Gopal Snacks Limited (GOPAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Gopal Snacks Limited Conference Call hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Gupta from Emkay Global Financial Services. Thank you, and over to you, Mr. Gupta.

Good afternoon, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Bipin Hadvani, Chairman and Managing Director; Naveen Gupta, Chief Business Officer; and Yash Rajpara, AGM Finance. I shall now hand over the call to the management for the opening remarks. Over to the management.

[Foreign Language].

Good afternoon, everyone. My name is Yash Rajpara. So let me begin with sharing key financial highlights for the quarter and 9 months ended on December 31, 2024. Let us take the key financials for Q3 FY '25 first. During the quarter, we achieved revenue from operations of INR 393.6 crores marking a year-on-year growth of 7.1%. This growth was driven by product innovation, focused channel engagement and expansion in distribution network as well as impacting essential training to our dealers and with feet on the street. Our gross profit for the quarter stood at INR 84.2 crores representing [Technical Difficulty]. Sorry for the delay. Our gross profit for the quarter stood at INR 84.2 crores, representing a gross profit margin of 21.4% against 26.3% last year. Our margins during the period were impacted by several factors, starting with rising key raw material pricing, which added a significant pressure on our margins. Key raw materials such as palm oil, potato and chana witnessed sharp price increases on year-on-year basis and that has substantially impacted our cost structure. In response to that, we have undertaken multiple initiatives like downward revision in grammage in our INR 5 and INR 10 SKUs of Gathiya and Namkeen products as well as upward revision in selling price in some of our larger packs. Margin pressure was also observed as a result of third-party start-ups to resume our production and supply consequent to the incident of fire. However, this pressure is both marginal and temporary. Our EBITDA for quarter 3 stood at INR 15.5 crores with an EBITDA margin of 3.9% against 9.6% from the last year. In addition to decline in GP being the main reason, the decline is also attributable to increase in employee benefit expenses as well as advertisement and promotional costs. Our profit after tax stood to INR 5.3 crores with a PAT margin of 1.5%. Now coming to YTD performance for 9 months of fiscal '25. We reported revenue from operations of INR 1150.50 crores with a year-on-year growth of 10.2%. Gross profit stood at INR 303.6 crores with gross margin of 26.4% as against 28.7%. Gross profit has remained in line with last year. EBITDA stood at INR 103.2 crores with EBITDA margin of 9% compared to 12.4% last year. We would like to reassure you that the underlying business fundamentals of Gopal Snacks are remaining strong, and we are well positioned for a steady recovery. Our focus remains on optimizing operational efficiency, enhancing profitability and delivering value to all our stakeholders. With this, I would like to request Naveen sir to provide operational highlights on the quarter gone by.

Good afternoon, everyone. Thank you for joining. During the quarter, we demonstrated resilience and adaptability, overcoming significant challenges to deliver a strong performance. Talking about state-wide performance, our focus states achieved a healthy growth of 19.7%, showcasing the success of our expanded distribution network and market-specific strategies. Other states contributed -- continued to exhibit stellar performance with a significant growth of 48.3%, driven by our targeted efforts to tap into new regions and expand our geographical presence. These results underscore the success of our ongoing initiative to strengthen our footprint across underpenetrated markets. Our strategic focus on key segment yielded remarkable results this year. The wafer category witnessed a substantial growth of 48%, driven by continuous product innovation, enhanced trade campaigns and improved channel engagement. We remain committed to establishing a leading position in this category by introducing region specific products and flavors tailored to our consumer preferences. Additionally, we are intensifying efforts to strengthen the Gathiya and Namkeen segments, which despite the fire incident remains integral to our portfolio. A key driver of our success remains our expanding distribution network, which has grown to 874 distributors, adding 207 new partners in the past 9 months. This expansion has played a crucial role in strengthening our market presence, driving revenue growth and increasing our share across key regions. Furthermore, commercial operations have started at our new manufacturing facility in Gondal. This facility is a pivotal step in reaffirming our commitment to operational excellence and supply chain resilience. The new plant is expected to operate at 100% capacity by end of this fiscal year, significantly enhancing our production capabilities and enabling a faster phase out of third party manufacturing. During the quarter, we laid the groundwork for additional branding and marketing initiatives, which are set to launch in the upcoming quarters. These efforts aim to enhance brand visibility and spend on market penetration, ensuring sustained growth and consumer engagement. Our long-term strategy focuses on expanding market presence, enhancing operational efficiencies and fostering innovation across our product lines with a strong distribution network supported by rapid deliveries to own logistics vehicles, increased capacity utilization and a diversified product portfolio, we are well positioned to capitalize on emerging opportunities. We remain committed to driving sustainable growth, optimizing profitability and delivering long-term value to our stakeholders. This is all from my end. I now request the attendees to come up with their questions. Thank you.

[Operator Instructions] The first question is from the line of Manish Ostwal from Nirmal Bang Securities Private Limited.

Yes, sir. Thank you for the opportunity. And it's really a tough quarter for the company. But you performed with resilience, so that's good to see. So first question on margin movement during the quarter. So we have seen almost 756 basis point of dip in the gross margin. And the reason is -- one is the RM inflation, the second is maybe third-party procurement slightly higher cost compared to what we were manufacturing inside. So first is what is the component of these 2 factors in terms of contribution of margin decline? And second is, when do you see your margin going back to the Q2 level in near-term? Is there any possibility you can make comment on that also?

Manish, thank you for the question. [indiscernible] attributable to RM pricing only. As you know, the third-party manufacturing was just after the fire, okay? So it is in the last few days of the quarter. Its contribution to the declining GP is very minimal, not even, say, 0.5% of the quarter. Majority of the declining gross margin is on account of incremental palm oil and other commodity pricing such as potato. And can you kindly repeat the second question?

The second question is, in your presentation, you said you mentioned that we have taken some pricing action. So when do you see your gross margin back to the quarter 2 level? That is the question, sir.

Let me answer this question. The margin pressures, what indications we are getting, the current quarter also continues to be challenging, and we see chana and potato prices significantly softening. And as far as edible oil prices are concerned, it's very difficult to predict although, but future prices, both are comparatively lower. So we see that in Q1, there will be marginal improvement in margins, but Q2 will be back on track because of 3 reasons. One, RM prices will stabilize. Two, whatever actions we are taking for short-term or midterm, whether it is corrections in grammage or increasing MRP or whatever the ways are to pass on inflation impact on the consumers. Plus, the third thing is by that time, our dependency on third-party will reduce or it will become zero. Third-party operations may not have impacted our margins beyond 1%, but there is a disruption in supply chain, which impacts our transportation cost as well. That additional transportation cost will also become zero. And we are expecting -- not expecting, we have clear timelines laid that our Modasa operations will start from first week of July itself to cater to a larger product basket. So that also saves us a substantial amount in terms of transportation cost, even inward and outward, both kind of transportation cost as well labor cost. Margins are expected to come back on track from Q2.

So Q4 will be -- margin will be very similar to quarter 3, am I right, sir?

Yes.

Okay. The second question on the ad spends for, so can you indicate the total spend we have done for 9 months and that quarter 3 on ad spend? Because we are expanding distribution network in the focused market, so that also increase the ad spend. So, how much we have incurred for the 9 month and the quarter 3?

So, by December 31, 2024, we have incurred the advertisement and sales promotion expenditure to the tune of 7.27 crores, which then translates to less than [indiscernible] of the revenue from operation.

Okay. And lastly, sir, to just the concentration risk of our production operations. So in terms of our plant wise concentration of sales like Rajkot, Nagpur, Modasa and Gondal, can you briefly give the indicative contribution of these facilities to our sales?

Yes. So let's take a ballpark figure of INR 100 crores what we did in the month of December. INR 40 crores came from Nagpur plant. And INR 25 crores came from Modasa plant, and the rest INR 35 crores came largely from the third-party. So third parties are now gradually getting shifted to our Gondal facility.

We'll take the next question from the line of [indiscernible] from Geojit PMS.

Hi, sir. Tough time, but I think, sir, despite the issue, we've got 7% revenue growth that is pretty good in my opinion. Sir, my only question is that earlier quarter also, we had spoken about increase in large size pack and I think the trend is showing towards increasing contribution from large size pack. So in this quarter, INR 10 and above is about 23.5% of our revenue. Anything that you can highlight? What are the good things we've done here? What is working and how do you want to take this ahead going forward?

Yes. I couldn't get your name exactly. What's your name?

Pawan. Pawan from Geojit PMS.

So Pawan, post fire incident, there was massive trouble for us to produce larger packs. Our key focus and even when we go for our dependence on third-party, so all the other parties had facility to pack the smaller pack but did not have the facility to pack the larger packs. So it remained under pressure and it will continue to remain under pressure in the current quarter as well. Now you can see from last week onwards, our complete focus is now how to ensure that we get larger pack supplies because we don't wish to lose market share of those consumers where our pack goes inside the house. Having said that, we have unveiled a product basket of 27 items which are standy pouches, which were earlier not in our portfolio. We already commenced production of standy pouches from Nagpur 10 days back. We have got tremendous response for our standy pouches. We are currently running out of stock on a daily basis from our Nagpur plant of these standy pouches. Going forward, as we had earlier mentioned that we are going to improve our footprint in modern trade and e-commerce platform. So these larger pouches will help us in 2 ways. One is definitely improving revenues and profitability. Second, it enhances the brand imagery. So we're going to launch these 27 standy pouches in Gujarat as well in next 15 days. Large pack contribution will definitely improve. That is one of our strategy how to improve our product mix from profitability perspective as well because these pouches gives us better margin as compared to our smaller packs.

Okay. Okay. And sir, any one-off costs in this quarter so far because of -- you highlighted travel-related thing. Apart from that, any one-off cost in this quarter?

No, there was nothing one-off.

Okay. And sir, lastly, given that [Foreign Language] before this fire incident happened. Now given that in the next financial year, only Q1 is supposed to be a soft quarter, largely our estimates for internal target for FY '26 and '27 should be broadly the same, if I'm not wrong. Is that correct?

[indiscernible].

Sir, your audio is not clear. [Technical Difficulty]

Is it better now?

Yes, so much better.

So there was no one-off cost as such. And what was the next question?

Since most of the issues are now behind us and we are seeing that in 1 quarter or so, post Q1, we should be completely back to our revenue and margin level that we were targeting earlier. All I'm saying that broadly, our internal target for FY '26 and '27 remain the same as we were envisaging before this fire incident. Broadly, is that correct understanding?

Yes, yes. [ Q2 ] first month onwards itself, everything will be 100%.

We'll take the next question from the line of Resha Mehta from GreenEdge Wealth.

Very unfortunate that the incident happened while we were on a very good growth momentum. But sir, now the question is, one is from a very short-term perspective that while you have not quantified the loss estimates, but do we have any number on that? Or what can be the one-off cost that we may see because then that will be an ugly margin surprise sometime soon, right? So any numbers there? And also on the insurance bit, so what's the kind of insurance cover that we have and the status on the claim and the time lines?

See, from the insurance perspective, we still believe that it's still little premature to comment on the exact quantum of loss to be proved, because the present survey and loss assessment activity is underway. In addition to that, an e-auction for the [indiscernible] restructuring is going on. But we are expecting better clarity in this Q4 regarding the exact amount of loss to be quantified and to be accounted for. And we have an insurance cover of 174 crores for this facility, to be very precise.

And sir, what was the invested amount to actually build this plant? What kind of Capex had we incurred to build this plant?

So, over a period of time, the aggregate [indiscernible] of the same was near to INR 75 crores to INR 80 crores [indiscernible].

Sorry, actually, I think the line is not clear. I'm not sure if there's a problem with me or across the board.

Depreciated value was close to INR 75 crores to INR 80 crores.

Okay. Okay. And by when do we expect this affected plant to fully come on stream? And how much CapEx would we be incurring to get it fully functional just like before?

No, no. Let me give you ample clarity. We don't intend to make this affected plant fully operational. We have stepwise plant ready with us. What we are going to do right now, our Gondal thing is a makeshift arrangement. From 1st of July, Modasa will become operational for 100% of our product basket. Once that product basket stabalizes, what we're going to do, for fryums category, which are lighter in nature, we'll start our production in our existing papad unit on a floor. So we will have roughly 10% contribution coming from Rajkot in future for Gujarat and 90% contribution will come from Modasa plant itself. We don't intend to restart this affected plant.

Okay. Understood. And this you're saying will be by 1st of July, this Modasa plant will be completely operational, right?

Let me further give you time line. By 30th of April, our civil work will be completed. So we will have 2 months in our hand to do machinery installation in our Modasa plant. So after that with each passing day, we will keep adding one product. So it will take roughly 1.5 months by 15th of August, 100% of our product basket will get manufactured at Modasa.

Okay. So by 15th of August, we are expecting full restoration of our production facilities, which was pre-fire. Is that understanding right with third-party sourcing, correct?

Third-party sourcing will come to an end much before that because we have our Gondal plant to back up our interim operation.

All right. So by when do we expect third-party sourcing to end?

Next couple of months.

Okay. Okay. And sir, while you did talk about the margins, but when you say we will go back to normalized margins by Q2, so what is it that an EBITDA level that we would be targeting?

In Q2, we are assuming that edible oil prices will get stabilized and rather decline at least by 5% to 10%, then our EBITDA margin will be to the tune of 10% to 11% in Q2.

Understood. And sir, when...

Sorry to interrupt. Ms. Mehta, I would request to rejoin the queue for follow-up questions, please. [Operator Instructions] We'll take the next question from the line of Nitin Gupta from Emkay Global Financial Services.

Naveenji, just wanted to check like what is the quantum of price hikes we have affected so far and the quantum of price hike we are looking to effect in Q4?

Can you come up again with the question? What is the quantum of price hike which we have done so far? Is that your question?

Yes.

in Q4, on the larger packs, we took a price hike of 12 to 13% on weighted average basis. And on smaller pack, like 5 rupees pack, we reduced grammage from 25 to 22 grams, but this reduction did not start on first week of Q3. So, the first we did 25 to 24 grams in first week, second week of October, and then 24 to 22 grams we made it in last week of November.

Okay, sir. And I just wanted to check, like, in terms of disruption in production, so how have our products been available across the market? So do you see any drop in outlet coverage and distributor churn post fire? There is a minor drop in distributor count in states like Gujarat, Uttar Pradesh, and Rajasthan. Just wanted to get some clarity on this.

On December 23, we had 275 distributors in Gujarat, and December 24, we had 290, and January 25, we had a count of 287 distributors, Nitin, in state of Gujarat. Lastly, our impacted states, Gujarat, Rajasthan and parts of MP, which we were catering from Rajkot. There is no decline in Maharashtra, there is no decline in Uttar Pradesh, there is no decline in Madhya Pradesh, there is no decline in Rajasthan Q3 versus Q3, but yes, January, Rajasthan had certain dip in number of distributors because of poor supply and other states did not have any drop assets. As on the 31st January, we had 878 active distributors. Last year, December, it was 638.

Okay, sir. And the last question...

Only one distributor left us. Only one distributor left us in Gujarat.

Okay. And in terms of the outlet reach?

Outlet reach, I'm not carrying the big data as of now. I'll get back to you.

Sure. Sure. And lastly, if you can help us understand about the CapEx outlay for Gondal and Modasa.

So, Nitin, expected CapEx for Gondal and Modasa is likely to be around, say, 50 crores to 60 crores, only including the plant and machinery as well as the civil structure, which is under construction.

[ Let us ] understand in a way because, in Gondal, our civil was already ready, and we just installed our machinery. Once we our civil is ready in Modasa, we will shift majority of those machines to Modasa.

We'll take the next question from the line of Manish Ostwal from Nirmal Bang Securities Private Limited.

Yes, sir. I have only one question. With respect to revenue target for F '26 and '27, what is the target for these 2 years?

We will be closing -- so this financial year, we're closing at roughly 1,500 crores. So we will deliver 1,800 crores in next financial year and we are [indiscernible] a minimum growth rate of 20% for the subsequent financial year as well.

The next question is from the line of [ Naitik ] from NB Alpha Fund.

So my first question is, if you could give us some sense on what sort of margins we make in our wafer segment. Is it above the company-level margins or below? Because we're seeing rapid growth in that segment. So just wanted to know what sort of margins we make in wafer segment.

I'm sorry, the line for the management has been disconnected. Please let me reconnect. Please hold the line. [Technical Difficulty]

So Naitik, apologies for delay. If we talk about the potato wafers, the quarter 3 margins were in the terms of 18% to 20%. Okay, but on annualized basis, the same shall be considered to be somewhere between 30% to 33% due to expected fresh and cheaper potato crops.

Right. Right. And in terms of EBITDA also, they are sort of at company level or above company level?

I couldn't understand the question. Can you please repeat?

Now. These are at gross levels, right? You know, 30% that we expect it to be. But, even on EBITDA, it will be similar, right above company level?

In wafers, as a category, annualized basis, the gross margin will be 30% to 33%, and at [indiscernible] basis, it will be 28% to 29%.

Okay. My second question is, it's quite heartening to see your growth aspirations of 20% and above. But my question is, sir, Snack Pellets and Namkeen have sort of not seen growth. Even if I exclude the last quarter, which was affected by fire, even before that, they have sort of been flattish and not grown. And these 2 are big categories for us. So can we expect these 2 categories to start contributing in terms of growth going forward?

Yes, definitely. If I try to give you a split of October, November versus December. October, November values were INR 279 crore, right? Going by that run rate, we would have delivered INR 135, INR 140 crores in the month of December itself. So snack pellets are a major contributor in Gujarat state. So, going forward, we are going to do lot of product innovation as well in snack pellet category. Our only new introduced product in Snack Pellet was Pizza Pasta and it was an instant hit. So we have three more products in our kitty and we will be supporting couple of our products through consumer promotion of like toys, etc. to come back at our regular pace In Snack Pellet category. As far as Namkeens are concerned, we have multiple plans how to bring back Namkeens run rate. One definitely will be our marketing endeavor because we are heavily dependent on Gujarat for our Namkeen revenue. Second, from outside Gujarat, we introduced the standy pouches, which are -- I mean we launched it 10 days back in Nagpur and feedback is very good. Whatever stocks we are producing every day, every day, it's getting sold out 100%. So Namkeens will also start growing.

Right, sir. Got it. Sir, one more question I have is the advertising spend that you mentioned, the voice wasn't very clear. If you could just repeat how much we have spent in the 9 months.

It was INR 7.24 crores.

Sorry, INR 8 crores, you mean.

INR 7.24 crores.

And sir, my last question is, are we going to appoint or are we looking for a new CFO or any updates on that front?

So Naitik, our talent acquisition team is already actively engaged with the potential candidates. And as soon as the company is finding suitable candidate, the one will be onboarded.

[Operator Instructions] The next question is from the line of Disha Giria from Ashika Institutional Equity.

Sir, you mentioned in your earlier commentary that you do not intend to restart the affected plant fully. So I mean, could you just explain on that once?

Yes, that's very simple to dismantle that building and remake that building is going to take more time. That building, that whole asset is already under insurance company preview. So we don't wish to lose our revenue. Secondly, Modasa as a location is more strategic versus Rajkot, which helps us roughly INR 10 crores to INR 12 crores on annualized basis, which helps to save us INR 10 crores to INR 12 crores on annualized basis owing to inward freight cost as well as outward freight cost. So it's more sensible for us to relocate to Modasa for our larger dependency of product basket.

Okay. And my second question is that earlier in one of the analyst questions, you had mentioned that the large pack contribution will improve with the launch of the new pack that you have. My query is regarding the small packs. So considering the inflation and how they do not contribute that much to the margin, are you planning on discontinuing the INR 5, INR 10 or any of these price point packs?

No, no, no, no, not at all. INR 5 products are our bread and butter, and we don't intend to discontinue with our INR 5 price pack product. There will always be a couple of scopes. One is further grammage reduction. Second could be reducing retailers' margin. If you remember, during COVID times, palm oil prices has spurted to in dollar terms all-time 25 years high and in INR terms, it has gone up to INR 165 per liter. At that point of time, majority of companies restructured the retailer margin and price to retailer was coming to INR 4.50, which is currently INR 4.25. So in case it further goes up, so entire industry will reduce the retailer margin and reduce the grammage. So one portion can be passed to the consumer another portion of inflation can be passed to the retailer.

The next question is from the line of Bhumin Shah from Sameeksha Capital.

So are we planning any price hikes or grammage reduction in quarter 4? That is the first question. And second is, if you look at the potato chips sale on quarter-on-quarter basis, pack's growth is only 2%, whereas price growth is 7%. So are we selling the larger packs or how the shift is happening over that? Just wanted to understand this.

Yes. So Bhumin, we are not intending -- as on date, we are not intending any further grammage reduction in quarter 4 at least because there is competition landscape as well. And coming to this potato thing, earlier, we were selling our wafers roughly 15% to 20% cheaper trade price versus the leader brand. So we have reduced that gap now by 7%, 8%.

Okay. And the last question is that let the Rajkot was X percent capacity before the fire incident, so will it be covered by Modasa going forward or Modasa will have a larger capacity as compared to the pre-fire Rajkot facility?

Yes, Modasa will have a larger capacity.

So will it be 10%, 20%? If you can give us the number, how much bigger would be the Modasa plant as compared to Rajkot?

Roughly 20%, 25% more capacity versus the affected plant.

We'll take the next question from the line of Pulkit Singhal from Dalmus Capital Management.

It's very unfortunate state of events, but it's good to see that we are trying to catch up and come back fast enough to our original plan. Just my one question is, I mean, in the process of going through this entire journey, I mean, you're having to reimagine your whole manufacturing footprint, logistics, maybe even product packaging and sizes. So what -- are there any good things that are coming out in this whole reimagination process, which kind of bring in more efficiencies into the way you now conduct business going ahead? What are those areas that you may have identified from efficiencies as well as from new product areas targeting, which gives you more revenue? So just trying to understand that.

There are a couple of things, Pulkit, which we realized, one is when we were running short of our key products. So we tried to drive our entire sales team as well dealer fraternity to start focusing on whatever was available with us. So at least distribution team is more geared now to sell a better range of products. And as far as efficiencies are concerned, whatever small, small inefficiencies were there in the affected plant because this plant was always made over a number of years. So those are identified. So definitely, when we put a new plant, so those things are taken care of.

Right. But are you able to quantify in terms of eventually, I mean, initially, this business was 11%, 12% margin kind of business. And even there, you had -- certain capacity utilizations were low, et cetera. But if you think of it 2, 3 years out, this new plant, the reduced logistics costs, et cetera, I mean, how much more margins can this add? I mean are you able to quantify the efficiency?

Yes. We got a cost sheet made from our cost accountant. And that is why I mentioned the precise number that by putting up -- we had a lot of diligence internally, and we had a lot of debate and discussion first. This is our guts. And then finally, we got into actions we said, okay, [Foreign Language] why we should move our manufacturing to Modasa because it gives us an annualized saving of INR 10 crores to INR 12 crores.

We'll take the next question from the line of Nikunj Mehta from Magma Ventures.

Am I audible?

Yes. Yes.

So first of all, very good commendable performance in terms of how we got back after the unfortunate incident, which kind of happened. I have a couple of questions. So first is that you -- one of the pointers which you mentioned is that in the month of December, almost around INR 35 crores was the third-party procurement, which we kind of had in terms of overall sales. Is that correct, that number?

Yes.

INR 35 crores?

It was roughly INR 13 crores to INR 15 crores -- INR 15 crores from third party.

Okay. So how do you see...

The total business loss was to the tune of INR 30 crores, INR 35 crores. This is what I stated.

Okay. Understood. Understood. So that roughly amounts to -- from a quarterly sales perspective, that roughly amounts to close to 5%. So how do we see the mix in Q4 from third party in your assessment?

See, our dependency on third party will remain on a monthly basis for the next 2 months, at least INR 10 crores to INR 12 crores per month. But simultaneously, business losses will keep reducing because now we will have our Gondal plant is also fixed.

Yes. Understood. Understood. Fair point to that. And the second question which I had was more with regards to competitive intensity. Now because of the palm oil prices, I think everyone is facing a lot of challenges. So just wanted to know that we have reduced grammage on the Gathiya side as we have mentioned that we won't lose further. So my question was one that how has the competition reacted to that? Has the competition also reacted to similar kind of grammage increase or they have been more aggressive to kind of take some market share by continuing with the 25 grams kind of a packet?

Yes. A few players have reduced grammages, few stops production and few becomes more aggressive, who are more keen to take market share. I mean, there are players who are still ready to burn the money and keen to take market share. So there is always mix of competition.

Okay. Okay. And in Q4, do you see on the wafer side to be further taking price hike? Because the point which I'm coming to is that we have mentioned that we have taken a weighted average price increase in the larger pack segment. And we are clearly not the market leaders in that segment. And though our pricing discount versus peers would have reduced, if suppose the competition doesn't take the price hike, then it will be very difficult for the product to get put into the market. So what is your sense on that? Because that is one of the segment which is the fastest-growing segment for us.

I just got a poll conducted yesterday itself from the entire distribution team. We took a price hike in wafers, INR 10 segment, which is the highest contributing SKU for us. We took a price hike to the tune of 7%, 8%. So I got a poll conducted from my distribution team, whether it is impacting revenue or not. So 100% of the people responded, there is no impact, no negative impact. So now coming to what competition will do. [Foreign Language] 10 MRP wafers, the leader brand in Gujarat sells at INR 8.50. A year back, we were selling at INR 6.50. So I took a gradual hike, then I made it INR 6.90, then I made it INR 7.40. So currently we are also selling at INR 8.50, but now I am supporting through a trade scheme of weighted average 7%, 8%. So versus competition, if 1 year back, the gap was to the tune of 20%, 25%, now the gap has reduced to just 7%, 8%. So competition will neither increase the price nor decrease the price from here.

Understood. And it is -- basically, it is not impacting the sales also is what you kind of clearly mentioned.

No, it's not impacting sales.

Okay. Okay. And last question from my side, because of this disruption and everything and because I'm assuming there will be a bit of increase on the working capital side as well. So have our borrowings decreased as compared to our September and balance sheet numbers?

So there has been a marginal utilization of working capital facilities because we had surplus available with us at the time of fire event taking place, okay? So there hasn't been much of utilization. Since we are expecting new crop season, there will be a utilization in Q4.

Okay. Understood, that's it from my side. It was very commendable that you guys have come back in terms of the production disruption, which was -- has happened and posting a growth in this quarter was a good feat which we have achieved.

We'll take the next question from the line of Abhishek Kumar from Sanctum Wealth.

So my first question is on raw materials. So raw material -- I just want to know our main raw material, which is Palmolive oil, potato, chana dal, so what exactly the percentage of our total raw material basket? If you could give some rough numbers on that?

You want split of RM?

Yes, split, sir.

So Abhishek, out of the entire composition, the Palmolive contains roughly 26% to 28%. And then the second highest consumed ingredient is chana, which contributes to roughly 20% to 23% of the product composition.

Okay, sir. Got it. And have you seen any -- you mentioned that you have seen softness in the potato and chana prices in recent months. So just wanted to know, so out of the total, the sudden swing in prices across our raw material basket. So by now, how much price hikes or grammage cut in order to cover for that we would have taken?

6%. You are asking typically about the waterfall, right?

Yes, yes, the cumulative price hikes in order to cover for the incremental cost, what -- how much you would have taken up until now? And how much do you intend to take, say, maybe next month or by Q1 in order to...

5.9% of the impact has been -- if RM prices impacted us to the tune of 10.8% on total, we passed on to the consumer 5.9% out of that.

Okay. And the rest you intend to undertake in future months or...

Yes.

Okay. Got it. And the other set of questions was with respect to our segregation of markets into core and focus given that this last quarter got impacted, especially the last month got impacted because of our Rajkot facility. I just wanted to know how do we look at the growth rates for core states, which is Gujarat and other focus states on a yearly basis, how is the company thinking about it? What kind of growth rates we could expect?

Yes. So core states, Gujarat definitely, once things stabilize, so we'll continue to grow at a pace of 10% to 12% because whatever corrections we were taking in Gujarat and distribution, those have started yielding results. And our focus markets will grow at a pace of 25% and the other markets will continue to grow at a pace of 40% to 50%.

And given that we are expanding at a good pace now, so what kind of brand-building activities and general ATL activities we are thinking of? Because given that our presence has now increased over several states, so you have to start investing on that. So what's the thought process behind that?

More than earlier, it was like want for us to grow revenue to come out with aggressive marketing endeavor. Now it will become a need for us because definitely, in this period, we have lost some market share, some market space to the competition. So in order to take back that shelf space or market share, we will do a full-blown TV commercial somewhere in Q2. More important for us right now is to get back our production to the full scale. Once product availability stabilizes, then we will do a full-blown TV commercial.

And sir, my last question is, again, with respect to focus markets. So we have presence in Maharashtra and UP and these 2 states being 2 big states. So how exactly are we set in there? And what is our strength in terms of our touch points in these states? And how are we attacking competition also on the ground? If you could just share some...

UP and which other state you mentioned?

UP and Maharashtra.

Yes. So we will focus more on Maharashtra because we have a plant in Nagpur. So that makes more sense to us to have a better distribution depth in the vicinity of 300 to 400 kilometers of our plant. Having said that, UP is a large market with a large population base. Gathiya is a big contributor in UP. Gathiya is not so big contributor in Maharashtra. But since our media campaign will be around our hero product, Gathiya, so definitely, we'll focus on Gathiya in Maharashtra as well.

The next question is from the line of Amit Agicha from EG Hawa.

And my question was with respect to the geographic distribution, like the presentation says like some North Indian states and some South Indian and East Indian states are not yet covered. Like when does the company plan to become pan-India? And are you planning to expand to exports to newer markets?

Going northward is going to be a costly affair for us. So in short term, our focus is to regain our production facility in midterm to consolidate and regain our market share in core state and focus state. If we intend to grow northwards or eastwards, it will be through either through M&A or through some sort of joint venture. In our salty snacks category until and unless we have multiple plants at multiple locations, it's not wise to go beyond 700, 800 kilometers.

Sir, is the company planning any merger and acquisition?

We were contemplating -- before the fire incident, we were contemplating a couple of small acquisitions. And those were not brands. In fact, those were small factories. But now we have stopped thinking as of now because priorities have changed.

The next question is from the line of [ Sanjay Dutte ], an individual investor.

I have 2 questions. First question is, last month, there was a news item that a dead rat was found in our Namkeen package, I think, in Banaskantha or somewhere in Gujarat. So what is the status of that?

The case is shut. Actually that consumer and the retailer had some tiff, and the consumer in question was 6 months baby. So it was all fabricated story.

Because there was no update from the company with the stock exchanges, like there was no filing or anything. So it was just a little confusion.

Yes, we proved the matter and the consumer had bought the product from the retailer, the consumer, and the retailer had some personal animosity. So they were fighting with each other. We unfortunately got into this.

Second question is about the GST notice that you had received for INR 12 crores or something. What is the status?

Sanjayji, thank you. With reference to the GST notice, the company is already in the writ petition at the honorable High Court of Gujarat and the matter is pending at that forum. And it is an industry-wide issue.

So that means we have not accounted for it so far in our accounts, right? It is a contingent liability right now.

Yes, yes. It pretty much is.

Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.

So I would like to thank everyone for joining the call. I hope we have been able to respond to all your questions adequately. So for any further information, we request you to please do get in touch with our Investor Relations team. Stay safe, stay healthy, and thank you once again for joining with us. Thank you so much.

Thank you, members of the management. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.