LT Foods Limited (LTFOODS) Q2 2027 Earnings Call Transcript

Gentlemen, good day and welcome to Q2 and H1 FY27, healthy foods on this call. As a reminder, all participant clients will be in the listen or remote. And there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sumanth Kumar from Motila Luswal. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and very warm welcome to LDFood 2QFY27 Post Result Earnings Call hosted by Motila Luswal Financial Services. On the call today, we have management team being represented by Mr. Aswini Kumar Roda, MD and CEO, Mr. Sachin Guttas, CFO and CFO, and Monika Chavala-Javier, Chief Corporation Development Officer, will begin the call with the key thoughts from the management team. Thereafter, we will open the floor for the Q&A session. I would now like to request the management to share their perspective on the performance of the company. Thank you, and over to you.

Thank you, Suman, for the introduction. Along with us, we have Mr. Ritesh Arora as well, who is the CEO of India and Faris Business. So, good evening, everyone, and thank you for joining us today on the post-Q2 and H1 financial year 27 earnings conference call of L.T. Foods Limited. Before we begin, I would like to remind you that certain statements made during this call may constitute forward-looking statements. These statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. The result documents are available on our company's website as well as the stock exchanges. So, I'll start with a brief strategic update across our key geographies and businesses. Across markets, our priorities remain consistent, strengthen our brands, expand consumer reach, build and profitable growth, a strong growth engine for healthy foods. Our strategy is centered on premiumization, portfolio expansion, deeper distribution and digitally enabled execution. We are also seeing encouraging traction in health-focused offerings, including brown, red, and black rice, while our biryani kits have grown by 38% during the first half. Our brand investments are translating into measurable outcomes. Against category growth of approximately 1.3%, our branded portfolio grew by nearly 8%, Supporting a 140 basis point increase in market share on year-to-day basis. Households reach increased from 56.2 lakhs to 67.5 lakhs over the last year. Through our project Vistar, we are increasing direct distribution, feed-on-street capability, and assortment productivity. Alongside this, investments in supply chain and sales digitalization are improving forecasting, Broadcasting, frontline execution, and on-shelf availability. With branded basmati skills significantly underpenetrated in India, we see a long runway to acquire consumers, premiumize the category, and expand into adjacent consumption occasions. Now, I'll cover the United States. United States remains our largest international market and an important growth engine, supported by strong brands, category leadership, and established omnichannel presence and strong distribution. We continue to strengthen our core rice portfolio while expanding into convenience-led and value-added consumption occasions. During the period, we advanced our ready-to-heat portfolio, expanding microwavable formats and continued premiumization across Royal and Golden Star in Rice. We are also investing in digital commerce and consumer discovery capabilities to keep our brands visible and relevant as the path to purchase increasingly moves across digital and AI-enabled platforms. Our ambition is to leverage our leadership into Rise to build a broader branded foods platform in North America. If I talk about Europe, Europe continues to be an important strategic market for us. While the operating environment remains challenging, we have made meaningful progress in strengthening the underlying business and creating a more scalable platform for the future growth. During the quarter, we further expanded our customer base and secured new mainstream private-label business across Germany and the Nordic markets. We have strengthened our presence in France and are expanding our commercial coverage across Europe. Together, these initiatives are increasing our participation across both mainstream and ethnic channels and substantially broadening the opportunity available to us. At the same time, we remain sharply focused on improving the quality of the business through better product and channel mix, procurement efficiencies, automation, productivity improvement, and the disciplined cost management. Our strategy from here is very clear. Scale the mainstream business, deepen our presence across key European markets, strengthen higher margin opportunities, and continue improving the efficiency of our operating model, and keep growing and further strengthening the Davut brand in ethnic markets. Europe remains in an investment and scale winning phase, but the business today is on a stronger footing than it was a few quarters ago. We have expanded our customer base, strengthened our commercial organization, and improved operating performance. Our focus now is on translating these gains into sustainable growth and progressively stronger profitability over the medium term. Middle East continues to be an attractive long-term growth opportunity for healthy foods, despite being a highly competitive and fragmented market. During the period, the region delivered strong volume growth, outperforming both last year, and growth was supported by deeper market penetration, expansion of private-label partnerships, and continued strengthening of our core branded portfolio. We also continued investing behind brand-building consumer awareness, helping strengthen brand equity and expand our consumer franchise across the region. While the overall demand in the region remained strong, the quarter was significantly impacted by the supply disruptions, which constrained inventory flow into the region, and a sharp escalation in the freight cost further raised the landed cost and weighed heavily on the profitability during this period. While we have taken active steps to mitigate these pressures to alternate routing, optimizing spends, and increased pricing, the full impact of these will show up in the subsequent quarters. Though still, we continued the momentum in our e-commerce business, where we maintained category leadership position and delivered strong growth despite the intermittent supply chain disruptions. Looking ahead, our strategy remains focused on expanding distribution, improving product availability, strengthening local partnership, and increasing penetration across both branded and private label opportunities. We believe these initiatives will further strengthen our position in the region over time. In rest of the world markets, we continue to enjoy leadership positions across several markets. Through focused brand investment, strong execution, and continued distribution expansion, we are further strengthening our market share and consolidating our leadership position across these geographies. If I talk about nature by a food, which is undergoing an important strategic transformation from an India-centric sourcing and export business into a globally integrated consumer-focused organic food platform, the first pillar is moving closer to customer through deeper direct relationship with retailer and consumer brands. This transition has created near-term revenue pressure as parts of the traditional intermediary-led business are replaced, but it should improve customer ownership and value chain participation over time. The second pillar is portfolio and sourcing diversification. We are expanding beyond rights and developing sourcing capabilities across different geographies like Turkey and other regions. Together with our European processing capability, this strengthens supply chain flexibility and enables a broader organic portfolio. In India, we are consolidating manufacturing through a new Madhya Pradesh facility with the first phase expected to commence operations in this financial year. This transition involves near-term costs but organic retail market, particularly in breakfast and between-meat snacking and creates an additional platform for downstream growth. Overall, NatureBioFoods, the organic arm of healthy foods, is moving from an origin-led organic ingredient model towards a globally sourced, destination-focused organic food platform with deeper customer relationship and greater participation in the downstream value chain. To summarize, across geographies and segments, our strategic direction remains clear, defend and deepen leadership in the core, broaden participation in convenience and value-added foods, strengthen consumer brands, improve the quality and profitability of international operations, and invest in digital and operational capabilities that support long-term scale. India continues to deliver strong, profitable growth. North America provides a platform to extend beyond rise. Europe and UK are progressing through disciplined operational improvement, and Middle East is building consumer scale, and Nature Bio Foods is being repositioned for high-quality growth. Together, these priorities support our evolution into a larger, more diversified, globally relevant branded food company. Now, with this, I'll hand over to Sachin, C.F. of the company, for the detailed financial update. Over to you, Sachin, please.

Thank you, Monica. Good evening, everyone, and thank you for joining us today. I am pleased to share our financial performance for the second quarter and first half of FY27. The first half delivered healthy, broad-based growth across all key geographies, led by different segments, even as we stepped up our investments behind our brand and maintained our focus on operational efficiency and disciplined capital allocation. Now, let me begin with our consolidated financial performance. During Q2 FY27, the consolidated revenue grew by 17% on year-on-year basis to 3253 crores from 2772 crores in quarter to FY26, A growth of 3% over quarter 1 FY27. The gross profit increased by 12% to 1058 crores from 948 crores. The gross margin for the quarter was 32.5% compared with 34.2% in quarter 2 FY26. The change in the gross margin was primarily due to two factors. Firstly, the change in the shipment terms with the related party from CIF to FOB basis, under which the freight cost now forms part of the cost of goods sold instead of other expenditure. This classification is EBITDA neutral. Secondly, the higher shipment costs across the major markets. Shipping costs as a percentage to revenue rose by almost 40 basis points, which also has an impact on the EBITDA. EBITDA grew by 13% to 358 crores from 316 crores in quarter to FY26 and was marginally lower than 363 crores in quarter one FY27. A beta margin stood at 11% compared with 11.4% in Q2, FI26, and 11.5% in Q1, FI27. This moderation reflects the gross margin factor, which I just explained, and a planned step of investment in the advertisement to support our brands and the new launches. We also continue to invest in building our health and convenience portfolio, ahead of the commissioning of RTH, facility in the U.S., which weighed on our quarterly margins. Meanwhile, the organic food segment improved sequentially with a beta of 22 crores against 10 crores in quarter 1 of this year. Depreciation increased with the capitalization of new assets, while the finance cost was higher on the year-on-year basis on higher supplier funding arrangements undertaken to optimize the working capital cycle. At increased by 10% on year-on-year basis to 180 crores from 164 crores. For first half FY27, the consolidated revenue grew by 22%, 26414 crores from 5273 crores in last year's FY26. On a normalized basis, after adjusting the golden star, which was not fully consolidated in quarter 1, FI26, the revenue grew by 18%. The gross profit increased by 15% to 2087 crores. A beta grew by 17% to 721 crores and a pad grew by 9% to 364 crores from 332 crores in H1 FY26. A beta margin in this half-year stood at 11.2% compared to 11.7% in last year, primarily reflecting higher shipment costs and increased brand investments. Brand investments in this half rose by almost 29% to 139 crores. Even as we continue to invest in our brands and future growth platforms, we remain focused on driving operating leverage and efficiencies across the value chain. Now, turning on our segment performance, our Basmati and the Specialty Rice business continue to lead our growth. In first half of this year, the revenue increased by 27% to 5764 crores from 4552 crores with volume increase of 11% on year-on-year basis. The segment contributed 90% of the consolidated revenue. The gross margin in this segment was at 33%, while the EBITDA margin was at 12%. The beta margin in the matured market, like India, US, and the rest of the world, stood at 15%. On the geographical front, India grew by 24% on a year-on-year basis, with volumes increasing by 10%, and India accounted for 29% of the revenue. On the international business continues to provide significant scale and diversification. North America, which contributed 50% of our revenue, grew by 21% on a year-on-year basis or 13% on a normalized basis after adjusting Golden Star. The Middle East and the rest of the world grew by 25% and contributed 9% of the revenue. Europe contributed 12% of the consolidated revenue during the period. The operating environment in Europe remained challenging, particularly due to the raw material and the freight cost pressure. Even so, the European business reduced the debt by 1.8 million euros and the improved working capital during the first half. In the UK, performance was impacted by the lower than planned mainstream and industrial volume and elevated operating cost. Price recovery initiatives are expected to help offsetting freight and logistic inflation, and the business remains focused on improving volumes, inventory management, and operating efficiencies. Now, coming to the organic and the ingredient business, the revenue in this segment was 520 crores in H1 FI27 compared to 583 crores in the last half year, reflecting the ongoing remodeling of the business. The gross margin held at 34% and EBITDA margin was at 6%. Encouraging, the segment improved sequentially in Q2 and we continue to work on improving the business mix and operating performance. On health and convenience portfolio, comprising of ready-to-heat, ready-to-eat, and ready-to-cook products, These segments contributed 102 crores in this half year, up by 8% from 95 crores last year. Even before the enhanced RTS capacity has become operational, ready to eat grew by 17% on a year-on-year basis, ready to cook grew by 28%, and the ready to heat grew by 7% in the rupee terms. We continue to invest in the category with the long-term perspective. Now, coming to the balance sheet and capital efficiencies, where we have made a meaningful progress. Inventory days reduced to 159 days from 187 days in the last half-year, with the trade table days reduced to 26 days from 29 days. As a result of the working capital days improvement significantly to 143 days, 174 days in the last year. We ended this half year with a net cash position of 247 crores in our balance sheet. Our return on capital employed improved to 22.4% from 22% in the last year. Return on equity was at 15.7% and the interest coverage stood at comfortable 13.8 times. Improving working capital and capital efficiency remains priority as we continue to invest in a brand, capacity distribution, and new growth opportunities. Now, coming to the stand-alone performance. For this half-year, the revenue in the stand-alone basis grew by 14% to 2417 crores from 2119 crores. The EBITDA increased by 34% to 223 crores, with EBITDA margin improving to 9.2% from 7.9%, and the PBT also grew by 28% to 173 crores, and grew by 24 crores to 134 crores from 108 crores. The quarter two standalone revenue grew by 17% on a year-on-year basis to 1 to 41 crores, and the EBITDA rose to 103 crores from 101 crores in quarter two, with the margin moderating to 8.3% due to higher other expenditures, including the brand investments. The standalone balance sheet remains net cash positive as on September 26. Now, to summarize, the first half of FY27 reflected the continued scale-up of our businesses. More importantly, we have delivered this growth alongside a meaningful improvement in the working capital and a higher return on capital employed. Going forward, our financial priorities remain clear. Sustaining profitable growth in our core Basmati and the Speciality Rice business, improving profitability in the organic food business, scaling up our convenience food portfolio, driving efficiencies across the value chain, and maintaining discipline across the working capital and capital allocation. These priorities are anchored in our strategies of strengthening the core, expanding distribution, and our product portfolio, driving premiumization, and building efficiencies across the value chain. With this, I request the operator to open the floor for questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their test on telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

The first question is from Bhavi Chauhan from KRPMS.

Please go ahead.

Good evening, team. Hope I am audible. My first question is related to the inventory. What is the current inventory level of a basmati rice, that is, companies holding, and what is the average cost on that inventory? And in Q2, our inventory is quite low. So, what is our strategy for an upcoming season where the prices are expected to be higher?

So, I will take the first part. So, our inventory level, as on September 26, the Paddy inventory was at 82,000 tons. At an average rate of 43, whereas rice inventory was at 2,60,000 tons at an average rate of 60 rupees.

And second question, you said, you know, the low. So whatever the inventory we are carrying is to our business plan and is sufficient for whatever the business plan we have.

So whereas on… So what is on… Okay.

Yeah, yeah, carry on.

So, like, it is expected that the current per day arrival is around 20% to 25% on a higher side. So, like, what is the trend you are expecting and how the procurement will be?

You heard it right. This year, crop 26, the prices are higher by 22% to 25% average, depends on variety to variety. Okay. But as far as our business model, for Prop 25, we are sufficiently covered to deliver our plan.

And yeah, is it?

Okay. So, like, and the second question is related to the Basmati. So, if I look at our Basmati right segment, so our volume growth is around 11% in H1 FY27, while the revenue growth is about 22% on a YOY basis. But if I look at it on a sequential basis, revenue appears to be grow modestly in all our geographies. So, like, if anything happens in Q1Q performance, and just to specify, what is our volume growth in Q2 FY27?

So, coming to your question regarding the growth in the Q2, on a year-on-year basis, the quantitative growth in the Q2 is 11%, with the value growing by 21% from the last year's same quarter. So, as far as the sequential goes, so our growth from the last immediate preceding quarter is 6% in the price, in the volume terms, whereas in the value terms, it is 5%.

And the last question is related to our RTC segment. So, if I look at our gross profit margins and the EBITDA margins of our RTC segment have declined sharply in this quarter. So, like, any reason for it? Like, is it a raw material installation that companies say things that we are not able to pass on to our consumer or anything like that?

So, no, it is just we are on the strategy. So, certain promotions and that were running in the RTH and RTC segment in this half year. So, it is, as per the plan itself, yes, this has reduced because the sampling is net off in our GP and other things. So, it has increased our overall, maybe, the PAT or the PBT numbers by two crores in this half year.

Okay. So, it gave our impact for two crores on our revenue and profit update, right? Correct, correct. Okay. That's it for myself. Thank you.

Thank you.

Thank you. The next question is from Saurav Bheger from Samikshar Capital. Please go ahead.

Yeah, thanks for the opportunity. So, my question was around the path for the right segment. So, if we see the PPT reports 11.4% growth, excluding tariffs, and even the volume growth is 11% is what I mean. So, basically, paddy prices had increased. If you see, the paddy prices of last year was just because even our procurement cost was higher last year. So, wasn't this any...

In the value terms, in this rice segment, Basmati segment, Basmati and Speciality, the value has increased by 26%, whereas the volume has increased by 11.5%. So, there is a value increase. There is a per-time increase. The rate increases almost a 13% increase. So, there is a price increase.

Could the tariff impact, the organic growth was 11%, right?

So, you are talking about the normalized one last year. The tariff also, it also had a sequential effect. The 25% or the 50% was being imposed in the month of September or August. That had a sequential impact on the last year numbers. So, the normal rate of tariff for the last year was 10%. For the full half year, it was majorly at 10%, which is currently also at 10%.

Can I do a request? Your voice is getting echoed, if I don't know what kind of, so, yeah.

Am I audible, no?

No, you're audible, but the voice is getting equal. No problem. Carry on. Yeah, please go ahead.

So I wanted to understand some unit economics on the part of, for say, when we procure paddy, and in subsequent quarters or in subsequent years, when the paddy costs are higher. So how do we pass on the cost? Is there any inventory gain that we mark in our books? So, what, so, from an accounting point of view, how do we deal?

So, normally, you know, when the crop change and we pass on to the consumer and the whole industry, you know, works like this, so, as far as inventory gain or loss, Sachin, you can add, we don't do any accounting in the books.

So there is no, we don't recognize any gain or yes, if the loss is there, it is on the basis of cost or market price, whichever is lower. So if the market price happens to be lower, then only the recording of the loss takes place, but any gain is not recorded.

Ultimately, it's reflected in our OCF, right? If you look at even the first half OCF, so there was a higher inventory release just because our procurement cost was lower and selling price was higher in the first half. Is that the case? What OCF? We reported a strong OCF in the first half, right, as compared to the last year's. And we only wanted a higher inventory release.

So, that is basically because of the other factors, the operating cash flow as such. Because of in the first quarter, as you know, the period season happens to be in the December. So, we generally enjoy, have a surplus cash. As I've told you, we have a net cash position of 247 crores that is sitting in as on 30th September. So, there is an operating cash leverage that happens during this period.

The question was on part of inventory. Inventory rate was higher, right, in the current half as when we compared with the previous half of the F-126.

Okay, so you meant to say our inventory days you are asking about.

So, inventory days, if you talk about the inventory days, last year it was 187 days, so for the half year, now it is 160 days. So, inventory days have, in fact, improved. So, we are... Almost same, you know.

So, your question is, now, so, inventory days are similar as compared to last year in the same H1.

I will get back to you on this in person. Of course. Secondly, it was only part of EBITDA margin. So I guess we are on a lower note than what the earlier guided margin was. So earlier we were aiming at 11.5% to 12% for this year. And since in the current quarter, we are on a slightly lower end. Is there any revision in the full year tidings and the sustainable numbers?

As Sachin just explained, this has resulted for two reasons, the lesser margin. One is the freight costs are higher by 40 BIPs, and the second is by 20 BIPs, you have invested more in brand.

I hope that, so

we are very confident on our business model and the fundamentals. So as explained by Monica and Sachin, by region by region, so some are, you know, markets are in the investment mode. And in the matured market, Sachin has just explained that, you know, we are getting more than 15% EBITDA. So once, you know, all these markets, Europe, Middle East, and organic, they will come to the scale. So we are very optimistic the margin profile will change.

And in the mature state, what EBITDA margin do we target for the organic and RTCRTH segment?

So, when I say matured market for Basmati, like US, India, and some other...

Yeah, I get that, but once the organic and RTCRTH are in place, so in the mature state, what EBITDA margin do we specifically target for those segments?

No, no. Organic is a different, you know, they play mainly in Europe. So, you know, where the margin will, when that scale up, the margin will improve in organic business in Europe, and in Basmati, Europe, and UK, and the Middle East.

So, if I reframe what I've meant as, in the organic activity, what is the margin target?

So, we will not give time guideline, but as I said, you know, our fundamentals are strong, our levers are working. So, timeline, we don't, you know, yes.

So, we are confident on the margin target. So, whatever the target is initially given. So, Ashwiniji was explaining that we are eyeing that target, the 13.5 to 14% of the EBITDA margin on a consolidated basis. It is just investing certain portion of the money in Europe, UK, that are diluting my overall EBITDA margin. In the matured markets like US, Europe, the US, India, we have an EBITDA margin of 15% plus. So once every market EBITDA margin, which is currently at 11%, will increase to almost 13, 13, 13 and a half percent.

And just to add, because you were specifically asking for the organic and RTH business, organic business, the way it is in the remodeling phase, in the coming two years, we are eyeing this business to also deliver 10 to 11% of the data margin. I think that was the question that you were asking. Yeah, yeah, perfect.

That answers, thanks. Yeah, thank you. Thanks, Alicent. Thank you.

Participants, as a reminder, please press star 1 to ask any question. We have next question from Vipil Kumar from Sumangal Investment. Please go ahead.

Thanks for the opportunity. So my question is, a substantial amount of working capital has been released in this quarter. So is there any one-off or is it a seasonal phenomenon?

So, it happens.

Hello. So, it happens. And during this, because this is a non-peak season for the procurement purpose, so the working capital is released. So, as I have told you, we have a net cash position during this period. Yes, it will be getting utilized in the coming quarters with the procurement coming up. So, it is there. It is seasonal procurement.

Okay. So, and previously we used to share volumes by geography of each major market like India, US, but this time it is not part of the presentation. So, can you give the volume and value figures for each market, please?

So, you know, we have stopped that volumes, but we are giving how much we have grown by value and how much we have grown by volume. So, for, you know, competitive reasons, we don't give the absolute volume, but we are giving the volume growth and value growth.

So, would you repeat it, sir, if you don't mind?

I said we are giving guidance on value growth and volume growth.

So, as per our presentation itself, the revenue mix of India is 29%, whereas the year-on-year growth in the India business is 24%. So, North America, the revenue mix is 50%, whereas the value growth was 21%. If you normalize the golden star, it is 13%. The Europe group, the revenue was 12%, and the Middle East was at 9% with a growth of 25%.

Last question, 13.5% to 14% EBITDA. So, from 11% to that journey, how much time it will take?

Sorry, you know, we missed that. You know, to your specific, volume growth is 11%, and value growth is... 13%. 13%. 13%.

So, volume growth is 11%.

It is mentioned in the presentation.

Presentation as well.

So, you are asking another question?

No, no, I was asking about your EBITDA, medium-term EBITDA guidance of 13.5% to 14%, if I remember correctly. So, right now, we are at 11%. So, how much, over what time frame we should reach that EBITDA mark, our desired range of EBITDA?

So we are not, as a policy, we are not giving any timeline. As I said, we are very positive, optimistic that in our matured market, I am repeating, the EBITDA margin is already 15% above in Basmati. And once these three, four sectors will come to the scale, the margin profile will change.

And so lastly, what is your experience in a rising petty market? Our margins generally shoot up or they come down from past cycles? What is your experience?

If you see historically, whenever the paddy price increase, the input cost increase, we normally pass on to the consumer. And the margin profile, you know, exceptional 1% gain or minus 1% sometimes. So it is in the range of that when the prices goes up or come down.

Okay, thank you, sir, and all the best.

Thank you, sir.

Thank you so much.

Thank you. The next question is from Mr. Yes Mehta from AART Ventures. Please go ahead.

Thank you for the opportunity.

So, the advertisement and brand building costs are elevated by about 40 bps this quarter.

So, just wanted to know, are they going to be at this level for the rest of this year?

So, our ad, if you, at the ad spend, purely on the ad spend, we are, we will be making an investment of 2.3% of our, as a percentage to revenue. In our, this quarter itself, our spend got increased to almost a 2.5, 2.6%. So, on a year, on a yearly basis, it will remain at 2.3%. So, which is, which is, which will be, which is elevated against the last year number. So, last year number was 2.1%.

Okay. Okay.

And are we trying to pass on the increase in the freight cost to the customers?

In some market, yes. In some market, it takes like Middle East is taking time. And Europe, it is not. But in some market, we pass on. That's how, you know, the consolidated impact is 0.4%.

Okay, thank you very much.

Thank you, sir. The next question is from Sayesh Paragreval from Value Vision. Please go ahead.

Hi, sir, am I audible? Yes, yes. Yes, you are audible. Congratulations on the strong set of results in a tough operating circumstance. I just wanted to understand what is the expectation of our margin for the next two quarters? Do we expect the tightness to continue if the war situation escalates in the coming quarters as well?

So, in VAR, you know, its main impact is on Middle East and in LTE foods, Middle East is contributing its 9% to 10%. So, we don't see any impact on the margin in the coming quarters. So, it should be, you know, going like this only. So, there will no be tightness. We don't see.

Okay, but it was my assumption that with the freight rates being high, even our exports to US and Europe would be affected with the current shipping rate problem which is there.

Yes, but, you know, somewhere we are able to pass on and some we are absorbing. That's how the consolidated 0.40 is getting impacted. Okay, okay.

And the second question was about our UK investments, since the FTAs and all have been signed, is there any benefit and when is that facility coming up and what do we expect it to contribute in the next coming few years?

No, no, UK definitely is a part of our strategy as a Basmati, you know, company. Europe is a, UK is a big market, and as far as when it will become profitable, you know, as the scale will come, and we will be in the next year, we are looking at it to be profitable.

Okay, okay, and what is the growth of revenue and PAD guidance for the year?

That's it, thank you.

And what is the growth guidance for the year and the coming two quarters, revenue and PAD?

In the coming quarters, as I said, you know, as H1-1, H1, H2 will be very similar.

So, we will be maintaining the momentum, basically, the kind of things in the first half which we have seen against the last half a year. So, we are quite positive on maintaining that.

Okay. Thank you. Best of luck. Thank you, sir.

The next question is from Mr. Rajesh Agrawal from Maniwar. Please go ahead.

So, my question is, accounting on tariff, any tariff and how we are accounting it for?

So, we are also reading in the newspaper, we are positive, if you are asking about the new tariff in USA.

No, I am asking for the old refunds, but tariff refund we have not accounted for?

No, we have not.

What is the statement on that?

No, partly we have got the refund and we are talking to our customer for that, you know, whatever the understanding is.

So, how much time it will take for accounting?

I think by year end, the things will be clear.

Yeah, okay. Thank you, sir. And, sir, you're bullish on the outlook for the company or the Basmati?

We are very bullish as, you know, Basmati category is a category growing 5% to 7%. If you see our result, India is growing, double digits, cash is growing, all the markets are growing. So, we are very positive on all our businesses, which is specialty rice, organic, and ready-to-eat.

So, the growth, when will you go through the profitability, because the margins are also for some reason or other, the plate and all, it is under pressure. When will the revenue growth and the volume growth?

You know, as far as ROSI is concerned, you know, we are improving on ROSI, you know, this H1, it's around 23%, and in the consumer space, in the category, we are delivering very well. As far as further margin improvement is concerned, as I said that, you know, in the matured market, I'm repeating 15% EBITDA. In the investing market, once that will scale up, the EBITDA margin percentage profile will change and further improve the ROC part.

So, is there a scope of any working capital improvement from here also?

No, no. No. Okay.

Thank you. Thank you, sir.

Thank you. A reminder to all participants, please press star 1 to ask any questions. We have a follow-up question from Mr. Saurabharia from Samiksha Capital. Please go ahead.

Thanks. So I wanted to ask on how particularly are we able to reduce our inventory days because what I believe is pass monthly requires a particular number of days of aging, right? And so as to maintain the premiumness of it. So how do we particularly are able to reduce our inventory days? And secondly, can you share the inventory cost as of March 26 and current, so the procurement cost which we had incurred? Yeah, that's it.

So, you know, our business model is a mix of basmati, other specialty rice, which is jasmine and organic fruit. So, as far as basmati is concerned, you know, whatever the aging is required brand-wise, we do that. There is no shortcut on that, and that is sufficiently covered.

On the part of the procurement cost is of 31st March 26th, and currently, what is the cost of current inventory?

As I have told you, the current inventory, the paddy rate is almost 43 rupees per kg, whereas rice is 60 rupees. As on March, March 26th, this was, the PADI rate was at 36, whereas the PADI, the rice rate was at 50.

So do we plan of any near-term price increase? Because since realizations or say price growth has not been in line with the increase in our input costs, so are we not passing on completely? And secondly, how do you see the sensitivity in the U.S. and Indian markets post price increase? Is there usually any impact on the demand side?

So, I will answer your last question first. So, as far as, you know, the sensitivity on the demand by increasing price, we have not seen. We are in this business the last more than 50 years. And we have seen the real test case when this duty came, and majority has been passed on, and we have not seen any impact on the demand. If you see, you know, Basmati is roughly, globally, the market size of rice is 500 million, and Basmati is just approximately, you know, 10 million, which is roughly 2% of the total market. So, normally in the specialty rice, we don't see any impact on the price increase on the demand. Even in Middle East, what we are seeing is the freight cost has gone up by, you know, I will say it was $50, $40.

The crop has

just started coming in the first week of September, and as this crop's use will come, The price increase will be passed on. Like in India, some crop we sell. The new crop, already price increase has been given and very well accepted.

We will pass on this increased cost next year, right? When we sell off the entry workload in the second year.

Yeah, yeah, yeah, yeah, yeah, we are confident. And historically, these kind of periods has come and we have been able to pass on successfully.

Thank you. The next question is from Mr. Premarsha. Please go ahead.

Hi, am I audible?

Yes, sir.

Good afternoon. My basic question is, what's the latest crop outlook, you know, update, looking at this gradual impact in the current year?

So, as far as crop is concerned, it's more or less like last year crop. But last year crop, there is no carryover, and demand has grown by, on an average, 4% to 5% India and export together. So, this year the prices has opened as, on an average, 25% against last year. Initial variety is 35%, but in some variety, you know, so average we are eyeing that, you know, roughly 25% the prices will be high against last year.

Okay. And would the finished product pricing also increase to the same range, 20-25% or higher?

The material cost is roughly, it depends, 70%. Proportionately, you know, the pricing will reset.

And sir, what are the current local finished product prices like just now? Because they were, I guess, about between 87 to 95, I think, in the first quarter of this calendar year. So, where would they be hovering just now?

So, you mean to say the impact of the cost has been passed in India?

No, no, no. What I mean to say, no, no, no, no, no. So, what I mean to say is your finished product, like Zawad is selling their rice or whatever is there in the open market. So, the price range about 110, 115 per kg compared to what it was in the first quarter at about 85, 90 rupees. That's what I'm trying to ask.

So, if you ask me, open market means retail, you know, in the retail industry. Yeah, that's right. So our Ritesh can add, you know, so our most premium product now sells 250 rupees a kg, which is our teriyani, which last year, same time, used to be around 220 rupees, price to consumer.

Yeah, so net net about 15% increase. Yeah, has already been taken. So, I need to say, what is your average realization currently, say in the month of October, approximate average realization per kg? Putting all the different grades and brands together.

Around 80 rupees.

Around 80 rupees. Okay. And compared to the first quarter of this year?

So, almost 10% improvement over Q1 of this year.

Yeah, but how much?

8%.

8%.

8%.

Yeah, got it.

Thank you. Thank you. Thank you very much.

Thank you, sir. We have next question from Mr. Saurav Beryo from Sumitra Capital. Please go ahead.

Okay, just a large question from my end. So, do we even benefit from the falling rupee if we compare rupee last year versus the current year? Or do we hedge that exposure or any impact is seen in the top lines?

Thank you.

Because we have a policy of purchase as well. So, purchase in the season, outside the season. So, somewhat, it gets offset with the purchasing trend as well. So, as far as the rupee is concerned, rupee depreciation benefits us.

Quantified, like, saw, caught a current normalized growth of 22%, which Basmati segment had, Basmati and specialty rice. How much was the forex impact, if you can quantify on that part?

Almost, if you talk about the forex on a constant dollar basis, it should be almost a 4-5% of the dollar value impact.

Or not top line, like if you can give a percentage of the total top line, how much impact was that of the forex? So 4-5%, what I told you, 4-5% is the impact. Okay. So, but still, if I do the math, company reports 22% growth in first half of F27 in the Basmati and Specialty Rise. 11% was the volume growth. Around 12%, you said, was the realization growth. So, that realization, according to you, includes the forex impact because the math doesn't go there.

Correct, correct. It includes the value terms because we report in the rupee terms. So, it includes the forex impact.

Thank you. There is an gentleman. I now hand the conference over to LTE Foods Management for closing comments. Over to you.

So, on behalf of the management of Healthy Foods Limited, we sincerely appreciate your participation in our post-earnings call today. We hope we have been able to address most of your queries and provide clarity on our performance and outlook. For any further questions or follow-ups, feel free to reach out to me or our investor relations partner, Ernst & Young, and the team will be happy to connect with you offline and assist with any additional information you may require. So, moderator, now we can close the call, please. Thank you.

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