LT Foods Limited (LTFOODS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to the Q4 FY '20 earnings conference call of LT Foods Limited hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anirudh Joshi from ICICI Securities. Thank you, and over to you, sir.

Thanks, Margaret. On behalf of ICICI Securities, we welcome you all to Q4 FY '20 and FY '20 results conference call of LT Foods Limited. We have with us today Mr. Ashwani Kumar Arora, Managing Director and CEO; Mr. Vivek Chandra, CEO, Global Branded Business; Ms. Monika Chawla Jaggia, Vice President, Finance and Strategy; and Mr. Sachin Gupta, General Manager, Finance. Now I hand over the call to the management for their initial comments on the quarterly performance and FY '20 results also, and then we will open the floor for question-and-answer session. Thank you. Thanks to the -- and over to Monika. Thank you.

Thank you, Anirudh. Good afternoon, everyone. And thank you for joining us on our earnings conference call. I hope that you and your loved ones are all well and safe. I would like to highlight that certain statements made or discussed on the conference call today will be forward-looking statements, and a disclaimer to this effect has been included in the results presentation shared with you earlier. Result documents are available on company's website and have also been uploaded on the stock exchanges. A transcript of this call would also be made available on the Investors section of the company's website. I would like to begin by taking you through the key highlights of our financial year 2020. In spite of many challenges faced by economy due to ongoing COVID-19, we finished the fiscal year on a strong note with a healthy demand, robust volumes, growth across India and the international markets and healthy margins. I would like to give you an update on our Q4 financial year '20 performance. The revenue was up by 20% to INR 1,217 crores on a year-on-year basis. The gross margin also expanded by 190 bps to 26.5% on a year-on-year basis. In absolute terms, the gross margin was up by 29% to INR 323 crores. This was also an account of both change in the product mix with an increased share of international branded and organic business. The EBITDA was up by 54% to INR 150 crores versus INR 98 crores, and the EBITDA margin was up by 275 bps to 12.3%. This was on account of higher GP and operational efficiency. The PAT for the quarter increased by an impressive 167% to INR 58 crores versus INR 22 crores on a year-on-year basis. The PAT margin expanded by 265 bps to 4.8%. Our consolidated revenue for the financial year '20 was up by 7% at INR 4,184 crores. As mentioned in our earlier earnings calls, our strategic intent has been to focus on our branded business. With continued focus, our branded business was up by 14%, and the share of our branded rice portfolio increased to 74% versus 69% last year. The gross margin also expanded by 174 bps to 26.7%, as there was an increase in the contribution of branded business and the strong growth from all the geographies. This is to further highlight that our premium and mid-priced product range achieved double-digit growth on a year-on-year basis. The EBITDA margins also expanded by 140 bps to 12.2% versus 10.8% last year. In absolute terms, the EBITDA was up by 21% from INR 421 crores to INR 509 crores. That is due to better gross margins and the operational efficiencies. The PAT increased by 45% to INR 199 crores, while the margins expanded by 125 bps to 4.8%. Now I would like to update you on all the efforts taken towards strengthening the balance sheet of the company. The company's net worth was up by 11.5% to INR 1,599 crores led by strong accruals. The overall debt of the company was down by INR 235 crores to INR 1,435 crores. The debt/equity ratio improved from 1.16x to 0.90x. Long-term debt-to-equity has reduced to negligible levels of 0.13x from 0.17x last year. This is to reiterate that majority of our debt is working capital debt, which is required because of the nature of our business, and our focus is to maintain the debt-to-EBITDA ratio to less than 3x. I would also like to give you an update relative to the continued interest from the international investment community in the group. After a rigorous due diligence and negotiations, SALIC, Saudi Agricultural & Livestock Investment Company, has acquired stake in Daawat Foods Limited, which is a subsidiary of LT Foods Limited through its subsidiary, United Farmers Investment Company. SALIC, as you may know or as you may be aware, is a strategic partner and a public investment committee of the Saudi government. The transaction in Daawat Foods Limited entails acquisition of 29.81% stake of India Agri Business Fund, which is sponsored by Rabobank, and 0.1% stake of the REAL Trust by the United Farmers Investment Company, which is a subsidiary of SALIC, for an amount of $17.23 million. Please note that there is no dilution in the listed LT Foods Limited. Also, there shall be no impact on the shareholding of LT Foods Limited and Daawat Foods Limited, which remain intact at 70.09%. Company was able to provide a rewarding exit to Rabo fund, which has been partnered in this subsidiary for more than 10 years. This new strategic partnership will open up the new opportunities and help LT Foods strengthen its position in the Middle East region. I'll now hand over to Mr. Chandra for the further business update for this financial year. Thank you.

Thank you, Monika. The branded business revenue of INR 2,631 crores in FY '20 registered a growth of 14%. This is higher than the total business growth of 9% due to which the share of the branded business in total improved to 74%. Quarter 4 was a particularly strong quarter with a growth of 20% in the branded business. All our business entities have performed well during this financial year. Our India branded business saw good growth in FY '20, with the premium and mid-price segments registering double-digit growth. LT Foods had launched various marketing initiatives on these segments on the Daawat brand and specific premium variants like Daawat Biryani and Daawat Traditional. India also strongly promoted its unique product offering of Quick Cooking Brown Rice. In quarter 4 of FY '20, we extended this health franchise by launching the iron-, folic acid- and vitamin-fortified Daawat Sehat product in the test market. This was supported with print and digital advertising and launched only in the quarter 4 of full year '20 has quickly built up to a good level of consumer demand. You will be glad to note that during this pandemic, Daawat Sehat tied up with an NGO, Feed My City, to provide meals to the needy. Our regional rice business continues to receive good response from the market. Sona Masoori has now created a niche for itself in the quality segment with both the retail consumers and the food service customers. In order to cope up with the twin challenges of manpower and logistics availability posed by the unprecedented crisis of COVID-19, the company has identified and nimbly executed a number of innovative, go-to-market approaches. The company joined forces with Zomato and Swiggy to use their platforms for direct delivery to customers. Post-enforcement of complete lockdown, a telecaller facility was set up to directly reach top retail outlets in the country and take orders from them. Moving to our U.S. branded business. U.S. branded business also saw a double-digit growth in revenue terms. The business has performed well across all channels, and there was a significant increase in the sales for the month of March due to the ongoing pandemic. E-commerce as a channel continued to see a surge in demand in the last few months. Our recently launched ready-to-heat products were very well accepted by the consumers and also experienced a huge increase in demand. The RTH sales have more than doubled in Q4 FY '20 on a year-over-year basis. Our Europe business has also performed exceedingly well in this -- on a quarter-on-quarter basis, and it gives me great pleasure to share with you that our Europe business has become PAT-positive in FY '20. The business has also seen a surge in demand for packaged rice as people are giving preference to packaged brands, taking into account the safety aspect. Our organic business has also seen a growth of 15% in quarter 4 on a year-on-year basis. While its major product categories continue to grow, the business had experienced a fall in its soybean business in the first half of the year. The company decided to move from the commodity-based soybean business to the value-added soy meal processing-based products. The business has seen a ramp-up in the second half, with installation of a dedicated organic soy meal processing plant done in a record time of around 3 months. The plant is running at full capacity to cater to the large orders received from global customers. Another expansion of this facility is now planned in the current financial year, which will help the company achieve even higher growth in the current financial year 2021. I would now like to hand over to Mr. Ashwani Arora. Thank you.

Thank you, Vivekji. Good afternoon, everyone, and thank you for joining us on the call today. I hope that you and your loved ones are all well and safe. As we all know, over the last 2 months, worldwide economy and various industries across India and international markets have been facing a unique situation due to the COVID-19 pandemic. Our primary focus during this challenging period was to service and make our product available to our loyal consumers, along with assuring the safety of our colleagues and manage our operations in the changed scenario with agility. We are proud of our colleagues in the manufacturing unit, distribution, the front liners and the support function who also ensured smooth operations while working from home as well. During these prime times, all the employees have come together, and the company has been able to demonstrate its true values through its actions. Needless to say that all the norms prescribed by the government and WHO have been strictly followed by -- at our manufacturing facility and distribution centers across the globe. The company's growth has accelerated in the wake of very strong consumer demand for our products and trusted brand name. Our international subsidiary plants are also functioning in line with the increasing demand. From an industry perspective, the export of the Basmati rice from India are approximately same in FY '20, and we have seen a growing trend in Saudi, Iraq, Europe, America and rest of the world. Iran has shown negative growth. Anyway, our exposure to Iran has been nil, and our global presence is helping us to keep up the growth momentum. India consumption till last year was growing at 13%, and we had been part of this growth journey. The branded business contributed 26% of market share. We believe that in the current ongoing COVID situation, consumer demand for packaged rice will increase because of the rise in home consumption, especially in the health and convenience segment globally. The HoReCa segment, however, has seen a decline. However, with HoReCa focused on online delivery and with government announcing opening up of outlets on selective basis in a few states, we have seen some pickup in this category. As far as inventory is concerned, we have procured enough during the last procurement season and are geared to meet the expected demand in the current year. As far as the next crop production is concerned, as per the current market data availability, the sale of Basmati seed is going more or less following the same trend. The transplantation process is expected to start in mid-June. The farmers might experience some problems with labor -- with respect to the shortage of labor, but they are working to find out alternative solutions so as to minimize the impact on the Basmati production. As far as operations are concerned, there were challenges in the initial phase, but the company is having control on complete value chain and having highly mechanized infrastructure, have been able to overcome the challenge and deliver their performance. We have delivered a strong operating performance for FY '20 and quarter 4 FY '20. As mentioned in earlier calls, the company has been extensively working on 3 strategic pillars of growth, margin expansion and strengthening the financial metrics, which is visible in our financial performance, and we'll continue to do so in the future. To add to these 3 pillars, the company also continued to strengthen its management capability. It has hired a couple of senior-level positions across its operations. We will be separately updating on these positions from time to time. Thank you. Now we will open the session for question and answer.

We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Resham Jain from DSP Investment Managers.

Congratulations for a good set of numbers and particularly on repayment of debt. Just on coming year FY '21, with most of the businesses actually showing positive trend, like this year, we have paid almost like INR 230 crores, INR 240 crores of debt. And next year, what will be the plan on the debt repayment front? That is my first question.

Yes. As I said in my thing that we will be keeping the same trend, and we will maintain the debt-to-EBITDA ratio less than 3, and that's what we are focusing on.

Okay. But from -- just from a capital allocation perspective, this year, you generated like close to INR 400 crores of cash after the CapEx. You -- if the trend continues...

The plan is to reduce the borrowings only, whatever -- internal liquidity will come. But I'm just making the statement that we will keep the debt-to-EBITDA ratio because if the paddy prices will go up in the next coming year, then may not be -- we will be able to reduce our borrowing. But more or less, whatever the -- we are not spending in the CapEx. So the goal is to reduce the borrowing going forward.

Okay. And what would be the CapEx plan, sir, for FY '21?

So next year, we have set up INR 60 crores of our CapEx plan.

And what would be the broader breakup of this INR 60 crores, sir?

Means where we are spending?

Yes, yes.

So mainly, we are spending, one is on -- we are putting the power plant, which is cogen power plant. That's one. The other is we are spending on the warehousing. And thirdly, we are investing in the mechanization, more mechanization, more automation. So these are the 3 areas, broader areas where we are investing. Repair and CapEx -- maintenance CapEx is very low. So mainly is the mechanization. And whatever in this quarter, we have seen the growth. As I said, we are expecting that more packaged rice will grow, and we need more packaging machines. So we are investing in that. So at the moment, all our consumer pack machines are running at full capacity.

Right. And sir, my last question is on overall margin trajectory. How do you see that panning out in FY '21? And what will be the levers for this?

So that -- so in the coming year, our -- both gross margin and EBITDA margin will grow. And the strategy is same that our product mix will change, and there will be -- in the gross margin, there will be an impact on the lower cost of the COGS also and the scale. These -- broadly, these 3 things will help us to improve our margin.

Okay. And any specific geographies where you see that you were playing out more positively as compared to other regions? For example, Europe, you have clearly turned around in the last 1 year from negative territory to almost the positive side. So within various geographies and various segments...

Yes. So this will -- of course, it will throw -- plays across -- play across geographies. But the major thing will play in Europe, America and the rest of the world. And India, because of this HoReCa impact, we may see a little de-growth in HoReCa business. Of course, the consumer business will grow.

The next question is from the line of Dikshit Mittal from Subhkam Ventures.

Congratulations on a good set of numbers. Sir, my question is on inventory. You have given the absolute level of inventory of paddy and rice. So can you give the volumes also?

Yes. Sachin will answer this.

Dikshit, our inventory levels during this year is 1 lakh -- paddy is 193,000 tonnes; and our rice is 140,000 tonnes.

Okay. And estimatedly, for last year, if you can give, for comparison?

It was 200,000 tonnes of paddy and 127,000 tonnes of rice.

Okay. So that means the reduction that we are seeing, that is totally because of the lower prices of paddy that is leading to lower inventory, right, this year?

Yes.

Okay. And so can we assume that this lower cost of inventory will help you in margins in FY '21?

That's what I said. It will be a mix of all the things, the lower COGS and the product mix and the scale. All 3 will help us to improve the margin.

Because we have seen 15%, 20% reduction in per-unit inventory holding, right, as compared to last year?

Yes.

So to that extent, maybe something will be passed on. But if you can quantify what kind of margin benefit that can accrue, that will be helpful.

Normally, we change the prices after June. So we have to see the competitive landscape in the month of July fully then. But definitely, it will help us to improve the margins. How the competitive landscape reacts on the July, August, only then -- how much this cost we will pass, how much it will be kept, we have to see the competitive landscape.

And sir, secondly, in your growth, we have seen flattish growth in domestic market. We have seen like decent growth in overseas. So is there any impact because of logistic issues that restricted the growth in domestic market?

So I mean if you see our consumer business, we have -- we call it like consumer pack business, which is 1 to 10; and then there is a 25 kg business. We have seen the growth in 1 to 10 kg. That's our strategic intent. So we are growing the -- of course, our export business has grown better because our Europe operations are running now full, and U.S. also has shown good growth. But India is growing as per the category is growing. We are in line with the category growth.

Okay. And sir, in terms of private label, we have seen sequential big jump in volumes. So that is onetime or maybe that will be maintained for next quarters as well?

So as far as the latest, whatever the trend is going, we are expecting the same trend will be there.

Okay. Because earlier, we were trying to reduce the trading to improve the balance sheet. But suddenly, we have seen like big increase in volumes in this quarter. So will that impact balance sheet next year in terms of higher trading volumes?

That's a more private label sale, not trading. So there are 2 types -- or 3 types of business we were in: the consumer business we call it or branded business we call it; other is the private label; and the third is trading. Trading, of course, we are reducing, but the private label business is where the growth is coming. That's our strategic intent, where the sustainable business is there. So any business which is -- we are doing private label is all strategic in nature, and that's a very sustainable business.

Okay. And sir, lastly from my side, can you give Europe numbers for this year for EBITDA and PBT numbers for Europe?

Europe had EBITDA of INR 17 crores, had a PBT number of INR 4 crores.

Okay. And last year, sir, if you can...

Last year, there was a loss of INR 11 crores, and there was a PBT loss of INR 24 crores.

The next question is from the line of Subhankar Ojha from SKS Capital.

So 3 questions. On this European operations, so good part is that you have reported a positive PAT. Can you give some sort of direction for FY '21? What are your internal targets for the margin for this European operations? That's one. Second, you had a very high other income in this current quarter. So if you can give a further breakup of this other income, it will be helpful. And third is this recent transaction wherein -- even though it's at a subsidiary level, but can you share some more data on what was the revenue and what multiple did this deal happen? And what was the earlier investment by Rabobank? I mean they are exiting at $17 million for 30% stake. What was their investment? So these 3 questions, basically.

Sure. So the first question is on the -- you said on the Europe. This year, we will be -- the target of EBITDA is in the range of 7%? Okay. Yes, in the range of 6% to 7% EBITDA we are seeing -- that's the industry benchmark.

Okay. So what was the revenue, sir, for European operations? The EBITDA number was INR 17 crores.

Yes. So revenue, we are targeting in the range of...

See, the revenue for this year was INR 468 crores.

INR 468 crores?

Yes.

Okay. Okay. So you have done a 3.5% type EBITDA, and you are looking for 7%?

That's in the range. That's what we are targeting.

Okay. Okay. Second question, other income...

The other income includes the exchange income. It's majorly the exchange income, and this is a part of the operations income only. So this is -- as per the accounting, we have to disclose in the other income. Otherwise, it is exchange.

And third, on SALIC, what was -- so what exactly...

My question is basically this unit had -- I think as per your press release, it had a 20% revenue contribution to the parent company. So that's about some INR 550 crores-odd. And the deal is happening 30% stake for $17 million. So my question is basically, what was the Rabobank investment?

10 years back, Rabo invested in Indian rupees, INR 25 crores, and in dollars, $5 million.

Okay. Okay. So that's -- so this is -- is it the right way to read it? I mean 20% of your revenue coming from Daawat Food, and that is getting valued at, say, about what, I mean, $50 million, right? $55 million. And that's about...

That's the one thing. That's a purely manufacturing subsidiary of that all the brands, everything is in LT Food business. So that's a purely manufacturing valuation of the company.

No, sir, that business -- sir, my question is that, that business is getting valuation higher than the parent company, which is not a value addition and therefore...

I think that answer is -- lies with -- more on the investors' side. But as far as this thing that if we evaluate our company, the kind of business model we have, the sustainable, profitable with a global footprint, normally, the company, globally, has a valuation of 15 to 16x of EBITDA.

Okay. I missed the initial part of your answer wherein -- what is your plan for deleveraging? I mean what is your plan for reduction of debt in the current financial year?

No. As I said just now, the plan is -- the broader plan is to keep the debt-to-EBITDA ratio less than 3 as the business will grow, and we are in the business of -- [ where we distribute ] the rice. But broader plan is, in normal circumstances, all the accrual will not go in CapEx and either reduction in the borrowings or, if needed, to increase the inventory. So broadly, more focus is in the reduction of the borrowing and take to the level of 2.5x or less than 2.5x to EBITDA.

The next question is from the line of Sudhir Bheda from Right Time Consultancy Services.

Congratulation on superb set of numbers. And sir, one more thing, I am also a consumer of your brand, Daawat Basmati...

Thank you.

And Brown Basmati rice, and it's superb. Sir, my question is you have done international brand business of around INR 1,655 crores from your present business. So what are the geographies, sir, major geographies? Does it include Iran and those kind of countries? Or...

Our major geographies outside India is U.S.A., Europe and then Middle East and then rest of the world. As I said, we don't have any exposure for the last 3 or 4 years to Iran. So that's as per the company's strategy not to get into a country which is...

So we don't foresee any threat as far as our exports are concerned?

To Iran, no.

Okay. And sir, my another question is, what is the proportion of rice and non-rice. Because you have certain other businesses also, like organic revenues and all.

We have 2 businesses: one is the Basmati rice business and the other is organic ingredient business. So out of the total revenue, approximately 10% to 11% come from organic ingredient business and rest is all in the Basmati rice business, which is all supported by other strong brands, which is Daawat and Royal.

And lastly, your original improvement has come, I think, in the margin and in the [indiscernible]. So is it because of your branded businesses are ramping up in India as well as at both U.S. and Europe? Are brands becoming popular over there?

That's one lever. Brand is already very popular allover. It's only we are doing the acquisition of new consumer and new markets. So brands are very, very popular. That's how from where the growth is coming.

And soon, from the consumer, I will also become a shareholder.

Thank you. I will tell you, I don't know how much time -- in this COVID time, we got an e-mail from our one of the loyal consumers in Bombay who was brown rice -- Quick Cooking Brown Rice. He said his wife is pregnant, and she doesn't like any other rice, and we are not able to get this Daawat brown rice. And we made sure that in 24 hours, we delivered the Daawat Quick Cooking Brown Rice to their home.

The next question is from the line of Sarvesh Gupta from Maximal Capital.

Congratulations on a good set of numbers. First question, sir, on the domestic branded side, we have seen some dip, obviously, because of maybe the HoReCa segment and all that. But how has been the market shares movement, if at all, in our favor or against us? Have you gained or lost any market share?

You are talking about the post-COVID or pre-COVID?

Sir, I wanted about 4Q, but if you can give us some indication about...

As you know, it's too early because [indiscernible] quarterly data. But our estimate and our, whatever, our internal data is telling us that we are doing good. We are able to maintain our share even in the difficult times, and we are trying our best to be available in all channel. As Mr. Vivek said, we are trying to find new, innovative ways to reach the trade and, therefore, our consumer will get us. We have done the whole digitization in reaching to the retailers. So answering...

So broadly, we have maintained market share in domestic branded business?

Yes. That's what our -- the data will come in June. And then -- but we are sure that we are maintaining our share here. We have a great presence in online modern trade. And as I said, we are trying to find innovative ways to reach our grocers.

Understood. And sir, this investment by SALIC into LT subsidiary, so what are the financial merits for this company?

So the...

Or maybe I can take it off-line also if...

Yes. Yes, we can do that. We can do that.

Okay. Understood. Now thirdly, there was this news about one of the large Basmati traders, SBI case against that. So because of this environment of leverage, are you seeing some of the competition dying or going away in a way which will help players like you?

I've told in earlier conference call, there are 2 types of model in Basmati rice industry. If you see globally, the 15 brands, which -- approximately, the 15 brands, which hold the 100% Basmati market. And India is -- as an industry, is mainly dependent on private label. There are only 2 companies who have the complete value chain in their hand. And as manufacturing, if someone is getting disturbed, it will have not -- it will -- I will not say, it will improve our margin because of the less competition. And the brand, it is helping us.

Understood, sir. And this other income that you mentioned is mostly forex gain, is it? The higher other income that we noticed in your...

Yes, yes.

Understood, sir. Sir, what is the capital deployed in Europe as of now?

Just a minute. It's approximately EUR 25 million?

Yes, EUR 25 million.

Approximately EUR 25 million.

EUR 25 million? Okay. And sir, if you look at the cash flow statement in the last 2 years, we have done CapEx of INR 120 crores and [indiscernible] in the last 2 years. So if you can just give a broad indicator of what is the split of this INR 90 crores and INR 120 crores that we have spent on plant, property and equipment, sir?

In the previous year, the cash outflow of CapEx was 60 crores. The remaining part is the exchange fluctuation. The exchange one is -- and the entire INR 60 crores, the major CapEx was in India. In India, we have installed new silos. And there was a mother warehouse that was installed at Bahalgarh facility, mother domestic warehouse.

So we have built a highly mechanized distribution center near Delhi. From there, we will supply to the whole of India and -- to improve our service level and less dependent on labor just to -- whatever the last year CapEx we have done in -- either in the silo and mechanizing our distribution. That's how we were able to service even in these difficult times because as a company now, we have very highly mechanized operations.

Understood, sir. And sir, you had mentioned in an earlier interview, I think, that we will come by end -- we will come to know by end of May that what is the impact because of COVID on paddy production. So do we have some visibility, sir, in terms of, a, [indiscernible] will be getting sown this crop season; and b, what is the likely impact on the paddy prices that we will have to put, sir?

As I just told that the initial survey is saying that the seed is selling more or less the same, and the transplantation will happen -- will start happening on the 15th of June. And we are expecting that there will be some problem on the labor shortage. But I think farmers are making the alternative arrangement. So in a nutshell, we are not seeing the much impact on the production till time whatever the indications or trends we are getting.

Understood, sir. And lastly, if I may ask one more question, sir, these are -- so if I look at your private label business, we see quarter back, it was on a higher trajectory and then we kind of lowered it. And then of course, in Q4, I think we got a very good opportunity to scale it up back. So that is understood from an opportunity point of view. But from a strategy point of view, I think we wanted to also increase our margins on a sustainable basis to increase the return numbers. What is your strategy around private label, sir? Are we going to increase it in equal proportion to branded business? Or how do we look at our private label? I mean trading part is understood that you want to decrease it, and private label strategy is something that I was not very clear of.

Yes. So private label, as I said, we have 2 areas where we will grow business. One is the brand. There, we'll even acquire new consumer, new distribution. Private label is business we do from the ROIC perspective. And so we are -- as far as ROIC is concerned, we have set a benchmark that below this, we will not do a private label business. And the only private label business we do which is sustainable in nature. So we don't do any private label business which is a transactional kind of thing. That's how the major private label business happened in Saudi Arabia and I think I talked about the energy industry, Iran and Iraq, and we don't have much exposure on this. Whatever the private label business we have is either in Europe or America, that too, with organized stores and a little bit in Saudi Arabia.

Understood, sir. What is this target ROIC that you -- below which you wil not do? What is that number if you have a range or a number that you have?

The range is, we will not do any business which has lesser -- in private label business especially, is less than 15%.

The next question is from the line of Chintan Desai from Param Capital.

Congratulations for a good set of numbers. I just wanted to understand the insights on how has been the situation post COVID in India as well as our overseas markets. Has the offtake been -- has increased? Or how is the current scenario?

So whatever the trend we are getting is across globe. The home consumption is growing. So only HoReCa is impacted. But whatever the home consumption has grown, as far as our company is concerned, we are able to offset that whatever the loss we have done in the HoReCa business. So overall, if you see as a category, 25% to 30% of Basmati consumption is in HoReCa and 70% in home. But that depends on geography, like India has more dependence on HoReCa business; Middle East has more dependence on HoReCa business. But our market, which is India, U.S.A., Europe, we have less dependence as compared to the industry on the HoReCa segment. But consumption at home is growing. That simply is the trend we are getting.

Okay. And sir, I believe FY '20 was kind of a year of consolidation for our U.S. business. So how has been the U.S. business in Q4? And will we start looking at strong growth numbers from this year onwards?

Yes. So U.S. business is always a growing business for us. Only the Europe was the business which we have started 3 years back. And last year, it has turned to positive. And we are seeing the good growth in this year, both in top line and bottom line.

Okay. And sir, what would be the capacity utilization at our Europe's -- Europe facilities -- facility, sorry?

This year, we will be above 80%.

Okay.

Because of this increased demand post COVID.

The next question is from the line of Rakesh Roy from Indsec.

Sir, my first question is regarding your supply chain and logistic. Can you highlight on the supply chain and logistic in terms of market scenario, sir?

Sorry, Rakesh, I didn't understand your question, please.

Sir, just my first question is regarding, sir, supply chain and logistic part. Sir, can you highlight how the supply chain and logistic in terms of market scenario?

Rakesh, supply chain, [Foreign Language] there was a disruption. But government [Foreign Language]. But as far as LT is concerned, from the day 1, as I said, with high mechanization and the great team, we were able to manage our supply chain efficiently. Have I answered your question or something is left?

Mr. Rakesh Roy, can you please confirm?

Hello?

Yes, Rakesh. Have I been able to answer your question?

Yes, sir. Yes, sir. Sir, my second question is, can you highlight on any discounting from your side to market to gain the market share or to gain the market -- expand market scenario, sir?

[Foreign Language]

Yes, sir. Right, sir. Okay. Then, sir, any price increase in U.S. business?

Sorry?

Price increase in U.S. business?

[Foreign Language] in this -- as a brand also, we don't want to get into a commodity mindset and demand. And so as a brand, we are -- the first focus is to make sure that availability is there. So neither we are decreasing price nor we are increasing price at this moment.

Okay. Sir, last question, as you mentioned, you are now focusing more CapEx in automation, sir. So how much margin expansion you are seeing after automation in company or in the industry, sir?

Power generation. So we are putting 2.5 megawatt plant in our Bahalgarh unit. That's a cogen plant. That's one. And then the mechanization. So what is your question now?

Sir, how much margin expansion you are looking in your future, sir, after doing this CapEx?

CapEx, sir, that's more for the growth, not the margin expansion. But yes, absolutely, the growth will come. The margin will improve with the scale and -- they'll improve on the scale.

Yes. My next question is regarding, sir, after automation [Foreign Language] automation is only for doing the best, sir. So after automation, how much margin you are seeing in your future? Just my question is this.

[Foreign Language] we are able to supply our consumer with less labor dependence. [Foreign Language] you have to run your business with great efficiency and lesser people. So that's what we are focusing. And [Foreign Language] basically, with the increased demand, we need more packaging facility. So with the scale, the margin expansion will happen.

Okay, sir. Okay. So how much bps -- for example, how much bps you are seeing after doing this thing in maybe next 2, 3 years, sir? Because...

[Foreign Language] so I'm not able to hear you properly.

Hello?

Yes.

Yes. [Foreign Language] bps you are seeing improvement in the next 2, 3 years, sir, from here?

So we have defined that we wanted to take our EBITDA margin to 15% in the next 2 years.

The next question is from the line of Nitin Awasthi from East India Securities.

My question was regarding your subsidiary, Nature Bio-Foods Ltd., which I believe is your organic division arm. Could you please shed some light on this company because I believe Rabobank has an investment in the company, and you're making subsidiaries across Europe and the U.S. for this company. So is that only like capital investment out there in facilities? Or is that only for branding, which is going to happen in Europe and U.S. and the whole manufacturing happens in India? Plus, what are the kind of ROICs that you will have in this business, the newer products, including the businesses like the oil, et cetera? Can you shed some light on this company overall?

Let me explain you the organic model of our growth. So this Nature Bio-Food is now owned by LT and Rabo. And the business model is we are supplying the ingredient, which is used for either the brands or making ingredients like baby food, rice milk, rice cake and all these things and then making the -- this protein, organic protein, which -- where we use -- where they use for the feed [indiscernible]. So this business is all B2B business and -- which is mainly in America and Europe. And all the manufacturing capability are in India because we have a very strong network with the farmers where we grow our organic produce. And this company is 25-year-old company. They are in this business for the last 25 years.

Sir, in your presentation and also on your website, I see there a brand within the Nature Bio-Foods' ecoLife.

Brand is majority B2B business. This ecoLife business is a small, I'd say, only roughly total revenues 10% business.

Okay. So just 1% of your total top line, if I'm correct.

As a group you are saying?

Yes. As a group, LT Foods.

As a group, you can say 1.5%.

1.5%. Okay. And you'll be getting into the oils also in this segment?

So in organic ecoLife brand, every -- there is a complete portfolio of organic food. There is lentil, rice. We have [Foreign Language]. We have flaxseed oil. So all -- the complete portfolio of organic basket.

Okay. And this is also manufactured in India and exported?

We have already launched this brand in Northern of India and U.S.A. and doing well. It's picking up well.

Okay, sir. And what are the kind of margins that you see in the Nature Bio-Foods, like ratio -- sorry, like rough ROIC?

The ROIC, you mean to say?

Yes. The return ratios in the organic business.

Just a minute.

The ROIC in the organic business is 18%, 18% ROIC we are getting.

Okay. And I believe the working capital days will be also much shorter because there'll be no aging involved as in the traditional business?

Yes. There is no aging involved.

Okay. And the focus is -- is there a push coming in from the management in this business segment? Do you wish to take this from more than 10% to a bigger share?

We have a big focus. One of the -- this is -- organic business is one of the focus of -- thus far. We have a good plan to grow this business in this year. [indiscernible] in Europe and America to do the stock and sell, and that's remained good.

Due to time constraint, we'll take the last question, which is from the line of Deepak Poddar from Sapphire Capital.

Sir, I wanted to understand, first, on the growth part. Basically, 7% growth we have seen overall for the year, and this quarter was abnormally high-growth at 20%. So what sort of sustainable growth one should look at over the next maybe a year or 2?

So as I said, pre-COVID, plan was to grow in double digits. And post COVID, we have to see how this HoReCa business behaves. But the first quarter trend says us -- say to us that we will be able to deliver the double-digit growth if the same trend continues.

Double-digit growth is what you might be targeting. But do you see that -- because of the current situation, people might be buying more, right? So is that one of the impact that you're seeing a higher growth and a normalized growth will be at a lower...

As I said, the home consumption is growing, especially in the international market. The people, at least 1 or 1.5 meal they have away from the home. Now they prefer to have at home. Therefore, the home consumption is growing. India is a little bit different. India, the dependence on HoReCa business is more, and the premium segment of the Basmati is a kind of luxury in India. But overall, if I talk overall as a company, we think that whatever the trend we are seeing right now, in 2 months or in the first quarter and the same trend continue and then the same doesn't go worse, we will be able to deliver...

Double-digit kind of a growth.

That's right.

And all your plans are currently operational at optimum utilization level?

At the moment, yes.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for closing comments.

Thank you. Thank you, everyone, for your continued support. Hope we were able to address all your queries. Should you have any further questions, please feel free to contact our Investor Relations team. Thank you, and we look forward to connecting with you again in the next quarter. Thank you, and stay safe. Thank you.

Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, And you may now disconnect your lines.