Patanjali Foods Limited (PATANJALI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Patanjali Foods Limited Q1 FY '27 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements do not guarantee the future performance of the company and may involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjeev Asthana, CEO, Patanjali Foods. Thank you and over to you, sir.

Thank you and good morning to everyone joining us today. A warm welcome to all of you on Patanjali Foods Limited's call to discuss the financial performance for Q1 FY '27. I'm accompanied by the company's CFO, Kumar Rajesh ji along with Mr. Priyendu Jha from Investor Relations and our IR partners, Strategic Growth Advisors. The results collateral has been uploaded on the stock exchanges as well as on company's website for your reference. Let me now take you through a quick snapshot of our financial performance for the quarter. During the course of the call, we will be referring to the stand-alone financials. We continued to build on this momentum delivering our fourth consecutive quarter of highest ever quarterly revenues supported by healthy growth in profitability. Specifically, revenue from operations stood at INR 11,337 crores growing 29% year-on-year. Operating EBITDA for the period was INR 543 crores with a margin at 4.80% while profit before tax stood at INR 453 crores translating into PBT margin of 4%. Turning to the segmental performance. Our Edible Oils segment delivered quarterly revenue of INR 8,505 crores marking the highest ever quarterly revenue with growth led primarily by the mustard oil. Quarterly EBITDA margin came in at 5.22%. On the oil palm plantation front, the company generated highest ever quarterly revenue of INR 740 crores in Q1 FY '27. Revenues grew by 25% year-on-year. This growth is closely aligned with the Government of India's National Mission on Edible Oil, Oil Palm, which has strengthened farmer viability pricing and planting assistance to drive India towards self-reliance in edible oils. As of 30th June '26, the cultivated area stood at 115,861 hectares with nearly 37% of the area in the prime yielding phase of 7 to 25 years against total allocated area of 6.63 lakh hectares. Turning now to our FMCG segment. The quarterly revenue stood at INR 2,938 crores with EBITDA of INR 190 crores and EBITDA margin of 6.45% in Q1 FY '27. The segment contributed nearly 26% of revenues and nearly 30% of EBITDA excluding unallocable income during the quarter. Within FMCG by category: the biscuits generated revenue of INR 560 crores registering year-on-year growth of 27%, reflecting continued consumer trust and preference with EBITDA margin of 15.35% versus 9.35% in the same period last year. The revenue from consumer staples segment stood at more than INR 1,000 crores in Q1 FY '27. Though a confluence of weather and geopolitical factors are expected to create some challenges here, but healthy government inventories and timely policy intervention should help mitigate the impact. The textured soya product division recorded revenue of INR 160 crores in Q1 FY '27 growing 14% year-on-year and 50% quarter-on-quarter with EBITDA margin of over 18%. Our beverage portfolio generated revenue of INR 38 crores driven by extended summers aided by delayed onset of monsoon as well as new product launches, including Mango Chutney, Mango Panna Juice, and Orange Juice. Ghee sales were softer during the quarter and generated revenue of INR 219 crores reflecting the seasonal nature of demand and lower summer offtake in export-oriented markets, particularly in the Middle East where geopolitical tensions disrupted normal consumption and trade patterns. Our other food categories; including honey, dry fruits, spices & condiments, herbal products, et cetera; collectively generated revenues of INR 203 crores during the quarter. Revenue from nutraceuticals stood INR 18 crores with sports nutrition gaining significant momentum. Our Home & Personal Care business delivered a strong performance with a total revenue of INR 629 crores in Q1 FY '27. Within the category, the skin care emerged as a major revenue growth driver and dental care inched up on EBITDA and EBITDA margin side. The Dental Care segment generated revenues of INR 325 crores followed by skin care at INR 165 crores. Home care revenue stood at INR 83 crores while hair care and other products generated INR 56 crores. Let me now give you a brief overview of the operating environment. With the combination of delayed monsoons and West Asia conflict, we saw commodity price inflation in Q1. This cuts both ways for us. On one hand, we carry long positions in edible oils so the resulting commodity price inflation has actually been a net positive for the business. On the other, the same inflation raises input costs for several of our FMCG businesses weighing on their profitability. Net-net the impact on Patanjali as a whole is smaller than it would be for a pure-play FMCG company though we are operating in a challenging environment through this quarter and into the next. In edible oils, we have witnessed substantial drop in veg oil EBITDA last year. However, we are seeing inflation returning in volatile oil markets driven largely by petroleum prices and genuine supply shortages across the spectrum. This is working in our favor offsetting much of the input cost pressure elsewhere in the portfolio and keeps us on course to deliver both the growth and the overall margin construct we have guided to for the company even after accounting for the raw material inflation flowing through from delayed monsoon. In this dynamic environment, we remain agile on pricing as input cost evolve. We took calibrated price increases in the Edible Oil segment while using targeted discounts in our FMCG portfolio to remain competitive. We also introduced smaller pack sizes to address changing consumer needs and market requirements. This calibrated approach to pricing and pack architecture has helped us navigate the environment effectively plus pricing measures are continuing in the current quarter as well as across the industry. Despite some delays in the monsoon, recent data on sowing including rice, pulses, core cereal, sugarcane, et cetera has showcased resilience. Acreage gap has narrowed to 1.9% vis-a-vis last year. In fact oil seeds saw a rise in area, which is expected to get further boost with widespread rainfall across key growing regions. On the input front, the palm oil prices which began firming in March '26 remained positive following the onset of the war, but turned marginally lower after de-escalation in the latter part of the quarter. Futures factored in the same and prices turned lower, still domestic prices were supported by rupee depreciation of 2.5% and again by festival period, palm oil prices reached 2 weeks' high in mid-August. The soya oil price futures increased by 40% towards the end of March and stabilized towards the end of June. The crop prices corrected by 66% amidst lower demand leading to a sharper decline in physical prices with further firming similar to palm oil price trend. In the current environment, physical oriented hedging strategy rather than reliance on futures alone along with timely import purchases helped us in capturing divergences and improved the margin. Wheat prices have remained largely stable during the quarter while milk prices trended upwards on the back of higher procurement cost. Sugar prices too stayed firm amid lower domestic production and tighter inventory level. Certain home and personal care products continue to face elevated input cost pressures. In addition to all, we saw an increase in packaging, freight and logistics costs during the quarter. Let me now move on to some of the other key business updates for the quarter. I want to take a moment to share some updates on our team. Our CFO, Kumar Rajesh, was honored with the best CFO of the Year award at the Asia Business Leader of the Year Awards. On behalf of the entire team, I want to congratulate him on this well-deserved honor. During the quarter, we launched several new products, including Rose Kanti Soap, Dant Kanti Sensitive Toothpaste, Super Dishwash Liquid, Sweet Lime Pickle, Almond and Chyawanprash Cookies in addition to our summer focused launches. We've also rolled out a range of new Dant Kanti variants that are performing exceedingly well. We are increasingly micro segmenting this portfolio by population, by choice architecture and specifically to address the Gen Z requirements for the toothpaste. The staples category is expected to see the most rural stress related pressure this quarter while home and personal care overall should continue to grow well. On the distribution front, we continue to strengthen our presence across e-commerce and quick commerce channels. We remain confident in Patanjali's own right to win; health, wellness, yoga, ayurveda, and what I call the Indianness of our proposition remain a core differentiated category for us in a market that is self expanding. We feel strongly and comfortably positioned to keep growing at the pace we have guided to even as the overall FMCG landscape becomes more competitive and different players go about it in different ways. I want to reaffirm the full year guidance range we have laid out for the business. Edible Oil margin construct between 3% to 5% volume growth for the year. Food and FMCG 8% to 10% growth with beauty and personal care growing at around 15%. FMCG vertical EBITDA growth at 12% to 15% for the year. On that note, I would now like to open the floor for questions and answers. With this, I conclude my opening remarks and hand it over for the Q&A session.

[Operator Instructions] The first question comes from the line of Abneesh Roy with Nuvama.

My first question is on the dishwash. So in the dishwash category, we have seen 1 large MNC temporarily kind of exit the market and also obviously that announcement has come that Godrej consumer wants to exit the liquid dishwash. Currently, obviously this segment is dominated by India's largest FMCG company. So wanted to understand what is your thought on getting success in this segment and do you see a big potential given the segment is currently seeing less competition because of that MNC vacating?

Yes. So Abneesh, look, the dishwash is actually fairly strong both as a category and as a line that we have and it has done exceedingly well. So we have no intention of either exiting or slowing down on that. We'll continue launching on the variants. That market is expanding. And to the specific name of the company that you mentioned, that is more a personal decision they have made on the corporate level what might have been decided, but we are pretty much doing quite well in that segment. I don't have the number readily available specifically for the dishwash part of it, but very happy to share that with you post this call.

Understood. My second question is on biscuits. So last 6 months in biscuit industry, we have seen 2, 3 players operate at the odd pricing INR 4.5, INR 9. So if you could tell us now that mostly everyone has exited, how does this impact the overall growth for the market leader and for you also?

So again actually it's one of our stronger stories or good success stories of our brand has been that how we've kept not just the quality part exceedingly in control, we have kept the unique positioning being the only atta biscuit player in the marketplace and have grown that consistently. So that brand of good biscuit that we have in the category of INR 5 and INR 10, we do almost INR 1,300 crores of business annually so it's a huge brand for us. And beyond the threshold, as you would see that even the EBITDA margins have continued to expand quarter-on-quarter and year-on-year. So this quarter for example, we did nearly 15% plus in EBITDA on the biscuits and I would say that a very substantial part of that has been driven at the back of the success of wheat biscuit on continued expansion. While we balance the portfolio of biscuits by launching, as we mentioned, that both the almond cookies and the chyawanprash cookies which were launched, there's actually a slew of products towards the premium end of the offering that we are planning. But we are very committed. We see a very positive growth in that segment and we'll continue to remain very active in that segment. Yes, we might go towards maybe premium cream biscuits. We might look at more variants in line with the brand building that has happened over the years. But otherwise, we are very committed to INR 5 and INR 10 sort of price points at which we are doing and I think that served exceedingly well the company's objectives overall.

Sir, last quick question. When I see your initial comments on staples and your recent media interviews, I find your comments a bit on the cautious side. And if I see the Q1 call of other staples companies, generally they are reasonably positive. Of course price hike will further accelerate and on the volume demand side also, generally companies are quite okay. No one is sounding overly cautious. So I want to understand one, why there seems to be some difference? And second, what kind of price hike you can tell us you have taken in which categories?

So there are 2 factors which are driving this caution and I think you'll see that unfolding over this quarter and the subsequent quarters. One is that this El Nino impact is still very unclear in the way how markets are going to react both on the production side and the availability side and very direct impact of that could be on the food inflation, which is there, number one. Number two is that the rural incomes and the rural market demand side, we'll have to watch with great deal of care as to how they play out, if at all we see some stress and resurfacing of some demand contraction there. I'm largely very positive in terms of the price outlook and bullish on the commodity pricing and so that has both sides. One is that in terms of the top line growth, it can continue to sustain so that's why I'm very much aligned on that. But in terms of the margin and the demand side of it and in terms of how that goes out, I think there we'll see some potential challenging environment I see definitely there and this may also have an impact on the margin construct. But the most important part is that we still have to see that the reaction from the policy side if indeed we see back to certain commodities control orders and essential commodities, et cetera, allocation of that. So we'll have to wait for that I think so that's why I've been a little cautious on that front. But overall, staples will continue to grow. There's no question about it so that we're positive ourselves. And we have in any case given a guidance of 8% to 10% growth on the staples side in the overall food business also and we pretty much stay true to that.

The next question comes from the line of Abhishek Mathur with Systematix Group.

Sir, the foods segment seems to have recovered quite well this quarter after some time. Just wanted your thoughts on what is leading this recovery across both ethnic foods as well as the staples seems to be quite strong turnaround. Yes, that's my first question.

Yes. So we had a very good, as I was mentioning earlier, that both in terms of the volumes and in terms of the revenue. So there has been an inflationary sort of buoyancy, which has driven that. So growth versus sequentially if I look at the previous quarter itself, our overall revenue in staples have grown almost INR 260 crores, which is 30% growth and we grew our ethnic food side, there was some contraction that we witnessed. But net-net the overall expectation is that this will continue to grow partially by volume and balanced by the price inflation that we are expecting to see across the board. The second part is that there was an extra focus on some of the unique product categories that we have like kesar and rice, et cetera, where we saw the immediate buoyancy in both the demand side and the pricing side so we benefited from that and I think we'll continue to drive that growth. We have come out with new variants also both on the lentils, on the pulses side as well as on the side of besan, et cetera. So we are seeing some bit of the added sort of demand as it is getting driven and company will continue to focus. So while it generates lesser margin, but it is one of the good indicators as to the reach that it develops and builds up and completes our presence in the kitchen. So that is something which is a stated target that the company has and which we'll continue to sort of work towards.

Right, sir. Just as a follow-up, what was the approximate breakup of the growth in foods in terms of pricing that you took for the quarter and the volume growth?

So overall, the volume growth has been around 7% to 8% is what we have seen across the segment. And so total -- so I've just got the specific number. The volumes have grown by 5% and the pricing inflation that came in was almost about 12%.

Understood, sir. And secondly in case I missed, what was the EBITDA number for HPC, for staples and for ethnic foods; these 3 divisions separately if you can give it out.

So for ethnic foods, our EBITDA was INR 9 crores and for the HPC as an overall basis -- our overall HPC EBITDA was INR 132 crores.

Right, sir. And for staples.

For staples as a category, we had negative INR 59 crores.

[Operator Instructions] The next question comes from the line of Sanjay with R.S.S. Investments.

Sir, my first question is regarding the current situation in the case with Ashav Advisory. What is the current situation?

That we can -- because it is matter subjudicious and we can take it up and we can discuss it post the call.

So how should I connect to you post the call?

I said you can take our number from the SGA Advisors and you can reach out to us and we can discuss that separately.

Okay. Sir, my second question is regarding the nutraceutical deal going in the international market. Are we aware of that? Medtronic buying, Bain Capital buying?

I would not be able to -- I don't have the specific details of these deals so I would not be able to comment on that.

Sir, for example Bain Capital buying Vitabiotics at a very huge price. I just want to know your comment on that.

I can give you a general comment not on the specifics of Bain Capital's acquisition. Nutraceuticals is one of the fastest growing segments in the health and wellness space across the board and this is across the world itself. So yes, I think in India also you're seeing the proliferation of brands and companies which have gone into the segment. We ourselves did serious amount of work on nutraceuticals, then we took a step back, reconstructed our entire portfolio, started building that up and we have turned positive now from earlier marginal negatives that we are witnessing. We have now turned positive and we intend to continue to grow that and I'm hoping that it will become one of our stronger performing businesses in the future.

The next question comes from the line of Rohit Kumar with ADM Advisors.