Madhusudan Masala Limited (MADHUSUDAN-SM.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '25 Madhusudan Masala Limited Earnings Conference Call hosted by Hem Securities. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Ramadhin Rane from Hem Securities. And over to you, sir.

Thank you. A very good morning, ladies and gentlemen. I welcome you all to the H1 FY '25 Earnings Conference Call of Madhusudan Masala Limited. Today on the call from the management team, we have with us Mr. Rishit Kotecha, Chairman and Managing Director; Mr. Hiren Kotecha, Whole-Time Director; and CA, Sarvesh Gohil, consultant to the company. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, as a reminder that this call is being recorded. I would now request the management to brief us about the business and performance highlights for the half year that went by, the growth plans and regions for the coming year, post which we'll open the floor for Q&A. Over to you, Rishit.

Thank you, Ramadhin. Good morning, everyone. Myself Rishit Kotecha, Chairman cum Managing Director of your company. I welcome all of you to the earning call of H1 FY '25. Actually, I don't know the exact number of participants who joined their conference, but I believe that good numbers are joined in this conference. So again, I'm welcoming you all to the conference call of this H1 FY '25. I believe that you have had an opportunity to review the presentation and financial results that were uploaded at the exchange. Before I discuss with -- about our financial highlights, I would like to give -- some of you already are aware about our company, but I believe today some new investors are also joining this interaction. So I'm happy to let you know about our company in brief. Madhusudan Masala Limited, which was incorporated in 1982, we are a manufacturer and trader of spices and other food products. We are engaged in the business of manufacturing and processing of various types of spices under the brand names of DoubleHathi, Maharaja, Mantavya and 77 Green. Other than spices, we are also manufacturing and selling some grocery products like various kind of flours, tea, papad, soya products, hing, achar masala, salt, kasuri methi, mint flakes, et cetera, under the brand name of DoubleHathi. Operating in the industry since last 4 decades, our founder, promoter, Mr. Dayaljibhai Kotecha and Vijaybhai Kotecha lead the foundation of our business in 1982, through a partnership from Madhusudan and Company to focus the high-quality -- providing high-quality foods, which were cost effectiveness and improved accessibility. Later our next [indiscernible] myself, Rishit Dayalaji Kotecha and Hiren Vijaybhai Kotecha continued legacy and developed an extensive experience in the industry. We believe that we have established our brand as a preferred home consumption brand for the Indian families. Currently, we operate from our manufacturing facility located at Jamnagar in Gujarat. Our manufacturing unit is situated at Industrial Area Hapa near the Jamnagar, which is strategically located near the local PMC market, which is facilitating easily procurement of raw material and quick access to transportation, which reduces our transportation cost also. Also recently, we acquired unit, Vitagreen Products Private Limited is operated from Rajkot, which is located at Metoda in Rajkot, and our blended spices are manufactured from this unit. Both of our manufacturing facilities are equipped with plant and machinery to facilitate efficient production process of cleaning, drying, grading, sorting, grinding and packaging. All spices and other products are manufactured at our unit with utmost care and by way of natural process with scientific methods so as to retain the natural properties of the spices, like colors and odors which will not reduce with the time. Now I'm very happy to say that your company has delivered a solid performance on both financial and operational front for the half year ended financial year '25, like we have touched consolidated revenue of INR 99.58 crores, which is almost 83% grown from the last half year ended financial year '24, while our EBITDA has been increased by 106% to INR 12.24 crore, which was also gained from INR 5.94 crores from the last half year ended financial year '24 while our profit after tax has tremendously increased by 97% to INR 6.5 crore, which was INR 3.3 crores in H1 FY '24. The main reason for increasing in PAT and EBITDA is that we have increased our branded sales percentage from 56% to 63% in this half year ended FY '25. And I'm very happy to inform you that we are in line with our improvement of increasing our own brand sales as mentioned in our earlier earning call. We are constantly working to expand our reach by adding new products in our portfolio, going in the -- aiming at greater geographical presence. To get several customers, we have implemented several operational enhancement. Like we have added 4 new packaging -- automatic packaging lines at our Metoda factory at Rajkot, which enable our content [indiscernible] supply of small-size-inch [indiscernible] while we deployed 2 new delivery vehicles to make timely delivery to our distributors on scheduled period. We also expanded our product portfolio with adding some new SKUs like we have added 200-gram HDPE jar for blended and ground spices, some new products like mint flakes, fennel powder or existing portfolio which enabled us to cater a new customer and provide entire range of spices to the existing distributor channels. We have successfully entered in the new market of Uttar Pradesh from July '24 and Jammu Kashmir from September '24. And currently, I'm very happy to let you know that we have received repeat orders from these 2 states also. And currently, we are operating in only Srinagar in Jammu Kashmir and Lucknow territory at Uttar Pradesh. More territories to be opened soon. So these 2 states are being more safe in the coming period also. Some strategic initiatives like below has also gained -- help us gain our markets. Like we have divided production facilities of ground spices and blended spices in both of our factories, like we have -- we're manufacturing the ground spices portfolio from our Jamnagar factory and blended spices portfolio are being manufactured at Metoda unit. So this initiative will help us to manage our dispatches smoothly and on-time delivery to our channel partners. Some of damage optimization also help us to gain our profitability and also enable retailers and distributors to enjoy the healthy margins in these small size scales. And our own cold storage facility also operated -- operational from this financial year. This also help us to cost sale -- cost of our rental raw material. So it is enhancing our overall profitability. Some of our marketing initiative has played a crucial role in driving growth, like our highly acclaimed Rewards for Retailers scheme has been a phenomenal success, offering a [indiscernible] changing opportunity that guarantees a sure price for every participating retailers, thereby fostering loyalty, enthusiasm and widespread. And our distributor also enjoys like buy more, save more scheme, which enable the distributors to take discounts and enhance profitability on their bulk orders. Our executives are also being rewarded by focusing our products in retail outlets. Recently, we read that Anuga Food 2024 at Mumbai Exhibition Centre, which delivered successful resounding and unlocking the new business opportunity nearby areas of Maharastra. And some of our other sales initiatives like constant marketing support to our sales team like we are giving the news media campaigns, eye-catching hoardings, auto-ricksha branding and more [indiscernible] sales growth. And I'm very proud to announce that our company has certified with the prestigious ZED Gold Certificate, which makes us the first spices manufacturer in India to receive this honor in the spice category. Additionally, we received the Pride of “HALAR” Award from the TOP FM as a leading spice manufacturer. All of this initiative and seeing the half yearly sales and profitability, I'm very confident that we will let you INR 240 crores plus revenue from this current financial year. I would like to extend my deepest gratitude to our esteem investors for their unwavering trust and confidence in our company. Your faith in our vision and strategy has been instrumental in driving our success. I also thank our dedicated team members, channel partners and stakeholders for their tireless efforts and commitment. Finally, I would like to congratulate our team on their outstanding performance in H1 FY '25. Your hard work and dedication have opened us to new heights. Thank you for your attention, and I welcome any questions you may have. That is all from my end. Thank you for your time. I would like to request you to open the floor for question and answer. Thank you.

[Operator Instructions] The first question is from the line of Vivek Patel from SIMCom Family Office.

My first question is, what is the source of confidence that you have to achieve INR 240 crore in FY '25? And also a sub question would be, how about the margins? What would they look like?

Thank you for your question. Vivek, as our business is some kind of seasonal based business, so our first half financial year will be 35% to 40% of total revenue, while second half would be more in revenue. So based on this -- our past experience and our business cycle, I assume that we will -- INR 240 crore of revenue in this current time and period. Margin would be similar to the actual -- we will continue to build end of the financial year.

So about 20% margins?

Yes, 11.5% to 12% throughout the entire year.

All right. Next question is, how has been the working capital base presently? If you could break it down in terms of inventory, trade receivables, payables? And also, how would you expect that to be...

Recently, we have opened a new area. So as of now, our trade receivables are on a higher side. But as soon as we get comfort from these channel partners, the receivable cycle will be some 40 days of cycle, as of now it is more than 80 days.

Okay, understood. And next, how has been the integration with the acquisition of Vitagreen? How has been the response so far from cross-selling initiatives that you have taken? What are the -- about Vitagreen, what are the revenue, inventory, dealers, the state of it so far?

Yes. In this financial, we have consolidated the Madhusudan and Vitagreen both procurement combined -- our Madhusudan factory. So inventory, their's are much [indiscernible] Vitagreen because Vitagreen is manufacturing only blended spices while other products like ground spices and grocery products and whole spices are being manufactured and packaging facilities are at Jamnagar unit. So inventory are mainly stored at our Jamnagar facility.

Understood. And also, how has been the response to your non-Gurajat states also about target market in the northern belt? And I think you have also come to a point brand ambassadors as marketing initiatives. How has that been?

Sure. Recently, we did not appoint any brand ambassador, but we are planning to appoint a good brand ambassador to get [indiscernible] area. But as of now, our priority is to provide local test quality to this new territory. Like in UP and Jammu Kashmir we have developed special blend for both states. So first, our first priority is to supply good quality and local like this to any required territory. This will help distributors and our retailers to get consumers easily convert to our brand. And later then, we also are planning to make marketing activity in these areas. So our products are well aware with our consumers and then we can get good benefit from the marketing campaign.

And also, I think the current blended spices share as of H1 is at 4% -- 3.5% to 4%. And what do you expect the blended spices share to be in the coming 2 years, if you can?

Yes, sure, definitely. Because from the last financial year, we have grown almost more than 200% in blended spices. So this due to our acquisition of Vitagreen which has good quality blended spices and its healthy portfolio of old blended spices ranging in other Indian brand. So definitely, we will grow our blended spices category in the coming year.

So what will you believe that share could be, 20%, 25%?

As of now, our share is very lower as per our expectation. But you targeted that it could be 10% within 2 years.

And if I could squeeze in one last question. What is the current breakup of online versus offline EBITDA? And offline, how much is general trade and modern trade, if you could just simply...

Sure. Yes. As of now, our online presence is at Amazon only while Flipkart we have just registered our company. So with the Flipkart sale not arriving, so Amazon on our own website sales are coming. But these sales are very negligible, which cannot also be measured in percentage of our total sales. But hopefully, we can cover this online sales in the coming future. And our major sales are from traditional sales synergies only, like retailers and distributors are selling 95% of our sales, only 4% to 5% are selling through modern sales channels.

[Operator Instructions]. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Ramadhin Rane from Hem Securities for closing comments.

I believe we have one participant for a question, if you would take him, allow him to speak.

Next question is from the line of Deepak Poddar from Sapphire Capital.

Many congratulations for a good set of numbers. Sir, can you throw some light on our future plan for expansion in terms of geography? I mean, recently, we have entered into UP and Jammu and Kashmir. So over the next 6 months to one year, what are other geographies we are looking to cover? So that would be very helpful. And my second query is how do we see FY '26 in terms of growth and margins?

Thank you for your question. Yes, I will answer your first question. We definitely are planning to spread our prescenec in Madhya Pradesh and Punjab in this current financial work. Also, we have appointed a sales team at Madhya Pradesh, which will be started from the month of December. So in this financial year, we will operate from Madhya Pradesh and Punjab also. Later on from next financial year, we have planned to cover Rajasthan territory also. Although have sales coming from Rajasthan and Madhya Pradesh and Telangana also, but we do not have a sales team or self distributors are there. So we are not considering these territories as our operational area. So most probably Madhya Pradesh and Punjab will start with good number of sales from these financial years.

Okay. Understood. And in terms of branded sales, how do we look at? I mean, in terms of branded sales currently 63%, how do we see the share of branded over the next 2, 3 years?

Two to 3 years, we already planned as we earlier discussed in our call also, till 2030 we will be sales only -- branded sales. I mean, 100% of our sales will be of branded sales throughout 2030. So most probably, this year will be closed around 65% of branded sales. And next year, we have planned for 70% to 75% of branded sales in FY '26.

Correct. And by 2030, it would be 100%?

Yes.

Okay. And then how do we see FY '26 revenue growth and margins?

In FY '26, I more than 340 -- INR 325 crores to INR 340 crores will be grwoth in FY '26.

And what about the margins?

The margins would be around -- EBITDA will be 12%.

The next question is from the line of Praveen Sahay from Prabhudas Lilladher Capital.

My first question is related to the branded sales. Definitely, in the branded sales currently, we had increased share of blended spices from 1% to 4% from last financial year to now. And the way forward that you are also guiding to reach to a branded sales 100%. So how the mix in the branded you are expecting the way forward between the blended spices, ground spices and -- so other grocery products?

Yes. So in branded spices, our category of ground spices will be the top selling category in the branded sales because we have expertise of ground spices since our insection. And we have a good -- personally, I see a good opportunity in ground spices to spread throughout the Pan India because there is a very huge gap of ground spices sales of any particular brand in entire India. So I'm seeing a big opportunity to develop our brand developed in -- within ground spices company in coming years. So in the future, our ground spices category will be zero products for our entire branded sales.

Okay. So basically to understand this, the 100% branded, mostly the blended spices and the ground spice you're targeting to improve?

Yes, mostly first our priorities on ground spices and secondly the whole spices because these 2 categories are yet very unorganized in all territories. So we can easily come out -- organized to -- unorganized to original in our proper way. So we are targeting these 2 categories priority base while blended spices has already developed big players like MDH, Everest, Badshah Masala and in some western parts like Eastern Masala and Northern, there is Goldiee Masala, a very good presence in blended spices category. So this category is very competitive by other players. So this ground spices and whole spices in a very unorganized sector. So I'm personally seeing a good opportunity in these 2 categories. And our primary focus is how to cater this ground spices category in different territories, like in India, there is a vast differentiation in ground spices, like northern states have different kind of taste in chilly powder while western parts have different kind of chilly powder -- using different kind of chilly powder. So we are constantly working on this products on our ground spices category to supply proper blend to this particular territory.

Sir, also related to this, basically, if I look at your whole spices number is quite high, whether it's a branded sales or your non-branded sales. So in the way forward, you want to reduce this whole spices business as a whole and transition to the ground spices? Is it like that?

No. In branded sales, our whole spices are growing quickly because this whole spices are currently selling with unbranded road lose sales from retailers or Kirana stores. So we are giving a good quality whole spices in our old brand in small packaging like 100-gram and 200 grams. So customers are really demanding this branded whole spices because of hygiene and transparency of quality. So our whole spices category in branded sales will be growing more in coming year also.

Okay. So basically to summarize this, your branded would be a mix of blended ground is prices and the more prices altogether. Where you are seeing a good growth in the way forward once it will achieve the 100% of branded, majority would be 3 segments. Is it fair understanding?

Yes, correct. Majority are these 3 categories will be for branded.

And also if you can give some gross margin level differences between these 3 segments, like a blended or ground and the whole, how is the gross margin scenario?

Sure. On this branded sales category, we have good -- we are enjoying good margin in blended spices, like 22% to 25% growth margin in blended spices while ground spices is 12% to 15% and whole spices has 6% to 7% of margins in whole spices, and grocery products like [indiscernible] somewhere between 8% to 12%, different in particular products.

Got it, got it. And the second thing on the geographical expansion you had already given in the presentation. So there are 4 or 5 states you are looking at for the expansion. But if I look at like you had highlighted for Uttar Pradesh, you have a presence in Lucknow or Jammu and Kashmir, you have presence in Jammu, so is it not like going beyond Lucknow in the Uttar Pradesh itself first and then after explore other states? Or you are just -- you're not targeting certain region of certain states only?

No. Our main object is to cater to new territories that we have already established dealer partners from our Vitagreen company which were connected with Vitagreen since last 10 years. So they are demanding us to reopen these territories, which was closed by the old management of Vitagreen. So currently, we are taking of this sales of Vitagreen, which already stated in this territory like Madhya Pradesh, Rajasthan, UP, Punjab, Jharkhand and Jammu Kashmir. But first of all, we see a good opportunity in Uttar Pradesh and Jammu Kashmir delears which are very aggressive in sales. So we suddenly opened these 2 territories. And our sales team is constantly approaching new dealers to approach -- to sales in other territories of Uttar Pradesh and Jammu Kashmir. But in Jammu Kashmir our Srinagar dealer is very capable to cover the entire state like the presence at end of [indiscernible] also. So in Jammu Kashmir, we will cover entire state within sale period. While in Uttar Pradesh, we have plan to deploy more than 30 to 35 distributors in different territories. So this is also in our plan.

So how many distributors of Vitagreen you have right now?

We have 200 distributors of Vitagreen?

Okay. So out of 200 only, you are giving an indicative of 30, 35 distributor in the UP you are targeting or it's an addition to that?

No, no. We are adding this new distributors to our Vitagreen entity. There already worked with Vitagreen in earlier period before our acquisition, but we are conservatively starting this distributors because after starting this particular distributor of territory, we do not want that these distributors order -- per month one order will give to us. We insisted them to particular focus on our focus and focus on our particular brand and ground spices and whole spices, and after taking the commitment from these sales channels, after that we started work with them.

So usually for you, average sales per distributor, how is that?

Sorry, I mean, you are asking that per distributor how much of revenue you are getting?

Yes, you are expecting. Like when you appoint any distributor, what the expectation of average sales?

Actually, this depends on the -- how big territory that particular distributor sells. Like if -- one distributoir has 100 retailers or portfolio of 100 retailers, then we expect INR 10 lakhs of sales per month from this distributor.

Okay. And last question, sir, because you had talked about the marketing -- lot of marketing activity you are doing also the way forward some brand investor will also come. Distribution expansion is also happening to drive the growth. But also you are guiding the margin will not go into impact. So like 11.5% or 12% of the margin guidance also you are giving. So after doing all those market expenses, how you are confident of maintaining the margin?

See, as of now, we have our branded sales around 63%, while nonbranded is 37%. So our profitability in non-branded sales are very cheap, like only 4% to 4.5% in non-branded. So we are going forward to enhance our branded sales. So this branded sales profitability is much higher than non-branded sales. So I'm sure that this profit margin will be needed throughout our assumption.

The next question is from the line of [indiscernible] from FinCom Family Office.

So my first question is, usually -- I think one of them are concerned -- if I can get what is the average sales per distributor for Madhusudan versus what is it for Vitagreen? And how much can it be going ahead?

Sure. Thank you for your question. Yes, particularly, we have different category of distributors. Like our Vitagreen distributors has average sales of INR 7 lakhs to INR 8 lakhs while our Madhusudan sales are coming from without distributors area, like our western part of Gujarat area is really strong part of our total sales, like our western part which is called Saurashtr. We have 35% of market share in this particular territory for our DoubleHathi brand. So in this area, we do not have a single distributor. We are directly supplied to retailers and wholesalers, numbers of almost more than 3,500 of retailers and wholesalers. So majority of our sales are coming from this direct-dealing retailers and wholesalers in Madhusudan while in Vitagreen, entire sales is coming from distributors only. So that is [indiscernible] some of the distributors and retailers.

So is there any average number? Like for Madhusudan what would be the average sales for distributor or you saying there's not much use of distributors in Gujarat state?

Just like we -- if we are talking about direct billing channels, there is an average number of per month sale is, something INR 80,000 to INR 1 lakhs for customer, but this is an average number because some wholesalers are selling INR 8 lakhs to INR 10 lakhs per month while some small retailers are selling only INR 25,000 of sales in the entire month.

Right. So that means -- so Vitagreen would be 7% to 8% and Madhusudan could be, I mean, you can say in the 8% to 12% kind of a range?

So yes, Madhusudan, if we are talking about distributor channel of Madhusudan, so our distributor actually is more than INR 20 lakhs in Madhusudan because we are -- we have a ground spices and whole spices category distributors in Madhusuda. So the same quantity of this -- both categories are really high in [conviction]. So Madhusudan distributors area sales are more than INR 20 lakhs per month while -- this is because of the blended spices category. So [indiscernible] something than this ground spices category.

Right. Yes. That's what I thought. So then in that case, so Vitagreen today is around INR 7 lakhs to INR 8 lakhs. Is there any plan to kind of take this up to maybe like the average from Madhusudan which is only at INR 20 lakhs. So over the next year, 2 years, 3 years, do you have such a plan?

See, if we are appointing a new distributor in a new area, first of all, we insist our channel partner that they have a good knowledge of spices industries, like we are focusing on ground spices and whole spices. So if our distributors or our channel partners do not have the knowledge of particular spices, they cannot sell to retailers in better manner. So first of all, if it is our channel partner, then they have a good knowledge of our spices industry. Then after we identify the knowledge of spices, we approach them and ask them that which kind of blend of quality are more selling in their particular region. So after getting the particular blend in range from the territory, we develop a particular blend to this particular distributor. So this is our news before acquiring new territory with help of local sales team and partners.

Right. Sir, but just one clarification that -- actually, I mean, if your distributor has the knowledge of spices or they are having the background of spices, then usually, wouldn't they already be like selling the spices of maybe the larger 3 players in India? So if in case we are developing anyways, new distributors who may not be associated in spice market, but knowledge might be limited. So how can we overcome this challenge? Or what are the steps you are taking to educate them?

Yes, sure. This is a good question. Actually, I will share one experience with our Jammu Kashmir dealer. This dealer was associated with a good brand like Hathi Masala, which is also our competitor in Rajkot manufacturing unit. And he was selling around monthly 50 lakhs of spices in the Jammu Kashmir region. But he is not getting a particular kind of blend, which mostly is required in Jammu Kashmir state, like in chilly power, we required powdered foam and without oily material. But the company is not giving as per his required quality. So we approach this distributor and we assure that we will provide you a particular -- as per your required quality, and after getting spices to the retailer, we will hope to reach our quality and our approach of being the -- as per the desired quality. So he will convert to sell our products and now he is a sole distributor of our DoubleHathi brand. So these players are not easily change their blend to a particular distributor or particular territory. There is a particular distributor to sell which they promised. While we have -- if a big territory is there, we will develop a new blend for the particular territory, and after that, we get the accessory from this territory. Because if we are giving the coarse ground type material to the Jammu Kashmir area, then our material will not be accepted in this region by consumers. So this is the basic required in a new territory. So for this particular reason, we are expecting that our distributor channel partner also have knowledge of spices sold. He guides us to make a particular blend for these territories.

Right. And there would also be like some percentage of distributors, which you will be appointing, especially in the newer states also it's possible, who don't have a background in spices because there might be distributors in something else or maybe you approach them to develop them as distributors. But it's possible that because there are the top 3 players in India, which are well entrenched in the system and in every state, so maybe it will be difficult for them to switch and so in that case, you would be the newer distributors if you want to grow, right?

No. In that case, it's our -- we are getting a good distributor, which has -- who has a good sense of number of sales in spices, but he does not have a knowledge of spices, then we infused our good knowledgeable sales into this particular distributor and on behalf of distributor our sales team survey the market and get feedback from consumers and retailers about the quality. After this is done, we develop a particular blend for this particular territory. And also, if we are talking for big brands like 3 brands like MDH, Everest, they are doing well in blended spices category only. Their share of ground spices is very less in total revenue of the company because blended spices are not different taste in different territory. While ground spices and whole spices are different blend and different taste in different territories. So these companies do not require knowledgeable sales men to sell their products. While we are focusing on brand spices category, so we have first priority that our sales team has good knowledge of spices.

Right. Okay. So shall we discussed some of the reasons as to how one can grow into new states and what kind of initiatives you can take on the distributor development side? Besides that, what are the kind of things you think are the right to win in the new states? Like you have presence for many years in Gujarat, but you are moving to the newer states, what can be our unique selling point or as they call right to win?

See, our [indiscernible] already told that we required quality for consumers, which are very known from decades they are using spices in their home because in India, every person like our mother or grandmother are really knowledgeable in spices because India is well-known for spices since decades. So in every family, one person is very knowledgeable in spices, so this ground spices category is not easily converted to another brand. So that's why we are getting the feedback from our retailers and from consumers also how -- which type of quality they need. So first of all, we provide -- we are quality prudent. And the secondary is our main competitor are unbranded, unauthorized or loose selling products. So particularly, we are targeting this unauthorized or unorganized players, which are selling loose and so it is a bulk sell to retailers and retailers are selling to consumer as loose sales. So these products are also unhygienic and customers are also well educated on the packet food to consume. So this benefit -- they have benefited us to sell in new territory.

Right, right. Sir, and one more question was that the dealers distributors, what is like their usual profile? I mean, you mentioned already that we should have a knowledge and a background to some extent about spice market and you mentioned already the average kind of revenues you are doing from Madhusudan and also Vitagreen average sales for distributor. But besides that, what is the generated profile of these people? Like are they really easily -- is this their only business? And do we have other interests of business? Is there any kind of other information or kind of rough profile of these distributors?

No. Our first requirement is that particular distributor has good number of retailers under their territory and he has a good hold with retailer, so we can increase the retailers to buy our products to them, then after our quality will speak itself to consumers. So first priority is that our distributor has a good relationship with retailers while the [indiscernible] of retailers in that given area.

Right. So the next thing I wanted to ask was that you mentioned that there is a specific taste that people are looking for when it comes to spices in different states and areas. But I just wanted to understand that how does that conversion take place? Because usually, I mean, as per at least for my limited understanding is that you have a certain order which you are placing every few months for spices at your home. So then how does there be -- how does their shift -- say like, if I'm placing already the same order for spices every 2 months or 1 month, 2 months, 3 months to my house or maybe I'm going and picking up the same thing from the same person for many years. How do I then make a switch? Like is it usually recommended that why don't we track this spices better or is the push coming from the distributor or the retailer? I mean, more the retail -- at the retail side, I mean, how is the push happening?

Yes, definitely, it is a good question. Because as per our past experience and from new territory, we've seen that where our products are selling to consumers, these consumers are buying our product, which earlier they are not buying some particular brand. Earlier they were using non-branded or making the homemade spices for their consumption. Mostly our consumers which are buying our products in our newly entered area, these customers earlier they were using own manufactured, like homemade masalas for their consumption or ey are procuring from their retailers non-branded packets. So majority of our new customers are coming from unorganized or homemade masalas consumers.

Right, right. But then what happens is that -- and I get that. But then, when you make this switch -- supposing if you're making homemade, then when you decide -- at one point, you decide that like -- I mean, maybe some elder person in the house has been making this, I no longer want to make it or that person has become old, they cannot make it. So maybe we need to buy from somewhere outside. So then when that conversation starts, I mean, then you do a Google search. So Google search will obviously point you to the large established players versus are you saying it's -- so it cannot be based on online, so then it has to be based on physical. So that means you are maybe approaching a retailer and then they are recommending it to you. Is that the way it is? Because I would assume that -- then it's only specific to say a certain location where your goods are available and if they are exclusive retailer where they're only keeping your products, then that is how the sales happen. Is that a correct understanding?

No, no. Where you are living, as per your understanding is correct. But if you are living in metros, your understanding is perfectly correct but we are talking not about metros only. We are selling in category A, B or C towns. So this town consumers are generally not much aware about the Google search or any particular brands, especially ground spices category I'm talking about. So these customers are influenced by their retailers or, I don't know, particularly if their nearby neighbors are using which type of -- on which brand of spices. So they are dependent on other retailers only. So if retailers insist them that this brand is very good, you are getting a hygienic product where you were using this unorganized or loose masalas to your home or you are taking whole spices from this retailer and making powder at your home, but this process is not sustained throughout the year because if they are making the spices for entire year, the spices will get some black in color after the period of 2 or 3 months. So this process is not sustainable to consume. So these customers are mostly influenced by retailers and retailers are influenced by our sales channels. So this is how our sales are getting from category [indiscernible]. And currently, we are not focusing on metros. In metros, we are focusing on blended spices through -- we are non-competent with well-established player. And this -- for this competition, we are giving good margins to distributors and good margins to our retailers.

Right. Right. And sir, my last question is that you brought an interesting point. So what would be the kind of breakup you have of revenue between, say, Tier 1, 2, 3, 4 cities, if you have any kind of a breakup available?

No, we do not maintain the category-wise data, but as per our distributor profile, we categorize A, B or C. So we have a data for our distributor, it's sales we are maintaining. But not everybody -- we cannot able to manage because our distributor has therefore in particular area which is a big popular area. But going in small villages also. So we cannot create the sales from our secondary channels.

Right. So when you say category A, B, C, it's based on the relationship -- like the quantum of the relationship with the person? Like based on the amount of sales they do, are they categorized as A, B, C or some other kind of way of categorization?

No, no. Not categorize on sales of particular distributors, we categorize how big population area reached out as a distributor with a partial territory. On this particular territory, how much populations are there and on that data, we categorize it as A, B, or C.

Right. Sir, finally, just a suggestion that -- 2 suggestions, one is that maybe some kind of higher -- I'm sure you are already doing it, but just an addition, maybe some micro influencers which are maybe influencing a particular property share, for example, some kind of marketing initiatives or sales promotion kind of initiatives with those kind of people would be better to get to brand awareness. Nowadays everyone is actually -- slowly everyone started using Google because the elder generation, you are right, who are making the masala often, they may not be very well-versed, but usually now the decision maker has become a much younger person like maybe as a traditional household, the daughter-in-law in the house definitely will be knowing how to use Google and maybe the mother-in-law is making the masala, but daughter-in-law now is using Google for...

So your suggestion is very good. We will have plan in our marketing strategy. This is a good suggestion for us also.

And nowadays the people who go to pick up the [Foreign Language] is the children, they too definitely look for Google, that's one. Any kind of experience in marketing program, which is in local community wise or maybe some local brand ambassadors also, especially in newer states. Second one is for the metros, I just noticed that, sir, now click commerce is -- everybody has started ordering many things on quick-commerce, I don't think it will be very harmful to at least have some presence on the quick commerce platforms. So that is one suggestion as well.

Your suggestion is already being executed, like we have already approved through Zepto and Blinkit, but they have some different kind of requirements, like you have a local -- where, I would say, particular area in which they are serving. So mostly, with quick-commerce side selling currently in metros only, so we are planning on how to create this quick-commerce.

The next question is from the line of Mahavir Jain from [indiscernible].

I wanted to understand the things on the working capital side. So currently, what is the credit period that we entirely give to the distributors?

Yes. Currently, we are giving 30 days of credit to distributors. But 30 days are not strict following up by our sales team because we are entering new territory. So mostly, it will get 45 to 60 days of cycle to [indiscernible].

Well, that is what -- actually, I was observing the receivables in the balance sheet currently. So going ahead, sir, as we see the expansion and growth in sales, do we see the working capital cycle similar to what it is currently? Or can we expect improvement in that?

No. In this half year financial, we have supplied some bulk material to our non-branded sales, that's why it's showing much higher [indiscernible] half year ended. But this will be -- if we are talking about our branded sales, it will be -- it could be around INR 35 crores or INR 40 crores.

And sir, one last question. After the recent fund raise, where do we see the peak debt numbers till FY '26?

Out of our total operational revenue, I'm seeing between 70 to 80 days of trade receivable cycle in the current financial year.

Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Mr. Ramadhin Rane from Hem Securities for closing comments.

Thank you to all the participants for joining the call, and thank you, management, for giving us their time. Wish you all a very good day. Over to you, Sejal.

Ladies and gentlemen, on behalf of Hem Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.