Bikaji Foods International Limited (BIKAJI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Bikaje Foods International Limited Q4 and FY '24 Earnings Conference Call. [Operator Instructions]. Please note that this call is being recorded. I now hand the conference over to Ms. Hazel Rathod from S-Ancial Technologies. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone, and thank you for joining us for Bikaji Foods International Q4 FY '24 Earnings Conference Call. From the management, we have with us Mr. Rishabh Jain, CFO; and Mr. Manoj Verma, CEO. I now request Mr. Rishabh Jain to take us through the key opening remarks, after which we can open the floor for the question-and-answer session. Thank you, and over to you, sir.

Thank you very much, Hazel, and thank you all the investors and friends. We welcome you to the year-end numbers review. And largely so, this year has been very good for our company. So, overall, we have done multiple works which have resulted in these numbers. Largely during this year, we set up a complete CapEx plan. We got a commitment from the government to invest close to INR 430 crores of investment and got a subsidy of INR 261 crores. This year we have largely completed all the CapEx commitments and eventually, we booked close to INR 93 crores of PLI income in this quarter which is for three years i.e. FY '22, FY '23 and FY '24. This year also all the investments be at all plant levels. So, we have completed all plants, be it the Patna plant which is coming this year, frozen plant, Raipur plant. So, largely we have become future-ready for growth in next -- at least for the next 2-3 years. Be it in terms of talent investment, so largely this year has been a year where a lot of investment, be it in talent, be it at the back end of content, so be it back end we've done a good investment in our team building and as well as content for all Core and Focus states. We have brought in good new leaders to run the company and set the distribution and right RPM. Also, with a view of automation, largely this year from an automation perspective, we've done a lot of investments. Be it setting up the right DMF, or SSA, or tracking every sales team, we have built a good sales team this year. So, largely on every front, we have made a good investment this year which will give good results in the coming 2-3 years. From numbers perspective, so largely this quarter has gone by, so overall our revenue growth was close to 12.8%. When we see this quarter, of course, in these numbers, PLI income has been added in the other operating income which looks fluctuating, but overall our organic growth is close to 12.8%, our gross margin is close to 33.1%, when we see our last quarter of December '23, our gross margin was at 31.5%. Our gross margin has increased this quarter to 33.1% and our EBITDA margin overall was at 13.1%. So, overall key metrics this quarter have improved for us. Largely from the PAT perspective, this quarter we have done INR 116 crores of PAT which is close to 200%, of course, this includes PLI income. Overall, at a yearly level, our revenue growth was close to 13.7% versus volume growth which was upwards of 15.5%. So, if we look at the Ethnic Snack volume growth it was close to +17%, Ethnic Snacks have grown at a good level above the Company average. At EBITDA level, so largely post-PLI income our EBITDA is close to INR 319 crores, this excludes PLI income also. Then also our EBITDA is close to INR 300 crores which is a significant jump from last year. Our ROE and ROCE were close to 21% and 31%. So, largely we have built the complete CapEx. Largely in the years to come, there will be minimal CapEx in plants at least and this will again help in improving ROE and ROCE for us. From a manufacturing facilities perspective, we are close to 300,000 per metric tons of capacity which can comfortably generate close to double turnover. We have built a good capacity for the coming years to come and across all Core and Focused markets, be it Assam and Bihar, which we set up a facility in the last two years. In Focus markets also like Kanpur, in Raipur, in UP as well as in the South, in all Focus and Core markets, we have set good plants to have a further growth in our business and we will go beyond Rajasthan, Assam and Bihar which are our Core markets. In the next three years, we target to include at least one or two states in our Core markets. So, Manoj ji, over to you.

Yes. So in terms of distribution, so over years, our direct reach has been increasing. And if we look at in the past one year, we have added almost about 100,000 outlets in our direct reach. Also this year, we opened CFAs, which we found no more relevant and to enhance and further strengthen our distribution network. So we opened or CFAs at Ghaziabadi and Varanasi, UP, in the West of India, Ahmedabad and Pune and also one in Raipur. That's where our plant has come up. Talking about our marketing initiatives. So first and foremost is that we have extended contract at Mr. Amitabh Bachan to continue as our brand ambassador for the next 2 years. More so, we also shot a lot of films with him and about 16 different films targeting at various products and subcategories to leverage them, which we aired on the digital media and also on air over the year. Besides this, we invested heavily on retail marketing initiatives. This was kind of, say, bus branding, road shows, dealer boards, so on and so forth. For the first time, we invested behind -- as much behind consumer offer, which was 10% extra or even on our product like Bikaneri Bhujia. Not only did we restrict ourselves to domestic media investment, we also invested heavily in our international market, and that's where we did this was the sponsorship of shows, which was for Badshah, then participated in most of the events which happened and the food festivals outside. Now coming to the business, if we look at it, so in quarter 4, our volume growth has been 14.5%. If we look at revenue growth, so revenue growth without -- if we say without PLI, 12.8%, however, if we add PLI to it, which is what is reported and you would see on the slide is 32.9%. Ethnic snacks in this quarter has grown at 10.5%, Packaged Sweets at 13.8%, Western snacks at 14.2% and Papad, this quarter has grown at 23%. If we look at full year performance, so overall volume growth is 15.3%, revenue growth, 18.5%, Ethnic snacks at 13.4%, whereas if we look at Ethnic snacks volume growth is 17%. Packaged sweet value growth is 14.4%, Western at a full year level 13.2% and Papad grown at 10% this year. The contribution of the Ethnic snack continue to be the highest. And the shift between -- if we look at last year quarter 4 and this year quarter 4 is almost the same. So there's hardly a movement there. All these categories have moved up. Now coming on to how our markets have performed, we look our India market as Core, Focus and others. So if we look at our Core markets, which contributes to over 72% has grown at 9.1% in this quarter. Our Focus market has grown at 15.3% and other markets with a small part has grown at 45%. Export in this quarter was flat. However, we look at full year number, export has grown at 22.2%. Core markets grown at 11.2%, Focus markets at 22.6% and other markets at 14.8% growth. So if we look at by segment, Core market contribute to 74.4% Focus market at 12.9%, Others at 9.8% and Export in this quarter 2.9%. However, at a full year level, if we look at our Core markets at 71.5%, followed by Focus markets at 13.8%, Other markets at 11.2% and Exports 3.5% contributing to our overall revenue. The mix of packs if we look at, Family Pack, which is above INR 10 pack in this quarter has grown at 11.5% and the growth of Impulse pack was 13.6%. Whereas if we look at the full-year level, the Family pack and Impulse pack have almost grown the same, the Family pack at 13.5% and Impulse pack at 13.6%. The contribution of the Large pack continues to be high and is at 59%, whereas the Impulse category is 39.5%.

So, overall revenue we have grown close to 18% post-PLI, EBITDA was close to INR 391 crores an 83% growth over last year and PAT is largely 93% we have done, PAT is close to INR 262 crores over the last year. So, largely when you look at the gross margin level, in quarter 3, our gross margin stood at 31.5% and this quarter it stood at 33.1%. Largely, we are seeing improvements in gross margin as well as there are multiple works in improving gross margin, be it raw materials supported plus we are passing some prices also. From the PLI level, we have booked close to [indiscernible] this year, [indiscernible]. So, the last two years' PLI income has been realized from the government. This year of course we have booked as accrual income because we have fulfilled all the conditions of the government of these investment or sales support. We are hopeful that we will receive a grant from the government before December '24. That's the part from the presentation. We are happy to answer all the questions.

[Operator Instructions] line of Abneesh Roy from Nuvama.

So for the full year, you saw 15% kind of volume growth and 18% sales growth. So my question here is, do you expect again teens kind of -- early teens kind of volume growth? And now most FMCG companies are talking about 2% to 3% of price hike in some part of the year. So would you expect that also to continue? Because in Q4, your pricing growth was not there. But do you expect that to come back in FY '25?

So, we have built up capacity across each Ethnic snacks and Western snacks largely in last 2-3 years. And we are currently 40%, 45% type of utilization. So, next year's target is also for the volume to grow at least a minimum of 13%, 15%. Of course, this year it looks like, chana, potato, both products prices are a little inflationary it seems like. We see that this year 2% to 4% price rise will be taken by us and so that's how the overall numbers will build up.

And would you have seen market share gain because I don't think the industry volumes are growing at 15%. So which states would you have gained more market share on a full year basis?

So if you look at our Focus states has grown at about 22% and the Core states at 10%. So what we assume is while we yet to have this data, but while we assume that we would have gained shares in the Focus states broadly.

Sure. One follow-up I had was, if I see your full year performance in Core and Focus and compare that to Q4, Focus states, there is a drop of around 7% in Q4, versus only 2% drop in Core. If you could tell us why in Focus there is a bigger drop? Was there a base effect? Was there a one-off? And how do you see Focus states in terms of outperformance in FY '25?

So I think the right way to look at it is that we look at a full year number and which is what is 22%. However, we look at that this particular quarter 4 is not as good because of Delhi, we have -- earlier, we did not focus or we could not got our eyes into Delhi market, which is what we have done some changes, some stuff which is happening. You will see in next one quarter. So by end of quarter 1 is what we will be in a different pitch on this Delhi market as well. Besides this, if you look at rest, all other markets have done extremely well. Also to tell the audience on the team, while we were talking about 6 Focus states, what we have also done is here onwards, Chhattisgarh is where our new plant was commissioned in the last quarter and now we will have our focus on this Chhattisgarh state as well. So, here on when we'll talk, we'll include Chhattisgarh also as our focused market.

Sir, last quick question. Your exports growth was flat in Q4 versus 22% for full year. Again, here, is there any one-off? Are you worried on all the surprises which are happening, Hong Kong, Singapore, et cetera? Because Indian regulator has said that spices there is no problem, but global regulators are saying there's a problem. And it could have a trickle-down impact on other exports also. So what's your comment on this?

No. So we don't see that, primarily on the spices and that's also there's a factor which these spices company also trying to work upon. However, our peer group or ourselves are not impacted of it. This is nothing but some quarter shift from this quarter to another quarter. And for exports, what we normally have is we have order about 60 days in advance. So this problem is not the reason you will see this coming back in the subsequent quarter. And at a full year level, if we look at, that's how we measure and that's how our team carries or our distributor carries target is fairly in line with what we plan is ahead of 22%.

And just one follow-up there. You also use a lot of spices, obviously, in your Namkeen, Bhujia et cetera. So there is no risk, right, from a global standard quality aspect, there is no risk?

So Abneesh, we comply with the law of land. So whatever is permitted in that country is what only we export. So this passes through very, very close and tough audit processes, and that's how we export it. Even when our product goes to that country, we get those checks, compliances check, and that's how we are able to sell in these markets. So we don't see as such any of the challenges with us.

The next question is from the line of Percy from IIFL Securities.

Sir, my first question is on the Focus states. There, your market shares are very low, right? So I mean, the percentage growth, I mean, can be very, very disconnected from the industry growth because of the low base -- low single-digit kind of market shares in many cases. So shouldn't you be running at some 25%, 30% kind of volume growth in these states? And what is required to get there? And do you think that is a realistic number to target, first of all?

See, I think very well said that one can look at these numbers as well. But in all these states, if you look at. So there is a situation wherein we have the market leaders and also have below us, the regional and the local players as well, right? So that's the status in these states. Now we don't want -- in the earlier con calls also, we have spoken about that we don't want to be a discounter brand, a disruptive brand wherein we gain -- do these kind of volume gains and thereafter, it becomes difficult to live with it or to continue with those stuff. So that's the reason our investment is more on to get our distribution right. If you look at the distribution number, if you look at the coverage what we are giving getting in these states, so it will be a slow and steady and a slow burn. This is what we always have been talking about. Even today, as we speak, we have grown at about 22%, that's the value growth. And if we talk about volume growth, it's about 25% in our Focus states. That's the volume growth we have delivered. And in certain states, when we speak about, say, UP, which is a large market, of course, our shares are also very, very small. But there, the growth are to the tune of this category is about 44%. So we are more or less in line with what you said 25% growth. But more importantly, this is about getting ourselves right and future ready for the times to come.

Understood. Secondly, just wanted to understand your judgment on what happens to volume in different pricing scenarios. So right now, we are seeing a slightly negative pricing and the volume this quarter is around 14%, 15%. Supposing if like next year, you are seeing 2% to 4% Y-o-Y pricing growth, in that scenario, does the sort of volume take a hit or we still continue with our 14%, 15% kind of volume numbers?

So largely, as a company with a big capacity we have made -- so our target is to at least grow at 10% to 15% volume growth at least for next 2 years.

Sorry, how much did you say?

13% to 15% volume growth.

Okay. Understood. Lastly, coming on to your margins. So this quarter, if I strip out the PLI benefit completely, your EBITDA margins are 13%. Now on an ongoing basis, I think you will be booking PLI benefit of somewhere around 150 basis points of sales, correct me if I'm wrong. So would we be right in assuming that for FY '25, we should be targeting a 14.5% kind of EBITDA margin?

Of course, post-PLI margin, we target around the same, post-PLI.

Sorry, I didn't get you. Can you repeat that?

Including PLI, of course, so without PLI, your target is to at least improve a basis point. This year, gross margin improvement, we see a little bit overall a little bit challenge on being the inflationary pressure. But overall, we have built all the cost set up all the capacity fixed. So in our books, all the cost has been fixed. So once we improve utilization, the operational efficiency will come in. And overall, we are targeting at least 0.5% EBITDA improvement this year also, with PLI.

Including PLI, right?

Yes, yes.

The next question is from the line of [ Dinamera H ] from JM Financial.

My question was regarding PLI. What is the consistency in the PLI scheme we can expect for the next 5 years? Are we going to continuously keep bidding for PLI in the next 5 years? And yes, how do we see that?

So largely from PLI perspective. So we have received close to INR 261 crores of commitment from government and we invested INR 430 crores. So it's a 6-year subsidy. So 3 years has been gone by and we booked close to INR 93.6 crores in a single year last year. It was for '21, '22, '23 and '23, '24. For next 3 years, it will be on a quarter-on-quarter basis because we completed all the CapEx commitments. So it will be on a quarterly basis, we book the PLI income for the next 3 years.

And how long approximately do we see the continuity of the PLI within our business?

For next 3 years.

The next question is from the line of Mehul Desai from JM Financial.

Just one question. One, obviously, if you could give some context on your plans for the frozen business. What is the status there? How are we looking at from FY '25 and '26 perspective? And how are the margins in this frozen portfolio?

Yes, thank you. So largely frozen is in a very niche shape up now. So largely, we committed -- we completed the CapEx in last December, started trials. So by next 2 months, we complete all the trials and everything. So frozen is largely for export business in overall export close to 40% comes from frozen. So that's the overall shift will be there and currently, we are buying from a third party, which will shift here. But yes, overall, we see a good improvement in frozen and this will also help us in building our QSR vertical, QSR business because we also want to be in this business. Of course, there will be slow and steady days in this. We don't want to go over. So largely, this year, there will be 2, 3 QSR outlets that we will open, do a lot of trials and everything. And from next year onwards, this frozen can become -- will become a back-end plant for all the QSR vertical as of course, to grow our frozen business in export.

Okay. Got it. Secondly, I think Percy did ask this question. But on the gross margin side, I mean, we have closed full year at 32.5%, ex of PLI was around 33-odd percent. And you are saying 2% to 4% kind of price hike. Do you think with that kind of price hike and current RM environment, you should be able to sustain this gross margin levels?

Yes, we will be able to sustain this because it looks as of now, we don't know post-election what will change. But yes, from the looks of the current scenario chana and the potato prices are very inflationary this year. So, chana in the last few weeks has gone haywire, increased close to 10% to 20% in a month's time. So, we are largely not dependent on a single raw material, like we are into 5, 6 categories, purchasing a lot of pulses, not any single crop -- like we are dependent on any single crop. So, largely any single increase in raw material doesn't take much on us. But yes overall we see that this year there will be little inflationary pressure, 2% to 4% price hike can work out well for us. In last year, when the price correction was there we did not pass on completely, we cannot reduce the MRP we started to promo offers, we reduce full once we see that price inflationary pressure will come, so we have the budget in hand currently also.

Understood. And some bookkeeping question. What happened in the staff cost? It was flat on Y-o-Y basis? And secondly, the other income was quite high. So if you can just explain that?

So, largely in other income, basically interest income has been booked, we have FDs close to INR 51 crores. That's the interest income being booked in other income. And staff cost is largely flat last year if you see the overall breakup when we publish the annual report. So, ESOP expense was big this year because last year has been booked. So, this year our overall investment in people was big. So, when we see overall it's a percentage wise flat but investment in people is big.

Okay. Okay. And last question, what are the CapEx -- what is the CapEx plan for FY '25, '26?

So for next 2, 3 years, there will be just -- we don't see major CapEx coming in, just NPD, regular maintenance CapEx. Thus, we need to build some small mother warehouse type of thing, but it will not be a big CapEx type of thing. It will be just a small from [indiscernible].

The next question is from the line of Shirish Pardeshi from Centrum Broking Limited.

So 2 questions in the beginning. Could you talk something about competition, how the reaction on the new markets when you are entering? Is there a discounting which is going up or you're primarily seeing a very sharp reaction for the organized players? Any color if you can add?

Shirish, this competition certainly is there and it's going fierce only. And from the top end players, they are completely aggressive and so are the small time players, which is local and regional players because there was some -- the price commodity benefit which these guys got and they started mushrooming up. So in terms of competition, certainly, it is there, and you have to be competitive to hold your space and move on. That's what is what. But good thing is that category has its momentum, and there is also an inorganic growth wherein it's a shift from unorganized to organized. So that's helping all of us move forward.

So let me ask, Manoj, the candid question. When you enter into the new market, you take a pricing strategy and discounting as a placement or you do the advertising route and do the local advertising. So I think I'm just trying to understand how do you plan to -- or how do you penetrate these markets? Because obviously, existing competition will be there and you are being a new player. Obviously, you will get with the right distributors and partners in the channel. But I'm just more curious that why this growth is happening?

Yes. So when we get into new markets, so certainly, discounting is not a part of our strategy, and that's completely outside for whatever we'll do. We are more into expanding our distribution reach, quality, that's what we talk about and also is the investment behind marketing to create some demand and brand awareness. That's what -- keeping in mind, we extended contract of Amitabh Bachchan, because his stuff, we did certain research, marketing teams came back with the brand equity, what we are getting and what we are leveraging. Whether we were there in the store or in those markets before or not, but when our guys go there, so ours is not an alien brand. We are at par or plus/minus to the national or the key brand whatever is selling there. That's what we do. Also, Shirish, these markets are not virgin markets for us. We have been there for ages. It's that we never focused on these markets. It was more of a trading model. Whoever had asked, we would go and then if supplies are not there, we'll not service. Though there has been the challenge, we are now getting into whole out in these markets. It will be a slow burn, but you will see over some time, we will be amongst top 3 players in these markets.

Okay. That's helpful. Rishabh, on Slide 24, you did allude saying that chana prices are going up. Just wanted to understand in the high inflationary situation, have we done any tweaking in terms of sourcing strategy or hedging strategy?

Yes. So largely, sourcing and hedging is a part of our strategy. And largely, we always book close to 40% to 60% of our overall requirement of season, we normally book. And this year also, we did the same. We have booked close to 35%, 40% of overall demand. So largely -- we have hedged, but of course we cannot completely foresee the price rise. But overall, we have secured our next 40%, 50% of the requirement. And balance, of course, we need to purchase and that's how we'll be passing on a few prices in largely products which are chana or potato based.

Okay. My last question is on the Chhattisgarh plant. When do you expect to get commercial production?

So we have done a commercial production in March.

Okay. And if I just ask what -- I mean, obviously, since Manoj has said that there will be some trading and the product will be available. But if you can share in FY '24 or maybe FY '23, what kind of revenue would have got in Chhattisgarh and what kind of expectation you are seeing because you're putting the infrastructure now?

So largely Chhattisgarh currently is a small number. So we see at least this year, 2025, we'll do close to INR 17 crores, INR 18 crores top line this year in Chhattisgarh versus last year, maybe even more of course.

The next question is from the line of Gaurav Jogani from Axis Capital.

So the question is with regards to the target of 13% to 15% volume growth. If you can help us dissect, how are you looking to target the volume growth within the various categories? So for example, what will be your target for volume growth in the Ethnic part of the business and what would be in the Western snacks and the packaged sweets part of?

Yes. So the growth in Western snacks would be slightly -- a couple of percentage points higher than the Ethnic snacks going forward, because the way we have commissioned our factories across, the way this brand is picking up, it will be ahead of the Ethnic snacks. However, all these plants do have the capability to produce our Ethnic snacks as well. It's only Bikaneri Bhujia and Namkeen, which primarily will continue to be produced and supplied from our Bikaner factory.

Sure. Sir, what about the packaged sweets? I think packaged sweets was also one key focus area for you. And there were talks about the democratization of these sweets into smaller packs so that the reach increases. So any update on that front?

Yes. So sweets if we talk about, of course, one -- so we spoke about 2 things, that sweet has a huge seasonality impact, right? So during the season time, the demand is by far higher than the capacity what we have. And in rest of the time, we see the reverse of this stuff. So what we've done is that we've started from INR 5 Patisa packs and all that stuff. And in the last quarter is what we've done price and it is getting well accepted. I think it will take a while whereby when we'll be able to settle these small packs, because the market for sweets in small packs is also not very big. This would be about creating an opportunity, creating a market for that, and that's what we are working on.

Sure. And sir, my second and last question is with regards to the margins again. I mean, if we look at the margins on a full year basis for FY '24 ex of the PLI, it is around 2.5%, the gross margin that is. And on an exit basis, we have already done, I think, 33% kind of gross margins. So with the inflationary impact that we are seeing right now, how much of an impact can we see on the margins going ahead? And how much can we negate this with operational efficiencies now since the capacities are around that.

So largely, what we are targeting is this year, the overall gross margin will be around 32.5%, 33%, this will be the range this year, this is what currently we are looking at. And the operational efficiency, of course, we are targeting at least 0.5% improvement in below the EBITDA level because last year, we did a lot of investment in people, setting up teams, setting up plant cost, everything. So this year, we'll have some result of that.

The next question is from the line of Nitin Gupta from Emkay Global.

Just wanted to check on this margin question again, like this chana price increase, given we have procured 40% to 60% of seasonal requirements. So, like, would we have any effect on our gross margin in Q1? Or since we are ahead so we don't see any impact?

So largely in Q1, we don't see any major impact. In Q2, of course, we'll look into it but in Q1, we don't see any major impact.

Sure. And secondly, on your A&P spending. So like in FY '20, when we sort of signed Amitabh Bachchan, there was a bunching of A&P spending. So similarly, this time around, when we have signed in, we have shot multiple videos and all. So do you think A&P spending as a percentage of sales will come down in the following years?

So largely, see, signing up Amitabh is one thing and it also depends on the marketing strategy. So largely, we are keeping close to 1.75% to 2% as the marketing budget because this marketing budget, we always keep ahead from all the competitors, be it in consumer mind as well as the distributors mind. So this is a branding investment what we planned.

Okay. My next question would be on your core market. We have grown at 9%. Can you provide some flavor in terms of how has been the growth in Rajasthan and Bihar and Assam?

So between these 3, 4 states, if we look at, Assam has been the highest growth followed by Rajasthan and then Bihar. Bihar, if you look back, quarter 2 has not been a great quarter for the industry also in Bihar because of heavy floods, what happened early monsoons and all that stuff. So that's where the growth of Bihar is about 7.8% and rest, both these Rajasthan and Assam are double-digit growth.

So in Bihar, it was 7.8% growth?

Yes.

Okay. But this quarter, what was the impact? Can you be...

So quarter 2 was the impact which has brought down this growth. Rest of the quarters if you look at or even the exit stuff, it's back on track.

So this 7.8% is the full year growth you are saying?

Yes, correct.

Okay. And how would be Q4? Any flavor...

Q4 is back at double-digit growth.

Okay. And the next question would be on your -- how is the profitability? Can you provide some flavor on your Core and Focus markets? How is our profitability in these markets?

So largely from profitability perspective, so it's close to 1.5% lower than in Core market versus in Focus market.

So 1.5% gap between Core and Focus?

Yes, close to a couple of percentage.

Okay. And lastly, like, we are looking to grow Western Snacks. Can you provide like how we are looking to sort of manage the margin here? We have appointed C&F agents and have local production facility, but the spot is something that Western Snacks generally are margin dilutive proposition. Can you provide some perspective on that? How we are going to manage our margins? That will be the last question.

See, there has been a paradigm and to a certain extent, it's fair also that Western snacks are margin dilutive. Now the reason has been, one, that they are more on INR 5 and INR 10 packs, so which is more of air or say, low density stuff and hence, the cost of logistics becomes by far high, right? For us, if we look at now, Western snacks is one of the categories where we play. So our contribution of Western snacks is just 8%. So therefore, it does not impact as much on our bottom line or the EBITDA numbers because we sell a lot of stuff which are high density products like sweets, which is very, very high -- Papad and all and this tags along over and above this stuff. So therefore, this is one reason that it is not margin dilutive for us. Second is that earlier it was so because you could not transport it from, say, Bikaner to the other corners of the country. But now that factory is coming up in the local areas, in the regional areas, this further reduces this stuff. And our Focus has been not just INR 5 and INR 10, we are into INR 20, INR 30 and INR 50 chips or large packs as well. So that's how we look at it. And we are pretty conscious in terms of that there is a threshold that our margins would not go beyond this stuff. If it comes to shop, maybe we'll have to pass the price to the consumer, but not take a hit in this.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management. Okay. There's a question. It's from the line of Nitin Gupta from Emkay Global.

One last question I wanted to check on is the dividend policy we have. Given like our CapEx is going to be limited, so how do we see the dividend policy ahead?

Yes. So this year, we've given 100% of face value like maybe INR 1 dividend this year. So largely, besides we did a lot of investment, we also taken care of all the investors. So close to -- but yes, overall in coming years, our target is to take this current 12% to 20% to 25% in the next 3 to 5 years.

Okay. And any thought like we will be needing CapEx after maybe 3, 4 years or maybe 2, 3 years. So how we want to use the cash generation?

So largely, see, currently, our major focus is to utilize this capacity. Of course, we are looking at opportunity, if we see any good acquisition opportunity. Currently, it looks very expensive because this category is very hot as of now. But yes, overall, we'll be looking into some acquisitions also in the years to come. But yes, overall, currently, we are majorly focusing on utilizing this cash.

Okay. And lastly, since you are talking about acquisitions. So if any acquisitions -- like what kind of acquisition it's going to be? Is it something like -- if we want to get hold of any market, we will acquire some regional competition? I just wanted to understand like what kind of acquisition we do and will be likely to be?

Yes. So I think you rightly said that we would look at, say, some local or regional stuff and not that with the lens of the capacity what they have. This would be more from the lens of that if we get -- or leverage their distribution strength.

The next question is from the line of Gaurav Jogani from Axis Capital.

Just repeating Nitin's question on the Western Snacks part. You said that yes, we have a bit of more higher price point packs versus the others. But sir, still given the fact that even this year, we have seen the pricing actually correcting for the Western Snacks. So how should one think about margins in this particular segment because this segment is expected to grow the fastest?

So largely, Gaurav, so see, overall, the growth what we are planning in Ethnic Snacks versus Western Snacks, we doesn't -- so largely, currently it's close to 8% of top line. And we hear in next 3 to 4 years, it will be less than 10.5%. And the margin gap between the 2 categories is close to 3% largely. So it will not impact my overall EBITDA because if 8% goes to 10%, and so it will be overall 0.6% on my EBITDA and there are a lot of other works which we are doing. So we don't see any major impact of Western Snacks hitting my bottom line.

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you very much the organizers and the participants who took their time out to join this call. Hopefully, we could answer the questions what you brought up and would be glad to take offline as well if anything you feel was unanswered or you missed asking in this forum. Thank you once again for showing your confidence, interest in this organization. Yes, thanks again.

On behalf of S-Ancial Technologies, that concludes this conference. Thank you for joining, and you may now disconnect your lines. Thank you.