LT Foods Limited (LTFOODS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q2 FY '23 Earnings Conference Call of LT Foods Limited hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kumar from Motilal Oswal Financial Services. Thank you, and over to you.

Thank you. Good afternoon, everyone, and a very warm welcome to LT Foods Limited 2Q FY '23 Post-Result Earnings Call hosted by Motilal Oswal Financial Services. . On this call today, we have management team being represented by Mr. Ashwani Kumar Arora, MD and CEO; Mr. Vivek Chandra, CEO Consumer Business; Ms. Monika Chawla Jaggia, VP Finance and Strategy; and Mr. Sachin Gupta, CFO. So we will begin the call with key thoughts from the management team. Thereafter, we will open the floor for Q&A session. I would like -- now like to request the management team to share their perspective on the performance of the company. Thank you, and over to you.

Thank you. Good afternoon, everyone, and thank you for joining us on our earnings conference call. 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 the 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 quarter 2 financial year '23. Our consolidated revenue for the quarter 2 financial year '23 was up by 31% at INR 1,732 crores versus INR 1,323 crores in quarter 2 financial '22 on account of increased sales from Basmati & Other Specialty Rice and the Convenience business segment. Our gross profit was up by 43% from INR 453 crores to INR 650 crores due to change in product mix and the partial price increase implemented on account of trade change. The freight cost was up by 660 bps that led to an increase in other expenses by 527 bps versus last year. The freight expenses are expected to stabilize or decrease from the forthcoming quarter. The EBITDA was up by 14% from INR 157 crores to INR 178 crores. The [indiscernible] was up by 17% from INR 111 crores to INR 131 crores. The PAT was up by 18% from INR 81 crores to INR 95 crores. The earnings per share stood at INR 2.80, up by 17%. The cash profit was up by 14% from INR 110 crores to INR 126 crores. Our consolidated revenue for 6 months financial year '23 was up by 32% at INR 3,352 crores versus INR 2,545 crores in 6 months financial year '22. This is on account of increased sales from the Basmati & Other Specialty Rice segment and the increase in Convenience business segment. The gross profit was up by 41% from INR 1,222 crores to INR 866 crores and the margins expanded by 241 bps from 34% to 36.5%. There was an increase in freight cost by 540 bps that led to an increase in the other expenses, which were up by 432 bps versus last year. The company also brought an efficiency at the manufacturing level. The EBITDA was up by 16% to INR 355 crores from INR 305 crores in financial year '22. The PBT was also up by 22% from INR 214 crores to INR 260 crores. The PAT is also up by 21% from INR 157 crores to INR 191 crores and earning per share stood at INR 5.6, which is up by 26% -- 20%. The cash profit was up by 16% from INR 215 crores to INR 250 crores. Now I would like to highlight the key ratios of our balance sheet. The debt equity ratio stood at 0.5x. This is to reiterate that the 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 between 2 to 3x, which stood at 1.6x. Current ratio has also improved significantly to 2.08 from 2.04 last year. The return on capital employed stood at 16.9%. The normalized return on capital employed on account of insurance claims stood at 17.5%. The return on equity stood at 16.2%, which is up by 64 bps and the interest coverage ratio also improved from 7.5 to 8.6x. On the cash flow front, in 6 months financial year '23, the net cash generated from the operations was INR 84 crores. During the year, the company made investments in the fixed assets or our capital advances amounting to INR 70 crores and investment in the JV with Golden Star that we have done in the U.S. that is amounting to INR 65 crores. Now I would request Mr. Ashwani Arora, the Managing Director of the company to give you a strategic update on the business. Thank you, sir.

Thank you, Monika. Good afternoon, and thank you for joining us on the call today. Happy to share that the company delivered a record growth of 32% backed by expansion and distribution network and strong marketing programs. In India, our retail outlet reach increased by 40% and stood at 176,000 outlet. As per AC Nielsen, our market share in India expanded by 180 bps and stood at 28.5%. Additionally, as per Kantar Home Panel Data, Daawat consuming household also increased by 36% on a year-on-year basis and today stood at 37 lakh household. We are optimistic on the outlook of the overall business. The category is growing, and we are well placed to capture the growth across all our business segments. With the combination of our strong brands such as Daawat and Royal, global supply chain hubs, wide distribution network in India and across geography. Going forward, the company will continue to maximize shareholder return by keeping our focus on profitable growth. Other enablers of growth such as digitization and transformation and ESG are being well executed and are going in line with strategic goal of organization. Thank you. Now we'll open the session for question and answer.

[Operator Instructions] We'll move on to the next question from Devvrat Himatsingka from Augmenta Research. Since there is no response, we will move on to the next question from Amanjit Singh from Oculus Capital.

Yes. Am I audible?

Yes, Amanjit.

So my first question is, so we've seen on a sequential basis, that is Q1 to Q2, an improvement in the gross margin in the Basmati & Specialty Rice, but the EBITDA margins have fallen slightly by 50 bps. So what is the reason for this?

So basic reason for the drop in the EBITDA margin [indiscernible] logistic cost during this quarter has increased. So if we compare it with the immediate preceding quarter, there is an increase by 2.5%. And if I compare it with the year on performance, it has increased by 6.6%. So this has led to my decrease in the EBITDA margins this quarter.

Understood. Secondly, so there were certain news articles on priority equity evaluation and our fundraising. So could you help us understand what kind of proposals is the Board considering? And what are -- what should we watch out for it?

So there was a strategic proposal that Board is evaluating it and seek more information. So maybe in the next coming Board meeting, they will decide.

Okay. But was it a complete buyout of majority? Or is it like a minority stake that they're considering?

I can't disclose much, but yes.

We have our next question from the line of Siddhant Dand from Goodwill.

I just wanted to get some guidance on how much Basmati have we procured compared to last year? Secondly, I wanted to understand why our margins are lower than the largest player in the industry. Is it because we age our Basmati rice less? And are we getting any ForEx gain from or benefit of ForEx because of our export market currency becoming stronger?

Okay. So first of all, I will answer your first question. The procurement season has just started roughly 15 to 20 days back. It was late because of the heavy untimely range. So the procurement is in progress as per plan. So we will be achieving our procurement targets.

So how much is it over last year in volume terms?

Okay. So you wanted to know the crop size or our data?

Yes, just the volume target. Last year, let's say, we preferred 100 [indiscernible].

For the total requirement, we have sourced around 15% to 17%. So answering to your second question. Second question was around margins.

Margin.

Margins. So we just explained our gross margin has improved, but the logistic cost has gone up. And strategically, we were not keen to pass on this kind of cost to the consumers as this is -- we believe that this is a kind of temporary and the freight trade will settle down soon.

Okay. And whether we're benefiting from imports, ForEx gains or something?

Sorry?

Because of our currency weakening, are there any benefits in the export market?

Yes, yes. So it is becoming -- if Indian currencies devalue, India is becoming more competitive. So that, of course, is helping us in our business.

What is that share of export?

In terms of -- you need to say, branded in USA, we have 50% market share. In USA, we have around 15% market share. So India, we have 28.5% market share. So we export to 65 countries. So if you talk about the branded rice which is owned by India, I will state, but we have a remarkable good share here.

And what is the share of exports of our sales? Like in our top line, how much comes from exports?

In the past, Martin, in the specialty segment, 70% of our sales comes from exports.

We have our next question from the line of Anand Venugopal from BMSPL Capital.

Yes. So could you help me understand what is the current state of the Basmati rice industry? And how are prices for Basmati rice holding up? And what is the outlook for Basmati rice prices going into 2023? And lastly, what are the demand factors that are leading to this outlook? That's all from my side.

As far as Basmati rice's industry, it's doing very well. It has become consolidated, stable, doing pretty well. On the pricing front, as compared to last year, the opening price is roughly 25% to 30% higher as compared to last year. And this is mainly because of the strong demand. And on the supply side, there was a constrain. But this year, the crop is better. We are expecting roughly around 12% to 15% higher. But demand is -- will pick up the success by and the prices, we believe that, will remain higher than last year.

We have our next question from the line of Abhishek Maheshwari from SkyRidge Wealth Management.

Am I audible?

Yes, Abhishek. Yes, very well.

Yes. So you were able to deliver a very good sales growth. And we just also know that the current harvest as we just begun. And how are you seeing the crop? Do you think the procurement prices might come down a little thereby helping us improve our gross and profit margin a little more in H2?

So Abhishek, because your voice was not clear if I'm able to understand your question. You're right. The crop is, as I told, is in the overall Basmati, all Basmati. It is 12% to 15%, we believe the higher production is there. But there is a strong demand across all geography in the world. So prices are roughly 25% to 30%. It depends on grain to grain higher than the last year. And we believe that, one, because of this weaker rupee, there will not much impact on the consumer price on the export market. And India, we have already started passing the hike in the consumer and this is well accepted. So on the gross margin side, we will be able to maintain the gross margin like this year.

Perfect. And secondly, regarding packaging and freight costs. Sir, in freight costs, the increase was mainly due to road logistics or Asian logistics?

The ocean freight, yes.

Sir, so ocean freight, we are hearing that it has started to moderate considerably in the last few months. So do you think H2 should be better EBITDA margin-wise?

Yes. So for the last month, it has started softening. And the impact we will see in the coming quarters.

Okay. Is it a substantial impact or just a little?

I think little not very substantial. It has softened, but not to the pre-COVID level or earlier [indiscernible]

Okay. And sir, packaging costs?

Packaging costs, stable, whatever the inflation has come. So packaging cost is not coming down. It is in the almost same range.

Sir, earlier your noncurrent borrowings...

[indiscernible] please?

Yes. Yes, Abhishek.

Yes. So regarding the noncurrent borrowings, they had increased by around INR 100 crores. Any particular reason for this?

Sachin will answer.

During this year, of course, this half year, we have actually made an investment in one-off -- we have acquired one-off -- one in joint venture in JV in U.S. that was Golden Star. In that, we have made an investment. That has related an increase in our borrowing.

Okay. And 2 more questions just. And any -- since your working capital experiments are very high -- do you think -- what do you think the rate hike impact is going to be in coming quarters? Will it be a substantial impact or just marginal?

It will be -- there will be an impact, but it won't be a substantial impact. It will be the margin impact by cost. Cost of the capital will increase. That is for sure. currently, it is at 6%. It will be increased to another half.

Okay. And sir, one last question. How is the demand coming from North America and Europe at the moment? Because there are some fears and supply chain issues there?

So demand is good as this, as such you said, 70% our revenue comes from export and last H1, we have delivered 31% growth. So it's a healthy growth, both in the Western world, Europe, America and India.

So any new geographies you're entering right now?

We are almost present across the possible area where the consumption of Basmati can be consumed. So we are available, yes, in all the major consuming, yes.

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

And congratulations on achieving that 2% additional market share in the domestic market. Sir, just one question about this Golden Star. Now we have 51% controlling stake. So how are we accounting for it? And so for example, what growth that we have seen from INR 1,300 crores to INR 1,700 crores? So what portion is contributed from that Jasmine rice business?

So as far as the accounting is concerned, we are doing equity method of accounting. In that, we are just recognizing the share of profit and that is accounted for in our financial statements in the 6 months financial statements that we have disclosed.

Okay. So the top line -- I mean so sales figures are not accounted for in the current numbers that we look at it.

No.

Okay. Okay. Okay. And sir, secondly, about this domestic growth, significant. I'm sure there will be some significant steps that were strong number of outlets as well as distributors have been increased. So what is the plan for going forward for the next year or so?

Yes. Vivek?

What we are seeing now is a result of some very fundamental work which has been done in our route to market and in our brand building over the last 2 years. And that is now playing out in terms of increased home penetration, in terms of increased distribution. And these programs that have been put in place, they still have a lot of headroom. So going forward, these sort of growths in the fundamentals of consumer acquisition and retail store expansion, we believe we will continue to see, and it is being supported also with the with an increase in the category demand in the country.

So we have more marketing spend to do? Or this has kind of fundamental steps have already been taken, as you said?

No. The marketing spend is a continuous process. In fact, it's a brand that we will keep supporting and building. And our marketing spends are higher than what we did last year and in response to business, we will adjust and grow, but I think we will keep growing the marketing in relation to the growth in sales.

Okay. Okay. Okay. On the freight cost, sir, just a couple of points. So basically, what we read in the newspaper or the freight index that we track. There is a significant reduction already in place is what we understand. So why the same has not flown in the real numbers, which you are indicating that it has just started softening from last month. And what we see from the articles or the numbers indicates otherwise. So if you can just throw some light on that? And second, while freight cost, I understand is more on the export side or on that side. Our domestic margins are also not very great. I mean despite increasing such a sharp domestic business. So can you just clarify on this point?

Sure. So as far as the steam freight, as I said, it kind of started softening for the last month, and it will have a positive impact in the coming quarters. Regarding India, India, the margin has improved for us.

Okay. So when I look at stand-alone numbers, I understand stand-alone, we'll have export numbers as well. But when I look at stand-alone, there is no improvement in the operating margins.

Yes. But in stand-alone, there was a -- you're seeing because it's a mix of trading also we have done with China. So that's a mix of -- but as far as branded business is concerned, we have improved margin on that.

Okay. Okay. Okay. And sir, this China contribution, what would that be in terms of...

China will be how much?

In this half year, the China was contributing INR 140 crores of [indiscernible]

In the H1, you are saying, not in the Q2.

H1, I'm saying.

Okay. Okay. Okay. Fine. Sir, in terms of this pipe, whatever freight costs that are being passed on. We have done it partially only. Our brand, whether it's Royal or Daawat, it's such a strong brand. Where are we not able or we don't intend to pass on the full freight because we are at quite a fag end or the lower end of the margins that we have been in our history.

So as I said in the starting that there's -- Daawat and Royal, very, very strong brand roles a 50% market share. But being leader, we have a responsibility also. So we have to see which cost is sustainable, which is not and we don't want it to be volatile in consumer pricing. So we believe that the stream of freight will come out and this is -- we have to take the hit documents of whatever that temporary has gone. So whatever was sustainable, we have passed on to the consumers.

Okay. Okay. Okay. And sir, in this Convenience -- Health and Convenience segment, when do you plan to break even?

I think at this point in time, the real question is that this is the -- we proposed to make this a significant part of our business. So really, it's more about expanding that range. There are, for each of the projects. So there is individual P&Ls with breakevens projected that have been made, but our current focus is for them to become meaningful and significant part of consumers' lives, which then translates into a good share of our revenue. And it will follow the pattern that you see with most consumer companies with product launches.

Okay. Okay. Okay. So we have some pipelines with new products, say, in next 2 quarters or so?

Yes, we do. But we've actually just launched a very exciting product with Biryani Kit, which is gaining very good consumer acceptance. Kappa rice continues to build. So if you were talking of the next 1 or 2 quarters, our focus is going to be on building these India and international and to continue to build the strong position that we are acquiring with RTH that it needs into the U.S.

Okay. Okay. And can you give this HoReCa segment growth, how things have been because, of course, one year was very bad. So now how HoReCa segment is doing and what kind of growth have we seen or some contribution that is there as of now?

HoReCa segment -- can you give certain data? As compared to last year, mostly growing more than 50%, I think, but we will have exactly...

HoReCa segment now is contributing 19% of overall revenue. So it has -- and it has grown by more than 15% from the last year.

15%, 1-5?

Yes.

Okay. Okay. Okay. Any number? I mean, what would be the sorry, 19% you said already. Okay. Okay. Okay. Fine. And sir, lastly, I understand that this thing or whatever acquisitions or whatever. So I'm not getting into that, but what I want to know from you is you have been so far guiding of 10% to 15% growth and of course, some margin expansion that you've already indicated in past multiple times. So now that we are planning for some fundraising and presuming we already generate INR 500 crore, INR 600 crore annual cash flow. So we are thinking something big or something higher target of growth rate. So what has changed that management growth target and why if you can just share on that part?

So still we are maintaining 15% growth year-on-year and the margin expansion. This is -- I can't disclose it at the moment, but this is very strategic in nature. So the unfolding will happen and then it will happen.

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

So a few questions. So first one is on organic piece. I think there has been a material dip in the revenue run rate, which we are doing since the last few quarters. So is there any issue there or there's like a one-off and will come back from next quarter onwards?

Resham, this is a one-off. It will come back, and the reason is there was a big shipment which was in spending and we can load in this quarter. So this will come up with -- it will be, again, on a full year basis, we will be in double-digit growth.

Okay. And what is that we are looking at the organic business, sir, in terms of let's say, over the next 2, 3 years? Are we going to maintain the run rate which we have shown over the last 3, 4 years? Or now -- on a higher base now, it will start moderating?

In higher base, it will moderate for sure. It will not be in the range of like 30%, 35% that we have delivered in the last 2 years. So it will be in the double digit, but we are very bullish on this business. The idea in this business is now more focused on the margin expansion in the organic business.

Okay. Understood. And also, sir, on the new product business, which Vivek has spoken about. Sir, there, a bit now, I think a few months into this new product launch, specifically Biryani Kit, Any color on what is that you are targeting? Because I think you are doing domestic as well as exports and any focused kind of market which you feel can be scaled up from the current levels? And what will be the distribution approach in this business, specifically the new product business, Biryani Kit and Kappa rice?

Right. So of course, for each, there is a different RTM that is planned. So it's talking about Biryani Kit, which will be in broader distribution. But the initial approach for these is really for us has been to test the waters and we've done that through going into e-com and then expanding into the top supermarkets. So as of now, that's really what the availability is. And it is from here that we are getting very good traction. In some of the e-coms, we've become new product top sellers in the way they measure and they record onto their own platforms. With this -- once we've got a certain amount of proof of concept, we'll start to be expanding this into the total supermarkets and the top grocery. So we will be following a top-down approach when it comes to this Biryani.

Okay. Sir, just one related question on the new product business. If you look at the gross margins of the new products, which are considered to be more value-added products. And if you compare it with the other businesses, Basmati and organic, the gross margin seems to be much lower than some of the other categories as well as if you compare it with some of the other food businesses, the gross margin seems to be much lower, 30% odd gross margin.

Right. Because I think what you're seeing here is a blended gross margin. There is a fairly large contribution in here of Daawat Sehat, which is in the health both doing -- it serves the social cause of addressing malnutrition and severe acute malnutrition in the country. But the point is that, that tends to follow more like the Basmati margin, but has a significant contribution. But the other products are all following the margins, Mr. Resham, as you talk about food, consumer branded, those -- the other product margins are in line with that.

No, actually, this is lower than Basmati as well, like 28% gross margin in this quarter. It was 33% in the last quarter. Last year, I could see this it was 36%, 37%. So constantly, this -- typically gross margin in these businesses, we have seen at around 50%, 60% and more -- but like 32% -- even 36%, 37%, which was on the higher side last year, the number seems to be too low for a consumer product like this.

I think you need to see the segmental margins. So the movement that you are seeing in the total are a function of how the contributions of the different products are moving. But individually, they are robust. So some of the newer products that you spoke of are going to be in the 40 ranges.

Okay. Because it's there in the presentation. So maybe I don't know.

It's a fair point. But I think, as I mentioned, it's a blended margin that we are seeing. So that's sort of clouding the picture, but the fundamentals which you are alluding to are all there and the segmentals will show that.

Okay. Got it, sir. Sir, the last one from my side is on number of households. I think you mentioned 37 lakhs or something. So what is the target kind of addressable market for us over here? And what is the approach we are taking here to get to that total addressable market?

See, the total addressable market, in a sense, is the total households. Now Basmati consuming households are about 1/3 of the total FMCG consuming homes, but this is growing at a double digit. So we're sort of not working on an absolute target. Our target is to grow at a rate which is faster than the growth rate of the category. And that really falls back into the fact that we want to keep growing our market share quarter-on-quarter. So our target, basically, when we measure these numbers and report these numbers, these are more evidence of the successful marketing and distribution campaigns that -- I mean, not campaigns but strategies that are in place. And these are the growth in shares, the growth in homes, the growth in outlets are numerical measures of the success of those strategies. You just run addition to the point I made earlier about this whole blended. As we bring in new products, there is a fair amount also of sampling, which is done free of cost to gain new users. And if in a quarter, that's quite heavy, that can also bring down but treated more as a marketing expense than a margin erosion.

We have a next question from the line of Amit Agarwal from Live Investments.

Sir, we made [indiscernible] leads.nu in January 2021. Right now, if you go through that website, it's just a one-page website. And now they are links are moving to Instagram...

I'm sorry to interrupt, your voice is breaking.

Hello? Is it clear now?

Yes, please go ahead.

Sir, we bought a [indiscernible] leads.nu in January 2021. Right now, if you go through the website, it's just a one page website, and all the links lead to Instagram. As far as I understand, this is that investment. Can you comment on this?

The investment is only EUR 200,000, which is equivalent to INR 250 crore. Just a minute, if I have understood it correctly. Let me understand somewhat. Yes. This is not debt investment. Also, we have done a small investment to lead as a brand is doing good in the neither line and they are adding the product also. So the investment is not that -- although it's a small investment, it's -- the business is working and doing good.

Just one thing, I thought you say e-commerce side, that is e-commerce venture.

[indiscernible] just charged me. If you have gone into the wrong website, the right website is leads.nu. Very impressive. It is -- it has opened in front of me. And if you can see the kind of the product range they have, you will be amazed.

Anyway, another question is 74% of profit comes in consolidated balance sheet, right? But if you go through the annual report, then it seems none of the subsidiaries are so much profitable. And only one of them is making INR 70 crores of profit around about. So can you elaborate on this?

What is this?

Sales from International Markets [indiscernible].

No, I think let us at understand your question right and then we will answer.

Shall I repeat the question?

You can repeat the question, but...

70% of our profit comes from consolidated balance sheet, right? But if you go through the annual report, then since most of our -- most of the subsidiaries are -- none of the subsidiaries are so much profitable. And one of them are making INR 70 crore profit per annum. So where is the profit coming from? In the course of consolidated benefit?

My -- all of my subsidiaries are making profits. You need to check the data and apart from LT Foods, that is the main company. We have in India, Daawat Foods, that is also main.

I think of is making INR 70 crore profit. That's the most profitable besides our standard company.

So apart from that, there is a U.S. company as well. That is LT Foods Americas, that is also making profit. There is a...

Can you elaborate how much ?

So -- but we may do -- so we use 10-year query. We will also -- but I can tell you with all the subsidiaries are making profits. But we will -- if you can...

No, no. I understand one of them was the INR 300 crore profit. The profit on consolidated valuation is huge.

Your voice is also cracking and we could not hear you properly.

You use your handset, please, Mr. Agarwal. Your voice is cracking.

I am using handset only.

I want to refer to Page #319 of the last year's annual report to go through the details of the profit that [indiscernible] is making. So it's very evident that all the subsidiaries are profit-making subsidiaries. Please refer [indiscernible]

But that is fine, but none of them is making -- adding up to INR 300 crore profit. That's my question. No profit is around about INR 300 crores. But if you add up all the companies, the different subsidiaries, that's almost INR 80 crores to INR 90 crores.

No, no. You can't. We will give you the breakup of that and that will be added up. So there is an addition that only -- that is amount. You can give us your e-mail ID to our IR, and they will provide you the company-wide profitability and it [indiscernible] whatever that has declared.

And my third question is, you have EcoLift products. Sir, I try to stretch them on online. It's not available in India is currently out of stock. And same goes for Europe. Europe is almost impossible to find any website selling EcoLift products. So we are just old basically.

We always say that our organic business, majority is B2B business and it is exported to Europe and in Africa. We sell organic products, but that's a very limited in the northern part of the India. And in U.S.A., we sell organic products under the brand name of Royal. So if you go to the first co and you see Royal organic Basmati, you will find it.

And my last question is a big basket at their own private label. Big basket oil. So are we in partnership with them? Because the brand is quite similar to our brand. Are we in partnership with them, the Biryani rice.

There is no partnership. But that's an IP issue and our legal department has taken up with them.

So we are not benefiting from Royal as such?

No, no, we are not. We are not.

We move on to our next question from the line of Aman Madrecha from Augmenta Research Private Limited. Since there is no response, we will move on to our next question from the line of Vipul Shah from Sumangal Investment.

Yes. Congratulations for good numbers, sir. My question is in -- previously, you used to share all the volume details for domestic and export business. And in domestic also, you used to segregate it between rice and non-rice. So that practice stopped. So I...

We have done strategically because of competitive reasons. Yes. So we will share all relevant data where the investor votes. So we have accordingly designed the presentation.

Okay. Okay. So if I send the mail, will I get those details or you stop that practice?

So we please send the mail. So our IR department will get back to you. .

And sir, what is the status of our court case, it is pending since a very long time. So any update there?

That's very unfortunately, the Indian vehicle adjusted. But we are expecting by the end of the year the first court verdict will come.

And sir, can you comment on the performance of our European business. So what is the turnover and what is the profitability?

Sure, it. The Euro business is doing extremely very well and we are using the full capacity. And this year, we will be, during full year basis, more than EUR 100 million, which is equivalent to INR 800 crores profitable business doing very well and growing.

It will be EBITDA positive, sir?

Yes. PAT positive.

PAT positive. Wonderful. Yes, I'll send the mail, please, if possible, please share those details.

Please do that. Thank you, sir.

We have a next question from the line of Vincent Andrews from Geojit Financial Services Limited.

I have only one question. Most of my questions have been answered. See -- first of all, congratulations for the good set of numbers. The -- you have grown around 32% in the first half. So if I can ask what would be the growth you're expecting in the second half and next year on that because if we see for the last 2, 3 years, the revenue growth was 12 percentage in FY '21 and 16 percentage, 17 percentage around in FY '22. Suddenly, the growth expanded to 32% in the first half of this year. So what drove the growth on the distribution strength or anything else? And what would be the growth you -- if you can guide for FY '24? Only that cost?

So on 23rd ending, we are expecting on full year more than 20% growth. And what is...

Yes. I think FY '24 is still under discussion with the individual businesses because I mean, there are things which are working strategically right for us which are driving this growth. But to sustain this level of growth, we will have to work with individual businesses and on their plans. So our AOP process and the 5-year planning process is currently underway -- and only once we've completed that, will we have a picture for FY '24.

Okay. So if I can ask, see the sudden jump in the growth this year from the last 2, 3 years if you compare. So is it the distribution expansion only cost this.

Distribution expansion has certainly played a role, but it is really 3 things that is driving that growth, whether it is in India or in the U.S. of any of our major markets. So 1 is distribution, but the second is that there is a very sustained and consistent marketing and marketing program, which is being delivered in all the markets, which is gaining for us new users and is helping in the retention and trial generation. And the third driver has been the fact that the overall portfolio of Daawat and Royal is getting strengthened as more and relevant convenience and health products come in the market, which then feeds also into the main brand. So really core adjacencies and distributions are all coming together to give this growth and not just distribution, Mr. Vincent, as you were referring to.

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

So just with respect to the EBITDA margin, just coming back to the freight cost. Can you give me the number with respect to freight cost as percentage of sales in current quarter versus last year same quarter?

So this current year quarter, my logistic cost is 13.7%. If I compare it with the immediate preceding quarter, it was 11.3%. And if it is compared with a year-on-year quarter, it was 7.2%.

That's a big increase. And with respect to the current rate, which means quarter 3 trend, where do you see this number settling at?

Subhankar, this is the peak. As you have said, this is a peak one. So this will be lowering in the going forward quarters. So this is as we consider it as the peak.

Okay. And sir, with respect to this presentation -- I'm sorry, presentation. So obviously, we set a EBITDA margin target of 140 to 150 basis points, but that's a 5-year target for us. Can we -- I mean, the request would be, can you put a number -- absolute number with respect this is what we aspire to do 4, 5 years down there because right now, we are doing 10%. So current quarter, taking as a benchmark, I mean we are basically talking about a 12% shut-up? Is that our aspiration or do we intend to do much better than this?

So what is our aspiration is to do 13.5% EBITDA.

13.5%. Okay.

13.5% where we are working towards.

Okay. Okay. Yes. So I think that can be added to this slide because basically, it keeps changing, obviously.

But we will do that. We will do that.

Yes. And you did say that on the organic part of the business, so there was basically a treatment delay sort of right, which is why the revenue declined.

Yes.

We have our next question from the line of Aman from Wealth Management.

Am I audible?

Yes, Aman. Yes.

Congrats on the great set of numbers. Sir, wanted to understand from the prices which we were [indiscernible]

Aman, your voice -- can you repeat your question.

Yes. Now is it clear?

Yes.

So we are seeing, sir, on a month-on-month basis, Basmati prices have came down 12% to 15%. So is it seasonal? Or is it the demand which is softening as of now? Can you help us play it on this part?

Aman, I don't know your reference like we do in the market, the prices are at least [indiscernible]. So as last year, the new sourcing has opened 35% to 30% higher than the last year.

Okay. Okay. Got your point. And second question was from the insurance recoverable the amount which we have classified in the noncurrent assets. quarter? -- you've said that case is also pending in civil court. If you can help just clarify of that amount.

So the amount standing in my book is INR 134 crores. So that is [indiscernible]

Okay. Previously, you have written off of INR 44 crores also, which was...

So it was 4 years -- 4, 5 years back, we had written off INR 44 crores. So my original insurance claim was INR 178 crores. So -- but the aim for which we have to receive is that is INR 178 crore only. So we have provided for in our books of accounts to INR 44 crores.

We have our next question from the line of Vihang Subramanian from Zaaba Capital.

Just wanted to know how does export realizations get determined for us in the Basmati rice segment like to local production dynamics come into play?

Vihang, can you repeat your question, please? Like you meant to say how the Basmati price discovery happens?

Correct. Exactly. Like for our export market. Because I just read somewhere that in India, a lot of the production was curtailed and because of that price increase has happened and your international growth also looks really good. Just trying to put things together, like is it because of that? Or am I missing something?

If you see with the Indian bus as a kind of in the past, is a monopoly 80% of the specific products happened in India. And the price discovery happened on the similar size of the crop. So if the crop is short and the prices got strong and crop sets the prices got softer. So this is the fundamentally how the price discovery happen. So Pakistan has a role to play, but that's only 20% of the production. So on the demand side, consumer is what we have seen historically. The consumer is like in [indiscernible] price to the Basmati. So the price increase has not impacted any demand.

So there has been a price increase, though this year in FY '23?

Yes, yes. Yes.

And could you quantify how much like how much percentage price increases come through for...

Like as compared to last year, the sourcing price for Basmati has gone up. It depends on variety to variety, 25% to 30%.

Sir, just so price increase has been 25% to 30% for this year then for FY '23.

On the pad level, yes. On the raw material level.

Got it. And sorry, I missed the starting of the call. So apologies if you answered this question.

No, no. It's perfectly all right.

Organic segment. Can you just talk a little bit about the growth in the organic segment? I think the growth has seen a bit of tapering off? So what has really impacted that? And could you just give some guidance for what should one think of for growth in the organic segment?

Sure, we are. So if you see the H1, we are flat. And the reason is that the shipment got delayed. But if you will see year-on-year basis, the growth will be double-digit. Where, as you know, if you see the historically 3-year CAGR is 36%. I hope that answers we have your answer -- question.

We have our next question from the line of Arpit Shah from Stallion Asset.

I just wanted to understand your revenue guidance is guiding of 15% revenue growth for FY '23. But if I see our first half, we have already delivered more than 30% revenue growth. So what is actually stopping you to at least, let's say, 20%, 25% plus revenue growth for this year?

So that's because we have given always give the volumes kind of this year, volume and value both has grown, and that has led to the 32% growth. And full year basis, as I said, we are expecting this year to close on full year basis more than 20% growth.

Got it. So typically, H1 is on the lower side for LT Foods. It's around 40%, 45% of sales, and you have done close to INR 300 crores. So is it good enough to say that we'll be able to, let's say, across INR 7,000 crores revenue for this year?

Under INR 7,000 crore, I would say.

It will be around INR 7,000 crores.

Around less than INR 7,000 crore.

Less than INR 7,000 crore.

Little less than.

Got it. And can you just bifurcate the revenue growth, let's say, in volume, price realization and currency tailwinds, which you would have got in the first half?

Sorry, could you repeat that, please? What bifurcation are you -- volume growth?

Yes. Yes. Volume growth, price realization growth, the realization growth and the currency tailing that you have got due to the dollar appreciation.

So my volume growth in this half year was 15%. And my realization growth during this half year is around 18%.

I missed your volume growth side.

Volume is 15%. 15% growth.

Right. Is for the first half, right?

Yes, it is in the first half.

And do we have typically any hedging that we do?

Yes, we do the hedging, and that is as per the policy, which we have done. So we do have forward in forward hedge.

Got it. Got it. And just coming to the strategic tie-up or the private equity investment that you had announced a couple of days back regarding an announcement. I just wanted to understand, would that be -- would that happen at the company or a subsidiary because we have seen in just 2 years back, we have announced a deal where a shareholder at [indiscernible] which was our lone subsidy, where we own 70% and 30% is now owned by Saudi Arabia, 1 of the Saudi Arabian funds. So just wanted to understand, would the money be coming to the company? Or would that money, let's say, be going to the promoter family? What do the big structure look like broadly?

Yes. I can't discuss it is on the Board level. I can't disclose at the moment who is coming and the name of. But I can say whatever will happen will be good for the company. And as I said, will unfold you on this on next call, maybe.

So do you expect to conclude this tie-up for this investment, let's say, by this quarter? Or you think the Board would require more time?

It's -- it will -- I can't give you the time line, but whenever it will, you will get the information here.

Perfect. Perfect. And just wanted to understand, let's say, that the Middle East is very much limited. And if you see 1 of our competitors who was starting a distributor had opened up a lot of space for, let's say, or players in the market to capture a bit of market share. Are you thinking on those lines?

Sorry. What did you say? Can you repeat that? Can you maybe a little slow?

Yes, yes. So in the Middle East, one of our competitors was struggling due to a change in the distribution.

I can't comment on competition here.

No, no. I just wanted to understand your perspective, how you are looking to gain any market share over there because they are struggling?

No, no. Saudi is a very big market, 3 million tonnes and we are doing good. So I can't comment on further that year.

Got it. And just commentary just last part on the freight expenses. We have reported on before this quarter. So where do you see this number, let's say by FY '23?

So as I stated, this is the peak number. So what we are expecting that this number to come down it all depends upon the freight, which we will be getting in the different territories. So of course, this was the peak, which we have achieved. So this is.

So whatever seasons you would have, let's say, in H2 FY '20 and are all focus EBITDA lineup?

Because we have passed on the freight costs. And of course, that will have an effect on that data.

Thank you. I would now like to hand over the call to management for closing comments.

Thank you, everyone, for your continuous support. Hope we were able to address all your queries. Should you have any further questions, please feel free to contact our Investor Relationship team. Thank you, and look forward to see you soon. Bye.

Thank you. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.