year. We will invest about 500 odd crores, more than 500 odd crores this year. We will have an opening carry forward at the end of FY27 of a similar amount as last year. And I think what is more important than the conversion ratio is the ability to execute these projects, both from an operational perspective as well as a financial perspective. So if you, and I need to go back to your earlier question, which was your three to five-year target of gross block, I think the endeavor that we will continue to invest... The money that we are generating out of our business into productive assets, which will continue to give us the threshold ROCEs of 18%. So, effectively, what we are saying is we should be able to grow without having to access outside funds. The opportunities are large enough. We will continue to leverage our internal accruals one is to one. And I think that gives us enough headroom in terms of being able to grow for the next few years.

Definitely. That's very helpful, and best wishes to you and your team. Thanks.

Thank you, Al. Thank you. Ladies and gentlemen, due to time questions, that will be the last session of the day, and I now hand the contents over to the management for closing comments.

Thank you for joining us today and for your continued interest in Hilsan food. Cuban FI27 has been a strong start to the year. We delivered robust growth across our key financial metrics and recorded our highest ever quarterly PAT, despite temporary cost pressures in our footwear business. This reflects the strength of our diversified manufacturing platform, disciplined execution, and long-term strategy. Looking ahead, we remain optimistic. India's contract manufacturing sector continues to benefit from strong structural tailwinds, and with a healthy project pipeline, new capacities coming on stream, and deep customer partnerships, we are well positioned to sustain our growth momentum. Our priorities remain clear. Commercialize new capacities on schedule, improve asset utilization, allocate capital prudently, and consistently enhance returns. We therefore reaffirm our F527 path guidance and remain committed to deliverable, sustainable, profitable growth. Before we sign off, here's a gentle reminder. Take care of your health. Enjoy your favorite ice cream. Stay refreshed with your preferred beverage and lace-up your sports shoes for a walk or a run. We are proud that Hillsong Foods is part of so many everyday moments. Finally, my sincere thanks to all our shareholders, customers, employees, and business partners for their continued trust and support. If you have any further questions, please reach out to us directly or through our Investor Relations Advisors, Strategic Growth Advisors. Thank you once again for your time and engagement. We look forward to speaking with you again next quarter.

Thank you. On behalf of Hindustan Foods Limited, that concludes the conference. Thank you for joining us and even our discussion tonight.