Chatha Foods Limited (544151) Earnings Call Transcript & Summary

So good afternoon, everyone, and thank you for joining us today for yet another very interesting session. This session is hosted by Go India Advisors. And my colleague, Garima will be the one who will be moderating this, and she will tell you the reason why she has kept me along with her. So, I hand over the session to her now. And Garima, over to you.

Thank you, Sheetal. So good evening, everyone. My name is Garima Singla. And joining me from my team and most importantly from my moral support are Sheetal Khanduja, our Co-Founder and Head of Investor Relations; and Nehal, my dear associate at Go India Advisors. I'm really excited to introduce today's company, Chatha Foods Limited. Chatha Foods has been quietly working behind the scenes of many brands we all consume day in, day out from, but we may not always notice. They work to the likes of Domino's, Subway, Taco Bell, et cetera. And now coming to the people behind the story. Today on the session, we are joined by Mr. Paramjit Singh Chatha, the Managing Director. So Paramjit Singh sir has over 25 years of experience in the frozen and ready-to-eat food category and has basically seen this space evolve from scratch. So, he's been deeply involved into the strategy, the customer relationships and overall direction of the company. We are also joined on the call by Mr. Vishal, who is the CFO of the company, and he's been a finance professional who has been with the company for over a decade. He leads the financial strategy, the capital management and ensures that the numbers make much more sense. So, between the vision and numbers, we've got everything covered. So, moving on to the company's profile. What I particularly found about the company is the portfolio. So, they have about plus 194 SKUs. So, this isn't a single product story. They operate across flat breads, gravies, paste, frozen-to-fry snacks as well ready-to-eat meat products. They literally doubled their every single year from FY '22 to FY '25. So, this company does customization, does R&D, does QSR-grade standardization and if we rank their journey, you'll notice something interesting. These are some of the range of their products. It started with focused R&D and then onboarded large QSR brands, they expanded into exports and then commissioned new facilities. And now they're kind of trying to scale their capacity over the years. So, this has not been overnight growth. It's been a step-by-step compounding with client additions and capability expansion. And finally, the backbone. So, they have 3 integrated manufacturing plants across Mohali and Aurangabad with integrated capabilities and total capacity of over 3,800 metric tons per year.

So welcome, sir. Now beginning with the session, sir. Sir, you kind of started with the Indian Army and ITC. So how did this scale for you on an overall basis? And what were the kind of products that you supply to them?

Good evening, everyone. So, Garima, yes, we started with the Indian Army. We started with ITC. But when we started with the Indian Army and the ITC, that was the same time we started with Subway as well in 2003. So, ITC, if you remember, they had a brand called Kitchens of India, which is also present in a small way even today. So, at that time, there was a big hype about the ready-to-eat meals with the likes of MTR, Kohinoor and ITC was one of the brands. So, we were supplying all the ready-to-eat products to them like ready-to-eat butter chicken, ready-to-eat biryani, various flavors, various kind of gravies with chicken in it and various kind of biryani is what we were supplying. So, our stint with ITC was for almost from 2002 to 2008. But somehow the ready-to-eat segment did not actually take off in India. So, 2008 was when we parted ways with ITC. For the Indian Army, we were giving them shelf-stable retorted sausages to the -- what we call as the Northern Command, which goes to the higher altitude -- soldiers placed at the higher altitude for the Indian Army. So that was a very innovative product at that time, shelf-stable product, needs no refrigeration. So that is what we were supplying to the Indian Army. So, the Indian Army business, still, it is more of a tender business. And we were regular with the Indian Army business up to 2018, '19. But then somehow the pricing structures and everything was -- became very different. There was slightly more competition, which came in. And so, we still do -- it's not that we don't do the business anymore. We participate in the tender every year. And if we make meaningful margins, we still do the business. This year also, we have participated in the tender. So, let's see how it goes on from here.

Okay. Got it, sir. So, I presume the large QSRs, you've taken a significant chunk from some of the other players. So, is this that you taking the share from the other players? Or is this primarily market demand that is kind of propelling this?

So, Garima, with some of the QSRs, it's taking share from the other players. Some of the QSRs like Subway since 2003, we've been working with them when they were 1 store. So, from 1 store to 1,000 stores, we are still working with them. So, it's been almost 23 years. But yes -- so initially, with Domino's, it was taking a share from other players. But over the period, we have played a very pivotal role in developing some very innovative products for Domino's. So, I wouldn't consider that taking a market share as of now. But yes, that's how it works. We -- it's -- some customers is taking the market share from other players or some customers is where we begin from the beginning with our R&D strengths, our technical strengths, developing products from -- for them and starting from the word go with them. So, it is not that we -- so there have been some customers where we have become a supplier who has developed products for them across as they've grown. And we've innovated products for them where it's been ease of operation for them. Scaling up has made more sense to them because with our innovations, scaling became easier because across multiple stores, consistency, quality, everything matters. So, it works both ways.

Okay. So, we're talking about scaling up quality and then the certification. So how -- can you just walk us through your supply chain in general? Are there any kind of sourcing risk? And where are you procuring from such kind of thing? If you could just throw some light on that for the audience's interest.

No, there are no sourcing risks, Garima. So, we -- when it comes to raw material suppliers, we have a very strong system of vendor onboarding -- so we have been always certified from the best food safety certification companies across the world, and we've been working with the best food safety systems like FSSC. As of now, we are BRC certified. So, when it comes to sourcing, we have a very strong vendor onboarding process where the vendors or partners are audited, the plants are audited. They have to meet our requirements, and we onboard vendors accordingly. So as of now, if we look at the kind of raw materials, we are sourcing, there is no risk on supplies or shortages of suppliers or not being able to meet our supply demand.

Okay, sir. Sir, what is typically the time taken to qualify as a global QSR vendor? If you can just shed some light on that?

Garima, it takes anything from 3 months to 6 months because we are very stringently audited by the global QSR chains because they have their own audit systems, even though we are BRC certified or FSSC certified, but they still have their own food safety auditing protocols. We are audited, then we come to product development. So auditing, product development, plant approvals, product approvals could take anything from 3 months to 6 months.

Okay, sir. Actually, there's been some questions also in the chat box. I'll take 1 or 2 right now. So, Mridul is asking, has there been any sort of volume impact due to backward integration done by some of the major giants? And any update on onboarding of KFC and big cinema company?

No. If you look at one of the giants going into their own processing -- so, this was a very mutually decided decision between us and them. We were taken into confidence. And so, the volume, which was promised to us 2 years ago, we are doing much better than that. And as far as the KFC product is concerned, it got a little delayed with the merger which happened. So that's still on, but it's on hold for the time being with the Devyani and the Sapphire merger happening.

Got it, sir.

And the larger cinema chains we're talking of, we were talking of -- I think we're talking of PVR Cinemas. That project is still on. Samples have been approved, pricing has gone, and I think we are at the final stage.

Got it, sir. Then talking about your products in particular. So, sir, this whole strategy from shifting from non-veg to veg was this a demand-led decision? And there's also a question I would like to intermingle it. So, what kind of products are you exactly supplying QSR like Domino's, Subway, KFC and other place? If you can also touch base on that.

Sure. The products we are supplying as of now from the chicken plant are mainly -- we're supplying them everything. Maybe it's sandwich fillings for Subway, its pizza toppings, it's sides, Taco Bell could be the taco filling, sides. So practically, what goes into a store in terms of chicken is being supplied by us. And the other question on the vegetarian facility, yes, it was -- one was that we wanted to do a very sensible kind of a scale also. There is a lot of demand for the vegetarian products as well. So being a strong QSR player in India, so vegetarian was one segment we want to get into. And then we wanted to expand our portfolio by getting into exports as well.

Okay. And sir, talking about your customers. So basically, huge proportion comes from maybe Subway or Domino's. So how do you see this changing in the time to come, maybe in FY '27, FY '28, how will the customer concentration change?

So, it has even changed this year. It has even changed this year, but not to a large extent. But as we're discussing about the big cinema chains, we're talking to some of the large QSR chains as well. There are some international brands which have come in, and we are into the product development process with them. But yes -- it will not be a paradigm shift or a very huge shift. But yes, gradually, we are working towards reducing our dependency on our 2 large customers. And we are also expanding into -- we've launched a new range of what we call as value products, which fit into the HoReCa segment as well. So HoReCa was one segment, which we talk of as mainly as hotels and the catering chains. We have not been participating in the HoReCa business from a long time now. So that is something we've reintroduced almost after 18 years. So next year, HoReCa also should -- I won't say a substantial, but yes, it will become a significant volume base for us.

Got it, sir. And sir, I think this will also kind of shield some kind of QSR dynamics that are changing with respect to some slowdown that we are seeing in the news. So, anything that you can comment with respect to that? Have you seen QSR volumes fluctuating? Or how do you kind of go about it the quantity decided well in advance? Or is it on the go?

See, if the QSR demand -- the per store demand could be going down, but we've not seen that our demand going down. Our store demand is down slightly but then which are growing, right? So, as we look at the QSRs plans, the plans of opening new stores every year. So, I don't see a very major impact coming on to us with the overall universe of number of stores being increased by all the brands.

Sir, there have been a lot of questions around your manufacturing facilities circling back. So right now, we have the non-veg plant that's operational. Moving ahead, we are moving to Allana facility as well as the new veg plant. So, sir, have the trials, et cetera or are we still in the kind of phase of commissioning is yet to start? If you can just give an update out there.

Garima, for both these units, what we call as R&D and new product development, this was happening parallelly. We have a pilot kitchen in our existing facility, which works 365 days a year. We work the year around for our QSR customers. And we had the new product development and research going on for the vegetarian products as well. As in for Allana, we have set up -- we can call it a pilot kitchen there. So, where we -- parallelly as the plant was coming up, we were doing all the trials and the R&D processes there. So, if we look at Allana, we are already under what we call as line trials. So, the products which had been developed in the pilot kitchen are being tested on the machines now or on the lines as we call them. Wherein for the vegetarian facility, around the third week of March, we should be at a line trial stage.

Sir, there are a couple of questions on manufacturing, and I would just like to take those. So, one, obviously, there is a question from Mr. Deepak he's talking about what is our capacity utilization? And what has been our peak until the past 6 months? And what will be the average utilization we expect in the coming years?

So Sheetal, on for -- if you look at our chicken facility, we are operating at almost a 75% capacity utilization, 75% to 80% capacity utilization. And we think next year, we should be increasing it by 5% to 10% in the coming year. For the vegetarian facility with our discussions going on with the customers, again, which are based out of India, which some of them are new customers, some of them are regular customers. Without any export business, we hope to do 25% to 30% of capacity utilization. And for Allana, with the samples which have gone to various countries, the response we've got in the coming month, we should be at what we call as a slightly larger sampling exercise. So, we -- I think Allana, we should do around 50% capacity utilization. And in the subsequent years, we hope to do for the veg unit, we -- I think we'll do around 65%. Allana should come to almost 80% capacity utilization. And third year from now, we will be at a full capacity utilization of all the 3 plants.

I think, Shubham, that also addresses your question. And I think now Garima, would like to discuss the next. Sir, since you've talked about capacity now, people are really excited to know the numbers as well. So, Vishal sir or Paramjit sir, if you can just touch base on the numbers as to how much revenue as well as margins will the new facilities, both Allana, the veg facility as well as the non-veg facility.

Vishal, you can elaborate on that?

Yes, sure. Good evening, everyone. So, on the numbers, Garima, like Mr. Chatha has mentioned in the veg facility we would be doing somewhere around 25% to 30% utilization, so that will convert into odd INR 60 crores of revenue from the veg facility. And for the JV facility, the 50% utilization will convert into odd INR 95 crores kind of top line. And on the non-vegetarian facility, basis the targeted utilization for the next financial year we'll be at INR 190 crores kind of revenue.

So we have a couple of questions more, and I would like to take those. So, one is from Mr. Sudesh Kumar only, and he has asked for a couple of questions, but I'll just take it in that order in which we are going. So again, on the facilities only, he has asked that do we have BRC, FDA, EU approvals for our new veg plant and Allana plant. And we can get this approval and when can we -- if they are not there, when do we get these approvals. Also, he has asked that what was the specific response from international retail chain for Unifayre range? Have any of these meaningful interactions converted into LOIs from purchase order that will utilize the new 16,000 veg capacity in '27?

So, Sheetal, for the chicken unit, we have BRC certified, right? And we plan to get the BRC certification for both the veg unit and the Allana joint venture JV facility as well. So, the Allana JV facility, the initial -- what we call as the initial audit process has been started. The veg facility, once we are done with the line trials, that is the time we will initiate the BRC certification. So that will -- should take around 3 months' time to get the BRC certification, 3 to 4 months' time. Because for BRC, we need the FSSC certification as well. For Allana, we've got the FSA certification. But for the veg unit, the FSSC certification is given only once the -- we are able to produce the products on the line. So, they come for inspection and after the inspection, the FSSC certification is given. So, the BRC certification will start after that. And as for FDA, once the BRC is done, it's an online application. We will apply for the FDA application. FDA and EU certifications, we will apply online. That's not a very lengthy process. As for Unifayre, for the vegetarian products, no samples have been submitted yet to any of the multinational store brands.

Sir, also, there are a couple of more questions around the -- basically the level of automation we have at our facility. So, we have a question, and this is from Mr. -- sorry, just one second. So, the question is basically that management previously mentioned a shift towards automation to handle labor-intensive products. How much has this reduced operating cost so far?

Vishal, can you elaborate on that for the chicken unit, and I'll elaborate on the veg unit after that.

Yes, sure. So, Sheetal, on this -- the automation thing, like we mentioned in the past year as well, so we imported a few cutting lines for the handmade artisan products. And so that -- so at the moment, those new lines are operational, and we will see that contribution in this financial year numbers.

And for the vegetarian unit, Sheetal, other than a few artisan products we will be doing these -- the bread units and the frozen-to-fry snack line, they're all fully automated. So, there will be quite a substantial reduction in manpower usage in the weed unit as compared to a chicken unit. And same for Allana. Allana has also -- we have kept the manpower cost in mind, and there has been a lot of automation done in the new facility as well.

Okay. Sir, now there is some question around strategy. So, Vinod is asking and there was another gentleman who asked this question that why are we -- do we intend to continue to be in B2B? Are we trying to build a retail brand as well? And what is our strategy behind acquiring new customers?

Sheetal, we will -- at the moment, the whole focus is going to remain on exports and the B2B customers as of now. We have -- we're not saying that we are fully averse to the idea of going B2C in the longer run. But the initial couple of years, the focus is going to be completely on our B2B customers and the export market. Export market also, we are looking at business for HoReCa distributors and white label manufacturing for large customers.

Okay. So, since you specifically spoke about price hike, Deepak has asked that when is the price hike taken and what is the hike agreed with the brand? Is it linked to CPI reviewed that specific period? And if it's a specific period, if you can specify the period also.

Can you please rephrase the question for me, Sheetal?

So, he's basically wanting to know how frequently we take the price hike and with the brands, is it brand specific? Or do you have like a general thing that during this period, we will take the price hike? And how frequently the price hike comes?

No, pricing for all our customers is done annually. And so, we work on an open book costing with them. And any considerable increments in raw materials are taken into consideration. Any substantial increments in other overheads, the direct overheads or other overheads are taken into consideration. So pricing is done annually. Until unless there is a very substantial and a long-term increase in raw material prices, which has happened once where we mutually decide with our customers on a price hike. But then it has to be a proven substantial price hike. And if the price hike is going to be there for a longer period, then we do it. Otherwise, short-term fluctuations normally are something we override. So pricing is done annually. It's not that pricing is done on a quarterly basis or on a reduction in demand from the customer. So that normally doesn't happen. It's always done on an annual basis. Even our raw materials are done on an annual basis, and the customer pricing is also done on an annual basis.

Okay. Sir, there are a couple of questions around CapEx, and we would like to address that.

Sheetal, basically being a wealthy person if she wants to set up a facility, how much will be the CapEx to set up this non-veg facility similar to yours?

I would like to specify I'm not planning to get into competition at all. I can't replicate anything that you have done. So -- but yes, there are a lot of questions around CapEx and also...

Sheetal, if you want to set up a facility as similar to our volume, it will be around INR 50-odd crores, INR 50-plus crores.

Okay. And sir, so what is usually our maintenance CapEx because given that these are highly automated facilities, which requires a lot of licensing, and we are handling something as sensitive as food. So, the regular maintenance of these facilities would be like paramount. And what is the annual maintenance cost?

Vishal?

Yes. So, Sheetal, currently, it is at 1.25x of our revenue. And that kind of -- I mean standard.

Vishal, I think -- no, no, no. I think no, not 1.25x. The maintenance cost, Vishal, annual maintenance cost for the plant and machinery.

It is close to 1.25 -- sorry, my apologies, is it 0.1.

So, Sheetal, we do -- I mean, I know we handle very expensive equipment. We handle very expensive equipment in terms of majority of the equipment is -- for the chicken unit is coming from Germany. It's all imported equipment. We don't get them in India. But we have a very strong preventive -- what we call as preventive maintenance SOP. So, Sunday is one day we don't run the plants, and that is the time Sunday is totally given to preventive maintenance. And we have developed a very strong in-house maintenance team. We have also been able to develop a lot of local vendors with genuine parts. So we are quite comfortable on the maintenance cost. So, I think, Vishal, we average around INR 1.5 crores annually on the maintenance?

On the maintenance, yes.

Okay. And there are some questions which I would like to take over here. One is that Madhur Rathi has asked that how do we manage raw material price volatility for chicken prices? Do we have long-term supply agreements with suppliers? And maybe over here, I would like to just briefly touch upon a bit on the strength of your procurement, given that we are handling poultry products, and there is a scare of bird flu consistently off and on it keeps coming. So how do you ensure that the fee -- the product which you are taking is probably antibiotic-free or like hygienically kept. So, can you just discuss briefly about your procurement process? And also, how are we handling the raw material price increase and the volatility, specifically for chicken?

So Sheetal, on the pricing part, like I mentioned earlier, pricing is done annually. And pricing -- one, pricing is done annually. Two, we work with vendors from different geographical locations. If we talk about the bird flu scare, we work with vendors or units from South. We work with units from West. We work with units from North. So, our procurement is spread across almost, Vishal, if I'm not wrong, 7 to 8 chicken slaughtering units. So, we're not dependent on 1 or 2 suppliers and pricing is done annually. So, bird flu, as of now, if you look at the trend, it is very region-based and very small now. I mean we've not come across in the last 15 years or maybe more, we've not come across where it's a pan-India bird flu scare. So, it does come up in pockets, but to mitigate that risk, we work with suppliers from different geographical locations. And pricing is annual. We have been able to maintain it. That's how we secure the pricing.

Sir, Garima also has a follow-up question on this. But just out of curiosity, I had another question. Do you have any kind of specific guidelines which you get from the chains that the facility from which you are procuring the meat should have certain standards and guidelines which you need to follow?

Sheetal, every raw material we buy, even if -- not only chicken, everything we buy, the facility, so it is not -- one is the guidelines we have from our customers. Secondly, as we are BRC certified. So, the minimum requirement is for the unit to be FSSC 22000 certified. So, any unit which is not FSSC 22000 certified, we don't approve that unit. So that's the minimum qualifying food safety certification from where we buy any of our raw materials. So be it chicken, be it vegetables, even up to vegetables, spice blends, packaging. So, everything we buy has to be from FSSC 22000. That's the minimum food safety requirement.

Sir, I think we have more or less covered on the raw material side. So, talking about your distribution. So, sir, how does it work? I mean for Domino's, do they come to your facility and pick up the product? Or are you supposed to supply to their facility?

So Garima, all the large customers, they have their own logistics systems. So, I mean, even a company like Wok Express has its own logistics systems. So, all the large 7 or 8 players we work with, they have their own logistics systems. For us, it's ex-factory. Logistics is managed by them. Transportation, warehousing is all managed by them. The smaller customers we work with, so we have a -- we call it as a distribution center and a distributor model. So, we work with a company, which is a logistic and a warehouse company. We work with them for pan-India. So, they -- again, it's ex-factory from us. They pick up the stocks from us. They do the warehousing in various parts of the country like Mumbai or Hyderabad or even Mohali. And from there, the stocks are sent to our distributors. So we are -- so primarily, we are not handling logistics for anyone.

And sir for the smaller customers, is the working capital cycle longer? Or is this more or less the same? And how do we look at -- are there any chances of bad debts or something in that regard?

Garima, working capital cycle is almost the same. I don't think that there is any change in the working capital cycle. And as on bad debts, I think it's negligible. I would say it's negligible. It's not that it doesn't happen, but it's negligible. It's -- I mean, it could be going to 0.00-something percentage. And from your current 58 days of working capital, so Vishal sir, is it going to be same for the next 2, 3 years? How are you looking at it?

For the Chatha Foods, we are planning to manage it -- we are targeting to manage it within 5 days of cycle.

Okay. There are a couple of questions on Allana still, and I would like to take those. And then there are some other questions as well. So, there are a lot of questions on guidance, and we will -- I would like to tell everyone that we will be taking all those questions, but in a bit. So just please continue this discussion. So, Kiran [indiscernible] is asking that since Allana is JV 70% owned by our company, only 70% of the total sales would be consolidated. Vishal, I think so that is the right way of looking at it, right?

No. So Sheetal, the total revenue will be consolidated. We will be showing that 30% as minority.

Yes. Okay. So that is one. And then there was another question on Allana, and I'm just reaching there. So, Kaushal Sharma has specifically asked that what amount of revenue potential from West facility being put up. I think you have addressed that. And when we will discuss the outlook, we can take it again separately. Besides that, there is another question on Allana. And yes, this question is from Shubham Jain. And he's asking that which international markets are we targeting first because we understand that Allana is primarily for your exports. And again, what is the revenue contribution, which we can discuss separately in the outlook. If you can tell us what international markets we are planning to reach out to through this veg facility?

So Sheetal, one, it is not that what we plan to reach out to, it is what Allana will reach out to. So, Allana has a distribution network across 85 countries now. So, it's going to be right from Singapore up to Africa. So, they're looking at the whole Southeast Asian market. They're looking at the Middle East market, and they're looking at the African market as well. So as of now, we have had samples gone to Singapore. We've had samples gone to Vietnam. We've had samples gone to Kuwait, Iraq, Senegal. So, I mean, almost 8 to 10 countries. So, this is the whole geographical territory they want to cover.

Okay. Sir, also Vinod [indiscernible], I'm sorry if I pronounced your name incorrectly, sir. He wants to know that do you have any confirmed interest from client because this is a huge plant for a segment which is new to us. So, do we have any confirmed interest from client? And basically, he wants to understand what is our right to win in the veg segment?

So we do have -- Sheetal, we do have confirmed interest from customers as of now, which is the domestic interest. International interest also, we have some -- so if we talk of interest, we can talk of interest coming in from our existing and some new QSR, large QSR companies. We have interest coming in from some people who want us to do private label for them, big brands. I mean, we should not be discussing the names as of now, who are already into exports, and they want us to do private label for them. And as for exports, we have been to a buy-seller meet in Thailand, where samples are being sent. And we participated in Indus. We have some inquiries, but we are not being very bullish on that, or I would say we're not being very aggressive on that because we're just waiting for the plant to come up and we start the line trials. So, we will be quite aggressive on the export inquiries after that. But as of now, for the domestic market, for private label exports, there are confirmed interest from customers.

Okay. Sir, out of curiosity, this is a question which I wanted to ask. I mean, both for your veg facility and for your non-veg facility. You have a huge number of SKUs. And I wanted to understand how do you identify like this is a product we want to develop? Like if it's, for example, aloo patty, there can be multiple variations of aloo patty, with cheese, without cheese. Now the product development like is sort of an R&D, like you will have technicians doing it maybe. So, what is -- what determines that this is a product we want to crack? Is it something which you get -- like you get a queue from the clients that this is the pallet towards -- the Indian pallets to which we want to develop a product? Or you sort of take that kind of initiative and pick up a product and then create a market for it?

So Sheetal, mainly if we talk about the QSR, the QSR, as you know, they have their own marketing teams. So, what product to develop, what flavors to develop, what type to develop is mostly decided by the marketing team, which is then forwarded to us. And -- most of the times with QSR, we work jointly on developing the product. And that's how it happens. And for the veg facility, as of now, we have picked up the most popular and high-volume products to do as of now. So, if we talk of Tortillas, we talk of Malabar Paratha, we talk of the -- what we call as a frozen-to-fry line where you do all those veg patties and you do veg nuggets. We've gone in for a base gravy line, base paste line. So, there are products which are already huge in demand. So, for the veg facility, we were very particular not to do anything innovative in the beginning. And as we grow, as we learn the market, as we learn the export market, I'm very sure there will be lots more we will do for the vegetarian products because there's a huge demand. There's a whole range which is in demand and which we are capable of. But as of now, we've kept ourselves restricted to all the higher volume in-demand products for the vegetarian facility.

Okay. Sir, on similar lines, there is a question from Shubham who is asking that you have been conducting trials for frozen pizza dough and Tortillas with a leading QSR chain. What is the status of the first commercial purchase order? And how large can this segment get?

Sheetal, it's a large segment. Like I said, commercial orders --we can expect the commercial orders to come in, in May. It's just that we have to get the plant commissioned. We have to get the FSSC license, and we are all set for after the line trials, after the plant visits by the customers. I think in the next 2 to 3 months, we should be ready for the commercial orders.

Sir, actually, there is one repeat question from Mr. Sandesh Kumar. And I'm sorry, we'll have to just ask you that again that management has previously emphasized a strict B2B and institutional focus to avoid a pricing war. However, we are now seeing a significant push into B2C with Unifayre brand. I understand that you have addressed this, but since he has asked again for his comfort, if you can address it again.

No, it is not a significant push, Sheetal. We have launched the Unifayre brand. And like I mentioned, it is -- we launched this Unifayre brand just for a few select markets where we are already present in the chicken segment. So, it is just like testing the grounds and sticking to a very tried tested brand, giving more volume to our distributors. Like I mentioned, it's not that we're writing off B2C, but yes. So, Unifayre was kind of a testing ground for us. So -- but for the -- like the question was that have we done it for the vegetarian segment to the large international stores? No, we haven't.

So, I think, we have understood the manufacturing process, the strength of your procurement and what is your strategy in terms of B2B and B2C. And I think so we have also addressed a lot of questions around that, and there are some questions which are still coming. We really want to now get into the unit economics and understand the margin profiles for these segments.

Sheetal, can take a break for a minute? You can address these questions to Vishal. I will join you just in a minute's time.

No worries. We will take these questions with Vishal.

Sir, I wanted to understand the realization as well as the margins. So, are they across the veg and the non-veg products? Or is there typically a difference between both of them?

Yes. So, Garima, on the margin side, so on the veg products, the margin will be comparatively better as compared to the non-vegetarian products. So, for the non-vegetarian products, we are operating with a gross margin of somewhere around 27%, 28%, whereas for the veg products, basis the initial product costing that we have done, the market that we have assessed. So, we will operating with the 32% kind of gross margin for the veg products.

Okay, sir. So, the realization for the non-veg will be higher but margins for veg will be higher, right?

Yes.

Okay. Then there's a follow-up question, I think. So, are we one of the largest domestic players in capacity after the commission of the 30,800 metric ton capacity?

Garima, as far as we understand the market --- I mean considering the product mix that we are coming with -- I mean we have a whole range of vegetarian, non-vegetarian [indiscernible] coming up with, so we will be one of the largest player in the country.

Okay. And on similar lines there was a question that are you -- who would be your largest unlisted peers? The listed, obviously, our audience knows, but they had a question on unlisted peers.

So unlisted peers for the chicken segment will be Vista Foods, yes, the largest. And unlisted for vegetarian would be a lot of them in Gujarat. Global Gourmet being one of them, other brands. In the listed entities, mainly ADF is there. Tasty Bites is there. Then unlisted, Global Gourmet is one of the largest players. And there are a lot of other players who are exporting, but they're mainly into the export market, not very big into the QSR market. So, ID Foods, if we talk of the Paratha segment and some of the segments we do, ID Foods is there.

So, sir, we will have to now jump into financials because we are also a little short on time. So, one is -- and I think Vishal will be able to address this. This is from Sandesh Kumar. He's saying that our trade receivables have doubled year-on-year from INR 11 crores to INR 22 crores. How does board justify the high working capital and marketing spend required for the B2C launch? So, till the time you address this, I will also pull up the other questions.

Okay. So, for the B2C brand, like we mentioned earlier, so at the moment, we are trying to be in the B2B segment only. So, we are not planning to put any investments in the B2C segment. And on the receivable part, as we mentioned last year also, we had to extend when it comes to one of our largest peers. For this year and going forward we are maintaining this current cycle of 55 days.

Okay. Great. And even post your expanded facilities and after our veg facility comes up, our working capital would be within this range, or you will see it expand a little?

No, it will be within this range only. And for the subsidiary unit, it will be less as compared to the CFL. We will be billing to Allana only so it will somewhere around 30, 35 days kind of cycle.

Let's go to numbers. Actually, a lot of question on numbers. So, INR 157 crores of revenue in FY '25 and approximately 7% of EBITDA margin. Sir, if you can just break it up for FY '27, FY '28 along with your gross margin. Someone has commented that the veg will make 32% of gross margin, non-veg will make 27%. How much do you see for Allana? If you can just break it down into 3 of them and then...

Also give us the revenue guidance because that's a large chunk of the question which is coming to us.

Okay. So, on the revenue part, basis the plan capacity utilization for the non-vegetarian facility we will be at INR 185 crore, INR 190 crore for this existing facility. And for the veg facility we would be doing another -- we would be adding another INR 60 crore. On the Allana facility, we would be adding another odd INR 90 crore. So, roughly we will be somewhere around odd INR 325 crore. And on the gross margins, veg will be between 30% to 32%, then non-veg I mentioned earlier we are maintaining between 27% to 28%. And for the Allana facility, it will be again 32% kind of gross margin. That is in-built in our [indiscernible] for Allana.

Vishal, you can expand. You're talking about '26, '27, so you are talking about '27, '28 as well.

Yes.

Sure. Basis this capacity utilization targeted for FY '28 and FY '29, so we are expecting plus INR 50 crore kind of revenue for FY '28. And by FY '29, considering the 100% -- full utilization we will be plus INR 550 crore kind of revenue.

[indiscernible] asking about the second half number. I don't think...

That won't be a question we can take because we are very close to the year getting over. So -- but I think they are confident about their journey. And so, sir, with this entire facility, what we will have of Allana and of our existing facility, what is the peak revenue which we can touch over the next 2 to 3 years in a phased manner?

INR 550 crores, Sheetal, as Vishal mentioned.

And with an EBITDA margin of 25% plus, this is what I understand? 50% plus.

30% EBITDA margin.

30% sorry. EBITDA margin.

Vishal?

So, when you're talking about the growth for the EBITDA 30% on the overall level, we can assume double-digit kind of -- sorry, the PAT margins.

Double-digit PAT margin. Okay. Wow. because somebody is saying the current EBITDA is 6% to 7%. So, they want to know what will be the expansion in EBITDA and where it will come from basically in the margins?

So, Sheetal, 1 is improvement in the gross margins, right? And 2 is economies of scale.

Okay. So, I think that is very interesting. And there is one last question, which has been being asked. So, there have been some sort of promoter sale -- the question was that there was a converted allotted warrant and the promoter sold some 75,000 shares in the open market. So, somebody wants to know that why this particular sale happened? And do we see any kind of dilution going forward from the promoter?

No, there will be no dilution, Sheetal, going forward.

Okay. Also, people want to concern -- again, they want a confirmation that we can consider the long-term EBITDA margin to be close to 30% plus, right? 32% is somebody specifically asking.

EBITDA around 7% to 8%. That was the gross margin number.

Okay. EBITDA around 7% to 8%. And gross margin?

No, we're talking about gross margin of 32% plus gross margin, Sheetal. And we're talking of double-digit PAT margin in the coming years.

Okay. Great. So okay, there are questions coming. So, what numbers do we see in EBITDA percent people are specifically concerned about the EBITDA margin. And majority of them -- Murgesh is specifically saying that if EBITDA is going to be about 11%, 12%, how can we do PAT in similar range in double digit?

Yes. So, I think so we...

We never mentioned that EBITDA is going to be [indiscernible]

30% to 32%, so that was misunderstood.

Okay. Can you repeat it again clearly? What will be the EBITDA margin? What will be the gross margin?

Vishal, can you please discuss the EBITDA margin, please?

Yes. Sure, sir. So, basis what we have planned -- this is the planned capacity utilization for the next financial year. So we are targeting...

Vishal, you can talk about the peak capacity utilization, EBITDA margin and...

Yes, sure. So yes, roughly, it will be close to 15% to 16% EBITDA margin.

Sorry, we missed you in between. Can you just repeat that again? Sorry.

Yes. So, I mentioned -- so it will be close to plus 15% kind of EBITDA margins at full capacity utilization.

Okay. So, to set the record right, it will be 15% plus EBITDA margin at full capacity utilization. And there is a follow-on question. What is the fixed asset turnover in our business? And what are you targeting basically?

Okay. So, at the moment, Sheetal, I think for the next 2 years, the asset turnover, I mean we have done the CapEx as of now. So on the asset turnover, once we have the full capacity, I think this question will be meaningful to address.

Okay. Sir, can we give a little bit of color around how much would be the margin expansion from economies of scale and how much from the expanded product portfolio because people think that this is a little aggressive given our current margin profile. So if you can sort of give a little margin walk that how much of this would be driven by economies of scale and how much would be driven by the expanded portfolio?

Vishal, please go ahead.

So, Sheetal, in order to address this, I would like to mention we have already done the CapEx and the OpEx base already there. So, as per our existing non-vegetarian facility we are looking at addition of almost 5%, 6% kind of gross margin on the total targeted [indiscernible]. The major chunk is coming from this targeted gross margin increase. And yes, like I mentioned, it will be -- I mean the OpEx space will definitely contribute to the economies of scale. It won't be, I mean, good to put a thumb on what will be the exact percentage, but yes, we have done the numbers. And -- I mean, yes, so the gross margin will be the major contributor.

Okay. Understood. And okay, 1 closing question, and I think we need to -- okay, we are getting a lot of questions, but we'll just take the last 2 questions. And I hope everybody's concerns, questions around margins is addressed. I think Mr. Vishal has mentioned it very clearly. Now -- so last 3 questions, and I'm sorry, after that, we won't be able to take any questions further. The first one is from Mridul. Are we seeing any benefits from the recently announced trade deals? Anything which you think will work in our favor?

Sheetal, we have not deep dived into it. I'll be very honest with you.

Okay. Great. And is KFC onboarding completed?

Like I told you, Sheetal, it's completed, but it's been deferred because of the merger.

Okay. And I think the last 2 questions are very interesting. While there is 1 question on the CapEx getting deferred. And I think you addressed that during your conversation. So, I will not dwell too much into it. But Ms. Kashish has asked a very interesting question that we are like expanding massively and adding a huge volume. So do we have the organization in place with the senior people to handle this kind of massive increase in the scale of operations?

Yes, Sheetal. The majority of the hiring has been done. The senior teams for both the new plants are in place. We have hired a CHRO. We've hired a Chief Operating Officer. There's a lot of delegation of duties to the team. And yes, so the talent acquisition has been done. It's ongoing also to handle these kind of operations. So, we've hired quite experienced people to handle these kind of operations. Definitely, it's quite a large expansion we're doing and the talent acquisition is being taken care of. It has been taken care of, and it's still ongoing.

Okay. And sir, if I may ask you, I mean, I should have asked you this question earlier and some of you missed it. But what are the areas you're specifically targeting? I mean, is it the distribution? Is it the marketing or more in finance? Like what areas are you beefing up for your organization?

We're beefing up in everything, Sheetal. We're beefing up in finance. We're beefing up in operations. We're beefing up in marketing. We're beefing up in human resource. We are beefing up in the -- on the technical team as well.

Okay. So, we are basically increasing the overall depth of the organization across the board?

Yes.

And absolutely, the last question, I promise I will not take any other after this. Last question from Mr. Vaibhav Kapoor. How does the margin structure vary for a customer as volumes increase? I think it was relevant because we had a lot of discussion on the margins. So, I think it's a question, if you can address it, it will be great.

Sheetal, can you please rephrase the question? How does the margin?

As the volume increases with the customer, how does the margin profile change?

Sir, how much bargaining you have as the volumes increase. So do you have more bargaining power or you have less of it?

Vishal, you can address that?

Yes. Garima, as the volume increases, there is no major change in the margin structure with the customers. So, like we mentioned, we are already working towards decreasing our customer concentration risk. And I mean the numbers will definitely in the coming years. So as such, I mean, we are trying to reduce that concentration and there won't be much impact due to the margin structure due to the volume increases in margin structure.

I have one last question.

I promised I won't take, but okay.

Any shareholder discount on your products? In case you plan to give.

We will give it for free.

So, I think we will get a lot of request for your site visit. And we will -- for the benefit of this audience over here, we will be organizing something soon, and we will keep you updated. But before we close, any closing comment, sir, a small brief from you, reiterating your growth again, and then we can close the session.

So Sheetal, it's a very well-planned growth with Allana. It's a very well-planned growth with our vegetarian unit as well. We want to make it a very sustainable revenue and margin growth kind of journey going forward. So that's one thing I can assure all the people who are listening to this conversation.

And Vishal, before we close and since I think you should summarize your outlook so that people get it clearly for once and for all. So, let's close it with a summarized revenue and EBITDA, gross margin, EBITDA PAT margin outlook.

Okay. So, the target is to -- I mean so for the next year, the target is to do plus INR 325 crores kind of revenue with a gross margin of 30% basis the capacity utilization. And our PAT margin is -- sorry let me continue the revenue first. For the next financial -- for the FY '28 the target is of INR 50 crore plus. For FY '29, we will be at peak capacity utilization and the revenue will be INR 550 crore plus. On the gross margin, the target is basis the current market study, the pricing structure that we have gave you, so the margins will be plus 30% on a combined level. And the PAT margins will be plus 6% for the next financial year, plus 8% for FY '28 and plus 10% for FY '29.

Great. You guys have been wonderful. It's a very, very interesting story. And actually, now when I will be eating a Mac burger or a Subway sandwich, I would know that patty actually comes from Chatha Foods.

Not the Mac burger, but every time you eat a Taco, every time you eat Subway sandwich, you eat a Domino's pizza, you go to Wok Express, we can name you go to a Burger King, you go to [indiscernible]. We can go on and on.

You have role in every bite we take, especially the Gen Z. So yes, and we -- I definitely appreciate much more now what I'm eating. We would really love to visit your facility, and we will plan something soon. And sir, you have been a great host to have over for our knowledge session. Thank you so much, Paramjit, sir. Thank you, Vishal, sir. And to our audience, thank you so much. We really enjoyed taking your questions. They kept coming in a [indiscernible], and I hope we addressed everything. In case we didn't, Garima is right here along with Nehal, and they will even organize a con call with the management in case you need it.

Sure. Any time.

Thank you so much.

Thanks, Sheetal. Thanks, everyone. Thanks, Garima.

Thank you, sir.