Earnings Call Transcript - XNSE:ADFFOODS 2026-11-06

Operator

Ladies and gentlemen, good day and welcome to the ADF Foods Limited Q2 and H1FI27 conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star, then zero on your touchtone phone. I now hand the conference over. To Mr. Sumedh from EY, thank you, and over to you, sir.

Speaker 1

Thank you, Rayo, and good afternoon, everyone. We welcome you to the Q2 and H1 FY27 earnings conference call of ADF Boots Limited. To take us through the results and to answer your questions, we have with us today the top management of ADF Foods, represented by Mr. Bimal Thakkar, the promoter, chairman, managing director and CEO, Mr. Sumeet Thakkar, vice president, sales and strategy, and Mr. Srinivas Ayagiri, the chief financial officer. We will start the call with an overview of the business and the recent update by Mr. Bimal Thakkar, and then Mr. Srinivas will give his comments on the financials. As usual, the standard safe harbor clause applies while we start the call. Over to you, Bimal sir.

Bimal Thakkar, Chairman

Thank you, Sumedh. Good afternoon, everyone, and thank you for joining us today. I'm pleased to share that we continued our strong growth momentum during the second quarter of FI27, delivering consecutive quarters of strong double-digit year-on-year revenue growth. During Q2 FI27, our consolidated revenues from operations increased by 23.6% year-on-year to INR 200.9 crores. This represents our highest-ever quarterly revenue and marks the first time that ADF has crossed 200 crores in quarterly revenue. On a standalone basis, revenue increased by 16.6% year-on-year to Indian rupees 163.3 crores. The performance reflects healthy demand across our brands, deeper penetration in our key markets, Expansion of shelf space and continued execution across both our processed foods and distribution businesses. Our order book remains strong, providing healthy visibility for the coming quarters. However, the conversion of our strong order pipeline was partly constrained by limited container availability and disruptions across key shipping routes. Importantly, we delivered this growth despite these logistical challenges and elevated ocean freight costs. Demand remained resilient across our international markets, supported by growing preference for convenient, authentic Indian foods. Our diversified portfolios across frozen foods, ready to eat, ready to cook, and meal accompaniments continue to enable us to address multiple consumer segments and consumption occasions. Let me now share an update on our key brands. Ashoka, our flagship brand, continued to deliver strong growth driven by sustained demand from the South Asian diaspora and deeper penetration across core and emerging international markets. Ashoka has delivered a revenue CAGR of over 20% during the last five years, reflecting the strength of the brand. The breadth of its portfolio and our consistent investments in distribution, consumer engagement, and innovation. Going forward, we will continue to strengthen Ashoka through greater self-presence, focused marketing, and new product introductions. Truly Indian maintained its strong momentum in the U.S. mainstream market. The brand is now present across... More than 3,500 stores in the United States, with new listings secured in marquee retail chains, including Kroger, Meijer, and Sprouts. We also continue to strengthen our presence through retail campaigns, in-store activations, influencer engagement, and digital marketing. Our truly Indian vegan naan range has been recognized under the dish reinvention category in Whole Foods Market 2027 Food Trend Predictions. This is an encouraging endorsement of our product proposition and its growing acceptance among mainstream consumers. We will continue to focus on expanding the range, securing new retail listings, and driving deeper penetration across existing accounts. In India, Seoul continued to expand its portfolio and channel presence. During the quarter, we launched A2 Geer Cow Danidar Ghee, prepared using the traditional Bologna process. This edition expands Seoul's Better For You product portfolio and gives the brand an entry level into a large everyday kitchen category. We will continue to build the brand in a measured manner through product innovation, broader distribution, and targeted consumer engagement. On manufacturing, our Surat Greenfield facility continues to make steady progress towards achieving its targeted operational performance. The facility enhances our frozen food manufacturing capabilities and provides us with capacity required for future demand. Alongside Surat, Nadead and Nasik further strengthen our manufacturing platform and improve our ability to scale efficiently. On growth investments, we continue to maintain financial discipline. Our balance sheet remains strong with a net surplus of 97.4 crores at the end of H1 of financial year 27. The board has also declared an interim dividend of 30% of the face value of share, continuing our track record of consistent shareholder returns. Looking ahead, we remain confident in structural growth opportunity across our categories and markets. Our growth will continue to be supported by deeper brand penetration, new retail listings, distribution, expansion, innovation, and ramp-up of recently added capacities. At the same time, we remain watchful of vessel availability, ocean freight costs, and geopolitical developments impacting our shipping routes and markets. Our priority will be to manage these near-term factors through cost optimization and disciplined execution. I will now hand over to Srini, who will take you through the financial performance in greater detail. Thank you, and over to you, Srini.

Srinivas Ayagiri, CFO

Thank you, BIMR, and good afternoon, everyone. I'll begin with the consolidated financial performance for Q2 FY27. Consolidated revenue from operations increased by 23.6% year-on-year to 200.9 crore compared with 162.6 crore in Q2 FY26. This was ADF Food's highest ever quarterly revenue and the first quarter in which consolidated revenue crossed 200 crore milestone. The underlying order book remains strong. However, container availability constraints limited our ability to fully capitalize on the strong order book during the quarter. Consolidated EBITDA increased 9% year-on-year to INR 39 crores compared with 35.8 crores in the corresponding quarter. The EBITDA margin stood at 19.4%. Profitability remained healthy despite elevated ocean freight and logistics costs. The impact of these pressures was partly mitigated through operating efficiencies, cost optimization, and disciplined operating execution. Consolidated profit after tax stood at 25.3 crore with a pat margin of 12.6. Sequentially consolidated revenue increased by 20.1%, EBITDA by 31.4, and profit after tax by 46.6% over Q1 FY27, reflecting improved operating momentum during the quarter. For H1, FY27, consolidated revenue from operations increased by 24.6% year-on-year to 368.2 crores compared with 295.5 crores in H1 of FY26. Consolidated debt EBITDA for the first half increased by 15.8% to INR 68.6 crore with an EBITDA margin of 18.6. Consolidated profit after tax increased by 2.4% to 42.6 crore with a path margin of 11.6. Moving to standalone performance, revenue from operations increased by 16.6% year-on-year to 163.3 crores in Q2 FY27 compared to 140.1 crores in the corresponding quarter of past year. Standalone EBITDA stood at 31 crore with an EBITDA margin of 19%. Standalone profit after tax stood at 21.6 crore with a PAC margin of 13.3%. For H1 FY27, standalone revenue increased by 18.2% year-on-year to 284.2 crores compared with 240.4 crores in H1 FY26. Standalone EBITDA stood at 58.5 crores with a margin of 20.6, while profit after tax stood at 39.9 crores with a margin of 14%. The year-on-year movement in H1 stand-alone profitability primarily reflects elevated freight and logistics costs even as the business delivered healthy revenue growth. Coming to the segmental performance, processed foods, Revenue increased by 22.6% year-on-year to INR 163.4 crores in Q2FI 27. Segment EBITDA increased by 41.2 crores translating into a margin of 25.2%. The company reported a net surplus of 97.4 crores at the end of the first half providing a With financial flexibility to continue investing in capacity, brand building, and strategic growth opportunities. Over the last two years, two and a half years, we have invested more than 145 crores in capacity expansion fully funded through internal accruals. Our capital allocation remains priority and remains unchanged. We will continue to invest selectively in manufacturing capacity, productive initiatives, brand development, and distribution infrastructure while maintaining prudent balance sheet. Cricill has upgraded our credit rating to Cricill A plus table from Cricill A positive, reflecting our financial strength and operating profile. The board has declared an interim dividend of 30% of the face value, reinforcing our commitment to the consistent shareholders' returns. Looking forward, we will continue to focus on maintaining healthy growth, protecting profitability through disciplined cost management, improving productivity, and generating operating leverage as our manufacturing capacities and brand scale. While freight cost and global shipping disruptions remain near-term monitorables, our diversified geographic presence, strong brand portfolio, expanding manufacturing platform, and healthy balance sheet positions us as well to deliver sustainable long-term growth. With that, I will hand it back over to Sumit to open the floor for questions.

Speaker 0

Thank you very much.

Operator

We will now begin the question and answer session. Anyone who wishes to ask questions may press star and 1 on your touch-tone 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Speaker 0

To ask questions, please press star and 1. The first question is from Saurabh Beria from Samheeksha Capital. Please go ahead. Mr. Saurabh, you may go ahead with a question.

Operator

Hello.

Speaker 0

Yes, sir. Please go ahead.

Operator

There seems to be no response from the line of Mrs. Rorabheria. We'll move to the next question. The next question is from Pritesh Shedda from Lucky Investment. Please go ahead.

Pritesh Shedda, Analyst — Lucky Investments

Yes, sir. Sir, I have one question on the CAPEX. So, now how much CAPEX is still balanced to be spent after these 145 crores?

Bimal Thakkar, Chairman

So, for this... For this financial year, we have approximately within our existing Surat plant, which there is some capex left and certain other additional capacities happening in Nadiad and Nasik, I think approximately another 40-45 crores is left in capex.

Pritesh Shedda, Analyst — Lucky Investments

So basically a total of 190 crores.

Bimal Thakkar, Chairman

Correct.

Pritesh Shedda, Analyst — Lucky Investments

Okay. Now, in this 190 crores, how much would you apportion to, is there a possible way to know how much you would apportion to the existing products and how much to maybe newer products? And this 190 crore capex, what kind of incremental asset turn one should look at here?

Bimal Thakkar, Chairman

So, at full capacity, we expect the asset to be increased. I said we expect the asset turn to be at least three times of the investment. And in terms of new products, from this 190, I would say close to 60-65 crores is towards new products.

Pritesh Shedda, Analyst — Lucky Investments

And my second question is on the volume growth. So, for the quarter 2 and for the H1, what will be the volume growth for us?

Bimal Thakkar, Chairman

Vini, you want to give the percentage growth of the containers?

Srinivas Ayagiri, CFO

Yeah. So, our overall growth for H1 has been roughly around 24%. Out of this, almost 70%, 60% to 65% would be volume growth, basically. Coming from volume.

Pritesh Shedda, Analyst — Lucky Investments

Okay, so let's say in the process 60%, so I can use that same thing for the processed food number.

Bimal Thakkar, Chairman

Yeah, this is for the processed foods.

Pritesh Shedda, Analyst — Lucky Investments

Yeah, this is for the processed foods. And at the company level?

Srinivas Ayagiri, CFO

The numbers will be almost the same. It won't drastically change. Another 5% here in this.

Pritesh Shedda, Analyst — Lucky Investments

Okay, sir. Okay. Thank you, sir.

Operator

Thank you. The next question is from Charchit Malu from Genuity Capital. Please go ahead.

Charchit Malu, Analyst — Genuity Capital

Hi, sir. Thanks a lot for the opportunity. Just one quick question on the sewer plant. Can you throw some light on the utilization level from sewer plant in Q2?

Bimal Thakkar, Chairman

So, you know, the Surat plant is not fully operational yet. There are some lines which are still to be installed, which will get installed in this Q3. But at an average, for Q2, I'm going to say we utilize about 15% of the capacity of the installed lines.

Charchit Malu, Analyst — Genuity Capital

Okay, and like, till H2, how much are we expecting to utilize this capacity?

Bimal Thakkar, Chairman

Yeah, so we are hoping to get to at least around 35 to 40 percent capacity utilization by the end of this fiscal year.

Charchit Malu, Analyst — Genuity Capital

Understood. So, majorly for this quarter and for H1, majorly volume was 30 thousand capacity.

Bimal Thakkar, Chairman

Sorry, I couldn't hear you.

Charchit Malu, Analyst — Genuity Capital

No, that's it.

Bimal Thakkar, Chairman

Thanks, sir.

Operator

Thank you. Before we take the next question, a reminder to participants that you may press star and 1 to join the question queue. Ladies and gentlemen, to ask questions, you may press star and 1. The next question is from Saurabh Beria from Samiksha Capital. Please go ahead.

Saurabh Beria, Analyst — Samikshar Capital

Hi. Am I audible? I lost the line previously. Am I audible now? Yes.

Bimal Thakkar, Chairman

Yes, you are.

Saurabh Beria, Analyst — Samikshar Capital

Yeah. So first question was on the demand side. So in the quarter, we reported a 24% growth. But, you know, as per the previous call, we had some containers struck and due to the crisis in the Middle East, we could not dispatch them. Taking that into consideration, and even in the quarter, we would have incremental demand or sales from the Surat plant. Overall, top line looks a little less than what was expected by us. Is there some problem in the demand side? Are we losing share somewhere? If the management could throw some light on this.

Bimal Thakkar, Chairman

No, so the demand continues to remain very robust. Our problem and challenge has still been the shipping side of things. Availability of containers, availability of vessels on certain routes, it's still been a challenge. So, shipping, I mean, we still continue to have carry forward shipments every month. In October, certain routes have become better, but... It's still not back to normal pre-war. We are still nowhere there. So, with all these problems going on, we are still managing to get the growth and trying to maximize shipments. But the demand remains strong for the products.

Saurabh Beria, Analyst — Samikshar Capital

Okay. So, secondly, on the margin side, in the quarter, we did 19.4% margin, which is a good number. Can you explain if there was some one-offs in the margins, be it on the PLI side or any tariff refund which were in place? So is this number sustainable is what my question is, because given the current free crisis and all is there, so once it is in place, so do we see margins extending from here or it would settle in the 17 to 19 percent range?

Bimal Thakkar, Chairman

We continue to be bullish on maintaining high teams in terms of the margins, and I'll let Sreeni answer more details on your question earlier. Sreeni, if you want to answer the other.

Srinivas Ayagiri, CFO

Yeah, fine. Yeah, yeah, sure, Bimal. So, yeah, so as Bimal rightly said, we will continue to have our margins estimated at high T. And see, this number is sustainable because and this will come through operating leverage as well. You also have to understand that we are still in the process of building capabilities. A lot of our capability building in key markets like US, India as well with the Surat plan coming in and in UK and Europe have happened during the second half of last year. And this year is the first year basically it's happening. It's the first year impact basically full impact. The second part is on the brand building. We have been continuing to invest on our brands in both Ashoka as well as Truly Indian in all our key markets. So that exercise will continue. So that's why you will see the margins at a heightened level. Having said that, the operating leverage, the way our revenues are growing at roughly around 24-25 percent, that will give us that operating leverage. But at the end of the day, we will also keep on investing for some more time on our brands and capabilities within the markets. The second question, I think. Yeah, sorry. Yeah, maybe, yeah, why don't you continue, then maybe I'll...

Saurabh Beria, Analyst — Samikshar Capital

Yeah, this was the follow-up, that one-offs in the current numbers, be it insurance or tariff refunds or PLI benefit, whatever was there.

Srinivas Ayagiri, CFO

No, so from a PLI benefit, so from a PLI benefit, we have been having this PLI, which has been there for five years, and this is the last year for which we will have the PLI. But again, you will have to understand that for PLI, we also spend. So whatever PLI, we get it, we have to spend 2x. Of that amount into marketing and advertising in foreign markets outside the country. That's where you get the PLI benefit. So that won't impact much. The second part is, I think, from an insurance perspective, it is gross margin neutral. So there is no impact on the overall PLI. On the tariff, if you remember, there was roughly around 3 crores lying in our balance sheet because of the tariff refund. So, that's been a part of the overall P&L this time.

Saurabh Beria, Analyst — Samikshar Capital

Okay, so which line item does it, it is exactly affecting the other income part, right? If I'm not wrong, the tariff refund.

Srinivas Ayagiri, CFO

No, it's in the COGS. Because it was passed through the inventory line and that's how it hits you.

Saurabh Beria, Analyst — Samikshar Capital

Okay, so we have a lower cogs due to the tariff refund, if I'm correct.

Srinivas Ayagiri, CFO

Yeah.

Saurabh Beria, Analyst — Samikshar Capital

Okay. And so, secondly, on the OCF part, so do we have any insurance claim? So, since in the note it was mentioned, can you mention the amount of the one-offs which were there in the current first half of 27 operating cash flow numbers?

Srinivas Ayagiri, CFO

No, so that's what I said. The insurance has been, so the amount as well has been settled from the insurance insurer and at a gross margin level it is neutral. So whatever.

Saurabh Beria, Analyst — Samikshar Capital

No, no, from the cash flow point of view my question was. Operating cash flow point of view.

Srinivas Ayagiri, CFO

So cash flow will come in the next quarter. Basically that money was received subsequently in October.

Saurabh Beria, Analyst — Samikshar Capital

Okay, so basically in the current quarter, or say in the first half of 27, we had no one-offs in our operating cash flow numbers, right? Okay. Perfect. That helps. And just one last question. So, from a macro point of view, we saw the U.S. midterm elections and even talks are there on the plate regarding tariffs getting settled at a lower rate. Do you see any benefits arising post this elections? Any change in scenario that you might expect which could benefit us? And even a lot of FTAs and all is in the play from a broader macro point of view. So how do we benefit from it?

Bimal Thakkar, Chairman

No, so obviously lower tariffs will help us. Right now, the tariff we are paying, additional tariff we are paying is about 10% on our products. So if we are able to get that reduced, it will obviously benefit our company and we'll be able to push more. And so, yeah, it's, and, you know, with the midterm election, I think this. The whole overhang and the uncertainty of whether the tariffs will further go up or this, hopefully, that is not there anymore. And we get some clarity and some finality to the FTA soon between the two governments.

Saurabh Beria, Analyst — Samikshar Capital

Perfect. And just one last question. So, data management…

Bimal Thakkar, Chairman

So, given the first two quarters where we've had difficulties in executing all our orders because of the steam-off rate and because of the availability of containers, You know, I mean, as much as we would like to try and get to the 900, realistically, I think we should, we would like to look at about 850 crores, because the container issues still continue to remain, and we hope it only gets better, and These last two quarters to achieve the balance difference for the 900, given the problems still there on shipping and availability of containers, looks still difficult. So we would feel comfortable with the 850. That's what the endeavor is, and hopefully there are no more surprises and problems in terms of shipping. And in terms of margins, we continue to be confident of the high teams to maintain that for the next two quarters as well.

Saurabh Beria, Analyst — Samikshar Capital

Okay. So, recently Iran did add some exceptions on some countries to pass their ships through the Strait of Hormuz, right? India being one of them. So, do you expect the Middle East crisis to ease or does it benefit us anyway?

Bimal Thakkar, Chairman

No, no, of course, it would benefit, but it's not yet, you know, it's some routes, there is some better availability of containers, but it's still a challenge. There is still a lot of uncertainty, and I mean, shipments to the Middle East are still a challenge for us. We are not able to make as many shipments as we would like. And the transit times have increased. You know, the transit, which used to be seven days, 10 days, has now gone up to 35, 40 days for the Middle East. And at freight rates, which are, you know, seven, eight times higher. So the Middle East still continues to remain a problem, freight rates and all the other geographies have also gone up and transit times have also gone up out there. So it is impacting and we are trying to navigate in the best possible way to see that we continue to get growth and continue to maintain our margins.

Saurabh Beria, Analyst — Samikshar Capital

Okay, so it might have some effect on our working capital as a whole because inventory is not moving that fast, if we talk of the Middle East side. So, if we can quantify in terms of inventory days, what incremental changes we have seen as compared to the previous year, that could be beneficial.

Bimal Thakkar, Chairman

Shini, can you please suggest that?

Srinivas Ayagiri, CFO

Yeah, so as Dimas rightly said, there has been a lot of challenges in terms of the turnaround time to deliver our products. Almost two weeks of inventory days is something which we are seeing is on a higher side and is having an impact on our books basically. But let's see how the next two months goes. The routes clean up and the transit signs do come to normal numbers. We should end our inventory day as to what we used to be in the month of March.

Saurabh Beria, Analyst — Samikshar Capital

Perfect. Great. Thank you. Happy Diwali and happy Dr. Ashutho all day. Thank you.

Bimal Thakkar, Chairman

Yes, to you all. Thank you.

Operator

Thank you. Participants who wish to ask questions, please press star and one.

Speaker 0

Ladies and gentlemen, to ask a question, please press star and 1. As there are no further questions, I'd like to hand the conference

Operator

over to the management team for closing comments.

Bimal Thakkar, Chairman

Thank you very much, everyone, and wishing all of you all a very happy Diwali and happy Tanteras, and see you all next quarter. Thank you.

Operator

Thank you very much. On behalf of ADF Foods Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen.

Speaker 0

You will now disconnect your lines.