ADF Foods (NSE:ADFFOODS) Q2 2027 Earnings Call

0:03 Ladies and gentlemen, good day, and welcome to the ADF Foods Limited Q2 and H1 FY 'twenty seven Conference Call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. I now hand the conference over to Mr. Sumed from Thank you, and over to you, sir. Thank you, Reo, and good afternoon, everyone. We welcome you to the q two and h one FY twenty seven earnings conference call of ADF Foods Limited.

0:48 To take us through the results and to answer your questions, we have with us today the top management of ADF Foods represented by mister Bimal Thakkar, the promoter, chairman, managing director, and CEO, mister Sumeet Thakkar, vice president, sales and strategy, and mister Srinivas Ayagiri, the chief financial officer. We will start the call with an overview of the business and the recent updates by mister Bimal Thakkar, and then mister Srinivas will give his comments on the financials. As usual, the standard safe harbor clause applies while we start the call. Over to you, Bimal, sir. Thank you, Sumit. Good afternoon, everyone, and thank you for joining us today. I'm pleased to share that we continued our strong growth momentum during the second quarter of f y twenty seven, delivering consecutive quarters of strong double digit double digit year on year revenue growth.

1:41 During q two f y twenty seven, our consolidated revenues from operations increased by 23.6% year on year to INR 200.9 crores. This represents our highest ever quarterly revenue and marks the first time that ADF has crossed 200 crores in quarterly revenue. On a stand alone basis, revenue increased by 16.6% year on year to Indian rupees $1.63.3 crores. The performance reflects healthy demand across our brands, deeper penetration in our key markets, expansion of shelf space, and continued ex... Execution across both our processed foods and distribution businesses.

2:31 Our order book remains strong, providing healthy visibility for the coming quarters. However, the conversion of our strong order pipeline was partly constrained by limited container availability and disruptions across key shipping routes. Importantly, we delivered this growth despite these logistical challenges and elevated ocean freight costs. Demand remained resilient across our international markets supported by growing preference for convenient, authentic Indian foods. Our diversified portfolios across frozen foods, ready to eat, ready to cook, and meal accompaniments continue to enable us to address multiple consumer segments and consumption occasions.

3:18 Let me now share an update on our key brands. Ashoka, our flagship brand, continued to deliver strong growth driven by sustained demand from the South Asian diaspora and deeper penetration across core and emerging international markets. Ashoka has delivered a revenue CAGR of over 20% during the last five years, reflecting the strength of the brand, the breadth of its portfolio, and our consistent investments in distribution, consumer engagement, and innovation. Going forward, we will continue to strengthen Ashoka through greater shelf presence, focused marketing, and new product introductions. Truly Indian maintained its strong momentum in The US mainstream market.

4:06 The brand is now present across more than 3,500 stores in The United States with new listings secured in marquee retail chains, including Kroger, Meijer, and Sprouts. We also continue to strengthen our presence through retail campaigns, in store activations, influencer engagement, and digital marketing. Our Truly Indian vegan non range has been recognized under the dish reinvention category in Whole Foods Market 2027 food trend predictions. This is an encouraging endorsement of our product proposition and its growing acceptance among mainstream consumers. We will continue to focus on expanding the range, securing new retail listings, and driving deeper penetration across existing accounts.

4:58 In India, Seoul continued to expand its portfolio and channel presence. During the quarter, we launched a two gheeel cow daniragi prepared using the traditional bologna process. This addition expands Soul's better for you pro... Product portfolio and gives the brand an entry level into a large everyday kitchen category. We will continue to build the brand in a measured manner through product innovation, product distribution, and targeted consumer engagement. On manufacturing, our Surat Greenfield facility continues to make steady progress towards achieving its targeted operational performance. The facility enhances our frozen food manufacturing capabilities and provides us with capacity required for future demand.

5:48 Alongside Surat, Nadia and Nasik further strengthen our manufacturing platform and improve our ability to scale efficiently. On growth investments, we continue to maintain financial discipline. Our balance sheet remains strong with a net surplus of 97.4 crores at the end of h one of financial year twenty seven. The board has also declared an interim dividend of 30% of the face value of share, continuing our track record of consistent shareholder returns. Looking ahead, we remain confident in structural growth opportunity across our categories and markets. Our growth will continue to be supported by deeper brand penetration, new retail listings, distribution, expansion, innovation, and ramp up of recently added capacities.

6:43 At the same time, we remain watchful of vessel availability, ocean freight costs, and geopolitical developments impacting our shipping routes and markets. Our priority will be to manage these near term factors through cost optimization and disciplined execution. I will now hand over to Srini who will take you through the financial performance in greater detail. Thank you, and over to you, Srini. Thank you, Bimal, and good afternoon, everyone. I'll begin with the consolidated financial performance for q two FY twenty seven. Consolidated revenue from operations increased by 23.6% year on year to 200.9 crore compared with $1.62.6 crore in q two f y twenty six.

7:30 This was ADF Foods' highest ever quarterly revenue and the first quarter in which consolidated revenue crossed 200 crore milestone. The underlying order book remains strong. However, container availability constraints limited our ability to fully capitalize on the strong order order book during the quarter. Consolidated EBITDA increased 9% year on year to INR 39 crores compared with 35.8 crore in the corresponding quarter. The EBITDA margin stood at 19.4%. Profitability remained healthy despite elevated ocean freight and logistics costs. The impact of these pressures was partly mitigated through operating efficiencies, cost optimization, and disciplined operating execution.

8:19 Consolidated profit after tax stood at 25.3 crore with a PAT margin of 12.6. Sequentially, consolidated revenue increased by 20.1%, EBITDA by 31.4, and profit after tax by 46.6% over q one FY twenty seven, reflecting improved operating momentum during the quarter. For h one f y twenty seven, consolidated revenue from operations increased by 24.6% year on year to $3.68.2 crores compared with $2.95.5 crores in h one of FY twenty six. Consolidated debt EBITDA for the first half increased by 15.8% to INR 68.6 crore with an EBITDA margin of 18.6.

9:09 Consolidated profit after tax increased by 2.4% to 42.6 crore with a PAT margin of 11.6. Moving to stand alone performance. Revenue from operations increased by 16.6 year on year to $1.63.3 crores in q two f y twenty seven compared to $1.40.1 crores in the corresponding quarter of past year. Stand alone EBITDA stood at 31 crore with an EBITDA margin of 19%. Stand alone profit after tax stood at 21.6 crore with a back margin of 13.3%. For h one f y twenty seven, stand alone revenue increased by 18.2% year on year to $2.84.2 crores compared with $2.40.4 crores in h one f y twenty six.

9:59 Stand alone EBITDA stood at 58.5 crores with a margin of 20.6, while profit after tax stood at 39.9 crores with a margin of 14%. The year on year movement in h one stand alone profitability reflects primarily... Profitability primarily reflects elevated freight and logistics costs even as the business delivered healthy revenue growth. Coming to the segmental performance, processed foods revenue increased by 22.6% year on year to INR $1.63.4 crores in q two FY twenty seven. Segment EBITDA increased by 41.2 crores, translating into a margin of 25.2%. The company reported a net surplus of 97.4 crore at the end of the first half, providing us with financial flexibility to continue investing in capacity, brand building, and strategic growth opportunities.

10:57 Over the last two years... Two and a half years, we have invested more than $1.45 crores in capacity expansion fully funded through internal approvals. Our capital allocation remains priority and remains unchanged. We will continue to invest selectively in manufacturing capacity, productive initiatives, brand development, and distribution infrastructure while maintaining prudent balance sheet. Crystal has upgraded our credit rating to Crystal a plus stable from Crystal a positive, reflecting our financial strength and operating profile. The board has declared an interim dividend of 30% of the face value, reinforcing our commitment to the consistent shareholders' returns.

11:44 Looking forward, we will continue to focus on maintaining healthy growth, protecting profitability through disciplined cost management, improving productivity, and generating operating leverage as our manufacturing capacities and brands scale. While freight and global shipping disruptions remain near term monetarables, our diversified geographic presence, strong brand portfolio, expanding manufacturing platform, and healthy balance sheet position positions us to... As well to deliver sustainable long term growth. With that, I will hand it back over to Sumit to open the floor for questions. Thank you very much. We will now begin the question and answer session.

12:32 Anyone who wishes to ask questions may press star and 1 on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and 1. The first question is from Saurabh Berya from Samiksha Capital. Mr. Sohrab, you may go ahead with the question. Hello?

13:25 Yes, sir. Please go ahead. There seems to be no response from the line of Mr. Saurabharia. We move to the next question. The next question is from Pritesh Charda from Lucky Investment. Sir, I have one question on the CapEx. So now how much CapEx is still balanced to be spent after this $1.45 crores? So for for this for this financial year, we have approximately... Within our existing Surat plant, which there is some CapEx left and certain other additional capacities happening in Nadia and Nasik, I think approximately another $40.45 crores is left in CapEx.

14:23 So, basically, total of $1.90 crores? Correct. Okay. Now in this one ninety crores, how much would you apportion to... Is there is there a possible way to know how much you apportion to the existing products and how much to maybe newer products? And this INR 190 crore CapEx, Yeah. What kind of incremental asset on one should look at here? So at full capacity, we expect the of the investment. And Sorry. Your your line skipped, actually. I said we expect the asset term to be at least three times Okay. Of the investment.

15:08 And in terms of new products from this hundred and ninety, I would say close to $60.65 crores is towards new products. Okay. And my second question is on the volume growth. So for the quarter two and for the h one, what will be the volume growth for us? Vini, you want to give the percentage growth of the containers? Yeah. So our... Yeah. Yeah,. So our overall growth for h one has been roughly around 24%. Out of this, almost 70%... 60 to 65% would be volume growth, basically, coming from volume growth.

15:59 Okay. So let's say in the process, 60%. So in... I can use that same thing for the process food number. Right? It is with the processed food. For the processed foods. Yeah. This is for the food. For the processed food. And at the company level? The numbers will be almost the same. It won't drastically change. Another 5% here and there. Okay, sir. Okay. Thank you, sir. Thank you. The next question is from from Genuity Capital. Please go ahead. Hi, sir. Thanks a lot for the opportunity. Just one quick question on the solar plant capacity. So can you throw some light on the utilization level from solar plant in q two twenty twenty?

16:53 So q... You know, the Surat plant is not fully operational yet. There are some lines which are still to be installed, which will get installed in this q three. But at an average for q two, I'm gonna say we utilize about 15% of the capacity of the install lines. Okay. And, like, till h two, how much are we expecting to utilize that capacity? Yeah. So we are hoping to get to at least around 35 to 40% capacity utilization by the end of this fiscal year. Understood. So majorly for this quarter and for h one majorly volume was also the 30,000.

17:42 Sorry. I couldn't hear you, Adi. So that's it for me. Thanks, Adi. Thank you. The next question is from Saurabh Berya from Samikha Capital. Am I audible? I lost the line previously. Am I audible now? Yes. Yes, you are. Yes. So first question was on the demand side. So in the quarter, we reported a 24% growth. But, you know, as per the previous call, we had some containers struck and due to the crisis in The Middle East, we could not dispatch them.

18:36 So taking that into consideration and even in the quarter, we would have incremental demand or sales from the Soodh plant. So overall, line looks a little less than what was expected by us. So is there some problem in the demand side? Are we losing share somewhere if the management could throw some light on this? No. So the demand continues to remain very robust. Our problem and challenge has still been the shipping side of things. Availability of containers, availability of vessels on certain routes, it's it's still been a challenge. So shipping... Mean, we still continue to have carry forward shipments every month.

19:23 October, certain routes have become better, but it's still not back to normal prewar. It's... We are still nowhere there. So with all these problems going on, we are still managing to get the growth and trying to maximize shipments, but the demand remains strong for the products. Okay. So secondly, on the margin side, in the quarter, we did 19.4% odd which is a good number. Can you explain if there were some one offs in the margins, be it on the PLI side or any tariff refund which were in place? So is this number that's the name is what my question is because given the current free crisis and all is there. So once is in place, so do we see margins extending from here, or it would settle in the 17 to 19 percentage?

20:25 See, we continue to be bullish on maintaining high teens in terms of the margins. And I'll let Srini answer more details on your question earlier. Sini, if you want to answer the other Yeah. Fine. Yeah. Yeah. Sure, Bimal. So... Yeah. So as Bimal rightly said, we will continue to have our margins estimated at high teens. And see, this number is sustainable because... And and this will come through operating leverage as well. You also have to understand that we are still in the process of building capabilities. A lot of our capability building in key markets like US, India as well with the solar plant coming in and in UK and Europe have happened during the second half of last year. And this year is the first year, basically, it's happening.

21:19 It's the first year impact, basically, full impact. The second part is on the brand building, we have been continuing to invest on our brands in both Ashoka as well as to Indian in all our key markets. So so that exercise will continue. So that's why you will see the margins at a high teens level. Having said that, the operating leverage, the way our revenues are growing at roughly around 25 or 24, 25%, that will give us that operating leverage. But at the end of the day, we'll also keep on investing for some more time on our brands and capabilities within the markets. The second question, I think... Yeah. Sorry. Yeah. Maybe... Yeah. You... Why don't you continue? Then maybe I'll Yeah. This was the follow-up was that one offs in the current numbers, be it insurance or tariff refunds or a PLI benefit, whatever was there. No. So from a PLI benefit so from a PLI benefit, we have been having this PLI, which has been there for five years, and this is the last year for which we will have the PLI. But, again, you'll have to understand that for PLI, we also spend. So whatever PLI we get it, we have to send... Spend two x of that amount into marketing and advertising in for... In in key... In foreign markets outside the country. That's where you get the the PLI benefit.

22:44 So that won't impact much. The second part is, I think, from an insurance perspective, it is gross margin neutral. So there is no impact on the overall P and L. On the tariff, if you remember, there was roughly around three gross lying in our balance sheet because of the tariff refund. So that's been a part of the overall p and l this time. Okay. So which line item does it... It is exactly affecting the other income part, right, if I'm not wrong, the tariff refund? No. It's in the cost because it it was passed through the inventory line, and that's how it hits you. Okay. So we we have a lower COGS due to the tariff refund, if I'm correct.

23:33 Yeah. Okay. And so secondly, on the OCF part, so do we have any insurance claim? So since in the note it was mentioned, can you mention the amount of the one offs which were there in the current first half of forty seven operating cash flow number? No. So that's what I said. The insurance has been... So the amount has... As well has been settled from the insurance... Insurer. And at a gross margin level, it is neutral. So whatever No. No. From the cash flow point of view, my question was. Operating cash flow point of view. So cash flow will come in the next quarter. Basically, that money was received subsequently in October.

24:20 Okay. So so, basically, in the current quarter or say in the first half of twenty seven, we had no one offs in our operating cash flow numbers. Right? Yeah. Yeah. Perfect. That helps. And just one last question. So we from a macro point of view, we saw the U. S. Midterm elections and even talks are there on the plate regarding tariffs getting settled at a lower rate, maybe I can negotiate on that part. Do you see any benefit arising post the selections, any change in scenario that you might expect which could benefit us? And even a lot of FTAs and and all is in the play from a broader macro point of view. So how do we benefit from it?

25:05 No. So, obviously, lower tariffs will help us. Right now, the tariff we are paying... Additional tariff we are paying is about 10% on our products. So if we are able to get that reduced, it will obviously benefit our company, and we'll be able to push more. And so, yeah, it's... And, you know, with the midterm election, think this... The whole overhang and the uncertainty of whether the tariffs will further go up or this... Hopefully, that is not there anymore, and we get some clarity and some finality to the FDA soon between the two governments. Perfect. And just one last question. So does the management withhold with its earlier guidance of 900 CR of top line? And if there could be a margin percentage, which you can guide for the console FY twenty seven on a yearly basis? Yeah. Given given the first two quarters where we've had difficulties in executing all our orders because of the steam of freight and because of the availability of containers, you know, I mean, as much as we would like to try and get to the 900, realistically, I think we should...

26:35 We would like to look at about $8.50 crores because the container issues still continue to remain, and we hope it only gets better. And the... These last two quarters to achieve the balance difference for the 900, given this problem still there on shipping and availability of containers, looks still difficult. So we would feel comfortable with the $8.50. That's that's what the endeavor is, and, hopefully, there are no more surprises and problems in terms of shipping. And in terms of margins, we continue to be confident of the high teens to maintain that for the next two quarters as well.

27:22 Perfect. Did... So recently, Iran did... Had some exceptions on some countries to pass their ships through this rate of almost, right, India being one of them. So do you expect the Middle East crisis to ease, or does it benefit us anyway? No. No. Of course, it's... It it would benefit, but it's not yet... You know, it's... Some some routes, There is some avail... Better availability of containers, but it's still it's still a challenge. There is still a lot of uncertainty. And, I mean, shipments to The Middle East are still a challenge for us. We are not able to make as many shipments as we would like, and the transit times have increased. You know, the transit, which used to be seven days, ten days, has now gone up to thirty five, forty days for The Middle East.

28:16 And at freight rates which are, you know, seven, eight times higher. So The Middle East still continues to remain a problem. Freight rates in all the other geographies have also gone up, and transit times have also gone up out there. So it it is impacting, and we are trying to navigate in the best possible way to see that we continue to get growth and continue to maintain our margins. Okay. So so it might have some effect on our working capital as a whole because inventory is not moving that fast if we talk of the Middle East Side. So if if we can quantify in terms of inventory days, what incremental changes we have seen as compared to the previous year that could be beneficial.

29:09 Sini, can you please get that? Yeah. It's... So as Dimas rightly said, there has been a lot of challenges in terms of the turnaround time to delivery to deliver our products. The... Almost two weeks of inventory days is something which which we are seeing is on a higher side on a... And and it's having an impact on our on our books, basically. But let's see how the next two months goes. If the the rules clean up and the transit times do come to normal numbers, we should end our inventory to what we used to be in the month of March. Okay. Great. Thank you. Happy Diwali and happy.

29:59 Thank you. Yes. Happy holidays to you as well. Thank you. Thank As there are no further questions, I'd like to hand the conference over to the management team for closing comments.

30:45 Thank you very much, everyone, and wishing all of you all a very happy Diwali and happy Tantares, and see you all next quarter. Thank you. Thank you very much. On behalf of ADF Foods Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.