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

Ladies and gentlemen, good day, and welcome to the Bikaji Foods International Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ambesh Tiwari. Thank you, and over to you, Ambesh.

Thank you joining Bikaji Foods International Ltd. [indiscernible].

Sorry to interrupt, Ambesh, your line is not coming out clear. Could you please arrange your handset.

Good afternoon, everyone, and thank you for joining the Bikaji Foods International Q1 FY '27 Earnings Conference Call. From the management team, we have with us Mr. Rishabh Jain, CFO; and Mr. Manoj Vama, COO. I will now request Mr. Rishabh Jain to take us through the key opening remarks, after which we will have the floor open for Q&A session. Thank you, and over to you, sir.

So thank you very much. Thank you to all the investors. So this quarter, we've grown at close to 12.5%. This quarter is a story of 2 halves, where in first 45 days, there has been supply and production issue for 2 reasons largely. One, of course, our chairman is no more with us. So there are 3, 4 days of plant impact across pan-India. And number two, there were Bengal elections. So there are a lot of movement of Bengali labor. But, post 45 days, we're seeing great demand across all product range, be it ethnic snacks, fashion snacks. So from primary lens, we're growing at 12.5%, but what we see from secondary, so we're seeing good secondary tertiary overall in first 45 days also. June, July, we're seeing good growth in demand and overall this festivity, we entering into festivity this month, being Rahki and next Diwali. So we are getting very good response from our organized retailers seeing good growth and maintaining 15% plus growth overall this year. That's what our target is. From bottom line lens, what we're seeing that there are multiple pressures, be it edible oil due to this geopolitical issue, this rainfall -- less rainfall. So it is also having some impact on few pulses, be it moong dal and chana dal, all have started increasing this year. And -- but yes, we have taken 2 price rise in the last 4 months, and we are trying to maintain and trying to passing on the price to the consumer. We have taken one MRP increase in April, but till now, we're not taking any [indiscernible] MRP increase. And what we see that till Diwali maintain this price what we're doing because as we enter into festivity, a lot of gift box and everything has been started. So that's what number one. From EBITDA lens, this quarter, our EBITDA was close to 13.5% versus last quarter, EBITDA was close to 12.2%. So there was good increase in EBITDA margin compared to last quarter. From capacity lens, largely our new ASRS investment has not gone live this month. So we have close to 1 lakh square feet of [construction] in Bikaner where there's a lot of supply chain business will be there going forward, where we'll keep close to additional 1.2, 1.3 lakh [cartons] extra to ease on supply chain. This will help in overall maintaining this minimum stock level at our key stock point.

As one of our growth driver, what we have identified is the reach increase in reach. So we continue to grow our direct coverage. And as we end this quarter, we are at 370,000 outlets plus is our direct reach, adding 17,000 outlets in quarter 1. Talking about our marketing investment, in fact, if you look at -- I mean, in this quarter, the gross margins are up, whereas EBITDA, there is -- it has slipped down, but that's primarily one of the key factors also is that we invested heavily in this quarter as well to build up momentum for the festive season coming ahead of us. So Pankaj Tripathi campaign, we had in this quarter as well, which was for UP, then some launches of our -- the Western snacks range, new products, what we did, participation in our international exhibition as always, what we do. Coming to the business, if we look at, so delivered an overall volume growth of 7.7% and a top line of value of 12.5% growth. Within this, the ethnic snacks have grown at 11.4%, Western snacks at 21.3%, sweet at 4.4%. Papad was a bit challenging for the quarter for the reasons that a little bit of early monsoon because June also, we saw that stuff. And what happens is that being handmade papad -- the monsoon impacts our production per se as well. Talking about business from the geographies, look at core states have grown close to 11%, focus states grown close to 19% and the other states at 5.6% Export is the only channel where we -- for the first time where we have seen that almost flattish or a negative growth of 2.2%, which primarily is on account of the U.S. tariff disturbances, which is happening. And more importantly is the crude oil prices going up, which has taken up the freight 2 to 3x kind of a stuff. So which is what has [deferred] certain shipments. That's where it is. Otherwise, we look at in terms of demand, export stays as much strong for us. The mix between family and impulse pack, if we look at family pack has grown at 11%, while impulse at 10.5%. The retail business performance if we talk about, so this has grown at 71.8% Y-o-Y and our stores have increased from 15 to 28 over 1 year.

So from top line growth perspective, uh, so over last, over last quarter our EBITDA has grown close to 13% and top line has grown close to 2%. So EBITDA has improved compared to last quarter. So that's all from the presentation. Thank you for -- and we are happy to answer all the questions.

Thank you very much. We will now begin with the question and answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead.

Yeah, thank you. My first question is on the retail business. So if you could tell us next 1 year what will be the plan in terms of the retail expansion? And for the different formats, if you could give us some numbers in Q1 on the growth and the margins, and any learnings you have where some tweaking of the business model is needed in any of the format.

So from retail lens, largely, we are mainly focusing on [PHS] as of now. And from [PHS] lens, they are doing -- they will open close to 10 stores this year. And largely what we see that this, this business can become -- can grow at 50-60% year-on-year for next 3-4 years. That's the plan we have as of now. And from 28 stores to plus 35 stores this year, and 50 stores in next 2-1/2, 3 years. That's the plan in PHS. And from Bikaji stores perspective, we are opening 2 stores this year, already in plan, already work has started. And post this, we'll evaluate on our business largely. But this business can from profitable lens also [indiscernible] so we are also working on basically from PHS lens, of course they are retail, but they're mainly focusing on fresh, pretty -- very premium sweets and gifting. That's a big business for them, and that's where, first store -- the first store we're targeting 700 crore business from [PHS]. That's the overall plan.

In terms of Q1, I think you are the only FMCG company which is highlighted, I think, on the Bengal, election impact on the manpower. So any long-term risk mitigation you can do? Because frankly, this is a solvable problem, and no other company has highlighted. So, if you can tell us why only you have faced this issue.

So largely in Bikaner -- so you'll see your snacks is manufacturing across all plants in India. So snacks has grown at +20% this quarter. So we'll not have an issue, but in Bikaner largely there are major Bengali neighbors which are there in Bikaner, and mainly bhujia we manufacture only in Bikaner, core bhujia. So that's how we have got impacted. But overall, what we are targeting that we'll also see -- and we'll learn from this, and we are targeting this year that we'll manufacture bhujia in two plants this year. We'll try to manage the same quality there. So that's what mainly the main issue was.

Sure. Last question on any of the growth states, [X] of those 3 states where you have a strong presence, if you could highlight where there has been slightly weaker performance than expectation and which are the faster growing states, because yes, those states are growing faster than your 3 core states, but still I think the gap isn't too much. And in fact one or two quarters, those three states have in fact grown faster also. So if you could tell us, the fastest growing states and what are the earnings in the weaker states.

So hi, Abneesh, this is Manoj. So if you look at focus states, have almost grown 2x to what core states have grown. So that's where it is. Within focus states, if you look at the states like UP, where we have made investment as well, has really paid us dividend back. And the fantastic growth we have got from there. And, across all focus states, growth is strong. Not that any of the state has underperformed for that reason. Core states, for the fact what Rishabh already spoke in quarter 1, within quarter 1 also, if you look at the first half of quarter 1, in April where we lost our chairman, and you know, as a mark of respect, 3-4 days there was a shut [indiscernible], so we could not make supplies. And ours is a very, very -- simply skewed supplies wherein -- which essentially means is that it's not any week high [indiscernible]. So on a day-to-day basis, we do almost equal supplies throughout the month. So any loss now impacts us. That was one on account of shipments. And also, the Bengali labor, though most of it is that stuff. And in April until mid-May, because of this Bengal elections and SIR, all those stuff, So we had no choice than to let them go, and they went, and that disrupted our supply, and which impacted more of Rajasthan and, you know, these states, the core ones. Now, focus were still managed because we have our depots across. We had shipped stocks there and they continue to get those parts. So those were it. Learnings in terms of it is, again, that one is that we realized that if any catastrophe, any such unfortunate thing comes up and Bikaji gets now isolated or disconnected, Bikaner, so would impact our overall business. And we are decentralizing it, so already started working on that. This Bikaneri bhujia, not only in Bikaner, we'll produce outside Bikaner as well. So those were few learnings which we built in in our plans and strategy going forward.

So one, uh, that's helpful. One quick last follow-up. On the demand side and competition. So if you could tell us on quick commerce, is there a very high competition? Because, I am seeing that a few commerce is now launching their own private label. For example, Swiggy has got the brand [indiscernible], and they have offerings across snacks and many other adjacencies. If you could generally comment on quick commerce performance, is it meeting expectation? Of course, everyone is growing very strongly. So that is not the right metric. The right metric is, is it going as per the plans, and is your market share in quick commerce higher than your pan-India market share?

Yeah, so Abneesh I think the right metrics to look at how are we doing it is in terms of at what rate this category is growing on that platform, and within that, are we over-indexed or under-indexed? That would talk about gaining share or loosing share on the platform. So first, let me talk about play of this category on, on the Q com platform. So yes, it is exponentially growing, and so are we. Our growth, if we look at in quarter 1, is upwards of 100% in, in the Q com channel. Second thing, what you spoke about on the private label of their own brands. So this, any of the, you know, format, be it modern trade or Q com, where you feel that the consumer or shopper footfalls are high they tend to launch their own brands. And so is what Swiggy and others would have started doing that stuff. But, it really does not work as much at the end of the day, you know, because the difference between a brand and their own private label brand is not as much. And hence consumer or the shopper stays back with the brand itself. So that's what it is. Well, it's too early to make a statement at this point in time. But, we, we are growing faster or in line with what these, uh, channels are growing for this category in this term.

Thank you. That's all from my side.

Thanks.

Thank you very much. The next question is from the line of Nitin from HDFC Securities. Please go ahead.

Hi, thanks for taking my question. My first question pertains to like what led to a surge in other operating costs. Like you have highlighted, there were brand investment, but just wanted to have a more sense on like what are the component for the surge in the other operating expenses. Plus also like if you can highlight how the spending going to be for the rest of the year.

So from other operation expense perspective, so there are multiple things. There is -- due to this geopolitical issue, the coal prices also increase in last 4-5 months. So close to 0.3, 0.4%, and at least 40 base point manufacturing cost has been increased, so from ad cost perspective, in last quarter we had not been-- not done very significant ads. This quarter we had done some sales promotion activity, some ads, so that this has given close to 40-50 base point hit. That's to a point where overall below gross margin is impacted.

And how should we like build this -- like, advertisement spend going ahead for the rest of the year?

Overall our year target is close to 2%. That's the target we'll maintain this year. And from overall planning perspective.

Okay, thank you. And my second question pertains to like, I have seen some of the product launches we are doing, expanding the [extruded] range plus getting into non-palm oil offerings. So just wanted to know what -- how material is the segment and what are thoughts and what are planned aspirations?

I think this is being future ready and looking at the demand what is coming up now from the -- say, Gen Z or the new generation and that stuff. While the mass or the, the bottom of the pyramid will always be very, very heavy, this would be icing on the cake. And we are ready in terms to do that stuff. We have piloted it in on the Q com channel because that's where they are sold both, the B segment. And, but this would not be a substantial, you know, business share -- share of business product going forward as well.

Sure, thank you. And my last question pertains to, your package sweets, like, how -- how we think like the growth going to be for this year. So like Q2 plus Q3 is the main season. So like for last 2 years there is a 7% revenue CAGR, and prior to that we were growing at 15-20%. For the combined 2 quarters. And so like from that lens, like given the capacity, how should we build a growth for this year amid the festive season?

So I think what we are looking at it is, see, festive, when we speak also, the 2 components to festive products, one is sweets, the other is our gift pack. So what we look at it is that now the sweets should grow at about 12 to 13% kind of a growth over last year, this quarter 2, quarter 3 put together. And the gifting would be even higher in this stuff. So, so sum total gifting would be, would be pretty good in this stuff and say upwards of about 17-18% growth.

Okay, so this is really helpful. And going ahead, like, our aspiration would be growing in mid-teen or like we want to sort of accelerate to high-teen types of growth for the full year?

So we'll definitely look at for high-teens, but [indiscernible] as we speak, you know, we see clarity on that stuff. That's a, say, close to about 16% plus minus should be the growth what we should do -- we should be delivering quarter-on-quarter.

Sure, sir. Thanks a lot and all the very best.

Thank you very much. The next question is from the line of Anand Shah from Axis Capital. Please go ahead. We have lost the line for the last participant. We will be moving on to the second one. The next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead.

Hi, sir. Just wanted to know this production sort of outage that we had for 4-5 days. Did that really impact our sales? Because this happened in April. You had 2 months to recover the production. It's not as if we are running at 100% capacity. So why should it impact our top line growth?

No, so if you look at now the progression of our billing, it is not like that everything is skewed towards last. So it's not just about production in the month of April, more about dispatches. That dispatches were shut for 3 to 4 days.

But I mean, there is a pipeline, right? There is a distributor, wholesaler, retailer…

Sorry to interrupt, ladies and gentlemen, we have lost the line of the management. Please wait while we reconnect. Thank you. We have the management back online, ladies and gentlemen. Please continue with your question.

Yeah, sir. So what I was saying is, so there is a distributor, wholesaler, retailer in the overall trade pipeline. We would have maybe, don't know how much, but at least a 15-day sort of stock. If you're stopping dispatch for 5 days, that trade pipeline falls to 10 days. Later on when your production is online, would you not want to restore that pipeline back to 15 days?

So exactly, that's what we said, that if we look at the -- so there is a story of two halves, first 45 days and second 45 days. What we are presenting here is the consol for 30 days. So first 45 days was even, we made up in the rest of the— no, so June was the ever highest kind of a delivery what we did. And July continues with that momentum. This is what exactly we are saying.

Understood, sir. What I just wanted to understand is, for the quarter as a whole, April, May, June quarter, has the production loss of 5 days impacted your sales for the quarter? That's all I wanted to know.

Yeah, so largely one thing, but of course this is loss -- be a loss because there is also labor issue going on during that time. So it was not the case that we -- in a normal scenario, of course, we'll double our turnover -- run day-night shift, but that was not the case till 18th of May. We've been able to run the plant with minimal production. So, there are two factors which are going on parallelly.

Okay, understood. Secondly, I just wanted to first congratulate you on the ramp-up of your subsidiaries, they are doing really well. But question on the standalone business, if I look at this quarter, okay, let's ignore this quarter because there was labor issue, production shortage, et cetera. But even if I look at last year full year, the standalone business, which is the core bread and butter, snacks, sweets, papads, et cetera, that has grown only at around 11%. So what is it that is preventing growth higher? Because earlier when we used to speak 3, 4 years earlier, the understanding was that the overall industry itself is growing at low double digit, and then there is a share of organized gain from unorganized, and then within organized also there are some fringe players and we will gain from that also. So the growth expectation was like 15% to 17%, but it is coming closer to like 11% odd. So just wanted to understand what is it that has changed versus that expectation in terms of the delivery?

Yeah, so, one is that if we look at -- so till 2 years back, the category was growing at double-digit growth, whereas if you look at the last 2 years, it's been a single-digit growth. And not just for the snacking category, overall FMCG -- within FMCG, if you look at food, barring few categories, the snacking still was better off. That's what it was. Last year also, if you look at the first half, which is quarter 1, quarter 2, were the weak quarters on account of the heavy rains and all those issues which, which came up. It was post-GST relief, what you said. So there is a clear uptick thereafter. That's what is the time wherein, you know, this -- the GST moved from 12% to 5%. That released the inflation what had gone up. You know, these benefits were passed back to the consumer, and we saw the momentum moving up. It is not just for Bikaji. We would say that the overall category growth has also moved up in that stuff. For us particularly, these 45 days were the deterring factor, that also purely from a primary lens. When we look at our secondary, when we look at our inventories at our distributors, they've got depleted. And as you were asking that, no, if you are shut for a few days and then when you start, so the way you, you cut down on your inventories, you building up inventory also takes some time. It is not an overnight factor that you do that stuff. So therefore this gives us comfort that, and the numbers speak louder than for what I can say. The way June came up, the way July, August, we're already in, but things are moving up. It's all positive. And mid-teens towards high teen would be the number. Will be able to deliver.

Got it, got it. And just one question on the PLI. This is, I think, the last year where you will get the PLI of approximately ₹50 crore, and next year it will not be there. So at the EBITDA level, this ₹50 crore will be a hit. So will you be able to either partially or fully mitigate it through some measures?

So from PLI lens, currently this year it should be contributing close to, close to 150 basis points in overall EBITDA. So what we're targeting, it will take it -- 50 to 75, based on improvement will take in pricing and gross margin. That's about it. It will take 1.5 to 2 years to reach again at the original margin.

Got it, sir. Thank you. That's all from me. All the best.

Thank you. The next question is from the line of Shirish Pardeshi from Motilal Oswal Financial Services Ltd. Please go ahead.

Hi, Manoj. Rishabh good afternoon. Thank you for the opportunity. Manoj, just a quick question. The D2C brands are penetrating much faster and they're reporting a very strong growth. In your conversation, can you share what kind of packaged food contribution on the top 3 platforms and what is our share in that?

Hi, Shirish. So see, there, where the play room is on the Q com platform. That's where it exists, right? If you look at overall contribution of this Q com to overall category is low single digit. That's the overall, at the time where they're playing. Now here, if you look at the top brands would contribute to about 50% of their category business, and the balance 50 is from the D2C and on the other small brands because this is where these Q com players make their bottom line, and the branded stuff gets them the top line kind of a stuff. Now, if you talk about the market share in terms of -- this is where, yes, they would have some reasonable and certain brands have better traction within their product range. Also, you will see that they will have one or two signature products kind of a stuff which is doing pretty well on that stuff. This is how it is. But in terms of when we speak about these brands, so the bottom line or the sustainability comes up as a real question. It's handful of brand that you could sustain in this environment.

So I was more curious to understand, because even if I look at the quick commerce basket, there are at least 6-7 brands which has crossed almost ₹100 crore. Now, are they selling on the price point and quantity, or are they selling on the ingredient and safety and healthy? I mean, I'm just trying to understand, more curious, what is it that they are getting right?

So, Shirish, it's mix of both, right? So one is [indiscernible] narrative that gets you, you know, try, and once you try, you like it, you repeat in that stuff. So this is what -- so it's a mix of both, one followed by another.

Okay. Uh, Rishabh, we have done some exchange filing on the Nepal project. Can you quickly give me what is the update now, when we think we will go ahead?

So from Nepal lens, we've done JV and within all the paperwork. Now the plant, construction is getting ready. So both parties invest close to ₹15 crore each, and by -- I think in next 8 to 9 months, the plant will get -- plant will get started, and we will get the local production from Nepal. That's the intention.

So this is on eastern side or this is close to Gorakhpur?

Nepal, it is near, it's between Birgunj and Kathmandu.

Okay, okay. My other question is on the upcoming season, and we see that THF is the growth driver which we have found, but I was more curious, I mean, when I look at the maths of the 12 stores, we are firing between 8 and 9 crore annual run rate for each store. So when you're opening new stores, can you share some more maths in around the economy of scale, or maybe some square feet, and which are the localities and geographies which you are expanding?

So from THF plant, we are largely focusing on tier 2 cities of India. As of now, we're not getting tier 1 cities. There are a lot of other players there. Tier 2, so that's the focus. And normally we're targeting 6 to 8 crore rupees of sale. And, we cannot say only [indiscernible] retail stores, where we say -- where we majorly focus on getting gifting right, premium sweets. And that's contributing 65-70% of sales. That's the focus. And from bottom line lens also, every store gives close to 25% plus core level EBITDA. So currently we are very concentrated with the team. We are actually [indiscernible] multiple things. But overall, this business in next 3-4 years can become plus 15-16% of EBITDA-driven business with 40-50% of year-on-year growth. That's, that's the projection what we are targeting in this phase.

Okay, that's helpful. My last question, I mean, last 2 quarters there is something other. I mean, we had GST rationalization, inventory issues in the trade, and last quarter also we had some disruption. In the context when we see the raw material prices are inching up, can you share, Manoj, some thoughts on the demand, how it is panning out? And are we taking, or have we taken any price increases in last 30 days, or are we going to take any price increase next 30 days?

So, Shirish we have taken 2 price increase in last quarter, last 90 days if we look at, right? So as to offset for what inflation or what price increase we could anticipate or has happened. Talking in terms of demand, pretty good demand. And when we speak to be the Q com channel, be the modern trade -- and I'm talking these 2 not because they are organized retail and they also build their plans, the Diwali revalue plans and all that stuff -- so very bullish plan they have. That gives us quite a satisfaction and confidence in terms of the business going forward. Similarly, [GT], the commitments when we see the demand plan for the next 3 months are very much positive. So, this looks to be, the good times ahead… and the next 30 days, we are not planning to take any price increase because now we have all prices, all that stuff signed off with these, the large accounts as well. So we'll not be doing that stuff unless and until something, some catastrophe comes up.

Okay, just one quick follow-up. Any good reason why our exports has declined?

So I mean, the only reason I would say is that now this, the Trump stuff, the policies, the tariffs, what's coming up, a little bit of uncertainty, but that still we were living with for quite a while now. I think the biggest one was the repercussions of this crude oil prices going up and the availability of these, these containers and all this stuff. Prices have gone 3 times when they were booked and now in time of [indiscernible]. So there is some delays happening, that's the only factor. Looking at demand, there's no issue with that stuff. It's the dispatches [department].

Okay, thank you and all the best.

Thanks.