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

Ladies and gentlemen, on behalf of Kaptify Consulting Investor Relations team, I welcome you all to the H1 FY '26 Post Earnings Conference Call of Madhusudan Masala Limited. Today on the call from the management, we have with us Mr. Rishit Kotecha, Chairman and Managing Director; and Mr. Hiren Kotecha, Whole-Time Director. 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, 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 period ended September 2025, the growth plan and vision for the coming year, post which we will open the floor for Q&A. Over to the management team.

Thank you Mr. Vinay ji for briefing the instructions. Hello, good afternoon, everyone. Myself Rishit Kotecha, Chairman and Managing Director of your company, Madhusudan Masala Limited. It is my pleasure to welcome you to the earnings call for the second quarter and the first half of FY '26. Some of you already aware about our company, but I believe today some new investors also joined in this interaction. So I'm happy to let you know about our company in brief, our heritage, like Madhusudan Masala was founded in 1977 by my father, Mr. Dayalaji bhai Kotecha and his younger brother, Mr. Vijay bhai Kotecha. Their vision of quality, authenticity and service has been carried forward by the second generation myself and my cousin Hiren Vijay bhai Kotecha. Today, we continue to blend tradition with innovation across our product range. What we make Double Hathi, our flagship brand for ground spices, blended spices, whole spices and other grocery items, while Maharaja and Mantavya, which is stands for our economy segment ground spices line, while recently acquired our Vitagreen Products Private Limited, which is who is our own subsidiary of your company, Madhusudan Masala, which also offers ground spices, blended spices, other grocery items and other than this ready-to-cook products under the brand name of 77 Green. I hope you all have received the presentation and financial results of H1 FY '26. but let me summarize them and explain why Q2 FY '26 has underperformed. Our branded product performance. Our focus on premium branded offering is yielding encouraging results. In H1 FY '26, our branded products sales stood at INR 6,303 lakhs. This figure rose to INR 7,993 lakhs in H1 FY '26, representing a 27% Y-o-Y increase from the past year. So this has been very good to our very good efforts in increasing our branded segment. This growth underscores our gradual strengthening of branded portfolio and the growing consumer presence for our Double Hathi, Maharaja, 77 Green and Mantavya lines. Financial highlights on consolidated basis. As expected, Q2 FY '26 shows a moderation in revenue while our profitability improved significantly. Like EBITDA margin was -- EBITDA margin for the Q2 FY '26 has been increased to 14.5%, which was 10.3% in Q1 FY '26. And similarly, net profit has also increased to 7.7% in Q2 FY '26, which was 5.7% in last quarter. The product mix between Q1 and Q2 of FY '26 is different as compared to Q1 and Q2 of financial year FY '25. So -- this is due to the growing contribution of our branded business and our disciplined approach to pricing and cost management. However, we look H1 to H1 basis, we have been consistently growing with revenue by 18.7% Y-o-Y and EBITDA has increased 24.2% Y-o-Y, demonstrating the strength of our business fundamentals and improving margin profile. It look, all of you have a question why Q2 FY '26 has been down compared with Q1 FY '26. There are many reasons behind this downfall. And this is our regular business cycle, which up and down in Q1 on Q2 in every year. Some of the key reasons behind this softer quarter is that carryforward inventory like therefore purchase by our distributors in Q1 when spices prices were historical lows, left a sizable stock that was largely consumed in the Q2 damping fresh, which damping the fresh orders in Q2. Conservative order intake, anticipating price rise after Diwali due to unseasonal rains and cyclone, we adopted a cushion approach to accepting the order and avoiding commitment at lower prices. And other reason is like strengthening shift to branded sales. Branded products now account for 71%, which was up from 65% last year. While improves gross margin, the intentional scaling back of low-margin trading volume contributes to the top line moderation. Despite the lower revenue, the higher sale of branded business expanded our EBITDA margin, underscoring the benefit of strategic focus. Now outlook has been coming that channel inventory have largely been depleted, positioning us for a robust rebound in Q2, Q3 and Q4. We expect demand driven by replenishment cycle and favorable price environment post Diwali. Our continued emphasis on high-margin branded products and disciplined inventory management should translate into sustainable growth and improved shareholder results. Also, our sales cycle has been compared to H1 and -- H1 and H2 has 1/3 and 2/3 in every year. So I think our H2 will be very robust in sales. In closing, I thank each of you for your continued trust and support. That concludes my remarks. I request to open the floor for question and answers. Thank you.

[Operator Instructions] We'll take the first question from the line of Resha Mehta.

So my question is on the sourcing. So, since we source, for example, our chili from the South, are we in any form at a disadvantage in terms of pricing or something of that sort versus, let's say, a South-based player? And do we source directly from the mandi or is it via some intermediary?

Yes. Your last question is already we have discussed in earlier meeting, but I will tell you that we are sourcing directly from mandi, but there is a mediator like commission agent between us and mandi. So, on behalf of us, our commission agent procure the material and send it to us.

And are we at a disadvantage in any form versus, let's say, a local player in South?

No, we do not have a market in South region. We are selling our products in Western parts, majorly in Western parts. And recently, we have started Northern regions. So we are not facing any competitive pricing for the raw material areas like in South, majority spices are grown in South. So we are not considering our product to be sold at southern part. And strategically, we are strengthening our presence in Western and Northern region.

Sorry, my question was not on the sales and distribution side. What I'm asking is that, let's say, we source our chili from AP, Telangana or Karnataka, right? So if there is a local chili spices player in one of these states, then in terms of sourcing, are they -- do they get better pricing? Or are they able to avoid these kind of commission agents or intermediaries in between, and hence, they are sourcing costs would be much lower versus ours. Is that a possibility?

No, no. I do not think this type of possibility has been arrived because same scenario also we are seeing in our local mandi like Jamnagar, Rajkot Gondal Gal that majority -- many outstate purchases are coming and their commission agents are coming in these mandis, they are getting fair pricing as we local purchase at that prices. So, similarly, in other states, when we're going to procure, buying the raw material, our commission agent is very familiar with the mandi and old farmers. So I do not think that we get higher price than local players in local mandi.

But does everybody go through via the commission agents? Or is it possible to like directly source from the mandi? I mean, even, let's say, for a big player like MDH and Everest, do they also go via commission agents? Or do they source directly?

No, majority big players or any medium players like us are sourcing via commission agent only because this commission agent, what they do, farmers are taking the raw material in a small quantity. So one farmer is taking 1 or 2 tonnes and other farmer taking 0.5 tonne. So our commission agent combines all the material from 5 to 10 farmers and make a lorry sizable quantity for us which we require. So commission agent generally make this be a focus and taking the commission for the factories.

Sir, also thank you for that. And just my last question on the margins, right? So there is another listed spices player in the SME segment, right? So they get around 50% of their revenue from spices. But if I look at their gross margins, they are in that 30% kind of range for their spices business. Whereas if you look at our gross margins, they are at around 18%. So -- and as a result, they are like half our size. And as a result of this, their EBITDA margins are also in that 16%, 17% range because -- possibly because their gross margins are higher, right? So why is there such a big difference in terms of the gross margins if for a similar spices product, spices player?

Yes. Your question is right. But spices has three, four categories and all categories have different margins, EBITDA margins. And we also have a trading business out of our total business, we have last quarter -- this quarter, we have 71% of branded products, while 29% was trading business, which has only margin of 4%. That's why our overall margin has been looks down compared to other companies. While our branded products has also four categories like ground spices, blended spices, grocery products and tea and ready-to-eat products. So all these categories have different margins. So overall branded product margin has been -- if you consider only branded products, we have a 20% -- 18% to 20% of EBITDA margin.

We'll take the next question from the line of Nishita Shanklesha.

Yes. So I just wanted to understand what are our current inventory levels? You mentioned that we were like almost absorbed the inventory completely from the Q1 inventory that we were holding in October. So what is the current inventory level?

See, Nishita, we have clarified that inventory level of our partners like distributors, super stockist and wholesalers inventory has been almost on empty side because they were procured in quantity for the Q1 because the lowest price of -- historical lowest price of spices. And we insisted all of our partners that please purchase the maximum of your need for one or two quarters in the first quarter. And they also benefited from that also. So our Q2 has been moderately downside because of historical purchase in Q1, which was INR 7,200 lakhs, which is compared to 2.5x from the last Q1 of FY '25. So our raw material stock is moderately as compared to the last year.

Okay. Okay. So, if I understand correctly, we -- hello?

I hope your questions I correctly give the answer.

Yes, yes. So just to clarify, like our partners have emptied their inventory. So now you are expecting that they'll have a better purchase in Q3, right?

Yes. Better purchase in next two quarters. And also seasons of marriage and other seasons are coming in this second half also. So both this quarter -- last two quarters are going very well.

Okay. Understood. And my next question is like are the margin at 14% level sustainable? And are we planning to increase the product mix of our branded portfolio? And like by how much are we expecting by FY '26, how much do you see the branded portfolio contributing to the revenue?

See, in FY '26, our branded product portfolio remains at between 70% to 75% compared to last year, 66%. And margins also stood at between 12% to 13%.

So margins will be in the range of 12% to 13%?

Yes.

Okay. Okay. Understood. And if you can give any revenue growth outlook for FY '26.

Yes. We have planned FY '26, we will close our sales revenue at a consolidated basis INR 300 crores. INR 300 crores to INR 310 crores.

We'll take the next question from Amit Taneja.

What is the internal target time line and framework to achieve 1% market share in the Indian spice industry?

We have targeted 1% market share till FY '30, financial year 2030, we have targeted that we achieved 1% of market share in branded segment.

So what would be that value, sir?

If we consider at the figures of FY '24, the entire industry of spices industry was INR 260,000 crores. So, as of now, is 1%, it stood at INR 2,600 crores. But this is also growing at 10% to 12% CAGR. So, in FY '23, it should be reached at more than INR 3.5 lakh crores.

INR 3,500 crores you're saying?

Yes. In India, the industry should reach at INR 3.5 lakh crores. So we reach our sales at INR 3,500 crores.

And sir, what is the capacity utilization currently for both the brands, Rajkot and Jamnagar?

Both of the plant are currently utilized more than 90%. So we have started new capacity plant between Jamnagar and Rajkot at Sanosara village, which has a capacity of 6,000 metric ton in first phase. And second phase, we are coming with 18,000 to 22,000 metric ton capacity per annum.

And sir, what will be the CapEx for that, and how will be the funding we done, internal accruals or debt?

No. In first phase, we are not getting any fund or banking update from this first phase. We are purely going with internal accruals.

What would be the CapEx amount, sir, if you could disclose?

Yes, that is not issue. The CapEx around INR 18 crores to INR 20 crores for first phase.

For the 6,000 MT you're saying?

Yes.

And what is the expected time line that you think so that this will be beginning?

We have taken the time line from the whom we have given the project that they are completed the project until March '26, but we're expecting to be operating this production by first quarter of FY '27.

We'll take the next question from the line of Vijay Chohan.

Can you please repeat the revenue target for the FY '26 or FY '27?

See, we have got a target for FY '26 is INR 300 crores. And for FY '27, we have targeted our revenue on consolidated basis is INR 400 crores for FY '27.

Okay. So INR 118 crores we have done in H1. So it's typically like 60-40 or 65-35 in terms of favor of H2. So essentially, we are committing, we will do INR 180 crores in the H2. So we should be doing maybe INR 30-odd crores on the monthly basis, okay, if we look at the six months. So we have seen already 1.5 months passing into the H2. So is the trend is in line because inventory also is depleted on the channel inventory side. So are you still seeing some stagnation on that part or we are able to -- we are near INR 30 crores kind of run rate on monthly side?

Yes, definitely, we are running on more than INR 30 crores per month revenue because after Diwali, our sales have been getting very high from our channel partners. So we are definitely assure that the year will be close to more than INR 300 crores.

Okay. And typically in H2, what is the consumption pattern, how it is different from the H1 side because of events what you are highlighting? If you can throw more light like how is it different and whether we are selling more of our branded products in H2 versus H1? Because anyway, we are at 71%. So are we expecting the 71% to be sustained in H2 or we can expect the normalized level of 65%? And what is the typical pattern in terms of the consumption behavior?

Yes. In terms of consumption behavior, the pattern of H1 and H2 is typical, like H1 is 1/3 of the entire year, H2 is 2/3 of the entire year. So our pattern is going as per our selling cycle only. And in Q2 FY '26, we have achieved 71% for branded products. And I believe that this above 70%, we can manage to take the branded products above 70% only till FY '26.

Okay. And what is the sustainable EBITDA margin we should look for the annual basis? Because right now, we are at like a little bit on the higher side because our branded has improved and so that is a good sign. But what is the normalized EBITDA margin like we should keep in mind going ahead, maybe one, two years down the line or three years from perspective?

See, this is, I can share the idea for the FY '26, but it is very early to share the EBITDA margin for FY '27 or FY '28. But in FY '26, we are considering our EBITDA margin will be stood at between 12% to 13% because of increasing our branded sales. This will be somewhere around 12% to 13%.

Okay. So, 12% to 13% on the annualized basis, and we had done some 11.9%, excluding other income. So we are expecting to stay in the same line, right?

Yes.

Yes. And what was like the post CapEx capacity expansion, what will be our total capacity?

Post expansion, our total capacity will be 12,000 metric tons. As of now, we have 4,800 at Jamnagar unit and 600 at Rajkot unit. So Rajkot unit will be shut down after operating of new facility. So 6,000 metric ton will be at a new plant, and we have also expanding our existing Jamnagar facility with 1,200 metric ton expansion. So Jamnagar unit will also the capacity has been increased to 6,000 metric ton. So total capacity in Q1 FY '27 will be 12,000 metric tons.

Okay. And both will be focused majorly on branded or we can manufacture any kind of product depending on the demand side?

No, no. We are only focusing on own brand only. We white label, but we focus on our own brand only.

Okay. And last question from my side. Typically on the, let's say, some event related or the wedding-related consumption. So, typically, do we give some discounts to our channel partners when they give us some large orders or something or that is not the case. So it is completely the normalized margin that we give even for the bulk orders maybe via channel if we get. So how is that working out?

Typically, our distributors and channel partners have a fixed margin ratio, whether they are giving small order or bulk order, the margins could be at same level. But sometimes if they are asking that they want to buy in bulk, so we give ideas that in future, if you're getting the price hike benefit, then we consider them to buy in bulk. Rest we are insist them to purchase as per the need basis.

We'll take the next question from the line of Akshit Jain.

So, sir, my first question is that for FY '26, if we are thinking of INR 300 crores to INR 310 crores, what would be the geographic like state-wise split for this?

See, currently, we are, we have a split of our geographically is 70% from our Gujarat state only, while 15% to 17% from Maharashtra, while rest of sales are coming from newly established Northern states like UP, Jammu and Kashmir, Punjab and Chandigarh.

Okay. And the mix is likely to be the same for the full year also, right?

On the front of H2, this split will be smaller in Gujarat, like we're expecting that northern region will be more higher from 12% to 13% to 20% in this second half.

Okay. And what are the strategies that we are adopting to grow in these new markets for us like the North market? I understand that Vitagreen is fairly established there, but to penetrate them further, what are the strategies being adopted?

First of all, we are adopting a good team, which has already been worked with any good spices company. So in Jammu and Kashmir, we already have a good team of four person who were connected in spices industry from a long period. So they were working with majority companies, well-known companies. So we hired them. So they have relation with distributors also and they have relation with retailers also. So, first of all, we insist our team that, team has more capable introduce our product to their known distributors and retailers. Then we procure the samples for the local market and provide the finished products to the market. So our product is not getting different from the local player. And we are giving more margin compared to well-established players like price-to-retail, PTR, is 22% in major big players, while we are giving 30% to 32% of PTR to retailers, and same in distributors generally 7% is giving by the big players, while we are giving 9% to distributors. So all of these actions are giving us a place to new regions.

Sure, sure. Got it. Got it. And similarly, I'm seeing that even in the spices mix compared to last year, our mix for ground spices has gone up. It's at 45% now, while whole spices has come down. So is that a conscious call in light of the gross margins of the categories?

Yes, definitely. And we are focusing on ground spices only because we see a huge gap in market that no big players are penetrate entire pan-India market in ground spices categories while blended spices is on hand of only two or three companies like MDH, Everest and Badshah, like ground spices has a very huge market. And also there is no any big players has a market in entire India. So we are focusing on this category to establish our Double Hathi brand as a ground spices player.

Okay. So what are the kind of margins that we are making in ground spices, whole and blended?

We are making 15% of EBITDA margin in ground spices.

Okay. And how does that compare in whole spices and blended?

Blended has 25% of EBITDA margin, while whole spices at 10%.

Sure, sure. Got it. And I was seeing that the company has launched new products like ginger garlic paste. So I just want to -- if you can just share some light on the thought process of new products going forward?

Yes. The new products of ginger garlic paste. is already being sold by 77 Green, but this product is sold in only small pack of INR 5. So we are getting more demand for big packs. So we launched in 500-gram and 1 kg packs in jar. So these products are already in our portfolio. But the SKU we have launched in a new category. And some new products like undhiyu masala is solely a new product for our portfolio. But these masalas are season based. In winter only, these masalas are selling, but the ginger garlic paste is sold entire the year throughout the year. So this bulk pack 500 and 1 kg is demanded by HoReCa business. So we launched this for HoReCa business only.

Okay. Okay. Okay. Sure. And lastly, in Q2, I can see that our EBITDA margins have risen from 10% to 14.5%. While a small bit of this could be on the reason branded sales have gone up in Q2. But there are -- are there any other factors also because it's a 4% jump in EBITDA.

The major reason is the increase in branded sales only. And the other factors like price hike of raw materials in recent period also reflected in the EBITDA margin. But this will be neutralized in the Q3 and Q4 because our raw material procurement is continuously buying at a higher price also. But in Q2, our scope of last quarter of FY '25 has been consumed in Q1 and Q2. So our margin reflected at higher side.

We'll take the next question from the line of Prashant Shah. I think we'll move to the next participant. We'll take the next question from Pratik Rathi.

You mentioned that the next phase of entire CapEx will be funded through internal accruals. Does that also include the pending warrant conversion?

Yes, yes, exactly. The fund will be utilized by warrant conversion only.

Got it. Got it. So I understand the warrant conversion will be due by May or June 2026. So that will be converted before that, the entire.

40% conversion will be in this year before March and rest will be in FY '27. So the entire project will be completed by this warrant conversion.

We'll take the follow-up question from Nishita Shanklesha.

So I just had a follow-up question on the CapEx plan that you have. I just wanted to understand what will be the Phase 2 of your CapEx plan? How much capacity will be increased in Phase 2?

Yes. See, first phase will be completed by FY '27 Q1, and capacity will be 6,000 metric ton. While the second phase will be started after the completion of this first phase. So we are planning that we will start our second phase by quarter 3 or quarter 4 of FY '27. And the capacity will be 18,000 to 22,000 metric ton per annum, which is under consideration, not yet finalized which capacity which we are going. So we will disclose the exact -- exactly about the second phase of our plan.

So, in second phase, we are going to add 20,000 metric ton per annum of capacity.

Currently we are considering this capacity but later we can go with more capacity also, see the market scenario and other things...

Okay. And this Phase 2, the construction will start in Q3, Q4 or the production will start in Q3 or Q4 FY '27.

We final the construction of Phase 2 in Q3 or Q4.

Okay. Okay. Understood. And like from the Phase 1 capacity at more than 90% utilization what will be the peak revenue?

New capacity or current capacity you're asking here.

The new capacity, the Phase 1 capacity that we will have, which will be operational from Q1 FY '27, what will be the peak revenue from that additional capacity?

Maximum between INR 450 crore to INR 500 crore, between.

Okay. And when do we expect the capacity to ramp up to full utilization? Will that happen by the end of Q4 FY '27 or earlier?

I think 70% to 80% capacity will be utilized by end of FY '27.

We'll take the question from Prashant Shah.

So, Rishit ji, my first question was that the first caller had asked first that we buy through the commission agents through various -- from various mandis. So, typically, the commission is in what range?

Commission is in the range of 1.5% to 3%, depends on quality and depends on mandi.

Okay. So, I mean, with large farmers, there is a concept of contract farming. Have we explored that? Or are we thinking of doing anything on that side?

Yes. No. Recently, we are not thinking for the contract farming. Before five to six years, we have tried in with some Gujarat local farmers as a trial base. But the quality and the consistency of farmers is not as we need. But -- so we are not going with the contract farming. But our desired quality has been procured by commission agents has done very well since 40 years. So we do not think that we have to go with contract farming.

Okay. And the next question is regarding our geographical footprint. So, we are largely in Gujarat, some part of Maharashtra and in the northern states. Any particular reason we are not branching in the southern states because southern states, the GDP is around 40% of India and geographically, the area is quite less. So distribution-wise, it is much easier. I hope you understand what I'm trying to say. So any particular reason why we are not going into the southern states?

Prashant ji, you are asking a very good question. See, whether any companies are selling spices in Southern region, they have own plant in Southern region only because majority of prices are grown in Southern states. So if we are taking raw material from the South state and processing western part and again, we send the piece to Southern region, then there will be a logistic cost much higher than local players. So if we are planning to capture the Southern region, then we have to deploy manufacturing capacity at nearby areas of raw material sourcing areas. So that's why we are not currently planning to capture the Southern market. While Northern market being emptied because there is no production of raw material of spices in Northern states. So we easily compete with the competition, while competitors are also getting raw material from Southern states, and we are also getting from Southern states. So, in Northern and Western, we do not have any logistic development, and margin competition from our nearby competitors. That is the reason.

So, going by that logic, I mean, in the near foreseeable future, we will not be putting -- I mean, we will not be expanding in the southern states, correct?

Yes, correct. Correct.

Okay. You mentioned that in this quarter, I mean, around 71% was the branded business and 29% was the trading business, correct?

Yes, correct.

So, out of this 71% branded business, I mean, how much was bulk packaging and how much was smaller packaging -- I mean, retail packaging, let's say, 1 kg and below, how much was the percentage and more than 1 kg, how much was the percentage of volume?

Exactly, we have not given out what we are asking for. But roughly idea I can give you that majority of our packing are sold in below 1 kg packs. So it will be around 70% of packs are sold below 1 kg packs. And on an average, we have a majority sale of 500 gram packs.

Okay. And the margins would be on the bulk packing and the retail packing or the 1 kg packs and below, the would be the PTR and PTD would be the same or it would be different?

No. Pricing ratios are similar in bulk pack and smaller pack only because the bulk pack maximum, we are selling up to 5 kg, but some of our HoReCa buyers are demanding in 10 kg also. But the pricing and PTR would be the same for the entire SKUs.

Okay. And we have around more than 500 SKUs, and we have a new line of, I mean, grocery products, instant mix, food products. Those are manufactured in-house or we get it on a job work basis do the branding and sell them?

No. Ready-to-cook ground prices, whole prices and other grocery products in some are manufactured in-house only. We are outsourcing three products like papad, ginger garlic paste and hing, three products are being outsourced and retail.

So, the non-spices would be how much -- what percentage of the business?

It is somewhere around 9%, 9.5% in Q2.

And how many SKUs out of 500?

That would be somewhere around 20% to 25%.

Okay. So, I mean, purely from a management bandwidth perspective, would it be beneficial to focus on the spices business only and -- or rather, I mean, you want to -- because I have seen that many companies, they expand their product portfolio too large. And later on, it becomes difficult to manage SKUs. There is a problem of freshness, the near expiry products, sales return, all that. So as -- I mean, how do you feel? I mean, these grocery products, instant mix in the coming period, I mean, do you think that this will be -- this will grow into a sizable business of a vertical of, say, INR 100 crores or something?

Our primary focus is on ground spices category only. And the other categories are -- going with our ground spices business, similarly, our distributors are -- if we have a distributor in one city and we have only ground spices portfolio, then this distributor has another products like ready-to-cook or whole spices, they are selling for another brand. So we do not want to our distributor to get another company in their distributorship out of our range. That's why we are keeping our SKUs in large size. So our distributors as well as our retailers are connected with our brand only. They do not look out to the other brand for a similar kind of these products.

Understood. Rishit ji, what I was trying to say is, let us take spice as one vertical. So that includes ground spices, blended spices, whole spices, that is one vertical. Other than spices, so that is grocery, instant mix, this other masalas and all that, that is other category. So other than spices, [Foreign Language] do you think that will be a substantial part of your business? What will be the EBITDA margin in that business? Is that -- is the EBITDA margin in other vertical, grocery, instant mix, will that EBITDA margin be comparable to your spice business?

Yes, exactly. We are getting 15% of EBITDA margin from grocery products because these products are very high margin intensive in terms of like ready-to-cook products has a 20% margin, while some of our products like salt and black paper, black salt, pink salt has a smaller margin up to 10%. So, on an average, we are enjoying the 15% of EBITDA margin from this grocery product category. That's why we do not want to lose this category.

Okay. Understood. And last thing, I mean, there are two questions on the funding and the accounting side, your other expenses, if you see on a quarter-on-quarter basis, Quarter 2 of FY '25, other expenses were INR 2.15 crores, and the sales was INR 70 crores. This quarter, the sales is INR 45 crores, but the other expenses has gone up to INR 2.40 crores. So on a lower sales, the other expenses have gone up. I mean, if you can share some details?

Yes. We are -- we have -- hello, Kirit? I think our CFO, Mr. Kirit will be more able to...

Okay. We will wait for Mr. Kirit. Hello?

Yes, yes. If you have any other question, then we can take.

Yes. My other question was, I mean, the company has issued warrants to promoters and part of the money has been received, part of the money is still pending, correct?

Yes.

Yes. So what -- is there any plan to call for the balance of the money because I see the debt is also going up and interest cost is also slowly, slowly climbing up. So any plans to call for the balance money on the warrants?

Yes. I already mentioned in earlier question of some investors that 40% of entire warrant value will be recorded in this year till March and balance 40% will be recorded in FY '27 before July.

Okay. So the 20% has been received, 40% balance this year. And by July next year -- FY '27, 100% will be received, correct?

Yes, correct.

Okay. Okay. If Mr. Kirit has come, then he can reply or...

I think he may be able to unmute. So, meanwhile, we'll take the question from one of the participants. Prashant, I think we can wait for him to join back. I think he is not able to unmute. Meanwhile, we'll just take the question from another participant now. So we'll take the next question from the line of Amish Kanani.

Sir, a couple of quick questions. In terms of EBITDA margin, sir, our presentation suggests that last year, our EBITDA margin in the first half also was 11.4%, which had gone down to for the full year at 10.5%. So despite second half being heavy. So -- and this year being first half being 11.9%, what gives us that comfort that we'll be able to maintain margin at 12% plus? I remember last year, there was some one-off because of the consolidation. So is that the reason why we are hoping that this year will be able to maintain the margin? And what typically happens in terms of operating leverage in the second half, sir, if you can explain that?

Yes, definitely. The first half of Q1 was very higher side and the Q2 has some moderate, but segment-wise, branded sale has been increased compared to the Q1 FY '26. So the margin has been also increased. And this trend will be continued in Q3 and Q4 also. So I'm sure that the margin will be somewhere around 12% to 13% for the entire FY '26.

And sir, if you can remind us why in last year second half, the margins were not so high just because typically, operating leverage should result in -- so was the gross margin issue last year, second half and something like that?

See, this depends upon our procurement cycle. Last year, we did our entire procurement before March. And this year, the season has stretched up to May, up to 15th of May. So this year, we -- our procurement cycle was running till May of this year. So our procurement of raw material has been very low and prices of raw material has been lower this year. Last year, the prices of the raw material were higher side at the season period. So, this year, we have procured the raw material in good quantity, 60% of our entire...

Sure. So you're saying we will get a benefit of procurement at a lower price. And the entire benefit, we may not be able to -- we may not pass on depending on the pricing for that season.

Current net quarter and current quarter, we are also procuring at a higher price also because rest of 40% requirement of raw material will be somewhere around to be procured at the higher price only. So the margin will be stage between 12% to 13%. That's why I am...

Sure. And sir, you said the inventory was depleted at the distributor level. Is it possible to -- if you can give us some sense of how much is the inventory at our level? And how much is the typical inventory at the distributor level? And how much was lower by in terms of either number of days or quantum, which was lower, which you will -- there will be a onetime replenishment of that inventory by distributor in the second half. If I take 30-day average, and if I take a INR 300 crore revenue, maybe INR 30 crores is a kind of revenue which comes as a 1-month, 30-day inventory. So is it something that is conceivable? What is the average inventory that distributor keeps? How low it was in, say, second quarter because of the seasonality that you mentioned? And what is something if you can quantify days value-wise?

Ideally, our nearby distributors are stocking at seven days, weekly stock only. Like in Saurashtra region, our distributors and wholesalers are keeping 7 to 10 days stock only. But some areas like out of Saurashtra in Gujarat and Maharashtra, our distributors are keeping stock of around one month. And currently in -- recently started parts of Northern states, we have a stockist, so our super stockist has to keep 1.5 to 2 month's stock because super stockist have to fulfill the requirement of all distributors. Distributor have to supply to retailers. So the inventory level at higher side at the super stockist level.

So that was depleted in the second quarter, you're saying. The super stockist may not have kept the same high level.

And also some new distributors are appointed in this quarter and last second quarter also in Northern state. So this new distributor sales is also coming in this two quarter.

Sure. So is it possible to quantify the value which was lost or what will be quickly replenished at distributor level, maybe INR 10 crores, INR 20 crores, INR 30 crores is the quantum that we have missed in the second quarter and which will be recaptured in the third quarter? Can you elaborate?

I didn't understand your question.

Sir, what you s say, sir, what you explained is, there was a low level of inventory at the distributor level. So when they replenish to a normalized level because you said first quarter, we had given a lot of it because we gave them a view that you procure as much as possible at lower price. With the way we captured the lower price, we tried and pass on the benefit to the distributor also saying you keep as much as possible, benefiting the lower price. That didn't happen in the second quarter, right? So I was saying what was the approximate value in terms of something that in the second quarter, we lost because of the destocking. Some sense if you can give, maybe it's difficult. So, and sir, then last question from my side, sir. This unseasonal rain, sir, is it affecting us in any way affecting our logistics and storage thing and -- or it's not something to worry about, sir? Is seasonality -- unseasonal rain can affect our third quarter or fourth quarter?

No. In our storage capacity, the atmospheric regions are not being affected because we have own cold storage for our raws materials. So we do not have any difficulties to storage material. But farmers are getting very low from the unseasoned rain and cyclone in the southern part of some areas. So this could result in high price of the raw materials.

Okay. So -- but there will not be issue in quantum, right? The quantum...

There is no issue for our storage material. We have a very good cold storage facility, which will be able to case the cyclone and any other atmospheric conditions and any conditions.

Sir, pricing, how is it -- is it possible to give us some sense of pricing trend? I know we have too many raw materials, but maybe some or some couple of key raw materials where the prices have moved up by some 10%, say, in the third quarter because of this phenomenon?

Yes. Our key raw material is chili. So we are considering chili prices rational for the entire our raw material. So the chili price went from 50% to 80% grown against the season of this current year. For example, if we bought a chili on the March or mid of April of this year at a price of INR 100 and then the same quality chili is selling at a price of INR 180 to INR 190 or INR 200 per kg.

That's -- so we'll at least benefit from on our raw material inventory.

Yes, definitely. We are passing to our channel partners also because this price is not grown INR 100 to INR 200 over the night, it has been gradually upcoming like one day, it up by INR 5, second day is up by INR 7. So, on time is up by 5%, we give our distributors let older price. So he also get the price benefit to the retailers themselves also.

We'll take the next question from the line of Shaikh Mujeeb Ahmed.

Sir, just I would like to understand this chili prices fluctuation. We noted that in the second quarter and the final quarter of the financial year '25 also, our volumes were okay, but prices came down. And this year also in the first two quarters, the prices were a little bit low. So usually, in such cases that means now the unseasonal rains, how it has impacted the chili prices, that means in the upcoming quarters. Will it be having the impact on the crop or how it will be?

Yes, definitely, the chili crop in Karnataka and Andhra Pradesh is more affected because of unseasonal rain and cyclone also being in some part of Karnataka. So Karnataka is a good quality chili produce state like dabbi mirch and Kashmiri mirch which are coming from Karnataka state. And guntur chili are also in terms of spiciness. So in this -- both of this region, there is unseasoned rain. So we are thinking that coming quarter 1 -- quarter 3 and quarter 4 price will be on higher side only. And recently, we are updating our price list on every week and the price would be on upper side only.

Okay. Okay. But this much fluctuation in the prices, is it very common in the chilis? Or is it something abnormal we are seeing in last one year?

No. This is not common. Many -- after many years, this type of scenario has been seen by farmers because this is the crop season and farmers are cropping the raw material and taking to the in mandi. But at the time of cropping, the rain has been arrived and cyclone also there. This is an uncertain situation. We do not -- we didn't see this scenario from past many years.

Okay. Okay. Sir, and the final question is, can you please again give the clarity on the capacity what we are having as on today and what we are doing now to increase the capacity? And after the expansion, how much it will be?

See, I already answered, but I will tell you that we have a current capacity of 5,400 metric ton in two units. And we are expanding our capacity by 6,000 metric ton in new facility and 1,200 metric tons at our existing Jamnagar capacity. So the new capacity will be 12,000 metric ton by quarter 1 of FY '27.

Okay. Okay. That means it means almost you are more than doubling your existing capacity?

Yes, we -- our capacity will be doubled from the current period.

So, in the similar fashion, are we strengthening our distribution network? Are they ready to take this much capacity?

Yes, exactly. Currently, our capacity is under we are utilizing about 90%, but the 30% to 40% of raw material we are getting outsourced a SFG level. Like in quarter 2, we have manufactured 1,120 metric ton of out of 11,00 metric ton 328,000 metric ton was outsourced. So this 93% was only 60% to 70% was manufactured at our unit because of our capacity constraint, we got outsource our SFG at other raw spices or other millers. That's why we want to double our capacity.

We'll take one last question from the line of Nikhil Kumar.

Good set of numbers. Many congratulations. Just one quick question I had. This was more in terms of like you have four brands, Double Hathi, Maharaja, Mantavya and 77 Green. And many of them have overlapping products like ground spices or at times branding. What is the reason to have so many different brands?

See each brand has a categorizing pricing like Double Hathi is a premium product, while Maharaja is subeconomy product and Mantavya is a very lower priced economy product. And 77 has entire different market from our Madhusudan brands. 77 is a brand of Vitagreen products. So 77 has separate distributors and separate sales team, while Double Hathi, Maharaja, and Mantavya separate distributor and separate sales team. So three products -- three brands are in Madhusudan, Maharaja, and Mantavya that are categorized as a pricing perspective.

Okay. Sorry, I missed the last part. 77 is -- how is that different?

77 is a totally different brand. Like we have distributors in -- for example, we have in Baroda, we have distributor for 77, and we have distributor for Double Hathi brand also. So these two products are selling at different distributors and with different retailers.

Kirit sir, are you able to unmute yourself. There was one question from Prashant Shah. I think there is some issue in the system front. I think we'll take one last question from Mr. Akshit Jain.

Yes. Sir, I just wanted to check that for the current 6,000 metric ton expansion, how much CapEx have we put for it?

We are putting INR 18 crores of CapEx in the 6,000 metric ton.

Okay. So INR 18 crores CapEx is only for Phase 1?

Yes.

Okay. And how much revenue potential does this translate to?

12,000, total capacity of 12,000 metric ton, peak utilization will be INR 400 crores and up to INR 500 crores [indiscernible]. We can get maximum up to this number [indiscernible].

Okay. And under Phase 2 of the expansion, further adding around 12,000 metric tons further, right?

Yet not decided, but currently, we are planning to expand the second phase with 18,000 to 22,000 metric ton somewhere around between this.

Okay. And Phase 1 will go into -- will go live in Q1 of next year, right?

Yes.

Okay. Okay. Sir, have we thought about MP as a steel because it's close to Gujarat and Maharashtra, which are strongholds sits in that Hindi belt for us.

Yes. We plan to coming in MP. Currently, we are focusing in Northern states because we have a good sales channel and sales partner in this region, which were connected through Vitagreen since long period. So we are focusing on the existing areas, which we are -- we have good demand of our 77 brand only. So we are focusing in these four states as of now. And recently, we have started super stockists at Rajasthan, but we have not deployed sales team to this region. So, gradually, sales are coming from Rajasthan also. In Jaipur, we have appointed a super stockists and which super stockists have 10 different distributors, under 10. So we started Rajasthan also, but we have not yet deployed the sales team in Rajasthan.

Okay. Okay. And you mentioned that in Maharashtra, dealers hold 7 to 10 days of inventory. Just wanted to confirm if that's a normal case or in Q2 when the inventory was lesser?

No, no. This was considered in Q2 only because in regular terms, they are taking 30 days of inventory.

Got it. Got it. Got it. So straight away because instead of four weeks inventory, they were holding just one week, and that's resulted in the sales dip.

Yes.

Mr. Prashant, you can ask your last question that was regarding the balance sheet. You can go ahead, please.

Yes. So quarter 2 FY '25, the sales was around INR 70 crores and the other expenses were around INR 2.15 crores. In quarter 2 FY '26, which is the current quarter, the sales are around INR 45 crores, INR 46 crores, but the other expenses are INR 2.30 crores or somewhere around that. So even though the sales have gone down, the other expenses have slightly gone up. What would be the reason Q2 quarter?

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That is the reason we have made a INR 1.25 crores of advertisement in season period, which was from March to May. And the agency billed entire coming in this quarter 2. That's why the other expense are reflecting higher side from the last year.

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Still, I'm not convinced, but Rishit bhai, I will reach out separately with your -- if possible, with you and your team to understand it better.

You can contact Kamlesh ji from Kaptify. He will meet us. So any of your questions, we will definitely clear out. And because this is a half yearly result, there is no notes on this. That's why you are -- you have to ask us. So, definitely, we and Kirit bhai will answer all the questions. And, Kamlesh ji please arrange a separate call for Prashant ji.

Yes, sure sir.

Thank you. So that was the last question for the day. Rishit sir, would you like to give any closing comment before we end this conference call?

Yes. Thank you, all investors, and thank you for attending this interaction and hear me very well. And all of your questions, it's my pleasure to give you as per my knowledge. Hope you have understand me correctly and wish you all the best for our journey. And I wish you all are supporting us in our growing journey. Thank you.

Thank you. Thank you to the management team for giving us the time. Thank you to all the participants for joining us on the call. This brings us to the end of today's conference call. You may all disconnect now. Thank you.