LT Foods Limited (LTFOODS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the LT Foods Limited Q3 FY '21 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Akhil Parekh from Elara Securities Private Limited. Thank you, and over to you, sir.

Thanks, Vikram. On behalf of Elara Securities, I welcome you all to Quarter 3 FY '21 Conference Call of LT Foods. From management side, we have Mr. Ashwani Kumar Arora, Managing Director and CEO; Mr. Vivek Chandra, CEO of Consumer Business; Ms. Monika Jaggia, VP, Financial Strategy; and Mr. Sachin Gupta, our Group Financial Controller. So without taking much time, I'll hand over the call to the management for the opening remarks, and after which we'll open the floor for Q&A session. Over to you.

Thanks, Akhil. Thank you. Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope that you and your loved ones are 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 9 months financial year '21 results. Our consolidated revenue for the 9 months was up by 19% at INR 3,524 crores versus INR 2,967 crores last year, on account of increased sales from U.S., Europe and the organic business. The gross margin expanded by 188 bps to 29.1% due to change in product mix and lower input costs. The EBITDA margin also expanded by 97 bps to 13.1% versus 12.1% last year and was up by 28%, from INR 358 crores to INR 460 crores. The company has generated significant cash flows amounting to INR 279 crores, driven by strong performance in 9 months financial year '21 that led to decline in overall debt by INR 229 crores. This further led to a fall in the finance cost by 29%, and the overall fund cost was down by 175 bps, from 7.5% to 5.7%. The PAT increased by 63% to INR 229 crores, while the margins expanded by 176 bps to 6.5%. The earnings per share was also up by 67% to INR 6.81 per share versus INR 4.08. On quarterly basis, the revenue was up by 9% from INR 998 crores to INR 1,085 crores on account of increased sales across geographies and for business segments versus last year. The gross margin expanded by 214 bps to 29.2% due to change in product mix and lower input costs. The EBITDA margin also expanded by 95 bps to 12.7% versus 11.7% last year, was up by 18% from INR 117 to INR 138 crores -- INR 117 crores to INR 138 crores. The finance cost was down by 36% and overall debt was down by INR 229 crores, and the fund cost was down by 240 bps, from 6.9% to 4.5%. The PAT increased by 44% to INR 69 crores, while the margins expanded by 155 bps to 6.4%. The earnings per share was also up by 46% to INR 2.07 per share versus INR 1.42. Now I would like to update you that all the efforts that we have taken for strengthening the balance sheet of the company has started yielding results. And the result of it is the ROCE of the company improved by 347 bps to 16%. And the normalized ROCE on account of the funds blocked in the fire insurance claim is 16.7%. The return on equity improved from 12% to 16.8%. The debt equity ratio improved from 1.02 to 0.75x as the overall debt of the company was down by INR 229 crores to INR 1,369 crores on year-on-year basis. 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 on to -- is to maintain the debt-to-EBITDA ratio between 2 to 3x, which today stood at 2.2. Current ratio has also improved significantly to 1.65 from 1.49 last year. Because of our continuous focus on working capital optimization, our net working capital has reduced by 25 days to 235 days in 9 months financial year '21 versus 260 days last year. The company adopted a revised dividend distribution policy last quarter and in line with the same, company has today announced an interim dividend of INR 0.50 per share. So the total interim dividend announced in the financial year '21 is INR 1 per share. I'll now hand over to Mr. Chandra for the further business update for the 9 months financial year '21.

Thank you, Ms. Monika, and good afternoon, everyone. For the 9 months till December, the company reported a revenue of INR 3,524 crores, registering a growth of 19% on a year-on-year basis. U.S., Europe and the organic businesses have been big drivers of this growth. Growth continues to be broad based. Basmati and specialty rice segment of our business grew by 15%, bolstered by the growth in demand, especially in our international business and with the recovery of demand in India. New product business also grew by 50%, and now accounts for about 2% of our revenues. Quarter 3, FY '21 revenue at INR 1,085 crores has registered a year-on-year growth of 9% versus quarter 3 '20. The big drivers of this growth have been Europe and the organic business. In quarter 3, we saw some unwinding of trade inventories stocked up in the COVID-induced panic buying of the first 2 quarters. And that has muted the growth rates to some extent in quarter 3, particularly in the U.S. and Middle East. The business trends in these markets, however, remain robust and at a higher sales rate than previously. Quarter 3 has also benefited with the restoration of India HoReCa business. I now share some more details on the businesses. Our U.S. business saw a revenue growth of 16% in the 9 months ended December '20. The broad distribution presence across all trade channels, coupled with our flagship brand Royal holding about 50-plus percent market share in this region, led to increased household penetration and consumption during the COVID impacted months. This higher level of consumption had sustained. Further supporting this penetration and consumer business has been an increased availability through new listings on the e-comm platforms and a robust digital marketing program. Royal Ready to Heat has been performing well, and the company is leveraging the strong brand equity and distribution network of Royal to market these products in North America. Ready to Heat business driven by a mix of new distribution and rate of sales increases in existing outlets behind aggressive marketing and awareness and trial generation, has delivered growth of 279% versus a year ago, leading to an overall 1% share of the RTS grocery segment as per AC Nielsen. This share gain represents 0.6 points gain versus a year ago. Europe business continues to grow quarter-on-quarter, resulting in a 9-month growth of at 105%. LT Foods has expanded its reach in new countries and also expanded to new customers, such as Jumbo, more than 600 store supermarket chain in Europe. To better serve this from an expanded reach, LT Foods has made further investment in additional packaging lines. LT Foods Europe has also expanded its product portfolio and recently launched Boil in Bag variant under the brand, Daawat. Our key markets in the rest of the world have continued strong growth momentum. Total revenue in the rest of the world has also delivered a double-digit growth. India business has started recovering in the third quarter with the restarting of the HoReCa business. Consumer business continued its strong growth with the growth in small pack businesses at 14% in the 9 months ending December. Overall, India business registered a growth in third quarter versus quarter 3 last year. Our marketing programs continued to build the consumer business and focused on the consumer trends of health with marketing campaigns on brown rice in Sehat. Second was the trend on experiential cooking at home, and Daawat's marketing campaign promoted the relevant products for this trend. Organic business has also registered a revenue growth of 67% in 9 months with a revenue of INR 443 crores. Demand for organic products has been very strong from U.S. and Europe, as consumers moved to safer and healthier food. This led to very good demand for the NBFL organic business in 9 months. NBFL BV, a subsidiary of NBFL has recently acquired a 30% stake in Leev, Netherlands with the right to increase the stake up to 51%. This transaction will help NBFL in augmenting its business growth, wherein NBFL will be an ingredient supplier to the organic branded consumer portfolio of Leev. In 9 months, LT has also made good progress on its new product initiatives. Daawat Sehat, the fortified rice, which has met with very good consumer response in its lead market of Delhi NCR, was expanded to other geographies. Daawat Cuppa Rice, which was launched last quarter, has also met with very good consumer response and is now being expanded to e-commerce and general trade in India, and has also been put in test market in international markets. Daawat Sauté Sauces was rapidly expanded, especially in e-comm, to cater to the emerging needs of consumers for convenience. Kari Kari has continued its momentum of growth and has shown a growth of about 325% in the 9 months versus last year, same 9 months. We are also starting to export Kari Kari on a trial basis. I now invite Mr. Ashwani Arora to give his comments on the strategic imperatives driving the business.

Thank you, Vivek. Good afternoon, and thank you for joining us on the call today. My colleagues have shared the results with you. We continue to deliver on 3 strategic pillars. That is growth, margin expansion and strengthening of financial metrics with the objective to build a progressive, sustainable, profitable and growing business to create value for all stakeholders. LT Foods has adopted various organic and inorganic routes to expand its region, new geography as well as strengthen its share in the existing ones. The company has been expanding its product portfolio in its core Basmati as well as Health & Convenience segment, and has further strengthened its distribution reach across globe to reach its consumers. All these growth initiatives have helped the company to achieve its strategic pillar of growth. On the margin expansion front, the company has been a margin expansion across all geography and segment on a year-on-year basis. The company continued to focus on strengthening the financial metrics, which is reflected in the improvement in the debt-to-EBITDA and return ratios. We are positive on the outlook of the business going forward as well and will make all efforts to maintain the momentum of growth and deliver on strategic focus area. Thank you. Now we open the session for question and answers.

[Operator Instructions] We have a first question from the line of Sudhir Bheda from Right Time Consultancy.

Yes. Congratulation, sir, on a very good set of numbers, sir; and healthy year-on-year growth; and particularly, ROCE has improved a lot. So congrats, sir. Sir, my question is, since this year, people -- investor consider this is a good year for the rice industry as a whole because there is -- lot of paddy is available at the lower price. So how, going forward, things will sustain for us, particularly in terms of margin as well as sales growth in FY '22?

Okay. Thank you Sudhir. As far as growth is concerned, first I would answer that. As we keep on saying that the category is growing, the consumption is growing on the geography we are in and therefore, we have been able to deliver the CAGR growth more than 10%. And going forward also, we see that the opportunity will remain in this category. As far as margins are concerned, we are very confident that we will maintain and grow our margin.

That's great. So you are expecting incremental margin improvement in FY '22, right?

Yes, maintain and grow. That's the...

And how organic business is doing, sir? Because in Q3, growth has slowed down, organic business. How it is panning out, particularly? What are the prospects for next year?

Yes. So Sudhir ji, as you know, Monika and Mr. Vivek has told that our organic business has grown 67% this year. So going forward, because this growth has come mainly -- we have added new products, which is soya meal, and that has given the growth. Going forward, we are expecting in the range of double-digit growth going forward also.

Your next question from the line of Amit from Care PMS.

Sir, there had been news that in this last quarter, there have been a significant demand in Europe. And I think India exported more than 70% -- I mean, 70% growth year-on-year. So did we also see any such set of -- such kind of an exponential demand or anything on that, if you can share?

Yes. Good evening, Amit. As we just explained that in Europe, we have grown our business this year till 9 months almost by 100%.

No, but this quarter particularly -- in particular, there was a significant jump. So anything...

There are 2 things. Mainly, there is one primary sale from India, and there is one secondary sale from Europe. So Europe normally import from 2 countries, which is Pakistan and India. But in this quarter, I think the whole of the Europe has imported more from India, better than Pakistan.

Okay. Because from where I see your -- I mean, the data presentation, like our 49,000 tonne has grown by -- grown to 59,000 tonne. I mean, just on a quarterly basis. So I'm not -- because I treat that as a quarter because the news pertain to this particular quarter. So I was just trying to correlate the growth.

So let me give you the answer. So Amit, one is primary sale because 70% growth is against last year. And Europe has imported more from Pakistan last year. This year, Europe has more imported from India. So as far as growth in Europe is concerned, that's not like this which is reflecting in export from India. Hope that clarifies that for you.

Okay. Okay. Sure, sure. Right. In terms of this new launch -- this new tie up with Jumbo stores, what kind of -- it mentions in the presentation that more than 600 stores that it has. So what kind of additional sales that we are looking for, for which you have also mentioned that you have -- additional packaging line also you have put up. So if something can be shared there?

So Jumbo is a very big chain of Netherlands. That's a good news that Daawat got listed there. It's too early to say how much sales we will get. And about that in the new line, as the business is growing and -- so we need to have more packaging line to meet the growth we are getting.

Okay. Okay. Any ballpark estimate that you have in mind when you put up this additional packaging line?

So -- I mean to say, how much volume we will do, value or...

Yes, yes, yes. Through these new tie-up Jumbo store, yes.

So Jumbo is -- we had just launched the brand. As I said, it's too early. But I can tell you, the category, Netherlands, the consumption is roughly around 20,000 tonnes. And Jumbo is a big chain. But how much we will do, so brand takes time to...

Okay. Okay. Okay. Right. And sir, on the dividend policy, if something -- because it says under last quarter also there was 20% to 30% of the profits of the company. And last time, I think you had mentioned that we are planning for half yearly. So can you just [Foreign Language] so this 20% is -- you will do it on a quarterly basis of the total profits. Then how would it be like? The numbers are not reconciling currently.

Okay. So 20% to 30% is on a stand-alone basis. And 20% to 30%, whatever the profit of a yearly basis, on that basis, we will announce the dividend.

Okay. Okay. Okay. Any reason for the stand-alone profit only considering only stand-alone profit?

That's what the Board has approved the policy.

[Operator Instructions] We have next question from the line of [indiscernible] Ghelani from Moneybee Securities.

Sir, my first question is regarding, with our current capacity, what kind of top line we can do? And what is our future CapEx plan? My second question will be on the procurement side. At what price do we procure on paddy during the season as compared to last year?

Good evening. Answering to the first question, whatever the growth plan we have for 2 years, we have -- as far as India is concerned, we have enough capacity to deliver that growth. The CapEx will be -- mainly going forward will be apart from the maintenance CapEx will be on the warehousing and maybe on some green energy on the solar power. But it will remain driven by guideline we have given.

Okay. And sir, regarding the procurement of paddy?

So procurement of paddy, the price is...

26.60.

26.60 is our average buying price of paddy.

And what was it last year, sir?

It is 5% above.

It's 5% above than last year.

Okay. Sir, another thing. Sir, our gross margins are better comparable to our competitor. Sir, but why doesn't that translate into the bottom line?

So we have a different business model that we -- in U.S.A. and Europe, we do stock and sell and all the distribution cost comes to us. So therefore -- so expensive side looks more.

We have next question from the line of Amit Vora from PCS Securities.

Congrats on a good set of numbers. A quick -- I wanted to understand what is this -- the company that you acquired, can you give some more numbers? What is the top line, what are the profits that will give us...

On the LEEV?

Yes, please.

LEEV, we have got a very good deal. So the company is valued at EUR 1 million, and we have taken a 30% stake. And with this stake, it will help our organic company to have a consumer-facing reach, and they have a very good distribution reach in the whole of the Netherlands.

No. What is the size of the company in terms of the top line EBITDA margins and profitability and for the debt on the book?

INR 4 million is the revenue size.

Okay. And what would be the profits, EBITDA margins and PAT? Is there debt on that book?

So -- no, there is no debt, and EBITDA is EUR 100,000.

We have next question from the line of Aditya Kondawar from JST Investments.

So this LEEV stake that you have got, is it only to be a raw material supplier to them? Or are we going to also explore getting the products here because we already have the Cuppa Rice here in India? So it may complement the Healthy Foods or the Ready To Eat portfolio. So any idea on that?

Yes, Aditya, that's also a thought that if these can also be brought into.

We have next question from the line of [ Aditya Mehta from GK Capital. ]

Yes. Congratulations, sir. Sir, my question regarding this quarter is that in this quarter, we haven't seen any impact of stocking up, right?

Sorry, can you repeat the question?

In this quarter number, around INR 1,100 crores of revenue, is there any impact of stocking up or not? Or is it normalized?

Yes. The impact that we've seen in these numbers is that certain level of inventory has come down in the trade and therefore, some of our in-market sales have been to that extent depressed. So as you asked the question, you could say that this quarter has normalized, whatever in quarter 1, quarter 2 may have been built up.

Okay. So we can assume INR 1,100 crores as a base going forward for our next upcoming years.

For the next quarter, yes, it will be a good base to assume.

And what is the like -- in terms of capacity utilization, what is the capacity utilization right now?

It is around 65% to 70%.

And what is the maximum that we can do?

We can do about 90%, 95%.

Okay. Then there's still lot of doing that.

Yes.

And now coming to EBITDA margins, there was -- the management has guided that we want to achieve 15% EBITDA margin in long term. So in what time line it is achievable?

So Aditya, we have said -- in the last 3 years, we said -- in the next 2 years that's the goal we are working towards.

Okay. Within next 2 years, we will be able to achieve 15% of the margins.

As I said, we will -- the idea is to improve our -- the margin, the return on capital employed. And that will be -- will go through EBITDA margin improvement and working capital efficiency.

[Operator Instructions] We have next question from the line of Keshav Garg from CCIPL.

Sir, how much does Iran constitute of our turnover? And sir, Iran is -- 35% of India's Basmati rice is going to Iran. So now that Iran imports are barred and until a breakthrough with the U.S. on functions is achieved, sir, so don't you think that there can be a glut in the Basmati rice market and then we might face inventory loss?

Good evening. The answer to your first question that LT Foods is not in the business of Iran. We do 0 exports to Iran. So as far as this Iran views is not a new view. So already trade knows. And accordingly, the price discount has been done. But Iran -- it's not that in Iran the goods are not going. In Iran, the export is continuing.

Okay, sir. So basically, you don't see any issue on that front?

No, no, not likely.

Okay, sir. And in the past historical experience, sir, have you ever faced inventory loss?

No. In some time, maybe, but not -- because all our buying is done in a very systematic manner. And all our business is branded business. So margin may have impacted, but not we have taken any inventory loss.

Okay, sir. And sir, also wanted to understand about the realization, sir, in the industry. Sir, who is enjoying the highest realization in domestic branded market as well as in export side?

Who means?

Sir, I mean, which company? Are we enjoying the highest realization? Sir, basically, it's another -- basically to just to give an idea about the brand that which brand is enjoying the most premium pricing in the market?

So like there are 3 rice plants in India. And we -- as a brand, we are in -- sorry, at par with competition.

Okay, sir. Sir, basically, in the domestic as well as in the export side?

Yes.

[Operator Instructions] We have next question from the line of Resham Jain from DSP Investment Managers.

Good results and good to see the margins trajectory continuing to remain very positive. So I have 2 questions. One is on the procurement side. How much -- have you completed the procurement? Or it will continue in the month of February as well? And in percentage terms, if you can say how much procurement is over from our side?

We have -- procurement is still going on, and we have procured roughly 65% to 70% of our requirement. Seasonal procurement has been done.

Okay. Okay. And -- so sir, what we have seen is a good reduction in debt last year also and that is continuing this year as well. So just from a debt perspective, will we see further reduction in absolute terms going into next year also? Because in terms of CapEx, our overall CapEx is not very significant in FY '22, as you mentioned. So what can be the actual level of debt, not the exact number, but in the bank, what can one see?

So the plan is to utilize all the free cash flow in 3 parts and dividend and the growth of the business and reducing the borrowings. So we will be maintaining the debt-to-EBITDA ratio, as I said, between less than 2. This is what we are working towards.

Okay. But any -- because your cash generation, for example, if I just look at the first 9 months, you have like used a significant amount of money to reduce your debt. And next year also, still there is no CapEx in whatever 20%, 30% dividend and that too of stand-alone?

So Resham, yes, we will -- as I said, we will keep reducing the borrowing in the coming year also.

We move to the next question from the line of Vibhooti Jain from Quest Investment.

I had a few questions from my end. On the Leev acquisition, so -- you mentioned that major buyers will be supplying inputs, raw materials to the company. So were you supplying raw materials earlier? Or is it a new business for the organic business?

So one, Nature Bio Foods will supply the ingredient to this company. And we'll also launch the new product of Nature Bio in the Leev brand in Netherlands.

Sorry, what are the new products that will be launched?

Sorry, I've not understood. This is a new thing, a new business to NBFL.

Okay. But it will be -- so it will be ingredient supplying that we'll be doing?

So we were not supplying before. We were not supplying before.

Okay. Okay. Got it. And what is the -- can you give a quantum of the size of the opportunity? So will Nature Bio be the exclusive supplier for those ingredients, which you currently have in your product portfolio? And what is the size of the business? If you can give some quantum.

We are in the process of finalizing the plan. So it will be soon freezed, and we will be clearly knowing that how big will be -- we will be doing that.

Okay. But the Nature Bio Foods would be the exclusive supplier to the company or...

No, exclusive means whatever the Nature Bio Foods can supply, they will be exclusive.

Understood. Okay. Okay. And -- yes, sorry.

For the super food category.

Right, sir. On the stake in previous ledger, Nature Bio Foods has a right to increase its stake to 51%. So is there a time line by when you can increase the stake? And is the valuation fixed for the same 21% or it will it be decided later whenever you increase the stake to 51% in Leev?

So valuation is fixed. So we have taken 5 years to -- for this option -- at the end of the 5 years.

Okay. Okay. Got it. Okay. Right. And so in the opening remarks, you alluded that the HoReCa business -- Indian HoReCa business is recovering now. So can you give a comparison as to at what level it is currently now as compared to pre-COVID levels, to get a sense as to how well it has recovered?

So we -- to get a sense of how well it has recovered in the peak COVID months, the HoReCa business was down to about 15% to 20% of this normal level. It is now restored to about 60% to 65%.

We have next question from the line of [ Arpit Jain from Samriddhi Capital ].

Congratulations, sir. Sir, my first question is...

Sir, I'm sorry to interrupt, Mr. Jain. Your voice is not very clear. Please use the handset, sir. There is some slight disturbance coming. Please use the handset.

Is it clear now?

A little better, sir. Yes, please go ahead.

So my first question is, I see your Europe business is contributing almost 14% of your revenues. I remember, sir, I mean, few quarters back, it was -- the margin was there at around almost breakeven, and the focus was there on improving the margins, and we had a management change as well and other setup. So sir, I just wanted to know how has been the margins in the Europe segment? And what is the guidance there? Sir, my second question is, we were also accelerating our growth in the snacks market, and we launched few products there. So sir, currently, what I see it is almost negligible in overall. So how do you look at that market going ahead, sir?

Okay. So I think Europe has positive PAT.

The PAT is INR 15 crores during this 9 months. So from a PAT of INR 2 crores last year, this year, the PAT is INR 15 crores.

So on the stacking, I hope that answered your Europe question?

Yes, sir. And just on the guidance, what is -- are we seeing more margin expansion there?

So going forward, the Europe business is doing extremely good. So we are expecting both in terms of revenue growth and margin growth. On the snacking business, I will request Mr. Vivek to give you a picture.

Yes. Sure. As we had mentioned that Kari Kari, that is our snacking entry, has actually met with good consumer response, we put it into unlimited sales. And the growth there is almost around 300%, 325% in 9 months versus 9 months. So we're now expanding that. So what we are seeing? So when you say that it's small, it's because it is still in limited distribution, but now aggressively that distribution is being expanded because the product has performed very well with consumers. And also, we are taking that into international markets. So we are very buoyant on the prospects of Kari Kari.

We have next question from the line of Sudhir Bheda from Right Time Consultancy.

Just I was listening to your call, say, INR 15 crores profit in the snack business. So that includes the Cuppa Rice as well as Kari Kari or...

INR 15 crore profit is in Europe business.

Europe business. Okay. So how this Cuppa Rice and Kari Kari turnover is going in [indiscernible]? What are the prospects for next year? What's the quantum you are looking at?

See the quantum that we are looking at for all our new products is that this will become a -- the combined 4 or 5 initiatives that we have put in will become a significant part of our revenue. Our internal target is in 5 years' time to have about 15% to 20% of our revenue coming from new products. And Kari Kari and Cuppa Rice are going to be big contributors to that. Again, as I said, right now, the revenue is coming from fairly limited distribution, but it is at 2% of our total revenue, we've done in the 9 months.

Yes, I've ordered the Kari Kari from Amazon. But the Cuppa Rice is still not listed on Amazon?

Well, last week, it has got listed, so if you were to now look at in Amazon -- and it's expanding. It's got listed in NCR and Pune, but it will soon be in Amazon nationally.

Okay. And you were supposed to -- you were -- what you said in the previous call that we have a pilot plant of Cuppa Rice. Now you want to expand to a full-scale plant. Is that being materialized? Or how Cuppa Rice is going on right now?

Certainly, pilot plant is not going to be able to meet the demand. But for now, we are testing the market with the pilot plant. And so it really is a scientific approach to new product development and new product capacity enhancement. But certainly, if all our assumptions are met, we will go to a commercial plant.

And last question, sir. Just a while back you said that we have seen a good growth in Europe because they have imported less from Pakistan and more from India. So if things neutralize, then our growth will suffer in Europe if they want to import more from Pakistan next year? Our company's growth I'm talking about.

I think the point is about the category in Europe. So when we look at a 70%-odd growth of Europe from India Basmati exports, so the point about switching between Pakistan and India was about category growth of Europe. LT Foods growth is dependent on our distribution, our brand and the strategies that we are pursuing. And the sourcing really does not influence that growth. But we've also enjoyed in the 9 months 105% growth because of the fact that some of these basics are now motoring and delivering towards the growth.

So our growth won't be affected, right, if they were to import more from Pakistan?

That is right.

That's right. And we -- as in Europe operation, we import both from India and Pakistan.

We have next question from the line of Amit from Care PMS.

This -- can you say that this Leev brand has been there for how long? And second question is on this -- there are other investors and where it's written that they have experience of Organic segment of more than 50 years. So what is their stake in the company? And as a company -- I mean, of course, it's very good for us that we've got a 30% stake and further extendable up to 21% in 5 years. So what was the reason? Because our presence in Organic segment is not that long. So if you can just...

Our presence in organic business is for the last 25 years, okay? We are doing this business since 25 years. And regarding this Leev company, they are there since 2010. What was your other question?

No, sir. What is the stake of the other 2 investors? Because if we have the kind of majority stake, so there are other 2 investors as well in the company.

So like 20 -- 21 is another partner. 21 is in the same other partner. So roughly 70% is with 3 partners.

Okay. Okay. Okay. So -- or the promoter is exiting, so to say, as in the -- the person who started the company?

Promoter is there. Promoter is there.

So he will be managing the business?

So he, and they have appointed the new CEO of this business. So he will be managing the business.

Okay. Okay. Okay. And what is the short-term and long-term debt on our books as on 31st December?

Sachin?

The short-term debt is INR 1,145 crores and the long-term is INR 225 crores.

We have next question from the line of Sarvesh Gupta from Maximal Capital.

Sir, one basic question that I had was, I mean, Q4 onwards, last quarter 4 of last financial year onwards, we have been operating on a higher base because of the COVID and the stocking that happened in the initial quarters of COVID, and now there is some impact because of the destocking. So what is the -- I mean, where do you see levers for the growth in terms of the revenues for the overall company? Because, again, next quarter onwards, it will start looking flattish, like we had. So quarter-on-quarter, we are not seeing any traction in terms of the growth. So do you see any levers in the near term, which can help you display that?

Yes. See, firstly, quarter-on-quarter also, if we see quarter 3, which we say has been impacted by the coming down of trade inventories, but we still have a 9% growth in quarter 3 versus quarter 3 last year. The second fact that we look at is that the base at which we are transacting in quarter 3 is higher than the base which was at pre-COVID, which really is the testimony to the underlying growth driving strategies that each market is implementing. And as we go forward, and we hope for that, that all the HoReCa and other business in India is going to come back. So when we look at the growth driving strategy, especially in our bigger geographies and organic business, coupled with the fact that during COVID we have continued to market and the increased consumer base that we have developed, which is being sustained, these are all going to continue. And as I said, there's some fairly good strong growth strategies in individual markets.

Yes. So on the HoReCa versus in-house consumption, obviously, during the lockdown more consumers would have tried your product. So if you can throw some light on the trends that you're seeing? Now that, for example, restaurants are open, so is increased consumption out-of-home? So in-home consumption, how is that getting impacted for you?

See firstly, in our business, HoReCa is accounting for about 20% of our total revenue. And the in-home consumption growth that took place, more than the in-home consumption, there have been some fundamental shifts that have taken place, and the consumers are continuing to cook -- they are continuing to experiment. And we as Daawat brand are very well positioned to be riding that trend and to be giving the consumer their needs for that trend. So we don't see any impact -- any downward or anything happening decline in the in-home consumption. The HoReCa piece will come on top of that. And we are expecting that the growth rates of our consumer business will continue. And we've actually had some very strong -- for example, our consumer pack business has grown more than the total business. And those sort of trends will continue.

Okay. Understood. And secondly, on the balance sheet side, now every quarter we are getting the impact of reduction in the debt, which is also helping us on the interest cost front. So now given that we have reached somewhat fairly comfortable or maybe in 1 or 2 quarters, we will reach much more comfortable levels with regard to the debt on the balance sheet. So then what is the capital allocation plan post that? Because -- would we continue to, a, reduce the debt continuously to make it 0? That can be one way. Or are there some other growth areas or growth plans that we have after 1 or 2 quarters? Because after that, basically, we'll be at a very comfortable leverage as well as return ratio.

Sarvesh, we are a growing company. And as we have said in the last call also, and -- that partly our -- the free cash flow will be going in reduction of the borrowing, partly to the dividend and partly to the growth of the business. So we are assuming that 50% it will grow in the growth of the business, 25% will be roughly in the reduction of the borrowing, and partly it will go into the dividend.

We have next question from the line of Resham Jain from DSP Investment Managers.

Yes. So sir, just wanted to understand on the logistic costs. We have heard and seen a lot of increase in container cost and the overall shipping costs. So any impact which is already there in quarterly numbers? Or it is yet -- you mentioned last time that we had certain long-term contracts. But just any further update on that side?

Resham, you've heard it right. The freight has gone very high, 3x, 4x the normal freight. And we are fortunate that we have a long-term contract till March end, some contract till April. So fortunately, we have not got any impact of this high cost in our margin. But next year, we are negotiating the freight, and we are evaluating our pricing strategy also accordingly to that.

And sir, roughly, how much it is if we go up just on a rough cut basis?

So roughly, it's -- I think for Europe and America, the freight will be 90% higher than the last year, 80% to 90% and above.

And will you be able to pass on this much cost to the customer over there? Or will it be gradual?

That will be -- that's what we are trying. We are hopeful that we will be able to pass on.

Okay. And just one bookkeeping question. If you can help with the absolute inventory number and the breakup between paddy and rice?

Resham, we'll send you an e-mail on the same?

Okay. Perfect.

I'll send it to you. Thank you.

We have next question from the line of Subhankar Ojha from SKS Capital.

So 2 questions. One, can you please share the absolute number of the European operations for 9 month to 9 month?

In terms of the revenue?

Revenue, EBITDA, PAT?

9 months, we have done INR 590 crores. And PAT, we had just told that, INR 15 crore is the PAT.

Okay. And secondly, give out some numbers with respect to your acquisition -- this recent acquisition, Nature Bio, 30% stake [Technical Difficulty] on the entity that you have acquired, I mean, in terms of revenue?

So what is the question? Sorry, we are not...

Sir, if you can share some detail about...

Yes. We have just told that the revenue is INR 4 million.

And that is a profit-making company?

That's a profit-making company.

We have next question from the line of [ Anoop Ramachandra from ANP Investments ].

You guys are doing exceedingly well even in this quarter. I have 3 questions. The first is, we're quite dominant in U.S. market, and we are performing really well in the Europe market. I just want to understand what the company's vision with respect to Middle East market?

For us -- please continue.

Yes, going forward, like, what's the company's vision or focus towards Middle East market?

Okay. So that's the question?

Yes, that's the question -- first question.

Okay. So we have 3 strong markets, which is India, America, Europe and some part of the world. As far as Middle East is concerned, we are looking forward, something -- the partnership we have done with the SALIC. So we are in the planning stage to have Middle East strategy, strengthen Middle East market.

Any plans to revamp the management over there? Or any of that plans over there? Like the way we did with Europe?

No, not immediately.

Not immediately. Okay. When do we get to see any traction with respect to Middle Eastern market? Any time lines?

So Middle East is divided in 2 parts. One is Iran, we are not interested; and lower Gulf, we are doing reasonably good. So in Saudi Arabia, the plan is to focus there.

Okay. What about Qatar and all, doing quite well is it over there?

These are -- they are small market. We call it lower Gulf.

Okay. Okay. So the -- any plan would be with respect to Saudi Arabia then?

Yes, yes.

Okay. No time lines as such?

We are in the process.

Okay. And the second question is with respect to the organic business. What -- how are we doing with respect to the plan to introduce or to market ecoLife as the B2C business?

So ecoLife, we have launched in some part of India, NCR. We are getting good response. And soon we will be rolling out in the other part of India also.

And what about the international markets with respect to ecoLife?

We are evaluating. We will do. We are evaluating.

So are we going to introduce ecoLife first in India and then in international market?

Yes. We have done international market. In some markets, we have started exporting. In U.S.A., we are doing in our brands, but in Royal, not in ecoLife.

Okay. So -- okay. Royal as in Royal organic, is it?

Yes, Royal organic. We have one portfolio of Royal organic.

Okay. And this is my third question. This is last question. With respect to the new product portfolio, I know I have lot of hope with respect to the Health segment as to turnaround. That quick cooking is doing quite well. Daawat, they have -- I'm hoping it's going to do well. My view is with respect to the Convenience segment. It may be very perspective. I just want to -- I just want the company to take the critical feedback of consumers before we go ahead with the full-blown marketing strategy with respect to Sauté Sauces or Kari Kari. Just a suggestion that's coming to my mind.

Thank you for the suggestion. I mean, it is very valid. Whenever you come in with new products, consumer feedback is critical. And one of -- that is one of the reasons why we've not gone full-blown national, that are in limited stores kind of test market to get some feedback. But really valuable suggestion, and thank you for that.

Ladies and gentlemen, due to time constraint, that was the last question. I'd now like to hand the conference over to Mr. Akhil Parekh from Elara Securities Private Limited for closing comments. Over to you, sir.

Thanks, Vikram. On behalf of Elara Securities, I thank all the participants and the management of LT Foods. In case if the management has any closing remarks, please go ahead.

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

Thank you very much, sir. Ladies and gentlemen, on behalf of Elara Securities Private Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.