ADF Foods Limited (519183) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to ADF Foods Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Udeshi from EY. Thank you, and over to you, Mr. Udeshi.

Thank you, Manav, and good evening, everyone. We welcome you to the Q1 FY '25 Earnings Conference Call of ADF Foods Limited. To take us through the results and to answer your questions, we have with us in the top management of the ADF Food Limited represented by Mr. Sumer Thakkar, Promoter, the General Manager, Sales and Strategy; and Mr. Shardul Doshi, the Chief Financial Officer. We will start the call with an overview of the business and the current business update by Mr. Sumer Thakkar, and then Mr. Shardul Doshi will give his comments on the financials. As usual, the standard safe harbor clause applies while we start the call. With that said, I now hand over the call to Sumer. Over to you, Sumer.

Thanks, Ravi. Good evening, everyone. Coming to the quarter gone by. Our consolidated revenues increased by 8.1% to INR 121.6 crores on a year-on-year basis. We consider this decent growth despite lost sales in June due to unavailability of containers. We generally see the first quarter as a seasonally stable quarter with growth picking up in the second half of the financial year. We continue to witness strong demand across all our brands. Our flagship brand, Ashoka continued addition of new products as well as increased penetration in existing markets. Our India-focused Soul brand expansion is going as per plan and seeing good traction. Further, we're gearing up for strategic expansion into additional quick commerce channels as well as modern trade set to energize the market in the second half of FY '25. We remain committed to achieving our aspirations target of achieving INR 100 crores within the next 3 to 4 years. Our U.S. expansion of the brand Truly Indian is on schedule and seeing increasing engagement amongst various supermarkets. It has been newly listed in several supermarkets as well as on the online format by Amazon. We launched new product categories, including frozen breads, snacks, wraps, ready to eat curries and ready to eat rice. The brand has been newly listed in a few regions supermarkets in the U.S. and is available on Amazon, as I mentioned. We expect these listings to start contributing to the top line towards the end of Q3 FY '25. We have a new team in the U.S. and we'll be investing in this brand to target the mainstream audience. We remain confident that Truly Indian as a brand has the same potential as Ashoka in the long run. Our agency distribution business saw a decrease due to supply chain issues, as we spoke about previously. Our principle listing continues to support us in this difficult period, and we remain optimistic that these issues will be sorted out, resulting in good growth in FY '25. We continue to be bullish in terms of our outlook for FY '25 and expect revenue growth to be upwards of 20%. In terms of margins, we're looking at high-teen margins on a consolidated basis. We'll be making investments in our India business as well as the Truly Indian brand. Our Surat greenfield Phase 1 expansion for catering to both new as well as existing lines for our frozen foods remains on track. Overall, we're excited about the future potential of the business and remain focused on achieving robust and strong financial growth going forward. I now hand over to Shardul who will comment on the financials.

Thank you. Sumer. Good evening, everyone. I'll first share the stand-alone performance. In Q1 of FY '25, we saw revenue from operations at INR 97 crores. This marked a 14.7% Y-o-Y growth and 24.8% Q-o-Q decrease. We lost sales amounting to almost $1 million due to nonavailability of containers towards the end of the quarter. Our EBITDA for this quarter was INR 22.8 crores, a Y-o-Y increase of 7.8% and Q-o-Q decrease of 28.5%. While our EBITDA margin was 23.4%, we saw impact on EBITDA due to lost sales and higher freight costs. However, we were able to partly mitigate the same through cost control and process efficiency. PAT for the quarter was INR 17.1 crores, a 4.6% increase Y-o-Y, 32.3% decrease Q-o-Q. Our PAT margin for the quarter stood at 17.7%. . Moving on to the consolidated performance. Our revenues from operations for Q1 FY '25 was INR 121.6 crores. an increase of 8.1% Y-o-Y and a 20.9% decrease from the last quarter. Our EBITDA for Q1 FY '25 was INR 19.6 crores, recording a decrease of 10.6% Y-o-Y and a decrease of 42.8% from the prior quarter. Our EBITDA margin stood at 16.1%, a decrease of 340 basis points on a yearly basis. This was on account of aforementioned reason as well as continued investment in the Soul and Truly Indian brand. We are committed to invest into brand building for both Soul and Truly Indian through our respective subsidiaries in India and U.S. We are investing in building a strong professional team, too. All these efforts will lead to continued growth in our flagship brand, Ashoka and increased market presence of Soul and Truly Indian, which will result in better growth going forward. Our PAT for quarter was INR 14.4 crores, marking a Y-o-Y decrease of 2.1% and a Q-o-Q decrease of 42.5%. For Q1 FY '25, PAT margin stood at 11.8%. All our CapEx plans are on schedule. Cold storage at Nadiad will become operational in the next 3 to 4 months. We have commenced work on Greefield too, and we have finished with the land leveling and have received necessary local approval to commence construction there. We expect our Greenfield project to be commissioned by September '25. Our balance sheet continues to remain debt-free as on date. Overall, we continue to judiciously invest in our manufacturing capabilities as well as our brand-building exercise in order to focus on increasing our margin profile as well as deliver greater returns in the long term. With this, I now request Ravi to open the floor for question and answer. Thank you.

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Pallavi Deshpande from Sameeksha Capital.

I just wanted to understand two questions here. First, what would be the share of meat products in our sales? I believe we were launching it in 2021. So that would be one. And second, if you could provide a breakup in terms of your -- you mentioned margins it was due to freight and the brand investments between the two -- how many basis points you can attribute to?

You are not clear the first question. Can you just repeat what you were saying?

On the meat side. Do we have how -- much is meat products?

So there is no meat which is being sold at this point of time. There is right now, Ashoka, Truly Indian, Soul all our brands are essentially selling all the vegetarian products. What we have is a plant based need products in our product portfolio. And second, freight cost increased by almost 1% Y-o-Y which is almost in the range of 8% for this quarter. And our brand promotion expenses are almost to an extent of 7% right now of our total portfolio total sales.

And there was 5%, 6% last year. Is that right?

Yes, around 6%.

All right. And just coming back to the meat question because I believe in 2021, we had said something on the con call May '21 call that we will be launching and getting into that. So was there a change of plan or were we never in it? Just want to confirm.

So we were in meat many years ago when we had our PJ's organics brand, than switched to burritos with chicken and burritos with Turkey. But we wanted to launch meat under a new brand, which was our Khansaama brand, but we -- so you can't export meat out of India to most countries about from the GCC. So to sell meat, you actually have to produce it locally and we were unable to find a reliable contract manufacturer. So that's why we put it on hold for the moment. In the future, we have nothing against going into meat. So if the opportunity does come up, then we will.

We have our next question from the line of Shalini Gupta from East India Securities.

I have a couple of questions. One was, what was the CapEx during the year?

So CapEx in the first quarter, what we are spending is around INR 5-odd crores split between the cold storage and greenfield and our normal CapEx total estimated CapEx between now and next financial year is almost INR 100 crores between all these projects, which we have already planned.

Okay. Sir, my second question is, were there any new listings in the U.S.A.?

Yes. So as I mentioned in my opening remarks, Truly Indian has been listed in few new supermarkets as well as Amazon. But it's -- I mean we'll actually see the numbers hit in Q3 of FY '25.

Okay. So I mean just to....

Sorry, these are not in U.S. supermarkets, the more regional chains with the West Coast focus.

Okay, in regional supermarkets. My other question is -- last time, you were talking about listing in Germany that has given you access to 1,500 stores in the U.K. and 500 in the U.S. -- I mean, 1,500 stores in Germany and 500 in U.K. But somehow, we -- sorry to say this, but we don't find the impact of this in the results at all?

So Germany has not been new listing. We've been listed in German supermarkets for in excess of 4 to 5 years. Now that's why we initially test marketed the Truly Indian brand. And that for us, contributes to about INR 10 crores to INR 12 crores in revenue on an annual basis. In the U.K., our brand again is present -- the Ashoka brand is present both in certain supermarkets as well as ethnic stores, and we've been in the U.K. for several years now and it contributes to a significant part of our revenues.

Okay. So both things are not -- so both these are not new listings. Am I right?

If you're referring to -- as we announced, I think about last financial year, if I'm not mistaken, which was 700 stores. That remains on track to contribute USD 1 million.

Sir, can you please repeat yourself?

Sorry were you referring to the new listing in the U.K. where we got 700 stores? That we announced over the last year.

Yes, that is what I was talking about. And I was just wondering when that listing will start kicking.

It has kicked in already, and it remains on track to contribute as we mentioned, USD 1 million across the year.

Okay. USD 1 million.

Yes.

Okay. And sir, gross margins have declined by 100 bps. So what do you think will be the reason for this?

It's primarily the sales mix, which keeps changing between our quarters.

Okay. And sir, other operating costs have gone up by 18% Y-o-Y. So what are the other operating costs? And why -- which are the costs that have gone up?

As I just mentioned freight costs, your marketing costs, these are the two big ones in this. This is because of the branding expenditure, which we are incurring. Another thing which had increased is your professional fee because lot of these new hires, they are working at two business for us. .

Okay.

So these are all investments, which we just talked about in terms of brand building as well as our people human resources.

Yes, sir. That's very nice. Sir, in the last quarter conference call, you had given a guidance that the EBITDA margin will drop to about high teens from 20% earlier? So EBITDA margins have really dropped in this quarter to -- EBITDA margins have dropped in this quarter. So is this a kind of number that we should work with? Or will the margins drop further?

So Shalini, just to give you context of what we had mentioned, we never said that the margins will drop. Our margins in Q4 were higher, but we had also said that we'll be doing brand building -- that's the investment which we want to do for our future growth as well as we'll be creating a team here, who is going to lead us to achieve that growth. High-teens is something which we want -- we will be achieving. This is the first quarter, always if you see historically, first quarter performance, our H2 will always be better than H1, and within H1 also Q2 will be we better than the Q1. So there will always be a ramp up, which will happen in the top line and bottom line and the quarters to follow.

Sorry to delabor this point, but I mean, are these steady-state margins or what?

Sorry to interrupt ma'am. May we request you to please rejoin the queue as there are several...

Yes. My last question. Sir, I mean these are steady-state margins or what?

Yes. So that's why we have been saying that clearly, you will see high-teens as a margin, EBITDA margin going forward for us.

We have our next participant from the line of Mayank Agarwal from Scientific Investing.

So I have a couple of questions. The first question is the PAT growth in the current quarter is lower in the sales growth. So that point -- and does it mean that there is some losses on the margin? And like how much margin was lost during the Red Sea issue, new hiring and product mix. Additionally, are there any other reasons for the losses in margins?

Mayank, you are not very clear, but I think you asked about the margin, right?

Like in the current quarter, the PAT growth is lower than the sales growth. So does it mean that there will be some losses on margin in the current quarter?

Yes, because there is an investment which we are doing, right, so your freight cost has gone up which is your any variable cost, but there is a people on which they are investing brand building, which we are doing. So all this has led to increased cost at this point of time. But this will all lead to increased top line going forward as well as better margin profile as well as better margin and absolute amount of...

Okay.

There was also losses less of sales due to container shortages. So that was another factor that contributed to a decline in margins.

Can you repeat? You're actually not audible.

Sorry. Is it better now? Can you hear me?

Yes. Yes, I can hear you now.

So I said another contributing factor to the decline in margin was loss of sales due to container shortages. Which, again, on account of [indiscernible].

Okay. And my second question is there is a 20% growth in the nondistribution piece, but there is a flat growth in the distribution. So what is the guidance on distribution going forward?

So on the distribution piece, there is good order flow, which we have as well as the supply chain issues are kind of -- they have been taken care by [ our ] principle. So hopefully, we should have better numbers in distribution business in the current financial year.

And my last question is on the growth rate of superstores and the brand sales of Truly Indian and Soul brand. Hello?

Can you just repeat again? Sorry.

Yes. My last question regarding the growth rate of superstores and the brand sales of Truly Indian and Soul brand?

The Truly Indian and Soul brand, the base is low. So the growth will be -- growth should be much better in terms of percentage. And just to give you a feeler, I think Soul, we are already doing a run rate of almost like INR 7 crores to INR 8 crores annually now. And -- this is further going to go up because we will be launching our products on the modern trade channel by end of Q3. And Truly Indian if we will listing again, the numbers will start kicking in from Q3 onwards. So both will give us nonexponential growth in next -- in Q3 and Q4 going in the current year.

[Operator Instructions] We have our next question from the line of Chinmay Nema from Prescient Capital.

Firstly, bookkeeping question, what's the run rate on monthly run rate on the Soul brand? You can share that?

So we are at around -- in the first quarter, we had around INR 60 lakh per month now.

So are you holding on to the guidance of this becoming a INR 100 crore brand in 3 to 4 years?

Yes.

Okay. Secondly, what kind of overlap do we have between our distribution business and the Ashoka brand? So as I understand, this distribution business helps you cross-sell the other business. So I'm just trying to understand what kind of overlap exists between these two.

Yes. So these are complementary products, which we are distributing in the market in U.S. and U.K. market. So what happens is our distribution cost also gets split between Ashoka as well as the distribution business. And so on -- simultaneously, we also do such joint promotions and are also able to -- that there is a push and pull effect on both the brands wherever we are strong key products we are able to push as well as wherever brands are somewhere Ashoka has been -- Ashoka we can push. So this is what is happening. So that's how the both of the businesses are growing in the U.S. -- U.S.largely, if you can -- if you have seen the numbers.

But like if you were to quantify it, so if you're selling Ashoka brand to 100 stores out of this 100 to how many would you be selling from the tea business?

Almost everywhere -- I mean wherever Ashoka is being sold, you will also see tea products being sold there.

Okay. Got it. And lastly, could you provide the...

Sir, may we request you to rejoin the queue? We have our next question from the line of Faisal Hawa from H.G. Hawa.

Sir, can you just help us understand how many stores in Walmart and stores that we have covered so far in U.K. and United States, respectively.

So Walmart, currently, we don't have any listings in the U.S., so this is in Walmart Canada. In Canada, we're listed in about 200-odd stores, if I'm not mistaken. And in U.K. in Tesco, we have about 700 stores, close to 700 stores.

And all 700 stores -- all stores, all products are present?

Not all products. We have a limited range. It's mostly on the [ shelfs ] to decide. We have our ready to eat curries and our pickles.

And have you given any kind of trial for an online presence all through the U.S. and U.K.

So in the U.K., we haven't so far. But in the U.S., we are listed on Amazon.

Is there any traction that we will need to put in some ads or something -- so really get it to an...

So we do that. The business has just started out. So it's at a fairly small base. But we're expecting this year to contribute about USD 100,000. So it's our...

So do we still stand by our target of roughly doubling [ PAT ] revenue obviously to 3.5 years?

Sorry, was that doubling every...

3 to 3.5 years.

Yes, on the standalone basis, yes.

[Operator Instructions] We have our next question from the line of Ravi Naredi from Naredi Investments.

Sir, my question or worry is the distribution business not growing even you are doing hard work. Hello?

Yes, Ravi.

Our distribution business is not growing even hard work done by you. What is the specific reason for that?

Ravi. We we remain very confident that there's a lot of scope of these brands. These are all latest brands. These are extremely well known in India as well as overseas. And there's a lot of scope for these products. Unfortunately, a post-acquisition, there were certain transition gaps which are now being filled in. But we remain confident that this business will continue to grow at a 15% to 20% once these issues are resolved.

Sir, you mentioned in investor presentation, brownfield and debottlenecking efforts and Surat greenfield, so our top line will increase by INR 450 crores. So give you timeline when it will happen?

So our greenfield at Surat will -- the plant will become operational at the current plan by September '25. And that's where we have committed INR 75 crores. Secondly, as far as a couple of brownfield projects are concerned, there is freezer capacity we are adding in our Nadiad. That's almost INR 15-odd crores commitment and will -- this will become operational by November '24. And then there is an ongoing CapEx, which we keep doing in our existing plant, where we are doing debottlenecking. So that's another INR 15-odd crores in the current financial year. And even in the last few years, we have spent almost INR 30 crores there.

So this last -- Nashik -- it is Nashik?

Sorry.

Last one is in Nashik?

It's at both the location, Nashik as well as Nadiad where we are...

When it complete sir?

So these are different, different projects within the plant where we are doing deep bottlenecking. So in any line, if there are any capacity constraints, we add machines there to increase the capacity there. So that's the ongoing CapEx, which is -- even in the current year, we have already spent INR 2 crores in the first quarter, and there is another INR 12 to INR 13 crores planned in the current financial year.

So it will be complete by now March '25.

March '25. Correct. Okay.

We have our next question from the line of [ Amit Agicha ] from H.G. Hawa.

Mr. Thakkar regards to the [indiscernible] I guess the Amazon listing, we see which you all have done, will that be available in India as well?

Yes. So we are on Amazon under our Soul brand. In fact, we've been listed for [indiscernible]. Yes, so we do have plans on entering frozen as well. This will probably materialize in in Q3 or Q4 of this current year. We have planning of launching about anywhere between 25 to 30 SKUs in the next 6 to 8 months.

Thank you. We have our next question from the line of [ Pradyumna Dalmia ] an Individual Investor.

Mr. Thakkar. I have two quick questions. What's our present capacity utilization out of the installed 28,000 metric tons. Secondly, as you said that approximately $1 million of revenue was lost due to the container shortages. But we see roughly around INR 18.5 crores to INR 19 crores of negative stock in trade. Could you please explain the difference between the two? What brought that up?

What was your first question? Sorry.

First question was the -- what's the present capacity utilization out of the installed 28,000 metric tons?

Right. So I think line to line the capacity differs. In some of the lines, we will be at almost 80%, 85%. But overall basis we will be around 70% at this point of time.

Okay.

And as far as...

So just a follow-up of this answer. So as of now, we are -- the revenue is not curtailed because of the capacity constrained to produce. Can I infer it this way?

Yes. So in fact, our capacity will take care of all our requirement or demand till our greenfield is going to become operational in the next [indiscernible].

Fair enough. And for the second question, sir, I will just once repeat again. You said that approximately USD 1 million was lost due to container shortage, which roughly converts to INR 8.5 crores to INR 9 crores but we had a negative stocking rate figure of roughly around INR 18.5 crores to INR 19 crores. So how would you justify the additional difference of INR 10 crores. Was there some lack of demand in this particular quarter? Or -- was this the production taken during the end of the quarter, and hence, we couldn't ship it out? Or how is it? If you could just throw some light on that?

So our infact, [ FG ] stock has gone up, so we don't -- that's a breakup, which is not available when you are looking into it. This dollar -- that has gone up in the work. I think there is an inventory which we have to build up after mango season and all the vegetable season, which is there.

Okay. Okay. Okay.

That all that comes here are the negative inventory -- negative stock.

Okay. If you can accommodate another quick question.

Please get back to queue. We have our next question from the line of Devanshu Sampat from Avendus Wealth.

I have two questions. I will just ask them together. So can you talk about the recent hires that we've done in terms of -- in India and the U.S., you said the professional fees has gone up, and by when do you expect this to sort of stabilize and just be sort of flat from a quarter-on-quarter perspective. That is question one. And second is regarding Soul. Do you just assume FY '26 data that the company is working with or targeting, so what will be our -- what will our channel mix look like, take commerce, mt modern trade? And are we looking at any other channel by then? And maybe if you can comment a little bit on the breakeven or EBITDA margin targets for FY '26 as well.

Shardul, you want to get the first question? I can get the second one.

Sure. So in terms of new hires, we have, in fact, built our team brand wise in U.S. earlier because there was a common team, which was taken care of all the brands. But now, the existing team is taking care of Ashoka brand sales there. And now we have a completely new team, very senior members in that, which is taking care of Truly Indian as well as private labels in the U.S. market. We have also had people in the Australia on the sales side. Secondly, there are operational guys who have been -- which have been hired in U.S. as a whole new team because in -- they first sold business. So there is almost now 15-odd people who are working in [indiscernible] to take Soul to the next level. So these are all the new hires which we have done. There are now further recruitments, which will happen as a departmental head in marketing, HR, IT and all those, hopefully, they will be done with this round of the hiring in this quarter.

Sorry, this you're talking about both the businesses, right? I mean both the regions of India and abroad.

Yes, yes.

On your second question, so the sales mix next financial year will probably be 40% modern trade, 40% quick commerce and about 20% e-commerce. Currently, the business is mostly coming from e-commerce. They're only listed on one e-comerce channel. In terms of breakeven we're looking at breaking even Q2 of next year, and we should -- and we need to be profitable next year on our EBITDA level.

We have our next question from the line of Pallavi Deshpande from Sameeksha Capital.

I just wanted to understand on the frozen food side, what would be the capacity utilization? And what would be the share of that in our sales mix.

So frozen, in fact, has been increasing quarter-on-quarter for us. And it's almost -- depending on the products, it will be between 70% to 85%, of course, because there are different variety of products which we produce. There are snacks, there are breads and there are cut vegetables, which we're selling under frozen. So this is how the capacity -- I think -- and that's where I think once the freezer is also installed, then we should be in a position to store our some of the finished goods, which we want to do it which we want to produce and keep a stock of it as well as then distribute it over the period. So that's something which we are doing on the frozen food side.

What could be the contribution of it in our revenue mix? For this quarter was a bit lower than previous quarter.

So we don't give breakup of that, but the frozen is the largest right now amongst all the...

No, no. So I'm just trying to understand the margin path. So traditionally, was it lower than last year contribution of Frozen to total?

No, they are not.

We have a follow-up question from the line of [ Pradyumna Dalmia ] an individual investor.

You said that India prohibits export of meat? That's correct. However, India has recently been putting a lot of thrust on the export of shrimps and other related seafood. So do we have any plans to foray into that? Just a thought on that.

So seafood is not a category we're looking at in the near future. We're looking at more value-added products. Things like chicken curry, chicken Kebabs, stuff like that. That's more complementary to our existing product range. The food is bit...

We have a follow-up question from the line of Pallavi Deshpande from Sameeksha Capital.

Just wanted to understand on the inventory days. How would that -- because of the delay of container was that increase in the inventory?

Yes. Our inventory days has slightly gone up. So roughly, we will be around 90-odd days of inventory now.

And for the year, can we expect the normalization and overall year-on-year, how would it be?

It will be around 70-odd days for us.

[Operator Instructions] We have a follow-up question from the line of Pallavi Deshpande from Sameeksha Capital.

I just wanted to understand on the freight side. Does this warehouse that we have [indiscernible] in the U.S. Does that not come in and help us when we have these issues? And what is the utilization of that warehouse?

So warehouse, we store goods there on the local market there. Yes, there is no connection assets with the freight cost as such. The freight cost -- I think we are doing make-to-order. I'm selling it from India and just keep a few months stock in the U.S. warehouse.

Sorry, just to add. It might help us build inventory, but your land cost within the U.S. has also gone up significantly. So [indiscernible] to ship from warehouses in New Jersey and Atlanta to other parts of the U.S. is actually as expensive as seafreight. That doesn't become feasible. And the biggest problem we face this time is container shortages, which is now out of India. So we couldn't get the goods out of India to the respective ports.

Right. What I was trying to understand is last time we spoke, there was some -- that we had redesigning our agreement with the distributors to have the freight cost distributed towards more towards them, I don't know how that was supposed to work off. Anything on that side to take out this volatility overall from our numbers.

So in fact, the freight cost has significantly gone up, you would have read it in the newspaper. It's hardly impacted us by 1%, and this all happened due to the mix change, which we have done, wherein the freight cost as some of the distributors have agreed to bear it.

So does that not then impact the gross margins adversely because -- do we have to give them a higher gross margin when they agree to the [ adjusted rate growth. ]

Yes, it's naturally, I think the -- when we are moving from [ CNS to FOB ] then accordingly, the freight cost has to be adjusted in price.

We have our next question from the line of [ Jagdish Sharma ] from -- an individual investor.

Thanks for giving me this opportunity, am I audible?

Yes, sir, you're audible.

Great. Sir, I just have one question, which is like a nascent kind of question. We have Ashoka brand and Truly Indian brand and the Soul brand and different kinds of brands and we are what -- building this brand as we speak, right, like Truly Indian or in the same. Why can't we do the same -- like why can't we do the same product in the Ashoka brand itself because it's a brand of Ashoka has a strong name in the market. Why do we need to bring the new model or new brand names and new products under different, different brands? That is my first question.

So let me answer that. So your right Ashoka as a brand is fairly well known in all the markets we sell in. Truly Indian is -- so each brand caters to a different target audience and each brand has a different sort of portfolio. Truly Indian is a brand that is more catered to the foreign consumer, so in terms of the actual product formulation, it's -- from Ashoka is what -- an Indian, living abroad would expect from Indian food. Truly Indian site levels are toned down for example, Truly Indian will have products like a meal case, which an Indian living overseas who never buy because they prefer -- so hence this brand has to be different. And then also in a lot of our markets, we face price comparison. So if you have one product listed in the supermarket and one product listed in that next store the price should more or less be the same. Truly Indian is more on the premium side, so we wanted to avoid that. In terms of why we launched Soul? So Ashoka is a brand which is not known in India, it's never been sold in India? And in India, our strategy is to go beyond just Indian food. So the brand Ashoka limits us to Indian food, but Soul more -- more of an umbrella brand, more universal, looking at things like Italian sauces, products like salsa, different various kind of tastes. So hence, that's why we thought Soul would be a better choice.

Just a follow-up question. You say that Ashoka was not in India. Why is that sir? Because people from abroad who were coming back to India, then whenever we do the cross-sect and things we get to know that Ashoka is a brand as a name and everything -- but as you said, why is Ashoka not in India? Like it is easy for you to do the same thing in India, right?

So historically, as a company, we've been an export-oriented company. We didn't have a presence in India. And that's the reason why we never sold in India. Now we feel like the opportunity in India is huge and now is the right time to enter.

So, you will enter Ashoka brand?

Under the Soul brand. Again, in India, Soul is still evolving and Indian food in India in the package format is not as a larger market, which is why we want to go beyond Indian food and get into different other cuisine.

Okay. Okay. My second question is what is your brand for Camel and Aeroplane brand. So what are you going to do? And what is the next 3, 4 years target for this and 2 brands? You have sold in just say -- INR 100 crores is what you are targeted what about the Camel and Aeroplane.

Camel and Aeroplane are two brands that are GCC focus is for the Arabic diaspora. They are both -- so Camel was actually acquired by us in the 1960s and it has been around for a few years before that. So it's almost a 100-year-old brand. It's a legacy brand has not -- is running on autopilot growing at about 10%, 12% year-on-year. And so is Aeroplane. And we're not doing much in terms of investment on marketing. So we're going to let these brands grow as is, it's not cannibalizing the Ashoka market, that's a separate market.

We have our next question from the line of Pallavi Deshpande from Sameeksha Capital.

I just wanted to understand the India piece better. So we have [indiscernible] [ INR 10,000 crores ] of revenues and EBITDA margin probably 1%. So are our targets not very aggressive -- we're starting to be EBITDA positive with this revenue base. And whether we are left out on the opportunity or are we not late in this entry in the Indian market.

So in terms of our India strategy, I believe [indiscernible] has a lot of food service, which contributes a significant part of the revenue and their gross margins are significantly lower that we only want to build the brand on the branded side. And we're also doing it in a very staggered manner where we don't want to burn a lot of money to get a lot of revenue in the first couple of years. And in terms of product range, we're getting into categories with significantly higher gross margins than what [indiscernible] is in. And also, [indiscernible] is a more -- I believe -- I mean there was to be a more mass market brand. We're looking at the premium space. So again, that gives us a higher margin. And also the endeavor to capture a smaller part of the market as opposed to what we are doing, which is why we feel confident that we can achieve profitability a lot sooner than I mean in the next...

So the premium positioning also, is it not too much of a premium like INR 250 for the jar of chutney versus [indiscernible] would be INR 150. I just wanted to -- a 25% premium, I wanted to understand the strategy -- this such a high premium.

So again, the target audience is a lot more niche and a lot of your millennials are willing to pay those kind of prices for a better-for-you product, which is what the whole Soul brand proposition is.

And so you mentioned about new categories, what would those post be? or Soul?

We're looking at things like Italian sauces, different kinds of dips and we're looking at frozen fruits. But again, all with the USD, where the product is better for you.

We have our next question from the line of Devanshu Sampat from Avendus Wealth.

So just a follow-up on the question that I asked earlier regarding the [ fires ] are in the U.S., right? So see, Ashoka for ADF is about INR 250 crore band. If you look at Truly Indian and private labels, I'm guessing the number would be around INR 100 crores combined as per my calculation. So just wanted to get a sense on the reasons behind this change in strategy because from -- you have mentioned earlier that these professionals, they don't come cheap. And so just if you can talk about the thought process, behind this change for the reason of having two separate teams or teams behind each brand and maybe what essentially, there -- what are the targets, internal targets that have been set over there. So that is one and part b to this is, have you seen any attrition in the recent hires that you've done in the U.S.

So what Shardul mentioned earlier where one person was handling all of the U.S., we've split up those territories for the Ashoka brand, so now the much stronger focus. For example, we hired some one separately for the East Coast, someone separate for the West Coast, someone for the Midwest. One person used to be doing these things. So now we have a lot more feet on the ground, these are people that are fairly at senior level. And while we don't want to build the same team for both Truly Indian and Ashoka because it requires a very different skill set. To sell to the supermarkets, you need different connections and different expertise in terms of brand building. And we continue to make investments behind the Ashoka. I mean, that is our largest brand. We continue to spend a significant amount of marketing across the board. And a lot of our new product development goes behind Ashoka. So R&D back-end efforts. A large part of the greenfield will be occupied by the Ashoka brand reserve.

We have our next question from the line of [ Jagdish Sharma ] an individual investor.

I have one question. Well two questions actually. The first is that we have a commonality between Mexican food and the Indian food. So a lot of common factors are here and there. So are we looking into any opportunities of bringing Mexican foods to Indian food or India through this Truly brand by any chance?

Not at the moment, but you're right, there are a lot of similarities, and that could be something we'll explore in the years to come.

So are there in draft like are you having -- or you have -- like do you have any kind of optionality there?

Sorry, I missed the last word.

No. I'm asking is this in plan. That is my question. Because there has been a lot of new, new companies or new, new start-ups coming in India, which is into this Mexican food. So I thought you guys doing something about it. That's my question.

So we are doing of fusion food appeal to the younger generations. For example, we've launched the range of Indo Chinese and Indo Thai products. And there's a new product -- I mean, we're also looking at launching Momos in the next quarter. We are looking at fusion food but Indian Mexican for the moment is not on the cards.

Second question is what about the CapEx, sir -- like do you plan to open any other factories in Africa? Or do you plan to open a factory in Africa or Middle East kind of thing? Because as of now, your green plant is about to come. So do you have any plans to do the same thing there?

So, a lot of a -- so why India is essential to be our base is a lot of our raw materials are sourced from India. I mean a lot of the Indian herbs and spices, which you don't get in other countries. And there are a lot of production efficiencies that come out of India as well as lower labor costs. So at the moment, I mean, we're just in the process of setting up a new factory and that will take care of our capacity for the next few years. So we haven't thought about another plant. But if something does come up when the opportunity does come up overseas, that is something we would be open to it.

We have a follow-up question from the line of Pallavi Deshpande from Sameeksha Capital.

You had mentioned about private label and B2B. So what was the kind of growth we saw there this quarter? And what would be the target on that side? Are we seeing increased traction for that business in the U.S.?

This year, we're estimating anywhere between 20% to 25% growth in private label and B2B. It has been growing for us at a similar run rate, and we are looking at adding certain customers in the U.S. as well.

So this is pressure margins, right?

Not really. We -- again, because these are all value-added products, they're still upwards to 40% gross margin, and we don't have to spend behind marketing. So that saves about anywhere between 7% to 8%.

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

Thank you all for joining us, and we hope we were able to answer all your questions, and we look forward to welcoming you next quarter as well. Thank you.

Thank you.

Thank you very much. On behalf of ADF Foods Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.