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

Ladies and gentlemen, good day, and welcome to the Mrs. Bectors Food Specialties Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Bector, Managing Director and Promoter. Thank you, and over to you, sir.

Thank you so much, and good evening, everyone. On behalf of Mrs. Bector Food Specialties Limited, I extend a very warm welcome to all participants on our quarter 1 financial year 2027 earnings call. Joining me on the call today are Mr. Manu Talwar, our Chief Executive Officer; Mr. Ishan Bector, Whole-Time Director; Mr. Suvir Bector, Whole-Time Director; and Mr. Praveen Kumar Goyal, Whole-Time Director. I would also like to take a moment to welcome Mr. Anshul Rastogi, who joins us as our Chief Financial Officer. He brings with him extensive experience in finance leadership roles at multinational consumer companies. We also have with us our Investor Relations advisers from MUFG Intime. I hope everyone has had an opportunity to review our investor deck and press release, which have been uploaded on the stock exchanges as well as on our company website. FY '26 was the year in which we crossed the INR 2,000 crore revenue mark. Quarter 1 of the financial year 2027 is, in many ways, the first test of whether the foundations we've built over the last few years can carry us at a faster pace. And we are pleased with how the quarter has turned out. The company reported revenue from operations of INR 548.7 crores, a growth of 16% year-on-year and 12.9% over the preceding quarter. Importantly, the growth was accompanied by margin expansion. EBITDA at INR 72.1 crores grew 23.8% year-on-year with EBITDA margin at 13.1%, an improvement of 80 basis points over quarter 1 of financial year 2026. On a 24-month view, revenue is up 25%, delivering both growth and margin in a quarter that carried the full weight of inflation and the West Asia disruption is, we believe, the more meaningful takeaway of this performance. On the demand side, consumption trends have held up better than we had feared at the time of our last call. Domestic demand remained healthy across both retail and institutional channels, and our export order book strengthened materially despite vessel availability yet to normalize fully after the disruption in this quarter. Barring a further escalation in the West Asia conflict or a sharper turn in food inflation, we remain optimistic on both businesses, underpinned by stable consumption, a continued focus on premiumization and a sustained investment in brand building. Our Biscuit business reported a revenue of INR 325 crores, registering a growth of 15.7% year-on-year and 19% growth compared to Q1 FY '25. Our Bakery business continued its strong growth momentum, delivering revenues of INR 215 crores, up 17.5% year-on-year and 40% higher than Q1 FY '25. The launch of Nature Baked reflects our commitment to addressing emerging consumer trends around healthy and clean label proposition. With our focused efforts, Nature Baked has crossed a monthly revenue rate of INR 1 crore. Our innovation pipeline continues to strengthen the portfolio with premium, value-added offerings that enhance consumer engagement, improve mix and support long-term profitable growth. On the marketing front, we stepped up our brand investments in a deliberate way, and this will continue to be an area of committed investment as we build long-term brand equity for Cremica and English Oven. Quick commerce continues to be of strategic significance for us and grew 58% year-on-year. Our Kolkata bakery unit commissioned in quarter 4 of financial year 2026 is now servicing East markets, and the market has responded encouragingly. Kapoli plant in Maharashtra was commissioned in March 2026 and facility is stabilizing well and is expected to scale towards full capacities over coming quarters, strengthening our West footprint. Mumbai remains a high focus market for English Oven, where we intend to lead with a high-quality premium product offering. On the international business, quarter 1 marked a defensive recovery even as the shipping environment remained difficult. Vessel availability has not yet normalized and freight and logistic costs have risen further. Despite this, our export business delivered healthy, high double-digit growth. Importantly, the U.S. market is back on a growth trajectory for us. And we have backed this recovery with new product launches, including peanut butter, where we are confident of a strong ramp-up in the quarters ahead. The company has steadily strengthened its international business through disciplined, calibrated expansion in the last few years with a focused approach on markets that offer structural profitability and high growth potential, and this quarter is a validation of that approach. Before I turn to numbers, let me spend a moment on the operating environment. India's growth story remains resilient, but the benign inflation of the early part of the last year has clearly reversed. Headline consumer inflation has climbed steadily through the year to around 4.4% in June 2026. And the input cost inflation has been defining feature of the quarter for us. The West Asia conflict has been an important contributor, though not the only one and the pressure reached us on 3 fronts: inflation in raw material and packaging materials, escalation in fuel cost and the consequent impact of the minimum wage hike. Against this, the mitigation measures we had initiated on a war footing, calibrated price increases and our institutionalized cost optimization mindset under Project Impact. In other words, the quarter's inflation was very substantially neutralized, leaving only a marginal residual impact. This is the discipline we intend to carry through the balance of the year, and we expect recovery to be progressively exceed the impact as the prices increase annualized and the project impact interventions mature. Financial performance. Moving to our financial performance for the quarter. The consolidated revenues for the current quarter stood at INR 548.7 crores versus INR 473 crores in Q1 FY '26, thus registering a growth of 16% on a year-on-year basis and 12.9% on a sequential basis. Gross profit for the quarter stood at INR 258.9 crores, growth of 20% with gross margin at 47.2% against 45.6% in Q1 FY '26, reflecting the benefit of price action and cost optimization. EBITDA stood at INR 72.1 crores, registering a growth of 23.8%. The EBITDA margin for the quarter stood at 13.1%, an expansion of 80 basis points in Q1 FY '26. PAT stood at INR 38.8 crores for the quarter, registering a 25.5% on a year-on-year basis. PAT margin for Q1 FY '27 stood at 7.1%. With this, I request you to open the floor for question and answer. Thank you so much.

[Operator Instructions] The first question is from the line of [indiscernible] Deshmukh from IIFL Capital.

This is Percy Panthaki here. I just wanted to understand what is the domestic biscuit sales growth for this quarter.

It has been high single digits.

Okay. And is it largely volume driven? Or is there any pricing element in the domestic biscuits?

It is pricing and volume both in this.

Understood. Secondly, just wanted to talk about the overall margins for the company. I mean what is the likely margin that you're looking at for this year, given where the commodity prices are currently? And how are you thinking about what it would be in the next couple of years, given whatever your cost saving plans or scale leverage, et cetera?

Let me brief a little bit in detail on this to you. So first thing is, obviously, as the Managing Director speech also said, there has been inflationary trend on account of war, on account of commodity prices going up on account of a few -- so that impact, but we have been trying to take proactive actions, both on the pricing side and the cost side to cover it as much as possible. Quarter 1, we have been able to cover up to the maximum extent. Quarter 2, again, the impact seems to be rather larger on account of commodity price increase, and we have already initiated actions. So quarter 2 could be a quarter where we will be able to cover most of it, not entirely, but quarter 3, again, we will be fully covered. On the margin side, if you would have noticed that we have been improving quarter-on-quarter for past 2, 3 quarters, and so have we done in this quarter. And so our target still remains that by quarter 4 of this financial year, we get to our 14% EBITDA target. So that's the journey plan we have in spite of the fact that we have quite a fair amount of inflationary trend on account of commodity prices and the fuel impact as well as the minimum wage impact. But the pricing action and the cost -- the impact program also, which we started about 2 years back, that's running well. And we expect this year to deliver almost close to 0.4% to 0.5% coming out of our cost impact program. I hope this takes care of your query.

Yes, yes. Understood, sir. On the exports part, just wanted to understand this quarter, was there any kind of pipeline refill, which has happened because the growth would have sort of got affected earlier. So therefore, would it be fair to say that we should not extrapolate this quarter's export growth going ahead?

Percy, So what I would say is that we had a couple of projects that had slowed down during the U.S. tariffs, but they are now back on track. Like our MD also mentioned that we've launched peanut butter cracker as a variety. So we've successfully added another SKU with the biggest retailer in the U.S. like Walmart, right? And that is a consistent business that we aim to grow. And our objective is that we're going to keep adding SKUs with the existing partners and keep adding new ones. So what we are anticipating is that the growth momentum is always going to be there. And we are already engaging with clients who we've been talking to since a year back, and their projects have started converting now. So the growth momentum will always be there for exports, right? And it's not only for the U.S., all the other territories as well. Sorry, I lost your voice. What did you say?

Yes, I'm saying there is nothing sort of exceptional this quarter in terms of restocking from the earlier sort of slowdown that we have seen. This quarter growth is all sort of something which is pertaining to this quarter's demand only. Is that the case? Or is there some restocking which has happened this quarter?

No, no, no. It's -- there's no restocking as such. This is all the growth that's pertaining to this quarter and some new innovations that we launched have started clicking with retailers. So there's no restocking as a thing that's happened with us.

Okay. Okay. Because like March month would have been sort of affected for exports, right? You would not have been able to export because of the geopolitical tensions in March. So those shipments would have spilled into this quarter, which would have propped up this quarter's exports growth or that's not the case?

So June, we -- like again, the MD mentioned, because of the geopolitical crisis, we had shipments on delay for the June month as well, right? So it all sort of balances out towards the end, where we didn't see any refilling or restocking as an impact from March to June right now.

Okay. So for the rest of the year also, like a high teens growth for the company overall, which we have done this quarter, that same kind of growth can continue because there's no one-off as such this quarter. That's understanding is correct.

Percy, our full year projection continues that we are targeting to hit around mid-teens kind of growth. There is a seasonality also, which makes a difference. So we still stick to our projections of mid-teens kind of mid-teens...

The next question is from the line of Harit Kapoor from Investec.

Just a few things from my end. First was on -- again, on the margins. So if you look at the sequential improvement, not only in your EBITDA, but in your gross margin also, there has been an improvement here from about 46-odd to 47-odd percent. What do you attribute that to given the fact that inflationary trends have only accelerated from Q4 to Q1? I know you did speak about mitigation, but there has actually been an acceleration. So is this Q1 specifically a product category mix differential also that plays out? That's the first. And the second question was on the OpEx side of things. This quarter, you have seen a bump up in the other expenses. Would you attribute that largely to, say, the freight cost challenges as well as the marketing initiatives that you have -- the brand investments that you have done? Would these be the 2 key factors driving up the OpEx growth? These are my first 2 questions.

Yes, Harit. So yes, on the gross margin, primarily the impact is on account of improvement in both sides, biscuit bakery, but there is also a role of a business mix. And there's a slight improvement in the bakery business mix because of the higher growth, if you look at that, and that has also added to that bit of margin improvement, which is reflecting there in gross margin. Yes, OpEx, you're absolutely right. It is on account of 2 items, which is freight and fuel. So freight on the onward side and the fuel on the -- large part is on the fuel, which is basically the plant consumption for the manufacturing. And second, yes, we have upped our marketing investments.

And the freight cost is there...

Yes, yes, freight cost is they're.

Got it. Got it. And second bit was on bread. You just mentioned product mix improvement, et cetera. The growth has also been quite strong this quarter. Any -- is there a significant difference between how the retail business under English Oven and Nature Baked has done versus the institutional business? Because institutional also would have seen some pickup given what's happening on the QSR side. So I just wanted to get a color if you -- even if you can't give exact numbers on how that mix has shifted in the 17% growth?

No, no. So first is that overall bakery has done well, right? Yes. That's why you see the bakery growth -- overall bakery growth percentage is higher than the overall biscuit growth. So that was a mix I' referring to. Yes, both English Oven and the QSR business have grown well. So the good news is, Harit, that we're clearly seeing very positive trends after many quarters on the QSR business and very, very confident these are trends are here to continue now. So clearly, the industry is now back on an upswing.

Got it. And my last question was on bread. I believe you added CapEx in Calcutta, and you said the offtakes have been quite encouraging. Would this be on retail as well as institutional or the Calcutta foray is only in 1 of the 2 segments. Just one clarification. Those are my questions.

So Harit is both segments. So both have started moving well for us, both on the English Oven side as well as the QSR side, and we are in the process of buildup. What the speech of MD referred to that we are delighted that the strength of English Oven as a brand and the quality of the product is clearly reflecting in our very newer market of East through the consumers, right? So English Oven is very well accepted and appreciated English Oven on our bakery product side and it is reflecting good trend. Yes, it is on the both sides, English Oven as well as QSR.

The next question is from the line of Binay Shukla from PhillipCapital India.

My question is on the EBITDA margin front. So could you please provide some sense of the EBITDA margin profile across all the 4 business segments? So I'm not looking for the exact margin, but could you indicate whether our EBITDA margin for each segment is above or below the company average? Because in our view, the domestic biscuit margin is operating at a very significantly lower side versus our company's average. So could you please just let us know if our understanding is broadly correct? Or is there any significant deviation in our view?

Yes. So as we have said earlier also, our bakery business EBITDA is above our company average and our biscuit business EBITDA is slightly below our company average. That's how the EBITDA margins of both the businesses stand out.

Any idea, sir, what kind of margins you are making in domestic biscuits?

We don't share that. We can separately discuss in the meeting. But as of now, as a principle, we haven't shared that.

Understood, sir. Secondly, on the domestic biscuits since we aspire to grow in mid-teens sort of growth for domestic biscuits. So just wanted to know what structural initiative are we undertaking in the domestic biscuit business, specifically on on-ground execution front to achieve this target? Yes, this is on the domestic biscuits.

So there are 3 drivers to that. One, obviously, distribution. As we have briefed that this year, we have taken a target of adding 40,000 build outlets above INR 200 per outlet. So that target -- that's almost increase in build outlets by 12%, 13% over the previous year. Second is that we are focusing largely in a 400 kilometer from our manufacturing in Punjab. So that area is being invested and driven more. Third is that, as I said, that we are after marketing investment. So we're investing behind the brand. And while 3 of our lead variety brands, which are Coconut, which is becoming a clear cut leader in the industry with the high growth, continued high growth, then we have Bourbon, which continues to be in the second number in the industry and digestive which again continues to be leading in the category. Over and above this, we are investing behind our premium creams and premium cookies, right, to drive our premium contribution in the business. So these 2 are being invested behind both on the distribution as well as on the marketing side to build that business over the next few quarters to come. Alongside we'll be investing in some of the high premium products like short bread, which is growing on e-commerce continuously quarter-on-quarter in a very healthy rate and similarly, butter cookies and some other varieties. So these are the levers of the -- or I can say, these are the levers of revenue growth for the Cremica Biscuits [indiscernible]

Understood. Sir, we have opened a new plant in MP. But on the other hand, Britannia and Parle remain very aggressive in [indiscernible] market, if I call it MP, UP, Gujarat, Rajasthan. So what is our right to win in this market? Are we going to offer a tactical additional fare input to the retailers or how we are going to attract new distributors and new retailers?

So first thing, just to clarify that MP plant, which has been opened, has been opened for both exports because it brought it closer to the port, plus we had a fiscal incentive supported by the government. So we've been manufacturing there largely export as of now, but we have started investing in the central market, which is MP and some part of Maharashtra and Gujarat. And this journey of investing in these markets is in the distribution side, largely on the distribution side as of now. And we're very confident over the next few quarters, you should start -- there will not be any instant large results coming in out of that, but it will be continuous investment over the next few quarters, we can start seeing some good movement of Cremica brand in these territories.

Okay. Sir, just looking for 2 data points. One is for domestic biscuits. So what is our current revenue contribution is coming from the [ non-Upper ] North market when we compare with 3 years ago? And second is what kind of growth -- what kind of contribution is coming from the existing clients for export business?

What is the second question?

What kind of percentage contribution coming from your existing customer in export market?

Okay. So -- sir will answer the second one. On the first one, we have now almost reached 50% our general trade business, 50% comes from Upper North, 50% comes from rest of India. Suvir, please if you can answer on that.

Yes. So more than 95% or 98% business would be the existing. But the thing is that the existing customers, we are consistently and continuously adding newer SKUs to them in the form of innovation to grow their share in the market. I hope that answers the question.

But 2%, 3% is coming from the newer clients. So what efforts are we taking to increase this share to near double digit over the, say, the next [ 3 quarters ]...

The teams -- so we have a very wide team who are consistently traveling across the world, wherever the markets are. We are analyzing data. We are in touch with top-tier retailers as well as distributors to start engaging with our products. And hopefully, we'll start seeing conversions as well. But this is a general trend that keeps on going because for a retailer to materialize, the conversion time is a bit longer, but we are in active discussions with a lot.

[Operator Instructions] The next question is from the line of Amit Purohit from Elara Capital.

Congrats on good margins. So I wanted to know on the price increase that you would have taken, one, whenever the input inflation goes up, what was the input inflation? Does the price increase in the institutions bakery side of the business as well as export, is it an easy pass-through? And what was the price increase in domestic bakery as well as domestic biscuits, if you could highlight that?

So impact on account of inflation has been around 1-odd percent over the last year, 1% to 2% approximately. And the price increase, which we have taken, where the partial impact would have come in first quarter and the balance will come in the quarter 2 because price increase happened during the quarter. The price increase has been on overall as a company around 2% to 3%. So you can say in the consumer side of the business, which is English Oven and Cremica, about 3%...

2% to 3% is the total price increase taken or it is -- in this quarter, it is effective 2% to 3%...?

No, no, no. Total price increase taken so is around 2%, 2.5% in the consumer business, which is English Oven and Cremica. And this quarter has seen a partial impact of that because the price increase was taken during the quarter.

Okay. And inflation -- cost inflation was just 1% on a Y-o-Y basis?

About 1.5% approximately was the inflationary impact for this quarter, the next quarter is higher. So the quarter 2 is much higher. You see the large part of the inflation impact started coming towards the end of this quarter. So the more challenging quarter is quarter 2.

Okay. Okay. So -- and on -- just on the freight cost part, I mean, I understand we have now a facility in MP, which will cater to both the export as well as the domestic market. Would you be able to quantify the savings because, I mean, earlier, you were kind of transporting from the north to JNPT or the export ports.

Yes. We will be definitely able to quantify the freight difference between Punjab versus there of our export shipment. Amit, what I would request that we will definitely get back to you over the mail on this information. I won't have ready information as of now.

Sure, sure. And sir, just to get an idea, I mean you indicated 14% margin. I could not understand that. That is you are saying by the end of the quarter, it will be closer to 14% or you were referring to 14% margin for the full year of FY '27?

No, what I was referring to, Amit, like we have delivered 13.1% EBITDA in this quarter. And so although the inflation of commodity prices and packaging material has been pretty steep and the large impact is coming in quarter 2, but our endeavor will be to keep improving. Endeavor is that by -- in the quarter 4, we should get to 14% EBITDA, right? So quarter 4 target is to kind of achieve 14% EBITDA for that quarter.

Got it. Got it. And over the medium term...

Sorry to interrupt, Mr. Amit, could you please rejoin the queue for any follow-up questions? [Operator Instructions] The next question is from the line of Shirish Pardeshi from Motilal Oswal Financial Services Limited.

I have 2 questions. The first question in the export market, what is our contribution as on date in the U.S. and Europe separately? And what was that number 1 year before?

Please go ahead, Suvir.

No Manu Ji, please go ahead ...

So we are today touching close to 23%, 25% in U.S., right? And it has built over the last 3, 4 years. I won't have last 1 year number as of now ready with me. But yes, it has grown over the last 4 years' time.

In fact, I have the number. So I mean I think the contribution in last year Q1, if it was -- it has actually doubled, I mean, than our last quarter, last quarter, '26; this quarter '27, we have actually doubled.

Okay. Anoop, sir, the reason why I was asking, last 1 year, we have seen a lot of tariff issues in the U.S. So actually, you're saying our business has doubled. So I'm not sure...

At the percentage, what we are doing, right, at the percentage. So U.S. doesn't happen to be our biggest market. It's -- from what we were doing, now what we are doing is double.

So just one quick check on this. How the U.S. customers are now reacting because I heard Suvir is talking about we are introducing new products and new segments. But then is there any indication in the current context is the customers -- because you mentioned Walmart has also picked up some product. So I'm just checking what is the customers giving you feedback in terms of demand? Obviously, the tariff issue will get settled over a period of time.

Customers are very optimistic from line from India. The great part is that even when the tariffs were there, none of the customers stopped working with us on future capabilities and future projects, right? So they've put an immense faith in our organization, looking at our capabilities and the technology that we have. So retailers are still coming down to India. They are visiting us and a few retailers are co-creating products with us, which are as per the U.S. standard. So from my point of view, all the major customers, distributors are very optimistic from line from India.

Okay. That's helpful. My second and last question, we heard in the morning, the market leader has rejuvenated the efforts in terms of key states and other states in terms of advertising and in terms of sales restructuring also. In that context, how this competition is behaving in our key states like Upper North and maybe you can say, Punjab and other places?