Earnings Call Transcript - XNSE:GANESHCP 2026-11-03

Operator

Ladies and gentlemen, good day, and welcome to Ganesh Consumer Products Ltd. Q2 FY27 Onings Conference Call, hosted by DAM Capital Advisors Ltd. 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 conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Manial from Dam Capital Advisors Limited. Thank you, and over to you, sir.

Speaker 2

Hello, and good morning, everyone. We are pleased to host Q2 FI 27 earnings call of Kanesh Consumer Product Limited. From the company, we have with us Mr. Manish Mimani, Managing Director, Mr. Amit Apadia, CFO, Mr. Narendra Mishra, Company Secretary and Compliance Officer, Thank you, Sanjay.

Speaker 6

Good morning to all the participants. Before I hand over the call to Mr. Mimani for his opening remarks, I would like to draw your attention to the safe harbor statement in the investor presentation. I hope each one of you would have gone through the presentation and the paper of the statement by now. If not, please go to the same before the Q&A begins. Thank you, and over to you, Mr. Mimani. Thank you, Mr. Sanjeev. A very good morning, everyone. On behalf of Ganesh Consumer Products, I welcome you to our Q2 Financial Year 27 earnings call, and thank you for joining us today. The second quarter of financial year 2027 saw our sequential recovery in a challenging environment for the category given by continued progress in our value-added portfolio. Revenue from operations was INR 2267 million, up 20.3% quarter on quarter, though it was down 5% year on year, while operating EBITDA grew 23.6% and profit after tax grew 68.7% year on year. B2C revenue declined 2.5% year-on-year with the pressure concentrated in the ATA category where volumes declined following changes in the state government policy. In May, the West Ranoi government decided to stop distributing ATA through ration shops and started to supply wheat grain instead. Local floor millers who were earlier engaged in job work for the state government converting ration wheat into ATA lost their business. They have since redirected their capacity towards selling ATA in the unorganized segment, which has added to the competition in the open market. This affected the package strategy as a whole. As per Nielsen IQ, the package ATA category in West Bengal declined 6.3% year-on-year during the quarter, and the broader package week-based category covering ATA and Mehta Suji declined 2.5% quarter-on-quarter. We believe the pressure on ATA is temporary and expect the volume to normalize in the medium term. Excluding ATA, B2C revenue grew 4.9% year-on-year and 26% quarter-on-quarter, which is a better reflection of our underlying demand for our brands. B2B revenue declined 13.8% year-on-year, mainly due to lower service income and softer corporate volumes. E-commerce, including quick commerce, remains our fastest-growing channel with a caterer of over 53% between financial year 23 and financial year 26. And we are now expanding our e-commerce presence in the other regional markets like Bihar and Akram. Sattu delivered strong growth supported by our targeted marketing campaigns involving Ravindra Jadeja. We continue to widen the portfolio with recent launches across whole blended and CBC spices, Swabu Dala and Soya Chans. We now offer 273 SKUs compared with 253 SKUs at the end of financial year 20-states. Spices revenue grew strongly and margins improved significantly on the fact of stronger realizations. We have now extended the approach that works for Satu to Spices with new targeted campaigns featuring Paramrata, Chato Bhattar, and Lai Ma Sen as Kadegi ambassadors. Alongside television and print, we are increasing our spend on digital channels and coin commerce. The board has declared an interim dividend of Rs.3.70 per equity share for financial year 2027. This reflects the strength of our balance sheet and our intent to share the benefits of our performance with shareholders. We are also aligning our manufacturing footprint more closely with our markets. We have sold our Hyderabad plant, a non-core facility based in job work for an FMCG player, which contributed about 1.4% only of financial year 26 revenue. The sale was concluded for INR $325 million, about 2.7 times its net worth, and the capital so released will be redeployed into Eastern India, where our business is concentrated.

Amit Apadia, CFO

Thank you, Manish, sir. Good morning, everyone. As RMD has taken you to the business performance, I will take you to the financial. Operating EBITDA for the quarter was INR 295 million, up 23.6% year-on-year, with EBITDA margin at 13%, up 302 basis points year-on-year, and 188 basis points quarter-on-quarter. A better product mix contributed, but the larger part of the margin expansion came from lower other expenses at 11.8% of revenue against 14.5% a year ago, mainly due to the phasing of advertising spend. For the first half, advertising spend was 1.9% of revenue in line with FY26, and we expected to step up over the rest of the year. Profit after tax for the quarter was INR $188 million, up 68.7% year-on-year, and 49.9% quarter-on-quarter. Fat margin was 8.2% and improvement of 358 basis points year-on-year. This reflects the EBITDA margin expansion and lower finance costs which fell to INR 6 million only from INR 43 million a year ago following our deleveraging. Diluted EPS for the quarter was Rs. 4.70 only. Our cash conversion cycle was 32 days on an annualized basis compared to 43 days in Q1 and receivable days remained at 6 as a result of our cash and carry models in general trade. Our balance sheet remains strong. Cash and bank balances, including fixed deposits, food at INR-108, 1,082 million, of which INR-4, 25 million, represents unutilized high-view groceries. Annualized ROCE was 21.9% and ROE was 16.4%. As of 30th September, the Hyderabad plant has been classified as an asset held for sale at its carrying value of INR 126 million and the advance of INR 32.2 million received from the buyer has been recognized under current liability. With the sale deed executed on 1st October for a consideration of INR 325 million, we expect to recognize a one-time gain of approximately INR 199 million. Looking at the full year, given the pressure in ATA category, we expect revenue from operations for F527 to decline by around 5%. At the same time, with an improving product mix, we expect operating EBITDA to grow by 50 to 70 basis points during the year. Even as we step up our advertising investment in the second half, we remain focused on translating operating performance into consistent cash-back profitability while maintaining the balance sheet discipline we have been following. With that, we are happy to open the call for questions. Moderator, over to you. Thank you.

Operator

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone 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.

Operator

The first question comes from the line of Nikhil from Runga Investments.

Operator

Please go ahead.

Nikhil, Analyst — Tunga Investments

Yeah, thanks for the opportunity. My first question is on the ATA performance. So, we have mentioned because of the change in government policies, our volumes have declined. And what is our outlook on the coming quarter and the next quarter? Because you mentioned around 5% degrowth in the full year level. Is it because of the softening in volumes of ATA category?

Amit Apadia, CFO

Hi, Nikhil. Thank you for participating. The decline in the B2C revenue. The overall revenue decreased by 5%, but the B2C revenue decreased by 2.5%. And the main reason for the decrease in the B2C revenue was the ATA category only. Except ATA, the overall category has grown during the quarter. Now, in the coming quarter, we are working with our sales team and coming up with multiple strategies to combat these small flour millers who have started distributing unbranded ATA in the district-level market. And we are having a closely watch on the overall market, and we expect the volume to improve in the coming quarters.

Nikhil, Analyst — Tunga Investments

Okay. Got it. Just one more thing. Currently, we see a bullish trend in wheat prices. So, are we expecting any price hikes in this quarter or coming quarter to sustain our margins?

Speaker 6

Yeah, hi, Nikhil. It will depend on the computer's step also. We cannot comment as of now. We will look forward for the computers to take the step for our market share. As of now, we have got enough to stop for the play side.

Operator

A reminder for all the participants, in order to ask a question, you may press star and 1. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The next question comes from the line of Sanjay Manyal from Dam Capital Advisors Limited. Please go ahead.

Speaker 2

Hi, sir. Just want to understand your sort of strategy for non-West Bengal regions. How has been the growth over there, and what is the strategy now for the growth in next few quarters?

Amit Apadia, CFO

Hi, thank you. So, we are very much focused in expanding our distribution network in the nearby states, including Sajkar, Nubisa, Atam, and Bihar. So, in a very short term, the strategy is to onboard new distributors, CNF agents, and in a very recent activity, we have entered into an alignment with multiple Q e-commerce players in Bihar and Assam region. We are present on the e-commerce and Q-commerce channel also there. Apart from that, on a long-term basis, you asked me the strategy is to set up a manufacturing plant in Bihar. Considering Bihar as a growing state, it becomes logical. Set up a plant locally and cater to the local market with better supply chain efficiency and source wheat from the same market. So, this is a long-term strategy and if you ask the overall growth, the Bihar market on a quarter and quarter basis has almost doubled. Again, the base is small for the previous year, but yeah, if you ask the numbers, it has doubled over quarter, year on year, Bihar and Assam. Okay.

Speaker 2

And if you can also give some color on how has been the, if there is any sort of change in our strategy on the spices side, how has been things working on the spice category, growth rate, and again, what probably lies ahead as far as that category is concerned?

Amit Apadia, CFO

So, firstly, we are very much focused to improve the realization on the spices category. It's been around two and a half years. We launched the CTC segment and around one year when we launched the blended masala. And we are continuously working in product development and process improvement in the spices category. So, everything is going parallelly, but the one focus is that we should increase the realization. As we had discussed in our previous call, the prices which we had set for the spices category over the previous years were very aggressive compared to the local players. So, the first focus is to improve realization and which has resulted in better margins, the spices category in the quarter. And apart from that, the spices category on a YTD basis has grown at around 17%. On a YTD basis, again, on a quarterly basis, it has grown more than 20%. So, these two, three strategies are there in mind to improve the product quality, improve the product offering, and to improve the realization through price increase.

Speaker 2

Also, just probably largely, I just want to ask about the Satu as a product, Given the fact that last year we had faced an issue from an extended monsoon and sort of a smaller summer days, but this year this situation is not there. And so how things are as far as that product is concerned, what kind of a run rate we can achieve, say, on an annualized basis?

Amit Apadia, CFO

So, on the Sattu front, as you correctly highlighted, this year, the summer was a bit extended, and we did a marketing campaign involving Ravinder Jadeja, which resulted in the growth in the Sattu categories. You see, on a volume basis, the category has grown at more than 10%, on a volume basis only. And the campaign started from April, when the monsoon had already started from March. That way, we feel the campaign plus the distribution has paid off for the Sattu category, and we look forward to a similar and a better growth in the coming season.

Speaker 3

Thank you.

Operator

Participants may press star and 1 in order to ask a question. The next question comes from the line of Ankit Babil from Subcom Ventures. Please go ahead.

Ankit Babil, Analyst — Subcom Ventures

Good morning, sir. Good morning. Yeah, yeah. Sir, you did mention about the pressure you are facing on the top line in FI27, but what's the outlook on FI28 on the, you know, base of FI27? What kind of growth are you looking at, and which categories you believe would lead the growth?

Amit Apadia, CFO

Now, as I, thank you for asking the question. So, for Sattu, as we said, since we have on-booted Ravindra Jadeja for the campaign and Spices, we have on-booted two Dollywood actors. We are hopeful that those categories will do well in the coming quarters and in the following year. But again, on an overall basis, it will be a bit early to comment because things are shaping up. As I told you, the ATA category, we have introduced a couple of strategies. I don't think we have to explain the strategies. It will be a better forum to explain the strategies now, but we have introduced a couple of strategies starting 1st of November, and we are very much confident that things should move in a better direction. So, our priorities obviously remain unchanged to strengthen our core category in our core market and to expand our distribution in the nearby geography. Maybe in Q3, by end of Q3, we will be able to comment on the better features for the coming year.

Ankit Babil, Analyst — Subcom Ventures

Okay, and you also mentioned that the margins in FI27 will improve by some 50 to 70 basis points. So, again, is there a chance of any further improvement in margins in the coming years? Or do you believe they will sustain at these levels?

Amit Apadia, CFO

So, on a conservative basis, it should sustain at this level. But as I told you, we have increased the realization of the spices category. And as the value added and the spices category grow, there will be a natural expansion in the product margin. And as we had discussed over previous call, that we are introducing, rather working and introducing new product ranges, right, including snacks, packets, sweets, it is work in progress. So, we will have to redeploy some of that additional margin to those categories also. So, on an average, if you ask me, we feel that we will be able to deliver similar margins in the coming year also, by 28.

Ankit Babil, Analyst — Subcom Ventures

Okay. And in the spices category, what kind of revenue you are expecting this year? And will it be a break-even or will it continue to make losses here?

Amit Apadia, CFO

No, spices. Firstly, the spices category will be better than break-even in this financial year because we are very much committed to not lose money in the spices category. And secondly, we feel that on an overall year basis, the growth should be in a good double digit.

Ankit Babil, Analyst — Subcom Ventures

If I'm not wrong, your category was around 40 crores or somewhere around that last year. I forgot the number. What was the revenue last year and what revenue are you targeting this year in spices?

Amit Apadia, CFO

Last year, the revenue was close to 38 to 40 crores as you correctly highlighted. And this year, again, as I told you, till YTD, till YTD six months, we have delivered a growth of close to 20% and in the coming quarters also, we feel that we'll be able to deliver a similar growth.

Ankit Babil, Analyst — Subcom Ventures

Okay. Okay. And last question is, within your product categories, excluding spices, which product category has the highest margin?

Amit Apadia, CFO

I think we have come to discuss the product level margin. But yeah, value added category enjoys the better margin as compared to wheat flour category, whole wheat flour category, and emerging products with the virtue of better margins in the spices and the industry average margins in emerging products enjoys better margins compared to the value added category. This is the industry you want.

Ankit Babil, Analyst — Subcom Ventures

Okay, then can you let me know what is the share of value added products in your total revenue, at least?

Amit Apadia, CFO

The share of total revenue this year, it will be more than close to 62 to 65%.

Ankit Babil, Analyst — Subcom Ventures

Okay, that's helpful. Thank you so much. Thank you.

Operator

Thank you. The next question comes from the line of Praveen Sharma, an individual investor. Please go ahead.

Speaker 3

Hi, good morning. I have a couple of questions. First is, you know, just a comment. We need to, you know, on this diversification from the geography, it seems, you know, it has to be expedited because sometimes this imami, you know, competition is more sometimes West Bengal policy, you know, stopping wheat flour and the millers dumping in the market. So, it becomes very geographically centric business operations. So, immediate need is to diversify. I know that you guys are doing it already, but need to accelerate it. This is just a comment. The question is, how much was the advertisement to spend in last year, and how much was it in the first half, and how much do we expect in the second half? If you can just throw light on that.

Amit Apadia, CFO

So, last year, again, based on the revenue, it was close to 1.9%, around 16 crores. And this first half, the overall spend was close to 67 crores. And for the entire year, we feel that the advertisement spend will be in line with the previous year.

Speaker 3

Previous year. So, 60 crores?

Amit Apadia, CFO

Not 60. 160. Was the number previous year. Yeah.

Speaker 3

And how much is it? H1? I missed it.

Amit Apadia, CFO

Close to 7 crores.

Speaker 3

7 crores.

Amit Apadia, CFO

Okay, okay, okay.

Speaker 3

The second question…

Amit Apadia, CFO

Answering and taking your comment which you correctly suggested, we are very much focused to expand our geographical network with onboarding new distributors and CNF agents. And as I told you that considering the supply chain scenario in the overall country, the wheat prices prevailing in UP, Bihar, MP, and Bengal, plus the transportation cost, which I think everyone is aware of, we are working every hour to make our product available in those geographies and improve our sales there. And hence, we decided that we should have an ATA plant, wherein the CAPEX amount is also not that large as compared to a large meat. That will help us to be available in the, to make available a fresh product in the local geographies of Bihar and Assam. That is work in progress. And we are working towards completing that project in a best possible timeline. And again, the first mindset of the management, the board, and the company is to earn profit on a cash-and-carry basis in the geographies we are dealing in. So, with that purpose, we are working towards the growth in those geographies.

Speaker 3

Yeah. You know, I must congratulate you guys on keeping the balance sheet exceptionally well. You know, working capital cycle, that everything is just phenomenal. And I hope it goes, you know, you will continue going forward in the future also. The second question is on the land purchase plan in Assam. Is it done and dusted and sealed that land has been acquired or it's still work in progress? And Bihar land, you know, the floor mill thing which we are thinking about, So, do we have a land for that or we don't require much land and we will lease it out?

Ankit Babil, Analyst — Subcom Ventures

So, firstly, we have leased

Amit Apadia, CFO

a plot in Bihar from Bihar Industrial Development Authority. So, it is a leased land, a long-term leased land. And again, the land is in our possession. We have got the position, we have paid the entire amount, and we have on-boarded an architect for designing the entire plant, and we have on-boarded a consultant who will help us in setting up the meal. So, it is a work in progress, and we are targeting to start the civil work anytime by end of Q3 or early Q4. So, this is on Bihar. Now, coming to Assam, we have paid a token amount to the seller, right? And the due diligence, we have onboarded a legal personnel who is based out of Guwahati who has done the due diligence as well. So, all the necessary formalities which is required at the local state level wherein we have to submit some applications and requests to the local government. So, that is a work in progress and we are hopeful that the transaction will get concluded post-Giwali.

Speaker 3

Okay, great, great. This capital work in progress for the September is 16 crores, which was, you know, so just to understand, this is about the sweet and snack machinery or this is about the lands and the civil structure we are planning in Bihar and Assam?

Amit Apadia, CFO

So, it is, majorly it is of, it has two piece to it. One is the sweets and snacks plant, which is getting commissioned near Calcutta. And the second piece is the new corporate office, where we plan to move in the next month because the current corporate office, where we moved in around 7-8 years back, is smaller and we are operating two offices now. So, it is for better synergies. We have taken up an office around two years back in Salt Lake, and we will move there. The entire team will sit out under one roof. So, these two are the major chunks in the capital working program.

Speaker 3

And this is our own bought-out office space?

Amit Apadia, CFO

Yeah, it is a bought-out office space. Currently, it is a rental office. So, again, that expense will be there.

Speaker 3

Okay, okay. And my last question on the sweets and savories, will it be limited to West Bengal only or do we plan to launch it on e-commerce and, you know, in other geographies? Because these have higher shelf life. And I think with the growing interest in the traditional and sweets and snacks, you know, there would be enough demand for our products in other geographies also. So what is the strategy on that? Because that seems to be very promising, the kind of multiples which these kinds of business, you know, they actually work on in the, you know, in the markets are very different. So, if it's become successful, the sweets and savouries, I think, you know, it will be a major growth accelerator for the company.

Amit Apadia, CFO

Correct. So, on an immediate basis, the plan is to introduce the category in the West Bengal market on all channels, including general trade and modern trade, and do manufacture here. And somehow, the knowledge which we have on the snacks is that we cannot manufacture snacks in Kolkata and ship it to Bihar. It will not make sense as of now. So, again, once we enter into this category with a focus to expand in the West Bengal market, then we will analyze the category and we'll plan how to expand the product in the nearby geography. Okay, okay.

Speaker 3

These are just the savouries like namki inch, etc., apart from sweets, or they are like ready-to-eat, you know, products like, you know, ready-to-eat and ready-to-cook?

Amit Apadia, CFO

So, snacks is ethnic snacks, which is chanachur, namkeen, vizpia, etc. Not Western snacks, which is chips and all, only ethnic snacks. And sweets are, we are introducing 3-4 sweets, right, which is your son papadi, then besan laddu, which is not readily available in the local shop. So, if you see the West Bengal dynamics, every 100 meter, you will get a sweet shop. So that's why we are introducing this Kaju, Burpee, Besan, Laddu, and Son Papri in the Indian region. And we are ready to cook and instant mixes is work in progress. We are working with a renowned consultant to develop that category and I don't think we should comment on this now. But yeah, it is work in progress. So, we control the raw material of all these snacks, sweets, and the proposed ready-to-cook and instant vegetables. So, that will be a synergy, a value addition.

Speaker 3

Great, great. Good luck and keep the good work doing. Thank you very much for giving me the opportunity.

Ankit Babil, Analyst — Subcom Ventures

Thank you, thank you.

Operator

Thank you. A reminder for all the participants who wish to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requesting to use handsets while asking a question. The next question comes from the line of Divi Khosar from Subcom Ventures. Please go ahead.

Speaker 3

Hi, sir. Thank you for this opportunity. Sir, in the first half, FI27, our EBITDA margin has been 200 bps more than the last year.

Speaker 2

And we are guiding for a 50 to 75 bps margin improvement for the full year.

Speaker 3

So, do you think there will be pressure in H2 in terms of margin?

Amit Apadia, CFO

So, that 50 to 70 basis point improvement is from the last year, right? So, the EBITDA margin will be in the range of 10.5 to 11 percent. This is what we are targeting. Now, I understand your question since the 6 month margin is this. So, obviously, your Q2, the second half margin will be lower. Again, it is not a pressure or an aggressive scenario, just that if you see the overall landscape of this category. So, the wheat raw material, The gram raw material, all the spices raw material are Ravi crops, right? And the season starts from March, end of March, early April. So, the prices of these materials remain softer during the first two quarters. And hence, we enjoy better margins in these two quarters. And structurally, the second half margin in a financial year remains lower as compared to the first half margin. So, it is structural, and obviously, we will not go ahead and bleed money by doing random advertisements. Everything will be planned. But, yeah, the margins will be lower as compared to H1.

Ankit Babil, Analyst — Subcom Ventures

Got it. Thank you so much. Thank you, Gigi.

Operator

Thank you. Participants may press star and 1 in order to ask a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, we will take this as the last question for today. I now hand over to the management for closing comments. Over to you, sir.

Speaker 6

Thank you, everyone, for joining us today and for your questions. Despite pressure in the ATA category, we saw sequential recovery in revenue, continued growth in our value-added portfolio, and a meaningful improvement in profitability this quarter. Our focus over the coming quarters is on executing the launches and extension plans we discussed today. If you have any further questions, please feel free to reach out to us or to our investor relations advisor. We look forward to speaking with you again on our Q3 FY27 earnings call. Thank you. Thank you.

Operator

Thank you. On behalf of Ganesh Consumer Products Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.