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 Q3 and 9 months FY '26 Post 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; Mr. Kirit Dharaviya, CFO; and Mr. Sarvesh Gohil, Auditor. 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 December 2025, the growth perspective and vision for the coming year, post which we will open the floor for Q&A. Over to the management team.

Yes. Thank you, Vinay ji. Good afternoon, everyone. I hope all are well, and thank you for joining us today for the quarter 3 results of our Madhusudan Masala Limited. On behalf of the management team of Madhusudan Masala Limited, myself, Rishit Kotecha, Chairman and Managing Director, pleased to welcome you to the quarter 3 and 9 months of financial year '26 earnings discussion. We truly appreciate your continued interest and support. I will now briefly take you through our quarter 3 and 9 months FY '26 financial performance. Our quarter 3 financial year '26 marked a strong operational and financial quarter, reflecting the scalability of our business model, improving mix and disciplined execution. Revenue for quarter 3 FY '26 has been stood at INR 763.2 million and a growth of 20.3% year-on-year growth and a strong sequential uptick driven by high volumes, improved capacity utilization and strong [indiscernible] branded products. Our EBITDA has also been increased to INR 82.5 million, a growth of INR 79.6 million year-on-year with EBITDA margin expanding to 10.8%, which is up by 357 basis points year-over-year, supported by our operating leverage and better product mix. Also, our net profit for the quarter was INR 47 million, which is up by 104%, which is almost double year-on-year with net margin improving to 6.2%, which is reflecting our improved profitability across the value chain, and financial performance for the 9 months stood as below, like revenue stood at INR 1,945 million, reflecting a 19.3% year-over-year growth while EBITDA rose to INR 222 million, a growth of 40% year-over-year with margin improving to 11.5%, while net profit increased to INR 123 million, which is also up by 40% year-over-year, demonstrating a strong earnings momentum. Operational and business highlights. During the quarter 3 of financial year '26, our capacity utilization has reached to 98% from our Jamnagar [indiscernible] and at Rajkot unit, we have utilized 100% of our capacity, underscoring the strong demand and operational efficiency. We continue to strengthen our brand portfolio with branded products contributing more than 70% of total revenue in 9 months FY '26 and non-branded still at 30%. While total sales volume during the 9 months FY '26 stood at 16,983 metric tons, with [indiscernible] metric tons from branded products, and we sold 106 million packets, reflecting a good retail penetration. Our distribution footprint expanded meaningfully with presence across 7-plus states over 42,500 retail outlets, 6,400-plus wholesalers and 358-plus distributors as of December '25. Strategic progress. As we continued investment towards -- our continued investment in capacity expansion, including capacity addition during the quarter 3 and progress on our greenfield expansion project in Jamnagar-Rajkot highway, which will add 6,000 metric tons in Phase 1, positioning us for the well future growth. In quarter 3 financial year '26, we added 1,200 metric tons of manufacturing capacity at our Jamnagar facility through a brownfield expansion. Overall quarter 3 and 9 months financial year '26 is reflected a strong execution, margin expansion and steady progress on our strategic priorities. As we move forward, our focus remains on scaling the branded sales, expanding our pan-India distribution, enhancing capacity and operational efficiency, delivering consistent and profitable growth. With this, I will now hand over the call for further discussion with question and answers. Thank you.

Thank you, sir, for your detailed opening remarks. [Operator Instructions] We'll take the first question from [ Risha Mehta ].

Yes. Sir, so my first question was -- so there was a report, which said that China has become very active in the chili powder space with chilis basically. And that could lead to depressed prices in the Indian market also. So since chili, if I understand correctly, is close to 1/3 of our revenues, right? So how does this impact us? So let's say, if the chili prices come down, right -- the commodity prices come down, then how does it impact our revenue and margins? So -- because from a value growth standpoint, do we need to pass on the price cuts to the consumers, which I think we will have to, assuming competition also takes price cuts? And then how do we think about EBITDA margins? [Foreign Language] or do we try to increase the EBITDA margin? Basically, just trying to understand like with this example of chili, the inflationary environment or deflationary environment [Foreign Language] when the commodity undergoes inflationary or deflationary cycle.

Yes. [Foreign Language] that is quite controversial because [Foreign Language]. Actually, China is a net importer of chili from India. China is not exporter. [Foreign Language].

[Foreign Language] fine, they are net importer. But I'm not talking -- actually, I mean, I don't want to talk specifically about chili as an example. [Foreign Language] it is versus what time period? Is it 1 year ago, [Foreign Language]. Yes, what time period [Foreign Language] inflationary cycle [Foreign Language] is it still deflationary cycle [Foreign Language].

[Foreign Language].

[Foreign Language] before the deflationary cycle [Foreign Language].

[Foreign Language] Hiren bhai is the better person to give you answers. So I will request Hiren to answer your question.

[Foreign Language].

Yes, yes, sir.

[Foreign Language].

Okay. And then sir, normally [Foreign Language]. From a pricing standpoint, [Foreign Language].

[Foreign Language].

Understood. [Foreign Language].

[Foreign Language].

[Foreign Language] it's like a commodity business, right? [Foreign Language].

[Foreign Language].

Sir lastly, [Foreign Language].

[Foreign Language].

We'll take the next question from chat. This question is asked by Rehan Syed. His question is, management has reported that Unit 1 and Unit 2 are operating at 98% and 100% capacity utilization, respectively. With the 6,000 metric ton Phase 1 greenfield expansion currently under construction in Jamnagar, what is the specific targeted commissioning date? And how does the company plan to service the projected 30% CAGR demand in interim period before this new capacity comes online?

Yes. Yes, if both the units are operating at 100% utilization, you can say, Jamnagar and Rajkot, both are at 100% utilization. With our new greenfield project, which is commencing at Jamnagar-Rajkot Highway, which will be operational by end of this September '26. Hopefully, we will start our commercial production from that unit from October '26.

[Foreign Language].

[Foreign Language].

Okay, sir. And he has asked another question like following the 100% acquisition of Vitagreen Products and the onboarding of the 77 Green brand, how much of the current distribution network is now fully integrated? And furthermore, as you aim for 1% total market share in Indian spices industry, is the current 30% CAGR guidance purely organic? Or does management intend to pursue further bolt-on acquisition to gain immediate access to new regional distribution silos?

See, as of now, we are searching for a good [Foreign Language] that will be add-on to the 30% of CAGR [Foreign Language].

Okay, sir. We'll take the next question from Amit [indiscernible].

Yes. Congratulations for a good set of numbers. Sir, [Foreign Language] first was like connected to branding, like [Foreign Language] what is the budget towards like social and digital media? And second question was connected to the hiring. Like [Foreign Language].

First of all, [Foreign Language].

Understood. And sir, branding?

[Foreign Language].

Sir, connected to this, the follow up [Foreign Language].

In quarter 3, [Foreign Language].

Understood, sir. Congratulations and all the best for the future.

We'll take the next question from [ Sanchita Sood ].

[Foreign Language] and once the new Jamnagar facility comes onstream [Foreign Language].

See, as of now, [Foreign Language].

We'll take the next question from Amit Mehendale.

[Foreign Language].

[Foreign Language].

Right, sir. [Foreign Language] I think there was another CapEx, which was planned. [Foreign Language] I'm not very sure. Is that a plan also [Foreign Language] Phase 2 CapEx?

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language] any fund raising plan for that, equity capital?

[Foreign Language] whether we are going with debt or fund raising.

Right, sir. [Foreign Language] will it be INR 40 crores, INR 50 crores.

[Foreign Language].

[Foreign Language].

Yes, yes.

Okay, sir. And finally, on the distribution side, on the marketing side, [Foreign Language] regional distribution, [Foreign Language]. Any granular color on that will be great.

Sure. As you see, [Foreign Language].

[Foreign Language].

[Foreign Language].

Okay, sir. And my last question is on the margins. [Foreign Language] raw material prices, 10% drop [Foreign Language].

[Foreign Language] Hiren bhai will answer the question more precisely than me.

Yes. I mean, see, I'll just clarify. See, our understanding is that for some products...

[Foreign Language].

Right, sir. And my last question, if I may. [Foreign Language].

[Foreign Language].

[Foreign Language] the same distributor is selling some other products currently maybe.

[Foreign Language] existing, well-known players. [Foreign Language].

We'll take the next question from [indiscernible]. Sir, we will move on to Vijay [indiscernible]. Vijay, you can go ahead please.

So majority of my questions on the business are answered. So my question is on the exit run rate side. So we have done somewhere around [Foreign Language] INR 195 crores [Foreign Language] in the first 9 months. So are we on track to even deliver 25% to 30% guidance for this year? Or we will see maybe the -- we will see some deviation from the target that we have set?

No, no. We are not [indiscernible]. We stick to our projected target of 30%. Definitely, we will achieve the target with more than 30%.

Okay. [Foreign Language] consolidated basis, that, we will be trying to achieve, right?

Yes, already on the track, and that will be more than [ 300 ] as per our confidence being [indiscernible] over the market.

All right. And typically, quarter 4 or quarter 3, so quarter 4 is the strongest or the quarter 3 is the strongest as per your experience?

Actually, quarter 4 stronger [Foreign Language].

Right, right. Have we decided something on FY '27 [Foreign Language]. If you have decided some internal target or EBITDA margin guidance, would you like to give it right now?

See, [Foreign Language] 30% CAGR, that will continue -- that will be sure.

Yes, [indiscernible], you can go ahead, please.

Congratulations for a good set of numbers, sir. I have a couple of questions. Actually, you can say that this is a continuation of the earlier caller. Sir, right now, still we are INR 100 crores short of INR 300 crores target for this FY '26 top line, correct? That means if we see the total growth in the last 9 months also, it is coming around 20%. So our target is at 30%. So how we are going to achieve this gap, sir, or fill this gap?

Yes, you are right. Because in last quarter 4, we have achieved 25%. And also in this quarter 4, we have a dedicated plan for Northern states, like I already mentioned that in UP, we have acquired a team [indiscernible] new distributors and new regions in other parts of the UP. So that will help us to achieve our target also. And our existing market is also getting -- there was no carryforward scope at our distributor level. So quarter 3 [Foreign Language].

Okay. [Foreign Language] EBITDA margins, if I compare with Q2, it has been dropped from 14.5% to 10.8%. What is the reason, sir, for such a drastic drop in a quarter?

See, quarter 2, [Foreign Language]. So that's why our margin is consistent compared to the Q2. But overall, [Foreign Language].

So what we can expect, sir, in coming quarters? What will be the sustainable margin? It will be around 10%, 11% or...

Yes. For the entire financial year, the EBITDA will be between 10.8% to 11%.

Okay. Okay. Sir, earlier just in this con call, you have told that you are planning for INR 600 crores top line with the CapEx. Is this with the 6,000 metric ton greenfield expansion what you're doing or with the 12,000 metric tons?

No, INR 600 crore revenue is for 6,000 metric ton vehicle and existing vehicle.

Okay. Okay. Okay. Sir, with the addition of the new capacity in this quarter, I think, around 1,000 plus something you have added, right? With this one is the demand what we are getting from the outside, are we still giving for outsourcing or the internal capacity is fulfilling the requirement?

No. We still have to give the material for outsourcing because our capacity is not yet sufficient to process the entire categories.

Okay. Okay. Sir, one more question. How are the chili prices now compared to Q2? Because in the Q2, I think the -- Q2 or Q1, it was -- that means the prices were very low. But you told in the last quarter that the prices have been significantly improved. How are you seeing the trend in this quarter?

Yes. So average sale price for our chili powder was INR 174 in quarter 2. And in quarter 3, the average sale price of chili powder is INR 241. So you can see the difference like more than INR 65 per kg.

I think that one is being reflected in your bottom line also because bottom line has been increased by 40%, whereas the top line is around 20%. I think is it...

Yes. But our quantity-wise sale has also increased.

Okay. Okay. So in quarter 4, because now I think around 20 days have passed, are these prices are being sustained? Or are you seeing any pressure?

As of now, we are seeing that price will be not only sustained, but it will go more higher side for our chili, turmeric and coriander, all of 3 commodity price will go higher side. As of now, we are seeing as per market scenario.

Okay. Sir, can you -- the last, can you just update on the expansion, what kind of works are going in the greenfield expansion and the machinery and other things have been ordered or what is the status?

Definitely. We have given the project to a single entity on a turnkey basis. So all of the construction and PEB structure and the machinery will be provided by a single supplier. So we have already ordered the machineries to them, and they are doing civil work as of now. And by end of this March, the civil work will be 100% completed. And after March up to April to June, they will start and complete the fabrication work. And in July, August, we will start commissioning of machineries and take final run in August.

Okay. Okay. It would be very great if you add the latest photographs in the upcoming presentation with the construction status. That will...

I will ask my IR team to do it.

Sir, we'll take the last follow-up question for the day from Amit.

Sir, my question is on the Phase 2 CapEx, and we discussed about that a little bit. [Foreign Language]. From whatever we understand of the business, right, [Foreign Language] our capital requirement will also be around INR 40 crores. And assuming that we take 50% debt [Foreign Language]. The capital expands, EPS drops [Foreign Language]. Do you think is this a correct assumption.

[Foreign Language].

Sorry, sir. [Foreign Language]. I could not understand. Hello?

Sir, you are not audible.

I think Rishit ji's line has dropped off. [Technical Difficulty].

Issue with the audio.

Hello. Am I audible?

Yes, sir. Please go ahead.

Yes. I just asked the concern with -- I cannot understand the concern what he raised for the capacity expansion. I didn't get the question correctly.

Okay, sir. Should I repeat the question?

Yes, yes. Amit ji, your voice is not getting loudly. Your voice is very slower.

I think there's some issue with the audio, but I'll repeat the question. Is it better now?

Yes, it's better now. You can go ahead.

Right. [Foreign Language] and profitability will also -- I mean, assuming that we do same level of EBITDA, we should do anywhere between INR 30 crores, INR 35 crores type of profit after tax. Our Phase 2 [Foreign Language] if we assume the same size of machinery or the type of process or quality, then we were assuming that we'll take about INR 35 crores, INR 40 crores of CapEx [Foreign Language] so we will not need to raise any further capital.

Yes [Foreign Language].

[Foreign Language].

[Foreign Language].

Sir, since there are no further questions, would you like to give any closing comments?

Yes. Am I audible?

Yes, sir. You can go ahead.

Yes. Thank you all of investors and well wishers for taking your good time to connect with us. And I hope in future, your support will be available to us and thank you. Good night. [Foreign Language].

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