AWL Agri Business Limited (AWL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to AWL AgriBusiness Ltd. Q1-F527 Earnings Conference Call, hosted by ICICI Securities Ltd. As a reminder, all participant lines will be the listen only more, and there will be an opportunity for you to ask questions after the presentation continues. Should you need assistance during this conference call, please signal an operator by pressing star 10-0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashutosh Jyothir Aditya from ICICI Securities Limited. Thank you, and over to you, sir.

Thank you, Palak. Hello and good evening, everyone present on the call. I, on behalf of ICICI Securities, welcome you on AWL AgriBusiness Ltd.'s Q1 FY27 earnings call. I would like to thank the management for giving this opportunity of hosting the call to us. From the management, we have Mr. Shrikant Kanhari, CEO and MD, Mr. Sharmin Seth, Executive Director and Chief Operating Officer, and Mr. Pankhil Guel, the interim CFO. I will now hand the call over to the management for any opening remarks. Thank you.

Yeah, thank you and good evening, everyone, and thank you for joining us. On behalf of AWLI Extend, a warm welcome to all of you for our Q1 FY27 Earning Conference call. Joining me today are the members of our leadership team who will take you through the financial performance in greater detail before we open the floor for questions. We have made a strong start for FY27 delivering another Quarter of broad-based growth with a meaningful step-up in the profitability. Revenue grew by 18% year-on-year to 20,000 plus crore, and the quality of our earnings continues to improve alongside this growth. More importantly, this performance reflects the continued execution of our long-term strategy. Over the last few years, we have consciously transformed EWL from being predominantly an edible oil company into a diversified food and FMCG company. Today, while edible oil continues to remain our foundation, our growth is increasingly being driven by packaged food, future-ready channels, and wider portfolio of value-added businesses. Let me begin with our food and FMCG business, which remains at the heart of our transition. Journey. Food and FMCG segment grew by 22% year-on-year during the quarter with revenue of 1726 crore. The encouraging part of this growth continues to be broad-based across the portfolio. Rice once again delivered an outstanding performance, growing by over 40% year on year, while categories such as wheat flour, pulses, besan, poha, And other packaged food continued to witness healthy consumer demand. Our tops range of sauces, pickles, and convenience food grew by healthy 23% year-on-year. And where we are pleased to welcome Madhur into our AWL family, strengthening our presence in the packaged sugar category alongside fortune sugar. Together, these additions reinforce a portfolio that's now spanned. Everyday staples, convenience format, and healthy focused innovation. What gives us confidence is not just growth in one category, but increasing scale of our overall food portfolio. Multiple categories are now approaching meaningful annual revenue milestones, creating several independent growth engines. This diversification will continue to improve the resilience and the quality of our Food portfolio and remains central to how we think about AWL's future. On edible oil, the business delivered low single-digit volume growth of 2% year-on-year. The industry witnessed temporary channel destocking following sharp volatility in global edible oil prices. However, underlying consumer demand remained resilient. Our integrated sourcing capabilities, pricing discipline, and premiumization initiative enabled us to effectively navigate this environment while sustaining our market leadership. On industry essential, we delivered another healthy quarter with the segment reporting 13% volume growth and 28% revenue growth. Within this portfolio, our oleochemical and specialty chemical business. which now contributes over 40% of the segment revenue continues to perform well. We continue to see this as an important strategic business and our expanding capacity at our southern manufacturing facility to progressively increase the contribution of higher value added specialty products. On channel performance, our alternate channel, modern trade, e-com, quick-com, grew 27% year-on-year during the quarter. Quick-commerce continues to be particularly exciting for us, recording a growth of 56% year-on-year. We increasingly see quick-commerce not merely as another sales channel, but a structural shift in consumer buying behavior. It enables faster product discovery, higher purchase frequency, and quicker scale-up for innovations. We have therefore continued to invest in technology, digital capabilities, assortment planning, and channel-specific execution to strengthen our partnership across leading quick-commerce platforms. Alongside this, Horeca and Branded Exports also delivered another strong quarter. Reflecting the increasing diversification of our route to market strategy. On distribution front, our distribution strategy is also evolving. Our direct reach now is close to 970,000 outlets this quarter, while our total reach as per the means and remains at 2.6 million outlets. With this expansion now, Substantially in place. Our focus is increasingly shifting towards improving throughput and distribution productivity rather than simply adding more outlets. We continue to maintain strong rural presence across more than 63,000 towns. Overall, I would say we believe the fundamentals of the business remain strong. Our integrated sourcing and manufacturing capabilities Trusted brands, extensive distribution network, and growing presence across future ready channels provide us a strong platform for a sustainable growth. As we move ahead, our priorities remain clear, strengthening our food portfolio, improving execution across channels, enhancing profitability, and continuing our journey towards building one of India's most trusted and largest food FMCG company. With that, I would now request our CFO, Pankaj, to take you through the financial performance in more detail. Over to you, Pankaj.

So, thank you, Srikant, and good evening, everyone. Let me take you through the financial performance for the quarter. We have started FI27 on a stronghold with broad-based growth translating into a meaningful step-up in profitability and earning quality. Consulated revenue grew 18% year-on-year to 20,048 crore, supported by 7% underlying volume growth across the portfolio. Operating EBITDA grew 34% year-on-year to 693 crore, while profit before tax and profit after tax grew 48% and 48% restrictively. This improvement in profitability was broad-based, reflecting better execution across businesses, a favorable and increasingly food-led product mix, disciplined pricing, and continued operating efficiencies. Every business segment contributed positively this quarter, a reflection of the strength of our diversified model. Food and FMCG remains the clearest expression of that strategy. Revenue grew 22% year-on-year to 1726 Crore and we continued to invest behind brands, distribution, expansion and new category additions including the recent addition of Madhur to our sugar portfolio and continued strong momentum in our tops range of sauces and convenience food which grew 23% year-on-year. Segment EBITDA came in at 104 crore with margin at 6%. We see this as the right trade-off. As these categories mature, we expect the quality and durability of these earnings to keep strengthening and food and expenses remains our single biggest priority for capital and management attention going forward. Edible oil delivered resilient performance in a volatile commodity environment with revenue up 15% and EBITDA per metric ton up 33% year-on-year, while industry essentials supported by continued strength in oleochemicals and specialty chemicals delivered another strong quarter with revenue up 28% and EBITDA up 47% year-on-year. Looking ahead, our operating outlook across three segments remains unchanged. In food and FMCG, we continue to target mid-team revenue growth, while containing EBITDA margin in the rate 3-4% range, as we continue to invest behind grants, distributions, and category expansion. In edible oils, we expect volume growth of around 5-6%, with EBITDA expected to remain in the range of 4000-4500 per metric ton. For industry essentials, we continue to expect volume growth of around 8 to 9% while sustaining EBITDA in the range of 3000 to 3500 per metric ton. We believe these operating parameters provide a balanced framework for delivering profitable and sustainable growth across our portfolio. Beginning this quarter, we have also refined how we present segment performance. For pool and FMCG, as the business scales and diversifies, we believe revenue, underlying volume growth, and EBITDA margin are now the more meaningful lands than absolute volume, and our disclosures will evolve accordingly. Edible oils and industry essentials will continue to be presented on a pertinent basis, given throughput remains the key driver there. We will continue to disclose segment-wise EBITDA on a consolidated basis and segment-wise return on capital employed on a stand-alone basis to give investors a clearer view of margin and capital efficiency across our diversified portfolio. Taken together, we believe this gives a more meaningful framework for evaluating an increasingly diversified food FMG portfolio and reflects where we are taking the company. With that, Let's open the floor for questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may please press star and 1 on their 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 a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is on the line of Dheeraj Mistry from Jefferies. Please go ahead.

Yeah. Hi, sir. Congrats on good set of numbers. Sorry if I missed out anything, but what would be the revenue? So, given that your FMCT business is back to the growth and you have done 6% margin, what would be the guidance going ahead? What kind of growth you are expecting and what kind of EBITDA you would like to maintain in this year?

So, this question is particularly for the food segment? Foods and FMCG. Foods and FMCG, okay. I think this quarter we delivered a revenue of 1700 plus, which is again a double-digit growth. I think the guidance which we can give for the rest of the year, I think we should continue with this double-digit growth in the food, both volume as well as revenue. And EBITDA margins, I would rather say... We should not be looking at a 6% EBITDA margin for this quarter. What we should be looking at is the average of last four quarters, given that food for us still remains in a growth phase or investment phase, and we will still remain aggressive on the top line rather than actually. Looking at a bottom line. So, 6% may not be the guidance, of course. The average of last four quarters or five quarters should be something which we should be consistently delivering.

So, in double-digit revenue growth, when you said double-digit, so 22% and 10%, what would be the guided range for that?

Guided range, in a sense, for volume or revenue, you are asking?

No, no, revenue, revenue.

Revenue guidance, I think guidance would be in and around, I think, between 18% to 20% is something we should continue to deliver.

Got it. Got it. And, sir, on Madhur brand, can you throw some light what kind of revenue this Madhur brand generates, what kind of margins, and what kind of terms and agreement you have with Sri Renuka Sugars, and what are your targets going ahead for this brand?

See, the Madhur brand integration has got one basic fundamental objective is Madhur is one of the strongest brand, or rather, I would say, the number one brand in the country. But Sri Renuka, on their own, were finding it difficult to scale the brand, in spite of the fact that brand is very... So, the fundamental objective is to leverage AWS distribution and grow this brand as much as possible. That's the objective number one. On the revenue, I think Madhur today sells close to 15,000 tons a month. Of course, our target is to scale it up further and make it close to 20,000 tons a month by end of the year. And therefore, average revenue that this brand today is generating or will continue to generate will be in the range of close to maybe for the full year I'm giving. Full year it can be close to 700, 800 crore kind of number.

Got it. And in terms of margins, what would be the margin profile, and is there any royalty payment which you would be doing to Sree Renuka sugars?

Yeah, so there is a, because it's a brand which has been licensed to us by Renuka, brand remains with the Renuka, so it is licensed to us, a kind of marketing agreement which has been done. So we would be paying them. Royalty of 0.5% on the sales that we will do for this Madhu brand. And on the margin guidance, see, as I said, the primary objective is to make the brand big, and therefore, we would certainly focus more on the top line and volume, and therefore, The margin guidance would more or less remain same as what we would be delivering in our overall food segment.

Got it, got it. And, sir, lastly on edible oil business, you have learned 2% volume growth. How the scenario right now in the market, let's say the de-stocking which you have witnessed in Q1, it's largely over, and the palm oil remains volatile in a way, what kind of, let's say, volume growth you would be, I mean, 3 to 5% volume would be over the medium-term basis, and you have done. This quarter, so your full year, it would be in a range of, let's say, 4 to 4,500, or it can be a bit higher in that terms.

See, this quarter was a little bit, we had challenge on both. One is, of course, on one hand, you had a volatility. On the other hand, you have supply chain disruptions also. And the third, of course, because of the volatility, The sluggishness in the market, the trade was hand to mouth, and the primary pipeline was more of a dried up. So that everything happened in this quarter and that therefore it impacted our volume for the edible oil and we grew only by 2%. But as we go forward, I think now we are looking like we are already done with July. As things are coming back. Whatever issues that we had in Q1, I don't think we will continue to face. Volatility has now become a new normal, so I don't think that would anyway we need to be, you know, discussed. But I think as we know, from second quarter onward, India gets into a festive mode and a lot of demands, and after rains particularly for edible oil, demand starts coming in. So, I am hopeful that the rest of the nine months, of course, we will not, I am not giving an items of 2%, but I think the rest of the nine months, I think we should go grow in a moderate single digit, which can be anywhere between 5% to 6% kind of number on volume. Of course.

Got it. Thank you very much. I will fall back in the queue.

Thank you, sir. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions, may please press star and one at this time. The next question is from the line of Ashutosh Jotir Aditya from ICICI Securities Limited. Please go ahead.

Yeah, hi, sir. Thank you for the opportunity. So, my first question is slightly on the longer-term vision, the 2030 vision which the company has. So, just want to understand, like, what kind of capex and what kind of market share opportunity or the gain opportunity the company has budgeted in for the edible oils and the foods and the staples business?

See, of course, our 2030 guidance we have recently given that we want to cross 100,000 crore of revenue, want to cross 4,000 crore of EBITDA and all. Of course, there would be a capex that will be there. I think not a specific, I can't give you a specific capex that we would be doing in the next four years, but as and when the capacities would need to be. I think we will do today our edible oil refining capacities are running at close to 60-61%. I think next couple of years it will get exhausted and we may have to put up capex. Similarly, we will have to put a lot of capex in the food also because still today 50% of our food business is coming from the contractual or tolling operation which we want to convert into our own operation. And so... A steady state for a modeling purpose, if you really want, I think you can continue to take, as you know, capex of anywhere between 700 crore kind of number for every year.

Okay, understood.

And my next question is that with this Wilmar ownership going up. Like, what kind of efficiencies the company can expect, like the global sourcing thing, or any other export opportunity, or anything that you want to highlight in this regard?

The sourcing efficiency was even before also. So, like, sourcing is one of the core strengths that we have. That's also because the Wilmar is something which is to our side, and therefore the kind of market info that we get from Wilmar is like nobody else get in this country. So that sourcing efficiency was earlier also will continue, I think. The biggest, I think, leverage that we will try to make out of a new setup or a new structure is We will try and leverage more of a R&D of Wilmar, which is there. They are quite big and the kind of R&D they have done in extracting value out of every chain where we are into, we will try and leverage that as much as possible. Besides that, of course, technical expertise which they have, we will continue to take benefit of that as well.

And the next question on this, we have seen like the redible oil typically is very volatile, and there has been initiative by the company and even other companies also to basically improve the domestic sourcing of the oil fields. So, any ballpark number like with this kind of strategy of domestic sourcing, what could be the reduction in the overall reliance from the imports of these particular oils that are happening, maybe like in the next three, four years, five years, any particular number or any sense on that?

So it's very hard to put up any particular number to be very frank with you. I think India's dependence on edible oil will continue for some time. Not some time, but I think for a longer time because given the fact that still we import close to 70% of our requirement. But I think there is a good amount of work which is happening on domestic oil, particularly on the oil seed. One is the mustard and of course other is government is trying to push. I think we are focusing more on this mustard segment and we are growing very fast on that. So that itself will have some kind of impact on reducing the import dependence, but of course the import dependence will remain and you will have to bear with the volatility that which we see in this oil.

Okay, I understand. So one last question. Again, like slightly medium term question. So this cross selling opportunity. So currently, you see like If my assumption is correct, I think around 35-40% of the distribution outlets of the overall edible oil that is being used for selling food and FNCE. So any particular target which the company has to, like in the next one or two years, how that percentage will change, is that cross-selling opportunity for host business?

Cross-selling opportunities, of course, there. So all of our oil distribution, which is there, I think we are leveraging that quite efficiently. And what we are basically offering is a basket to our trade, which includes not only edible oil, but also the food part also. So we keep leveraging between or we keep Thank you. I can't give you a number to that, but only we will say that this process will continue.

I just wanted to understand, there isn't much friction in keeping the FMCG brand, right? Of course, the oil brand definitely has a stronger brand equity compared to the first product. So that way, I was asking, there is not any friction within the distributors in keeping these products right?

No, no, of course not. There is no friction in it. Thank you. Thank you, sir.

Thank you, sir.

The next question is from the line of Lakshmi Narayan from Tunga Investments. Please proceed.

Thank you for this. I have a couple of questions. I just want to understand what percentage of our raw material is important, and especially in the oil, and within that, what percentage comes from Wilmer? That is my first question. And the second question is that, if I look at the last 10 years, your volume growth has been around 7% on a target basis. So do you anticipate this kind of a volume growth over the next decade also? Because from where we are now, we have kind of penetrated, I think, but just want to understand whether the market is available for you to grow at that. That's my second question. The third question is that what's the mix of your food business by B2C and B2B? Now, three questions.

Okay, I'll take one by one. So, first question was, how much of raw material is imported? I think for edible oil is close to 70% is we import. I mean, little more than 70% in fact is imports. And of that 70% close to one-third is will mark. So, because our palm portfolio is close to 30% of our entire. So this is answer to your question number one. Second, you said that the company has been able to register a CAGR of 7% on a volume growth over last 10 years. I think it will be a little bit more than that because food got into our scheme of the things only last five years and food is growing double digits. Edible oil, we are saying that it will continue to grow at 5-6% kind of number, and the industry essential again close to 8-9%. And food, as we said, we will strive to grow it in a double digit. So if you average it out, this is the kind of proportion all these three segments have. I think 8-9% is something which we are... And this is the guidance also we are giving it for quite some time. So we should continue to deliver that. And on a food, B2C and B2B, I think 80% for the food, 80% is actually B2C. In fact, more than 80% is B2C hardly. 15% is B2B. But this portfolio, having said that, we are mindful of that. This is also, B2B is also very lucrative portfolio, given the fact that we are quite big in institution when it comes to edible oil. And most of our institutional clients who buy edible oil also requires food, which is wheat flour, rice and all. So we are building this slowly. So right now, at this point of time, it is only 20% in food and B2C is 80%. But slowly, I think it will continue to grow.

The first thing that you talked about, sourcing from Vilma, so what kind of credit period do we get? Is it like we get some kind of an advantage, and especially in terms of hedging, how do you handle it? Because your counterpart on the other side will also be thinking of protecting their own margins, and you will also be doing the same. So, how does that work in terms of payables to Wilmar? Is it in line with the payables you have with the rest of the imported portfolio or imported raw material?

Wilmar being a related party, and we've been listed, and of course, you are subject to audit and related party transaction, transfer pricing audits, and all that. I think for us, Bilmar is a preferred supplier. Everything is at arm's length, whether it is a pricing or whether it is a period or any aspect of the transaction, everything is in line with what otherwise we would have got from any outside supplier. So that's the answer to your question.

Just coming to another thing, I just want to understand how often do you do mark-to-market of raw materials, especially the oils, and typically how many raw material stock days you carry in your most dominant category of oils? And also the third question is that if you look at the regional mix of your sales by oil, can you just help me understand which region is growing faster and what is our saliency?

See, mark-to-market is a dynamic process. I think it's something which, as per the accounting standard, you have to do a mark-to-market at the close of the accounting period, and that we do, whether it is mark-to-market sitting in your inventory, or whether it is sitting in your hedges, or whether it is sitting on your firm contract. So that we do, basically, whatever is required as per the...

The typical raw material stock base you carry on your most dominant category of oils. How many stock base of RM you carry?

Stock days are anywhere between 30 to 35 days given the fact that most of our raw metal is imported and there is a voyage period of 35-40 days. So since voyage period is 30-35 or 40 days, you have no option but to keep that much of stock so that you are not out of stock at any point of time. So we keep 30-35 days of stock at any point of time for whether it's a palm or soya or sunflower.

And the last question of the oil... Sorry to interrupt, sir.

Lakshmi Narayan, sir, may we request you to return to the question queue for follow-up?

The question is already asked in terms of the regional mix of oil. So if you can give that spirit, it will be great. Otherwise, I will come in queue.

The business mix of oil is like, in the overall scheme of the things, we have 30% weightage coming in from palm, another 30-35% coming in from... So, yeah, 20% comes from sunflower and rest of the 15% predominantly comes from all your local oils like mustard, crown nuts, cotton, and rice plant.

Thank you.

Thank you, sir. The next question is from the line of Ashok Shah from Eklavir Invesco Family Office. Please proceed.

Thanks for allowing me to ask questions. Sir, any plan or the program for guiding the farmers to grow palm tea or any other food related item, are we doing anything, something like that?

No, so we are not into any palm plantation or any contractual farming for the plant, palm, but what we normally do is we try to, we have started one program where we are trying to procure directly from farmer. So this in the caster seed, we try to procure directly from farmer, so close to 18-19% of our procurement directly comes from the farmer.

So, do we run any simultaneous program to increase the acreage of the production from the farmers?

Yeah, we are doing one program on a mustard farming with one NGO called Solidaridad in association with SEA, where we have adopted some 3500 model. Mustard farms where we are spending and trying to improve the efficiency of this farm and we have got some good results. So we will continue with this kind of initiative, particularly for the mustard, given the fact that government is also pushing up for improvement or increase in oil seed production of India to become less dependent on import oil.

Thank you, sir. The next question is from the line of Gaurav Nigam from Tunga Investments. Please proceed.

Yeah, thank you, sir, for taking my question. Our first question on when we, I think, you had declared the hedging gains, and I believe, as you mentioned, there is mark-to-market gains on the opens. I wanted to understand from your raw material perspective, what proportion you keep as hedges and what proportion you keep it open? That's my first question. And the related. Please, since these will be variable things which will be happening every quarter to quarter, what is the metric that you use to, unit,

or any metric that you use to judge profitability?

I think as far as this hedge is something we import and we are, we don't usually speculate or we don't take any big calls, given the fact that the brand is in front of us. I think brand itself is our biggest hedge. So usually most of our buying is keeping in mind what is the demand on the ground and how much of time we have to sell the product. And our brand actually itself becomes hedged. Besides that, we do come some hedging by, you know, doing forward sales, which is also one way of hedging. So that's not something which we have in a sense. Anything which we have to, we can put a number to it. But given the fact that our brand itself is strong, that itself acts as a privilege for us.

Thank you, sir.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments.

Yeah, thanks, everyone, for attending the call, and do keep tracking us, and in case you still have any questions, you can reach out to our investor relation team over email, and we will certainly get back to you with answers. Thank you.

Thank you, sir. On behalf of ICICI Securities Limited, that concludes this conference call. Thank you for joining us and you may now disconnect your lines. Thank you.