LT Foods Limited (LTFOODS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to LT Foods Q2 FY '25 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Ms. Lavita Lasrado. Thank you, and over to you, ma'am.

Thank you. On behalf of Mirae Asset Capital Markets, we welcome you all to the Q2 and H1 FY '25 Results Conference Call of LT Foods. We have with us from the management team, Mr. Ashwani Kumar Arora, MD and CEO; Mr. Sachin Gupta, CFO; and Ms. Monika Chawla Jaggia, Chief Corporate Development Officer. We will begin the call with brief opening remarks from the management team, and then we will open the floor for the question-and-answer session. I would now like to request the management to share their perspective on the performance of the company. Thanks, and over to you, Ms. Monika.

Thank you. Good evening, everyone, and thank you for joining us on our half year and quarter 2 financial year '25 Earnings Conference Call. Before we start with the key highlights of the quarter and the half year ended 30 September 2024. I would like to highlight that certain statements made or discussed on the conference call today are forward-looking, 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 exchange. A transcript of this call will also be made available on the Investors section of the company's website. I would like to begin by taking you through the highlights of the half year financial year '25. Our consolidated revenue for the first half increased by 12% to INR 4,222 crores versus INR 3,781 crores in H1 of financial year '23. This is on account of increased sales from the Basmati and the Specialty segment as well as increase in the Convenience and Health segment. Gross profit stood at INR 1,428 crores, and the gross profit margin expanded by 160 bps from 32.2% to 33.8%. EBITDA increased by 7% to INR 514 crores compared to INR 479 crores last year. EBITDA margin was 50 bps slower at 12.2%. On account of increased rate. The profit after tax was higher by 4% at INR 306 crores versus INR 295 crores last year. The earnings per share increased by 3% to [ INR 8.71 ] versus INR 8.45 in the first half of the financial year 2024. The cash profit increased by 7% to INR 393 crores versus INR 366 crores last year, and the net debt reached to INR 546 crores versus INR 569 crores in the last half year. Moving on to the key ratios of our balance sheet. The return on capital incurred stood at 20.8% in half -- first half of the financial year '25 compared to the first half of '24, which is 21.6%. Return on equity stood at 17.1% for the first half of '25 compared to 19.5% in the first half of '24. The debt-to-equity ratio gained at 0.2% in the half year, '25 versus the half 1 of the '24. The debt-to-EBITDA ratio at 0.8% is in -- compared to 0.7% for the last year. Current ratio improved from 2.4 is in the first half of '24 to [indiscernible]. Our net working capital days stands at 195 days versus the 174 in half 1 of the financial year '24. If I talk about now and talk about the quarter, our consolidated revenue for the Q2 financial '25 was up by 7% to INR 2,134 crores versus INR 1,992 crores last year, on account of increased sales from our all the segments. Gross profit grew by [ 17% ] and the gross profit margin was 320 bps higher from 30.9% to 34.1% attributed to the higher contribution of premium products and also the growth in the organic segment. EBITDA for Q2 was flat on a year-on-year basis at INR 256 crores and the EBITDA margin stood at 12%. PBT was slightly lower by 6% from INR 211 crores last year to INR 199 crores in the Q2 financial year '25. PAT for this quarter decreased by 4% to INR 151 crores compared to INR 157 crores in the previous year. EPS decreased by 5% to INR 4.3 versus INR 4.5 in the Q2 financial year '24. And the cash profit for the quarter was higher by 1%, that is INR 196 crores. Now we will open the floor for the question and answer. Thank you.

Thank you very much. We will now begin the question and answer session. [Operator Instructions] Our first question is from the line of Amit Doshi from Care Portfolio Managers Private Limited.

Yes. So this higher other expenses would be completely attributable to the freight cost? Or is there anything else that we need to know?

Amit, this is attributed to the Red Sea impact, the higher freight cost.

Okay. I mean, so last time, I believe you had -- shared what is the impact in terms of percentage. So can you share similar numbers that for the purpose of our analysis?

Sure. Let me give to Sachin, he will...

The impact of the Red Sea, the logistic cost increased by 1.8% as compared to the revenue this half year.

So 1.8% compared to last H1.

Yes, yes. So it is now 6.6% of my revenue as compared to 4.8% last half year.

Okay. Okay. Okay. And any trend that you would want to share on the freight cost. I understand that it will be difficult to predict, but general sense of how much higher is further likely it can go or anything on that?

Actually, we have our inventory. So this impact -- there will be impact in the third quarter as well. Yes, the freight costs have more or less normalized and we are expecting it to come back in the fourth quarter and the later part of the next year. So this will be normalized.

Okay. Okay. Okay. In terms of our inventory, so just wanted to know what is the current market prices trend after the new prices open, which we understand we believe that it has opened lower. And what is our strategy towards it? And second, regarding inventory, like is our higher cost inventory now kind of over? And if not, trying to understand how the inventory has valued. So for example, if the current prices are, say, 20% down compared to last year, then do we kind of book loss for the updated market value of the opening inventory?

So Amit, one is that we value the inventory at a cost. The second thing is the new crop is good. So we are expecting the prices to come down, but it is not going to impact on the old crop. So the new crop is better by 10%, 12%, and we are assuming that the paddy prices is coming down. And that will improve our margin in '25, '26.

Okay. Okay. And so how much prices are -- have opened lower?

Roughly, it depends on variety to variety, but in the range of 10% to 17% or so that is the change.

Okay. Okay. Okay. In terms of depreciation also, I note that there is a big jump in the depreciation cost, while our figures are broadly same, of course, I noted that Capital WIP has moved from INR 41 to INR 116. So can you just clarify on that part, depreciation as well as this Capital WIP?

Just a minute.

So this depreciation because certainly, there has been certain capitalization that has taken place in the last year. So this depreciation has increased. So my current depreciation for this half year is INR 87 crores as compared to INR 72 crores. This is because of the capitalization of the fixed assets that has taken place in the year. And regarding the WIP, the major WIP that sits in my financials is the capitalization of the U.K. unit, the U.K. unit, which is to be capitalized in the later part of this quarter. So that is there in the capital work in progress that will be capitalized this quarter.

Okay. Okay. Okay. And our other income has also quite up from INR 14 crores to INR 26 crores. What is that regarding?

The other income includes certain charges which we charge from one of our associates, the Golden Star. So that because its revenue is increasing, and we are getting that charge from one of our associates.

Okay. Okay. Okay. And overall, I noticed that Jasmine rice, we have launched even in the brand of DAAWAT. So is it launched at global level, India level? And what is the potential of this the Thai rice, the long range rice that we have acquired from Golden Star?

Amit, Jasmine is very popular across the world. In fact, it is 5x bigger in America. And that's why the Golden Star has become the #1 brand in America. So as far as India market is concerned, we have launched our Jasmine. That's a small market, but that's the portfolio we wanted to build where as a brand, we are fulfilling the need of around rice. So we have got a good response. We have launched in Israel also. We are going to launch in the other part of the world also. So we are positive on adding the Jasmine rice to our portfolio. Hello, Amit? Hello, Amit?

Yes.

[Foreign Language].

I can hear you.

Is this Amit?

I think you were speaking to some other Amit.

The next question is from the line of Meet Jain.

Sir, am I audible?

Yes.

Yes, Meet.

So my question is on the gross margin. We saw gross margin expansion of almost 320 basis points this quarter. However, in the base quarter, the margins were a little subdued and sequentially also our margins -- gross margins are a little flattish. And when we rationalize that, we said that this is because of the higher mix of premium product and organized segment. So how much further can we see a gross margin expansion from current level?

So yes, Meet, you are right. Our gross margins have expanded in this half year. So from 32 base, it has increased to 33%. So this has contributed because of certainly the mix of the premium segment. And secondly, our organic segment also has -- if you look at our organic segment, this -- there has been a growth in the EBITDA margins and as well as in the gross margin. So that has contributed in the gross increase. Yes, we are focusing on increasing as our brand spend is increasing, and we want to increase further these gross margins to 34% to 35% levels going forward.

Okay. Other question is on the macro environment on the basmati rice. So we have been growing at a very good pace of around 15%, 20% over the last few quarters. And this quarter, basmati rice growth has been around 10%. Any thoughts about some demand challenges...

Can you speak louder a little?

Am I audible, sir, right now?

Yes, yes, yes.

Yes. So I just wanted to understand, are you facing any demand challenges at any region, location, geography, if you can mention?

No, we are not facing challenge. Actually, whichever part of the world we are present, the category is growing, be it the U.S.A., Middle East, Middle East, we have grown 34%. In U.S.A., we are growing. In India, we are growing. So we are not facing any demand challenge. Rather, we are expecting to further grow this category. In India also, India is a 100 million tonne rice consumption, whereas basmati is just 4 million tonnes. And we expect the categories to grow. And similarly, in other part of the world, we are positive about the category growth.

Okay. Understood. And on this Spanish partnership, so can we talk about that how has been the progress on that part?

So that's progressing well. As told in the last meeting, we have appointed distributor. And there's better news is coming. We are in the process maybe in a month's time, we will hear a good news.

Got it. And my last question is on the inventory days. We have seen increasing inventory days. So can you throw some light on that? What is the main concern? Are you facing any inventory challenges or something on that part?

Yes. Our inventory days have increased from 166 to 194 days. So that is an increase of 28 days. This inventory days is actually in order to cater the increase in the demand that we are seeing in the different parts as Ashwani was saying in different regions in India, in U.S., we are seeing that kind of demand. So constrain that kind of demand, we need to maintain that inventory levels. So this is to have that increase -- meet out the increased sales.

Can we expect this to come down in 3Q and 4Q?

So yes, of course, we will be maintaining the ROCE at a level of 20 plus and the inventory days will be, of course, in line to that ROCE level. So we will be maintaining the 20-plus ROCE levels in the going forward quarters or years to come. Yes, inventory days this September because we had to build up for the increased demand. This will -- in the March, we are more or less be at the same levels of the inventory days that we were in previous March, 4, 5 days here and there.

[Operator Instructions] The next question comes from [ Sakshi Chhabra from Swan Investments ].

So my first question was I wanted to just understand that in the first half, there has been an increase in the short-term borrowings to the tune of INR 285 crores. Can you just explain why that was?

So the short-term borrowings, yes, but if you compare our net debt, so we have a balance -- bank balance as on 30th September, and that is to the tune of INR 270 crores. So if you compare it with the -- if you reduce that, our debt balance has, in fact, reduced from the last September as well. And so that is, in fact, reduced by INR 22 crores in this -- so we have. So there is a cash balance that is sitting in my financials.

Okay. But short-term borrowing was to meet working capital needs or...

That was a working capital need. And actually, that got transferred in the later part of this quarter. So there was a cash balance as well as there was certainly the borrowings.

Okay. And this degrowth that we have seen in the ready-to-eat and ready-to-heat segment, so is that only pertaining to one segment that has been discontinued? Or has there been an overall degrowth?

The ready-to-eat and ready-to-heat has grown by 8%. So there is no degrowth in this.

So the growth in H1 is 8%, but in Q2, there has been a degrowth of 15%. I'm just -- I'm referring to the Q2 degrowth.

So we have discontinued or rather we are going to discontinue the DAAWAT Sehat, the fortified rice that we are in the process of -- but our ready-to-eat and ready-to-cook is growing. Rather, we are building another capacity in U.S.A.

Very clear.

Yes.

Okay. So in the medium term, what is the expectation of growth from the ready-to-eat and ready-to-heat segment?

So we are positive on ready-to-eat. Yes. So that we are expecting in U.S.A. in H1, we have grown our 33% ready-to-heat, and we are positive in 3, 4 months, we will be up by the new facility. So we are positive double-digit growth in ready-to-eat and ready-to-cook and some products are in the pipeline.

The next question is from Yash from Stallion Asset.

Congratulations on a good revenue growth. So my question, sir, was that in Middle East, we've seen a very good market share gain, almost 300 basis points Y-on-Y. But I'm just trying to understand that we just added one distributor in Saudi Arabia right now. And given that our partnership with SALIC has already been 1.5 years, so what is stopping us from going a little bit more aggressive in that region given the pressures that our peers are facing? When can we expect some more aggression in terms of adding more distributors and expanding our market share over there?

Sure. First of all, thank you, Yash, for all your appreciation. On the Middle East, it takes time to plan the things. And as I said that we are very positive in the next month time, you will hear a good news. And as a style of LT, we are positive and that we will have a good position in Saudi Arabia. Already in Middle East, we have covered, which is the lower Gulf, we call it, Dubai. In Dubai, our share in premium segment, [indiscernible] has grown to 9.8% from 6.2%. We are improving our market share in Kuwait, in Qatar, in Muscat and Iraq also. Now the strategy is in place, the distributor has been appointed. And we are hopeful that we will do good in Saudi Arabia. As you know, in the consumer business, it's not a trading business. Consumer business takes time to build here.

Thank you. The next question is from Yash Mishra from SKS Capital and Research.

[ Abhijit Subhankar ] here. So a few quick questions. With respect to your H1 number, does it have any revenue contribution from your U.K. operations?

Yes. The revenue, there is a contribution from U.K. I will tell you the number.

So there is a 80 million contribution that has come from the U.K office.

INR 80 crores.

INR 80 crores. And what is it that you expect for this rest of the financial year?

So we are expecting a revenue of GBP 24 million to GBP 25 million this fiscal year.

Okay. Secondly, so you said your freight cost will continue to be higher in quarter 3. And then quarter 4, you expect this to normalize. So basically, the trend is we had 5% of revenue as freight cost in quarter 1. Quarter 2, it is you said 6.6%?

6.6%, yes.

So Q3, we expect this number to be here, you expect to go up a bit and then quarter 4, you want to come down?

Yes, it will be in this line itself. So it will remain as such. Yes, we are focusing on improving other operational efficiencies, bringing in more operations so that we deliver the kind of profitability which we are delivering. So yes, the freight cost will remain more or less at 6.6% to 6.6%, this level.

Not going to go up from here, basically, you mean to say?

No, this won't go up.

Okay. And then with respect to your ready-to-heat and ready-to-cook, so this basically has had a 9% EBITDA, I mean, loss, I mean, negative. So H1, you had a breakeven at INR 100 crores of revenue. But for quarter INR 244 crores revenue, you had a significant lower OpEx, it seems like, right? I mean what level you will get breakeven because you exited one brand. So what level you want to breakeven?

So we will be breakeven at a revenue of around INR 350 crores to INR 400 crores. So that will be the breakeven point. And this, we wish to achieve -- we have plans to achieve at 2 to 3 years' time frame. So that's the breakeven level.

Okay. Okay. And finally, sir, with respect to the Supreme Court verdict for the insurance-related matter, we thought that because it is already a couple of months, we thought that there will be something final because after the Supreme Court verdict, you got in written, so the money should have hit your bank in a month time. But it's been 2 months. There is no update on the same as of now.

Yes, that's true we have one in Lower Court. We have one in High Court. We have one in Supreme Court. But executing court takes time. They will take date and all this. So we all know that the system. But I think everything is clear. It's a matter of some days only. That you know.

The next question comes from Pradyumna Choudhary from JM Financial Family Office.

So the first question is on why -- like last year was a year of higher paddy prices, right? So why have we really seen a decrease in input costs for this year? Ideally, it should have gone up, right? That's the first question. Second question is...

Can you repeat the first question? Last year, prices were high. Yes.

Last year, paddy prices were higher, right? So ideally 1 year later, the input costs should have actually gone up, while in our numbers, we can see that the input costs have fallen. So why would that...

It has not fallen yet. So you mean to say you are referring to gross margin?

Yes, yes.

But we have taken the price hike also, yes.

So then our revenue growth in basmati in Q2 was only 3% and volume growth was 7%. So despite the prices hike, the value growth that is in the average realization growth has actually been in negative territory, right?

Let me check the number, but it depends on the mix as we play on a different price point. So sometimes the mix -- some quarter, the mix changes. But answering to your first question, the gross margin has increased because we have taken a price hike also whatever comparative to the input cost increase.

Okay. Maybe like later in the call, if you can just double check on this because I'm very surprised 3% revenue growth in basmati, which is suppressing our overall revenue growth as well in a quarter where we have taken price hikes, that somehow is not adding up.

Sachin?

So the GP margin improved because as a percentage to the cost increase, we have increased the sales price. So our GP margin has improved as you can see in the quarterly or the half yearly results. Yes, if we have to compare our quantitative growth in this half year, the quantitative growth is almost as equivalent to that of the growth of my revenue. So we have increased by 12% in the quantity terms. The revenue -- the price -- it's just a mix that has changed. So that has increased my overall margin levels in this half year or this quarter.

No. So just -- sorry, just trying to clarify. I'm just talking about Q2. Our basmati volume growth was 7.3%. Our revenue growth was 3%. So like roughly the realization was down by 4% for us. So you're saying this 4% decrease in realization is all because of mix change towards lower value.

As for the product mix, the mix in the product that has given. Otherwise, our GP margins have improved. If you compare the quarter-on-quarter basis, our GP margins have increased in this quarter.

And why would that be a customer down trade? And is that the case?

Because of the mix, actually, it depends upon the different -- we have in a basket, if you -- we have a 3 range, $3, $2 and $1, $3 contributes around 40% to 45% of the GP margin, $2 contributes 30%, and $1 20%. So a mix change, of course, has a positive effect on my GP margins. That's what we were explaining the GP margins from here as the marketing spends are improving and we are -- so our GP margins, yes, will improve. Yes, our spend will also improve. And yes, it will have a long-term effect...

Right? And second was...

Mr. Choudhary sorry to interrupt [indiscernible].

This was first question. Sorry, this was just to follow up because I couldn't get the clarification. My second question is remaining. So on the second question, yes, I understand that freight increase was there, and we've previously spoken about INR 4 crores a month of freight cost increase. But if I look at other expenses Y-o-Y, it's gone up by INR 96 crores, right? So what would explain the difference? I know the freight cost increase would add up to around INR 12 crores and digital spend would add up to another INR 12 crores to INR 15 crores. But that should be maximum INR 25 crores to INR 30 crores of increase, whereas other expenses have gone up by around INR 96 crores. So what explains the remaining?

So if you compare it with the half year, half year numbers, the other expenses in this half year is INR 676 crores as compared to INR 523 crores immediate in the last half year. So in that, the major spend increase is the logistic cost. The logistic cost from -- it has increased by almost INR 100 crores in this territory. Yes, there has been certainly a certain increase in other costs as well as the scale of operations and that -- that is in the percentage terms has remained the same more or less as the revenue. The major increase has come as change in the percentage that has come in the logistic cost.

But earlier, we were guiding for INR 4 crore increase per month, right, in logistics cost?

No, no. That all depends upon the business also. The business has increased and that has resulted. But yes, we -- the business overall has increased. The cost as a percentage, if I have just told you that it has increased by more than 1.8% in the logistics cost, an increase of almost INR 100 crores. So that's INR 40 crores to INR 45 crores a quarter increase business that has because of the 2 factors, the business increase and as well as the Red Sea effect.

All right. I'll join the queue. I'm not very clear on the answer given but I'll join back the queue.

The next question is from Yash Mehta from [ Art Ventures ].

Sir, I wanted to ask that the decline in 80 basis points of the EBITDA margin, sir, how much of this is attributable to the Red Sea crisis? How much of this decline is attributable to the Red Sea crisis, sir?

You mean to say the decrease in the EBITDA margin?

Yes, yes. Yes.

So as we said that our logistic cost has increased to the revenue 1.6% as compared to last year. So I will say half it will go because the natural freight cost has increased that we have already taken in our pricing. But roughly, I will say, in the range of 1% has really attributed to the Red Sea.

Okay. 1% of the 80 basis points.

Yes, yes. Yes. So roughly, we have impact of INR 27 crores, INR 28 crores on our budgeted number, that counts for 1.2%.

Okay. And sir, what is the volume growth that you see that you will be able to achieve in FY '25? And what are the margins do you see that you will be able to achieve at the end of the year?

So as per earlier guidance given, we will be having a growth of about 10% and the EBITDA margin will be in the range of 12%.

10% is the volume growth, right?

Yes, 10%. 10% to 11%, whatever we have done in H1.

Okay. And this is for the full FY '25?

That's correct.

The next question comes from Hitesh Goel from Riddhish Advisors.

I just want to understand in 2Q, what was the basmati revenue growth in India and exports because it's only 3%. So basically, is there a big decline in the export segment in 2Q only, I'm talking about.

As compared to last year. So I think we can explain that, but the good thing is to measure H1. So that we have grown 11.7%.

No, no, I understand that. But I'm just trying to understand, is there some one-off because of Middle East crisis or some kind.

Nothing is. Nothing is.

So can you give those numbers so that we have some sense on India and exports. On 2Q only.

So the growth in the India market is 9%, whereas the international market, we have grown by 5%.

No, but the overall revenue growth is only 3%. So how these numbers...

Quantitative growth. So quantity-wise, we have grown in this. If you compare it with the overall market revenue-wise, so we have grown better in India, the value terms, that is 10% growth that we have witnessed in the revenue terms.

International.

International market, it is -- there is a growth of -- on a year-on-year basis, there is a growth of 2% in the balance year.

No, but this is not adding, sir, because your growth overall is only 3% of revenue, which you've given in slide.

Growth -- in the basmati category, the specialty and the basmati category.

I'm talking about only basmati. I'm not talking about the organic. Internationally, is there a decline in basmati? That is what I want to understand on a Y-o-Y basis.

So the basmati market, we have grown by 4%, 4%. So there is a mix there is. So international contributes almost 65% of my revenue. So there, the growth is almost 1.5%, whereas the India market has grown outpace. So there is the difference.

And mix, you said is adverse, right? Because revenue in 2Q, we are not about 1H.

I'm also talking about the Q2 year-on-year basis.

But then how did the gross margin improve if mix is adverse on a Y-o-Y basis?

See, mix -- in the mix also, you have different categories of products. So we have a premium product, there is -- and in that also there are certain products which give me a higher margin. On a $2 also, there are certain products which give me a higher margin. So we are focusing on the products which give me more margins. So we -- in fact, that's the reason in spite of having a lower -- not increased margins, we are able to increase the revenue growth. We are able to have a higher GP margins. So our focus is having bettering our GP margins.

Yes. That's fine. So my second question is in the international market. The Middle East, if you look at 1H also, your rest of the world growth was only 7%. So Middle East is growing fast. So which market has got impacted that our revenue growth has got impacted?

So the European market that has impacted. And that too -- because, again, we want to focus on more margin where the margins are growing. So that is also -- we want to focus on high-margin markets. So that's the reason.

So is there a stress in exports that are you seeing revival in second half in terms of growth?

No, no, there is no stress. In fact, we are growing in the different markets.

Yes.

But can we achieve 10% kind of growth in exports in the second half? Are you seeing that kind of orders?

Yes, that's what we are expecting, and that's the guidance we have given in full year basis.

The next question is from Resham Jain from DSP Asset Managers.

So I have a couple of questions. The first one is on organic business. Last, I think, 5, 6 quarters after some issues last year, we have seen a continuous growth in that business. So if you can just explain what is driving the growth in the organic piece?

So every product is contributing, rice, of course, then soya also. And the other product portfolio, which is the oilseeds. So all these -- all categories participating, but bigger is the rice.

And sir, this business, how are you seeing growth here because we had this import-related issues from India. And then we have set up our -- some of the sourcing from African region. So from the growth perspective, how are you seeing visibility here in the next 1, 2 years?

So we are positive on -- we are expecting again 10% to 12% growth in organic also. Our stock and sell in Europe and America is really helping us in strengthening our organic business. So what we are doing is to the main growth drivers we are adding is to source from the other part of the world also like we are sourcing from Africa, we are sourcing from Brazil to add more product in our stock and sell portfolio. So we are expecting with this incident of soya, we have learned that we should not get into very commoditized organic business. So we learned from there. We have -- again, we have catch up. Now this year, we are expecting to do more than INR 1,000 crores inorganic. So that's building up. We are expecting in terms of the growth and margin expansion.

Right. And sir, recently, the non-basmati rice export, there has been some relaxation. In the past, I remember that there were like certain opportunity on that front and which you cashed in 2, 3 years back, if I'm not wrong. Are you seeing that also as an opportunity from the export market perspective?

Definitely, Resham, we will evaluate the opportunity. And normally, we are not into non-basmati business and business which is not sustainable in nature. But in a branded segment where the sustainability from, we will definitely evaluate. This is a positive news for overall in the industry.

The next question comes from Shivam Dave from Prodigy Investment.

Hello, am I audible?

Yes, Shivam. Yes, yes.

I wanted to understand on that disclosure that we had a substandard quality rice. Any color on that on anything that you have.

This is a very normal thing. I keep collecting samples. So they have not awarded any this thing on us on any. So they have picked up on the basis of this and then it will get to lab and then the final results will come. So the weight and management and the size. So nothing. No harm. Nothing all is in control.

Okay. That's good. The second question I had is on the ready-to-heat and ready-to-cook segment. Now when I look at the last 3 quarters, we have grown about 30% in terms of volume growth. But then this quarter, I think you've degrown by 15%. What is the reason for this sudden sharp decline in volume growth?

As you know, our RTH and ready-to-cook business is growing. So only one product we have discontinued in the phase of discontinuing is DAAWAT Sehat, which we were selling in India. But the main business is growing, which is RTH and ready-to-cook business.

Okay. So I think -- so one -- can one product make such a big impact on your volume growth? I mean.

It is a new business for us. We are learning also from there. And DAAWAT Sehat was...

INR 18.5 crores of business.

Okay. So INR 18.5 crores business we lost, we have not lost, but we have discontinued.

Okay. Okay. And just one follow-up on the ready-to-cook segment. How is the working capital cycle for that? Is it lower than our basmati business? Or is it on the same line as it?

Ready-to-cook?

Yes, yes.

[Foreign Language] Must be 90 days working capital cycle.

The whole cycle as such, right?

Yes. Right.

The next question is from Mohammed Patel from Care Portfolio Managers Private Limited.

Sir, my first question is, so how much more in volume terms we'll be buying inventory as compared to last year?

How much we will buy?

Inventory, how much more?

Yes. That is as per the growth we will buy as per our demand. Yes. So we are growing in volume terms 10% to 12% year-on-year. Accordingly, we will source our...

So just trying to understand if you will take the advantage of lower prices and buy more?

We don't -- we will -- we may -- it depends -- the season has just started. We will see how the pricing behaves. Maybe we will source more -- but it depends. It's too early to say that, and we don't want to speculate on that.

Okay. My second question is, we have relaunched Royal Atta. So what are your thoughts on this?

That's doing good. So we have launched Royal Atta 6 years back because -- but this India little destruction on the wheat flour. Again, we have started importing wheat from -- importing wheat and then processing and selling it again. So we have relaunched it kind of thing. that's adding on, that's not a big ticket to our revenue.

[indiscernible].

That's adding on. That's not a big ticket to our revenue.

The next question comes from Abhishek Maheshwari from SkyRidge Wealth Management.

Good numbers considering all the challenges. Just two questions, sir. Regarding the insurance claim, you mentioned that you have won at district court, high court.

Yes, Abhishek, I just explained that we have won in all courts. But in the executing court, it is taking time. sometimes judge is not there, sometimes another party takes date. But it is a matter of a few days, I think we should get our money.

So is it that you -- only once you get the money in the bank, then only we will recognize exception -- or will you wait for the written order from the high court -- from the relevant court and then recognized?

No, no. The court has already awarded in our favor. So now it is the matter of execution. And execution court is taking it up, but it is taking as usual and judiciary 2, 3 months. So hopefully...

October to December, probably we should see the exceptional gain.

Yes, yes. We are hopeful. Now the next date is 5th of November. And we are hopeful for the resolution.

Okay. Lastly, regarding the freight cost, I think as Sachin sir mentioned that Q3, obviously, because of shipments, the cost will be higher. But Q4 onwards, should we expect normalization or only from first quarter FY '26, should we expect these costs?

Quarter 4 to quarter 1, you will see a better performance. There will be some leftover because it takes for us to reach always in water in store, we have a 5- to 6-month inventory. So hopefully, quarter 4 will start improving. And quarter 1, we are positive.

But freight costs...

So I said as per today's situation, we are in freight margin...

No, no, no.

It's coming down. We are...

What I'm trying to say is ask is -- so the freight costs have come down to pre-Israel crisis level -- Israel attach level, right, because it had moved up, it has come down again. So 6 months kind inventory you have. So probably from Q1 onwards, we should expect...

So yes, a little bit of improvement should come in quarter 4 and then quarter 1 will be more clear.

Understood. Thank you very much, and all the best.

The next question is from Rohan Patel from Turtle Capital.

Hello.

Yes, Rohan Ji.

One of your opening remarks, you said that we are having good crop this time. The crop offtake is good by 10%, 12% and paddy prices are down. So can we expect that we maintain our gross margin or we are going to also expect the gross margin to be coming down as well?

No, no. We will definitely maintain and improve and that's what we are expecting because it's another 2 months, 3 months in the months, we will source, but we are optimistic that if the sourcing price remain the same, what has been open up, then we are expecting to have a better margin in '25, '26. That's the kind of...

So we can expect that your EBITDA margin, if you can provide any guidance to be somewhere between in the lines of 12% to 14%?

Yes, that's the guidance. 12% is already there. So we will improve from there. Yes.

Second thing that I wanted to know. So how are you catering to the U.K. market? Like I'm asking from sourcing point of view because if you see sale of basmati rice was banned from India to U.K. and Europe due to pesticide issues. So can you just explain me how are you sourcing from big geographies?

No, no, it is never banned. But there were some issues where the Indian product was not matching to the MRL level of U.K. or -- but as an LT, we have a big farmer program where we make sure that we have a product of compliant product. And we are doing our regular export to U.K. and EU. Sometimes our EU unit sources from Pakistan if India is not competitive. But as an LT Food, we are regularly exporting our brand from India, DAAWAT, both U.K. and EU.

Even if we have to see the international operations that you have in America as well as in U.K., so all the rice are being sourced from India or you have some more diversified geography you want to keep diversification on geography for sourcing?

We call it specialty rice we have. In specialty rice we've Basmati, we do Jasmine rice, and we do the regional specialty, which is Sona Masoori. So Sona Masoori and Basmati for America, we only source from India. As far as European, we call it EU and U.K. Partly we source from India and partly we source from Pakistan. But all our brands in U.K. and EU goes from India. So the rice we do the private label for the stores that is done by India and Pakistan. I hope that's clear your question.

Definitely.

Sorry to interrupt you Mr. Patel. May we request you to return to the question queue.

Just last question.

Sir, there are many other participants waiting for their turn. Extremely sorry, sir. The next question comes from [ Tom A. Kadavul ] from Geojit Financial Services Limited.

I just wanted guidance on the depreciation for FY '25 and also the share of associate profit for FY '25?

So the share of profit for the associate in this quarter -- this half year was INR 19 crores. And for -- that's what your question was?

How much is the revenue for the entire year?

So that will be in the range of around INR 30 crores, INR 30 crores profit that will be coming from the associate.

INR 30 crores profit.

Yes.

And on the depreciation front, what would be -- can you give a guidance on the entire final figure FY '25?

It will be more or less in the same range that is where the half year, the INR 87 crores, it will be around INR 175 crores to INR 180 crores.

INR 175 crores to INR 180 crores. Okay. And another question that I have is on the Basmati. What is the Q2 volume India and international?

The Q2 volume in India this quarter, the volume is -- that is -- India is 89,000 tonnes and the international is 82,000 tonnes.

82,000, okay. And realization for Q2?

So the realization, the average realization in the Q2 is INR 102.

INR 102 is the average. And can I get a breakup of India and international?

INR 54 and INR 144.

Could you repeat?

INR 63 and INR 144.

INR 63 and INR 144.

The next question comes from Raman K.V. from Sequent Investments.

Sir, I just, -- can you hear me?

Yes, yes, Raman.

Sir, you are setting up a plant in U.K. as well as you are setting up a plant in U.S.A., wherein with respect to U.S. -- the new plant in U.S.A., the production capacity has gone up. And at the same time, you're -- from what I understood from the presentation, you are setting up a manufacturing facility in Uganda as well. So can you give me an estimate about when will this plant -- setting up of the plant will be done and from when they will start contributing towards the revenue?

Sure. So U.K. plant has already been set up, and we just done an aggression in July. That has started contributing. Regarding U.S.A., we are doubling our capacity of ready-to-eat plant. Right now, we are producing 15 million pouches, which is totally sold out. Now we are doubling to 35 million. So of course, whatever the growth will come year-on-year, that will be serviced from that increased capacity. And Uganda, Uganda is a small investment, very small investment. That is mainly for our organic business where they are putting the soya meal.

No. But when will the U.K. -- U.S. plant will be like start -- so it's like value addition plant or?

So already, we had a plant which is producing ready-to-eat product, which is microwave rice. We have set up the plant 5 years back. Now the capacity is fully sold out. Now we are expanding our capacity to double.

So when will this expansion...

To service the -- that's a continuous process. To service the continuous growth of the market.

Sir, also, you said that you're discontinuing DAAWAT's fortified rice. Can you...

Yes. Fortified, yes.

I didn't understand. Can you give some more clarity on that?

Sure. So what we have done 4 years back, 5 years approximately, we have launched in India, DAAWAT Sehat rice, which is under the fortified because government was promoting the trend was coming the fortification. But that has not met our expectation in terms of growth and market share. So we decided to discontinue that product.

Okay. Sir, I just have one question with respect to inventory management. So whatever we produce, we pack it and sell it to the retailers. like either like a big chain of retailers or shops at the local level. So while -- and there is a freight car also. So if there is any damage during the freight, are we supposed to pay for the damages or it's based on a contract basis?

If I understood your question correctly, we operate like any other FMCG company operate, we are accountable, responsible till consumer consume it. So guarding whatever what you call is -- replacement, that is very small, sometimes package get damaged.

Sir, can you give a figure about what might be the replacement.

Very less. I don't have right now. Definitely, but that's very less. Not even in percentage.

Ladies and gentlemen, we would take that as our last question for today. I would now like to hand the conference over to the management for closing comments.

Yes. Thank you so much. If any question is left or not cleared, I request everyone to send your questions to our IR department. We will definitely clarify all queries. Thank you.

Thank you. On behalf of LT Foods Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.