Mrs. Bectors Food Specialities Limited (BECTORFOOD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '24 Earnings Conference Call of Mrs. Bectors Food Specialities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Bector, Promoter and Managing Director. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of Mrs. Bectors Food Specialities Limited, I extend a very warm welcome to all participants on Q4 FY '24 Financial Results Discussion Call. Today on this call, I have with me, Mr. Manu Talwar, our Chief Executive Officer; Mr. Arnav Jain, Chief Financial Officer; Mr. Ishaan Bector, Whole-Time Director; Mr. Suvir Bector, Whole-Time Director; Mr. Parveen Kumar Goel, Whole-Time Director. We also have Orient Capital with us on the call who are our Investor Relations adviser. I hope everyone had an opportunity to go through our investor deck and the press release that we have uploaded on the exchanges and on the company's website. Company reported a strong fourth quarter with revenues from operations increasing by 17.4% and PAT by 21.6% on Y-o-Y basis, reflecting on our annual performance for our year FY '24, company stands at the highest ever revenues as well as PAT with both our business segments registering growth in high teens. Indian economy continues to demonstrate resilience amidst global slowdowns, India story continues to be domestic consumption-driven and now we are increasingly becoming a sourcing hub for the world as well. I'm glad to tell you that your company is well placed to make the most of both the opportunities. Our journey of driving multipronged business strategy continues with focus on spending both in domestic and international business with continuous investments in developing our brand, brand portfolio and building future ready supply chain with state-of-art manufacturing setup. We all understand technology is key to any business success. Thus company has focused on selling and distribution side through SFA and DMS implementation in the past 2 years and now has taken an agenda of technology intervention in manufacturing and supply chain over the next 24 months. On the domestic front, I'm glad to inform you that we have achieved our stated objective of doubling direct coverage to 3 lakh plus outlets in 2 years. On the export side, I'm happy to share with you that Cremica brand now has a footprint in over 65 countries. We will continue to follow our stated strategy of calibrated expansion in both domestic and international markets. On the brand portfolio, we continue to invest behind our brands, Cremica and English Oven. Campaign with Kareena Kapoor Khan, Apna Apna Cremica, Bun Great toh Burger Great and Goodness of Fiber aimed at driving awareness on the range of Cremica and English Oven products was received well and continued in Q4 '24. While we continue to expand our portfolio by offering the launch of Preservative Free Cake, Cashew Delight cookies, Atta Kulcha and a 12 piece Pav amongst others. I would like to share with you, in particular, our foray into frozen bakery. We have invested ahead of the curve and developed the capability on frozen premium bakery products like filled puffs, desserts and artisan cookies. We believe as the disposable incomes rise, need for high-quality premium bakery products will increase and provide for an opportunity of future growth. Updating on the CapEx plan on the biscuits front, we have commissioned 2 biscuit plants in Rajpura in FY '24 with 2 more additional lines to be added and estimated to be commissioned by H1 '24-'25. Commissioning of the MP Dhar plant is also expected in the current financial year. On the bakery front, we have commissioned Bhiwadi plant in FY '24. We have started construction of building for our Khopoli bakery in Maharashtra, and we are putting another bakery unit in Calcutta, both with -- both will be commissioned by Q4 '25. We have initiated Project Impact 1.0, a journey towards cost transformation throughout the organization. It is an initiative across multiple fronts, which includes procurement, packaging, optimizing manufacturing process, reducing wastages, streamlining logistics. The preliminary assessment work has started across these functions. We believe this will lay a strong foundation for a sustainable growth moving forward. Also, I'm pleased to share that we have declared interim dividend of INR 1.25 per share and declared final dividend of INR 2 per share. Now I will discuss the financial performance. Starting with Biscuits. Our Biscuit segment reported a revenue growth of 18%, which stood at INR 240 crores in Q4 FY '24 as compared to INR 203 crores in Q4 FY '23. This segment has grown by 68% over Q4 FY '22. Our Biscuit segment witnessed high teen growth in Q4 '24 as compared to Q4 FY '23. Bakery. Our Bakery segment revenue for Q4 '24 stood at INR 151 crores against INR 128 crores in Q4 FY '23, thus registering a growth of 18% Y-o-Y basis, including retail bakery and institutional segment. This segment has grown by 59% over Q4 FY '22. The consolidated revenues for the current quarter stood at INR 406 crores versus INR 346 crores in Q4 FY '23 thus registering a growth of 17% on a year-on-year basis. EBITDA stood at INR 15 crores in Q4 FY '24 resulting in growth of 22% from the corresponding quarter on year-on-year basis. EBITDA margin for the quarter stood at 14.4%, a growth of 49 bps on a year-on-year basis. PAT stood at INR 34 crores in Q4 FY '24 and saw a growth of 22% on a year-on-year basis. Our PAT margin for Q4 '24 was 8.3%, registering a growth of 28 bps year-on-year. Moving to FY '24 financial performance. The consolidated revenues for FY '24 stood at INR 1,624 crores versus INR 1,362 crores in FY '23 thus registering a growth of 19%. EBITDA for the financial year '24 stood at INR 242 crores versus INR 175 crores in FY '23 with growth of 38%, resulting in improvement of EBITDA margin of 207 bps year-on-year basis. PAT for FY '24 stood at INR 140 crores versus INR 90 crores in FY '23 with a growth of 56%, resulting in improvement of PAT margin to the tune of 203 bps year-on-year. The company has reported highest ever PAT margin of 8.6% in FY '24. With this, I would request to open the floor for question and answers. Thank you so much.

[Operator Instructions] The first question is on the line of Subh Labh that is from Arun Kumar.

Yes. Congratulations for the good set of numbers. Sir, I would like to know about the current acquisition which we did for the Mrs. Bectors Cremica Enterprises that we said that it was in the manufacturing of the ice creams. So would like to know your views on it.

So this -- I mean this company was originally making breads. So we have acquired the bakery business from this company. So it's not ice cream. Although they also make ice creams, but we have acquired the Cremica brand with their manufacturing capabilities, whatever they have and the brand for all the bakery products. So we have acquired that. So this is a transaction, which should happen in the coming quarter or sometime -- the time lines are being worked out. So it is more about the bakery operations.

Okay. And sir, the amount of CapEx...

For Punjab, I think Cremica brand being very strong in the upper north. So we will have in the future when the deal happens there could be a possibility of Cremica brand also getting launched in the bakery side of the business.

Okay. Okay. And just a follow-up on the same, that what amount of CapEx we need to do for the upgradation of the plant? Or is it available to production?

Currently we have not worked on this. We will work on it once the deal happens. So currently, we are not working on it. It's more about getting the brand in hand and then evaluating what we should be doing in the North Indian market of Punjab, Haryana.

The next question is from the line of Janhavi Jain from Axia Asset Management Private Limited.

Yes, so I have a few questions. The first one being largely on the working capital...

Sorry to interpret Ms. Jain, you're sounding too low. Can you speak a bit louder please?

Hello, is it better now?

Yes, yes. Please continue.

Yes, I have a few questions. The first one being largely on the working capital. We see the receivables to be quite inflated for FY '24. Any specific reason? Any change in credit cycle or anything to worry for the future? That's the first one.

So, would you like to tell us all the questions, then we can answer them.

Yes. Sure. Sure. The second largely on the contract manufacturing front. If I just calculate that, that was the contract manufacturing revenue has been declined. Like, is there any reason for that? Third one being cakes, like you've launched cakes right now. So what are the plans to actually grow? Do you have any plans to launch more variants in that? And any strategy or any number to further reach in that segment because that's a very big market as well. So these are the 3 -- last question.

Okay. So Manu this side, let me answer first 2 and then Ishaan will take up the Bakery side, Cake side. On the working capital side, our contribution of exports, a, has been high. And because of the Red Sea disturbances, the receivables are also high, but it has been taking more in transit time to reach to the destination. So that's actually one of the large reasons of that, that higher export contribution in this quarter and the Red Sea issue, which had led to the higher debts. Second is, we also had bought and booked the sugar for long 8-month period. So that has also led to some increase in the working capital. So these are the 2 prime reasons largely being exports and the Red Sea issue, which has led to a temporary increase in working capital. Coming to the contract manufacturing. Just because of the demand cycle, there has been a bit of a contraction in the quarter 4 on the contract manufacturing side. But as for the company for which we are doing the contract manufacturing, this is more about temporary transit stage, and it should come back in 1 or 2 quarters. So over to Ishaan for the Cake part.

Yes. So on the cake part, what we are doing is we are building some capability for cakes both in the Delhi market and the Mumbai market. So the idea is to leverage our ability to do both B2B and B2C via Cakes. B2B would largely be in the frozen front in which we are already operating. The idea is to become more competitive and reach a lot more customers. On the B2C side, we have already launched a Cake in the Delhi market, which is a small INR 10 cake. We have seen a good success in that cake, and the idea would be to get a range of competitive products on the B2C side, primarily right now via English Oven, which is short shelf-life products, the current life of our cake is about 1 month. As we progress and get more confidence, we can also look at higher shelf-life products on the cake side. So I think it's going to be a journey. But it will definitely add a revenue stream for the business in the future.

Okay. Just follow up if I could squeeze in, on the CapEx front, if you could just stratify the CapEx for the next 2 years.

So as of now, we -- at the last time also we gave the CapEx visibility for the year 2023-'24 and '24-'25 then over the 2-year period, we will be doing the CapEx of around INR 550 crores, and that's the current projection look like. In terms of our CapEx going forward beyond that is -- it's still under planning cycle in the next Board meeting -- the next investor call, we should be able to give you a visibility on our CapEx beyond this. So as of now, around INR 550 crore, INR 560 crores is the CapEx between the last financial year and this financial year. Last financial year, what we have CapEx which we have spent and the rest in the book is around INR 170 crores, and the balance would happen in this financial year.

One last question on the export contribution to the total biscuit if you could just justify. That's it from my side.

Export contribution to our overall business?

Yes.

So as of now, we normally don't share the contribution business-wise and we normally share on an overall basis as you are aware. But it is close to, we can say 30-odd percent is our exports.

The next question is from the line of Amit Purohit from Elara.

Congratulations. Sir, just if you could...

Amit, can you be a bit louder?

Am I audible now, sir?

Yes, yes, better.

Yes. So I'm saying -- I just wanted to understand in terms of demand trends, how are you seeing the demand, one on the biscuit side, specifically from a competitive intensity perspective and otherwise, also in terms of growth trends.

Okay. So let me start first with the demand trend. The demand trend post Diwali as we are aware has been a little low. There has been a pressure on OpEx, and that's what is even reflecting in all the reports of all the companies and the [indiscernible]. So there's definitely a slowdown in offtake versus what it was in the first half of the '23-'24 financial year, right? So that's the case there. In terms of competitive index also starting, I think the quarter 3 of last financial year, there has been more competition from all the companies, especially the leader in the category has rolled out a lot of consumer offers kind of dropping the consumer price of the product. And we have also taken a respective action in quarter 3, quarter 4 in terms of being competitive in the market. So -- but we're very hopeful. We all know the good monsoons are projected for this year and the inflation is also coming in control. So we are also very confident that starting quarter 2 of this financial year, we should see the demand coming back and definitely post Diwali, it should be a good run. So that's our kind of outlook that good monsoons as well as inflation, which has been under control for the last 2 quarters and going forward also to remain in control should swing it back to a good demand and a better growth should be back starting from quarter 2, quarter 3 of this financial year.

And sir, in view of the FMCG companies have indicated that they have seen some uptake from April, May. Have you also witnessed similar kind of a growth [indiscernible] uptake improving from...

We are also witnessing a slight improvement in demand trends, right? But it's still not reached back to the significant level what it was pre-Diwali, I would say, in the last financial year. So yes, the trends have started looking minorly better now, and we hope post monsoons, they should start improving it in a much better way.

And on the biscuit side, while you said, you don't share the breakup within biscuits on domestic and exports. But just to get a sense for the full year, the 23% kind of growth in the biscuit category. Are -- is it safe to assume that biscuit growth would be very close to mid-teens or high-teens? How do you think it is?

Yes. So we are targeting it to be mid-teens, right? For the annualized growth.

FY '24.

Pardon?

FY '24 was also similar mid-teens.

Yes, FY '24, that's what I'm coming to -- that was also mid-teens growth in FY '24 also. And FY '25 also, we are targeting that on an annualized basis for the full year, we should be able to achieve a mid-teens kind of growth.

And sir, just continuing on the overall growth plan you've been indicating growth rate around mid-teens. But I mean, when I look at the overall -- that is for the overall company as well? Or we're just referring to branded biscuit, domestic business?

No, I have answered as of now mid-teens for the domestic business. I think your question was specific to domestic biscuits, and that's what I've indicated.

So effectively, the overall company growth could be higher, right, because one, we have a bakery capacity which is [indiscernible]...

So we have been consistently saying that we want to maintain at a company level mid-to-high teens kind of growth, right? And that's what we have achieved this year also. So that's what we are striving for to achieve on a consistent basis on an annualized basis, mid-to-high teens kind of growth.

Okay. And sir, on the margin side, 2 things you have indicated 14% to 15% margin, but you also have initiated a cost-cutting initiative, any estimated saving benefits that would probably come and which can able to have at least stable or increased margins from here on?

So that program has just started, and it's more on a study and scoping stage. So in terms of benefits to start coming in from this program, it would start reflecting in some manner in quarter 4 of this financial year and then in the subsequent quarters of the next financial year.

[Operator Instructions] The next question is from the line of Rushabh Doshi from Nirmiti Investment Advisors.

Congrats on a great set of numbers. So my first question was related to the acquisition, like could you just share where the plant is located and what capacity does it have?

Sorry, we are not able to hear you properly. I think voice -- there's an echoing.

Am I audible now?

Better. Better, yes.

Yes. So my first question was related to the acquisition, like what is the capacity and where is this plant located?

So the capacity is -- actually, this is an old plant. And so once we take over. So this has been an agreement with the company that we will take over this brand, Mrs. Bectors Cremica for the bakery purposes because this brand enjoys a lot of equity in the North Indian market, especially Punjab and Haryana. So on the investment side, they are holding old plants. Our teams will be evaluating what is going to be the status of these lines, how can we use these lines. And the location of this plant is right next to our biscuit plant in Phillaur. So it is at an adjacent wall to the biscuit plant.

Okay, and like, have we thought like how we would be operating 2 brands in the bakery division, like? Because we've built English Oven and it's projected to be...

As you understand that we've always looked at premiumization. So it's also about -- we will look at the strategy, but Cremica as a name enjoys a lot of equity, right? We hold a 15% to 16% market share in the biscuit side, and our coverage in the outlets is extremely high. So when we are doing rusk, we do rusk under the brand English Oven. So when we were getting into the market, which are Delhi, Bombay, people understand what is English Oven. But when you move out of these markets, then you have to create presence, you have to make people know what is English Oven now? So being also in the urban and rural segment, so I think Cremica with its coverage of 320,000 outlets will have a better acceptability. So the rusk or our other products, which were coming under the English Oven brand could also have the possibility to come under Cremica brand.

Okay, and also, like this quarter, can you just break up the revenue growth between volume and value?

Which quarter? You're talking of current quarter?

Yes, the 18% growth.

The quarter 4, you said.

Yes.

In the quarter 4 growth, we had a mid-teens kind of growth in volume on overall and our revenue growth, you're aware, it was around 17%.

Yes. And then my last question is in FY '25, like what do we expect like a price growth of around 2%, 3% that would -- are we expecting that? Or it would be mostly flattish.

In terms of price growth?

Yes.

See, I tell you the -- what are the levers of revenue growth management in our company, right? And in our case, the very key factor of revenue growth management is the premiumization, where company focuses a lot. And we have considerable journey of premiumization over the last 2 years, right? And our premiumization percentage even starting from a part of this year, to quarter 4, we have reached 37%. So there is a 20% jump in the premiumization percent. And if I take a 2-year period, it has rather considerable so that is one of the large levers of revenue growth. Second, on overall basis, the second lever of revenue growth is always our business mix. And third is definitely price. So we are in a very competitive industry world. It is entirely -- and we are not the market leaders in especially biscuits in India. So it will be more about keeping high on the competition and how the leaders are taking it forward. And then accordingly, we will act at that point of time.

The next question is from the line of [ Harsh Shah ] from Bandhan Mutual Fund.

First one is on the employee cost for the quarter, it's up 36%. Now I think you mentioned in one of the footnotes that we have an ESOP trust, which we kind of set up in October 2023. Is there an element of one-off in these employee costs because of any ESOP...