CCL Products (India) (NSE:CCL) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the CCL Products (India) Limited q two FY twenty seven earnings call hosted by Ashika Institutional Equities. 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. Please note that this conference is being recorded. I now hand the conference call over to Mr. Deepak Saha from Ashika Institutional Equities. Thank you. And with you, sir. Thanks,. Good morning, everyone. On behalf of Market Gas Solutions Equities, it's indeed a great pleasure to host the q two FY twenty seven earnings call of CCL Products Limited. Joining us today to discuss the earnings call for the quarter ended 09/30/2026 Mr. Praveen Jayapurya, Chief Executive Officer Mr. Chatteranya Vassehiradhi, Chief Financial Officer Mr. Ravi Rasari, Company Security and Compliance Officer. We thank the management for giving us the opportunity to host this call. I would now like to hand over the call to Praveen sir for his opening remarks, post which we'll open the floor for q and a. Thank you, and over to you, Praveen sir.

1:15 Yeah. Thank you, Deepak, and thanks for Ashika Securities team and Ikra for hosting us in this call. Good morning, everyone. I welcome you all to the second conference call of FY twenty six-twenty seven. Now let me give a brief overview of the company's performance for the second quarter and the half year ended 09/30/2026. The group has achieved a turnover of INR 1,215.99 crores for the second quarter as compared to INR 1,128.21 crores for the corresponding quarter of the previous year, achieving a value growth of 7.8% on the back of a double digit volume growth. The value growth because of the green coffee prices coming down, the value growth trades the volume growth, which stands at double digit.

2:06 The EBITDA stands at INR217.3 crores as against INR198.6 crores, which is a growth of 9.5%, while the profit before tax is INR150.86 crores, growing at 18.7% and the net profit stands at INR 130 crores with a growth of almost 29%. As far as H1 is concerned, the group has achieved a turnover of INR 2,419.58 crores as compared to INR 2,186.25 crores, which is a growth of approximately 11.6%. The EBITDA stands at INR $4.14 crores as against INR $3.60 crores, which is a growth of almost 15%.

2:51 And the PBT, which is at INR 279.88 crores is growing at 26.48% and the net profit, which is at INR 246.96 crores for the first half is growing at 42%. The domestic business has achieved a gross turnover of $2.10 crores this quarter. Out of which the brand sales is approximately INR 140 crores. The good part is that the growth momentum for the branded business continues and we are growing at 25%. And we look forward to maintain this kind of a growth momentum going forward as well. As far as the green coffee prices are concerned, while it is still fluctuating, but has been range bound in the region of $3,400 to $3,800 per ton.

3:45 And the Vietnam crop, which is slated to come, you know, around November December time is the time where which will decide the future, you know, price trends for coffee. But the good thing is that even before the crop, the prices have held on to these levels, which is a good sign. The order position for Q3 and Q4 looks robust, and we expect to end the year exactly as per the guidance that we had given at the start of the year, which was around 15% volume growth and a similar EBITDA growth as well. That is a brief note from our side. Now I open the floor for questions. Thank you very much, sir. We will now begin the question and answer session.

4:35 Anyone who wishes to ask a question may press star and 1 on the attached 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue is assembled. The first question is from the line of Shireesh Pardesi from Motilalos Wealth Financial Services Limited. Go ahead. Hi, Praveen and team. Good morning. Thank you for the opportunity. Praveen, starting with the the volume growth, what you have stated, is it significantly higher than 15% or is it the range of 10% to 15%? No, it's in the range of 10% to 15%.

5:20 Okay. And, yeah, it's in the range of 10% to 15%. Okay. So one follow-up here. I think we have been seeing coffee prices is declining and the customers were also not stocking up. So is the inventory level... I would assume that inventory level would have normalized now. And hence, the order book growth looks very strong at this time because coffee prices might further decline or remain stable? Know, so this there are two views here. One is that, you know, the good thing was that every time before the crop, the... Generally, the coffee prices tend to increase because there is a lack of availability of coffee before the crop. But this time, it has as I was telling you in the opening remark, it has been range bound.

6:10 So while it is fluctuating every day, we see some $50.100 dollars of ups and downs that happens on a daily basis. But the good thing is that it is not broken away from the 3,700, 3,800 levels. Now we are expecting the crop to come by end of November, December. While there are news of El Nino and pockets floods as well. So there are conflicting reports that is coming from the market. But the fact that the pre harvest prices are good, there is an expectation that there could be a further reduction. So during this time, what happens is that the customers also wait for the direction to evolve by November, December. And every year, we see that November, December is the time we start getting more contracts into the order book. So generally and same is the case when during June and July when the Brazil crop comes in. So I think that's how the things are. But as far as we are concerned, as I was telling that our quarter three, quarter four order book looks robust and we are well on track to get that 15% volume growth for the year. But let's say some additions happen, then we'll keep updating you on that front as well.

7:24 Okay. No, I was just trying to check, is there any discussion between FD and spread right volume growth? So FD, now what has happened, of course, two things, series. FD, our utilizations are much better. The FD demands in the world market has been better than the FD demand. But as far as our proportions are concerned, it is very much same as what we have seen in the last two, three quarters, Largely also by this time last year, second quarter onwards, the full Vietnam FD capacity was in play. And therefore, a lot of these sales of FD is also building the base itself. So we didn't see much of a proportion change, but having said so, we see that there is, as of now, at least a better demand for FB worldwide.

8:16 Okay. And just last question, I could see there is lot of fans across media channels. So is that... If you can give me some color how it is impacting the revenue momentum in terms of our brand sales and the the the institution. So brand series as we just... I was, you know, mentioning that we are going at 25% last year because of a lot of price increases. We also got value growth, but this 25% is backed completely by volume growth in the domestic market. So we are going very, very, very well. And the best part is that the growth is coming from, you know, all channels, which is GT, MT, e com, everything put together. So there has been an all round effort.

9:04 And in India, there is a little bit of a skew, especially in the non strong coffee markets in the winter season and the festive season. So we are doing we are also gearing up for that, putting up a lot of efforts, both in terms of ATL and BTL during this. So we hope to continue the momentum on the branded side as well. Okay. No. I was just more interested in knowing, have we adjusted any prices? Sorry, I didn't your voice is breaking a little. Have we adjusted any? Have we adjusted any prices because of lower coffee prices? Yes, yes. In the domestic market, there are SKUs where we had to drop prices. But the good thing is that we did not have much of an impact because in some SKUs, we kept the prices at the similar levels also. Last year, if you remember, September, I think it was September 20 or so when the GST cuts were announced. So the whole category and the whole industry had taken price drops, so did we. But there are certain SKUs post that we also because of intermittently coffee prices and the energy cost had increased, so we have taken some price increases. So it's a mixed bag wherein there were price drops and there was also cases where there were price increases as well.

10:28 Okay. Thank you and all the best. Thank you. Thank you. Next question is from the line of Vivek Ganguly from TCG AMC. Can you just give an updated number on what the date right now is? And what is the rate of interest? I'll just ask the CFO to shipping here. Sure. The gross debt asset September 30 is $1,001.92 crores. Net debt is around 742. And what is the date of interest? Sorry? Rate of interest. Rate of interest. Rate of interest the rate of interest has slightly gone up over the last one quarter or so. The average rate would still hold between seven to seven and a half percent.

11:18 Okay. About 7.25 or seven You point can take it 7.25 as of now. Sure. Sure. Sure. Depending on depending on where the loan is taken. Right. Right. And you had given in the indication that by the year end, your debt would be in this, you know, 1,100 ish range. So given that you all are... Are you all likely to exceed that and get two, three digit numbers? We'll we'll still maintain the guidance that we have given. Our initial guidance was that we'll maintain debt between INR 1,000 crores to INR 1,200 crores of gross debt and net debt around INR 800 crores. Given that what we have ahead is the procurement season because of the Vietnam what we have ahead is the Vietnam harvesting season. So there is a significant procurement and working capital may slightly go up.

12:06 And therefore, we intend to maintain the guidance that we already given. Thank you. Next question is from the line of Abhishek Nawalkha from Nirubhavang Institutional Equities. Please go ahead. Yes. Hi. Thanks for the opportunity. The first question is on EBITDA growth. So I think after nine quarters back to back, wherein our EBITDA growth has been consistently ahead of gross profit growth as well as volume growth, we have seen a 8% kind of a growth quarter. So first, is there any one off in the other expenses, particularly in 2Q? Abhijit, not significantly. If you see, you know, the volume growth, I was saying, between 10 to 15, but EBITDA is around 10.

12:53 So so there is also, as I was explaining, all this while we also were getting little benefit of our proportion change because freeze dried demand was ahead of spray dried. There's a lot of noise coming, Abhishek, from your end, I think, or I don't know from there. Are you able to hear me? Hello? Abhijit, are you able to hear me? Yeah. Yeah. Yeah. I can hear you, sir. Yeah. Yeah. So what I was telling, Abhijit, is that, you know... So all this while you're also getting that benefit of a better proportion and all that, which now is in the base itself. So which meant that your EBITDA and the volumes will kind of move together. So yes, there is a little bit of a dip here and there, but these are as I've been always telling that in a quarter, you will see last quarter, we saw a little higher growth of EBITDA than the volume. This quarter, little low, and therefore, it will all settle down to a long term guidance that we had given of 15% or so.

13:51 And that is very much on the cards, and that is where we are headed towards. So my only question was basically last year we have seen a significant increase in per kg EBITDA also. The impression which was given was maybe we'll continue with that guidance, I mean in terms of per kg. But this time even in 1H if I see our gross profit growth is significantly ahead of our volume growth. So we were under the impression that at the gross profit level, our mix is still improving. So maybe... That's why my question was basically whether we... Whether the absolute EBITDA growth can be slightly ahead of volume growth or it will be exactly in line with like 15% like you're saying? Mostly in line, Abhijit. There could be a little, you know, at the end of the year because, you know, there is not only one thing that will play in terms of, you know, how the EBITDA will pan out apart from proportions. There are many other aspects that will come into play.

14:45 So it could be a couple of percentages higher also. I'm not denying that fact. But our guidance remains that both will move in tandem with each other. And in fact, if you remember, I told this last time as well that once the basis are normalized of the same proportion of FD and SD, then the particular EBITDA is very, very unlikely that it will move significantly differently from the volume growth. And that is why we have said that this year will be fifteen and fifteen type of growth. And that is what we are likely to end the year at. Sure, sure. And last question is on debt part. We have already seen significant amount of debt reduction in the first half itself. So are we still on track in terms of the INR 4,000,000,000 debt reduction or there can be or you want to bring the debt down further from the current level? No, I think just now, Cetinia just explained that we had a guidance given a guidance that the gross debt will be between INR 1,000 to INR 1,200 and the net around 800.

15:49 We already have kind of got to that levels. But as we explained right now, going forward, the Vietnam crops are going to come in. And that's the time that could be newer contracts that could come our way, and therefore, the buying could increase. So we are not changing the guidance as of now. Maybe closer to the third when we are meeting again in the third quarter phone call, we probably will be able to give you the exact number how the year end will look like. Sure. Sure. So I'm sorry, sir. Just one last one. Basically, you were saying that with the declining coffee pricing, we might see demand for freeze dried increasing even further maybe in the newer geography. So are you seeing any... Anything of that sort playing out?

16:34 I... So already the demand for freeze dried since last year has been much higher than the spray dried. And if the coffee prices kind of, you know, continue to kind of have this kind of a bearish trend, I have a belief that the feed side demand will hold like it has been holding till now. So we will have to just wait and watch that how things pan out. Sure, sir. Thank you and all the best. Yes. Thank you, Vijay. Thank you. Next question is from the line of Rahul Maheshwari from Ambit Investment Advisors. Please go ahead. Yeah. Good morning, Praveen and entire team. Hope I'm audible. Yeah. Yeah. Rahul, you're audible. Yeah. Yeah.

17:22 Couple of questions. First, can you give what is the capacity utilization for the domestic and the Vietnam as these two parts? And currently, any... How we should look for next two, three years because the majority of the CapEx has been done for 75,000 ton. And also the speed drive capacity in the Seripur, Seripati region, how that has been paid? That is the first question on the capacity utilization. Yes. So Rahul, we are like at an aggregate level, I don't want to last time also I said that I'll not break it down very deep, but I'll give you a flavor. At an overall control level, our capacity utilization is closer to 70 odd percent with freeze dried utilization higher than this. So the freeze dried utilization is much faster.

18:17 And at least for the spray dried part, we need not worry about the capacity for the next at least two to three years. Freeze dried is something that we have to keep an eye on because maybe at best, we may have one more year of maybe in a year or year and a half, we could be very close to full utilization, which means that we'll have to see how do we augment the capacity. We have been looking at evaluating both that how do we kind of increase the capacity at our end. Also, are seeing that is there any strategic partnership that we can do in the short run to make sure that the capacities are there to fuel the growth.

19:02 So that's on the capacity side. And the question that you asked again, not trying to break it up unit by unit, but there has been a similar sort of utilization even for the Tirupati unit. Just wanted, as you had guided for 15% as a volume growth, not just near term, but medium term also you want to maintain this trajectory. So at optimum capacity utilization, you would have to go for a further capacity expansion. Because, generally, we are seeing at 80, 85%, you are just at the CapEx. Correct. Correct. So that stays true at 88, maybe, you know, 85, you need to kind of go in for expansion because while we talk about rated capacity, a lot depends on how much of changes you're having, what kind of, you know, blend that you are taking out. So generally, 80, 85, we would be kind of initiating capacity expansion.

20:03 So that stays true. That is why I said for the straight ride, we are good for another two, three years. We need not worry. But for freeze dried, we are keeping a close watch on how the demands are shaping up and how our capacity utilization are there so that we can take calls on the same. Just a decent question to this that before expanding the capacity, any debt levels you want to reduce it down so that it doesn't become the balance sheet. So just I'm not asking from near term six months perspective, but from a strategic direction perspective. No. So Rahul, I think, you know, today and last time as we said, we are in a very, very, you know, comfortable position. If you remember last time when we were doing expansion, top line used to be 2,000 crores and the bottom line was probably INR 200 crores pad.

21:05 But with the current position of the part itself, which has gone which has doubled and the cash flows are very robust. Just now Chetaniya told you that at INR 1,100 crores gross debt, our net debt is around INR $7.40 crores. So which means that there is a INR 300 crores, 400 crores of cash position that is there. So if at all, if required, a lot of our now capacity expansion can be taken from a large part of it from internal approvals as well, right? So we are in a very comfortable position right now. So we are not kind of thinking too much of putting that, okay, at this level, I'll go for capacity expansion or at that level, I'll to capacity expansion. So we are good on that front, comfortable on that front. So if at all capacity has to be expanded, I don't think so.

21:53 Funding the CapEx will be of any issue at all at this point. Think, certainly, I just wanted to add the point. Sorry. Sorry. Just... Yeah. Yeah. Yeah. Please. Please go ahead. Yeah. The second question was regarding as the coffee prices have been declining, any shift in the consumers from a long term contracts perspective? Because from last two years, we were witnessing in your commentary that the customers are preferring short contracts. So are you witnessing some signs and any inquiry in pipeline which has been built up? So yes, some quite a bit of long term contracts are coming back. But Rahul, I was telling you that customers or the clients are a little on a wait and watch when the prices are rising.

22:45 At the same breath, I was saying that prices rising stability of prices is more important than a higher level or a lower level. And what has happened is that even now the prices keep fluctuating. And that is the reason sometimes the the clients are a little still on a wait and watch that while the prices have fundamentally come down, the fluctuations still holds true. So in fact, you know, after three months, I've been seeing that every day there is a fluctuation between $50 to $100 per day. So one day it goes up, one day it comes down. So it keeps the clients still on their toes. And but having said so, because the price table has come down at a broader level, we are seeing a lot many more medium and long term contracts coming back.

23:32 Right. And any last question from my end, any wallet share increase you are witnessing from your existing clients and any new client addition that has taken place or any client run data, if you can guide? Rahul, again, are continuous process. There are instances where we have seen wallet share increases There are clients where we have increased wallet share. And again, there are new clients that have been added. We have been speaking about our initiatives in Far East, which two years ago when we were doing the phone call, I said that we are seeding the market and we are trying to kind of get new clients from that side because that's a that has been not so strong geography for us. And we are seeing the results now.

24:21 We are getting a lot of new clients from that market as well. So both the things are happening. There are wallet share increases and the new markets also are doing well for us. Any client we have lost or any There would have been. Yes, absolutely. See, this is a business. I cannot say that I haven't lost the client. It will be a scenario, but there is no significant loss. There is no big client loss. There is no significant loss. Yes, there are so many small clients who keep coming and going. Its business is always a... As I always say that it's a leaking bucket. So there will be a... We just need to make sure that a good proportion of your clients stay intact and your tap is, you know, bigger than your leak. Sure. Sure. Best wishes to you and your entire team. Thank you.

25:08 Yeah. Thank you. Thank you. Next question is from the line of from Kenner. Go ahead. Yeah. Thank you for the opportunity, sir. Just one question, sir. This is on the other expenses. Expenses. So, sir, is there any one off in this quarter? Because typically for the large part of FY '26, we were at around $141.50 crores, but that has now gone to $19,200 odd crores. So is it that the freight or the insurance fees that we are unable to pass on, on the export side? Or is it that higher A and P spends for the domestic business? So basically, just trying to understand these other expenses, why it is appearing little on the higher side? Yeah. So I think what you mentioned, we... There is an increase in freight cost and insurance cost and all that is there, which is leading to this increase.

25:57 But we are also able to pass. Yes. Of course, the ones any CIF contract which you have done and the prices have increased, you will take it up in your pocket. But most of it present when the price increases are happening, we are able to pass that through. Now what happens is that when even if you convert, let's say, the FOB contracts to CCL contracts and you are passing on to the clients, your top line also goes up and the, you know, the the expense comes down and fix here. So, optically, it looks like that it has gone up, but at a, you know, operational profit level, you will see that there is no impact of that. Okay. Okay. Got it, sir. Thank you. 10%. You. Next question is from the line of Abhishek Mathur from Systematics Group.

26:48 Just on the EBITDA again, For the second quarter specifically, the EBITDA per kg, has it slipped below the 130 level slightly? Is that correct to assume? Not... No, Sorry, go on. Go on. Yes. Okay. So is it between INR130 to INR135, is it the range that we should be looking at? I think 135 to 140 we had said last time. That is where it stays. Even for the second quarter as well? Yes, yes. Great. And I was asking, you spoke about the mix, the proportion in terms of FDC, small, etcetera. Apart from the mix, any other factors that we should be watching out for when we think about the changes in EBITDA per kg?

27:36 No, not really. Because again, like I have been guiding for last three, four quarters that because the proportions or let's say, the product mix are now in the basis, I don't see much of it because a lot of people had asked that will the EBITDA per kilo still increase. So to that, I have said that while we are making efforts, there are various things that goes into deciding EBITDA per kilo. And I don't see that changing either downwards or upwards. So it will kind of follow the volume growth profile. So there won't be any change there. Got it, sir. And secondly, on the just going on to the international branded business, I think this is an area that we don't talk about much on our calls. But you have talked about per call in the recent past.

28:28 I think you indicated a revenue number of INR26 crores to INR27 crores where it is at right now. And you have talked about an expansion in The Middle East as a near term area of So if you can just talk about the overall international branded business, how big is it? Are there other pieces apart from Percol? And for Percol itself, what is the growth and what kind of margins that we are talking about? And also any other pieces of the international branded business that we are that we don't typically talk about much if you can spend some time talking about these? So on the Perfal, Perfal continues to grow. Again, it's a very different geography, UK, wherein you have to keep doing the relisting the contracts with the chains. But we have got some good responses from there. As of now, we are looking at a similar kind of a number between INR 25 crores, 30 crores that we will end this year at.

29:23 Having said so, we had indicated that maybe one, two years because we are investing behind the brands also, maybe INR 1 or 2 crores of loss at an annualized basis. Hopefully, by next year, we should start seeing some profits also coming from that front. Now as far as expansion is concerned, yes, we have been kind of working with a lot of chains and distributors across many countries. So for example, now we probably have got if you remember along with Percol, we had got some another three, four brands. And we have said that depending on the geography and depending on strategy, we'll use these brands. So Percol was a certified coffee, but there are a couple of other brands like London Blend, Percup that we had bought at that point of time. So one or two brands very soon, we have finalized the deals in the with couple of things in The US market for one or two of these brands. They will be launched very soon.

30:19 We have officially launched our brand in the Nepal market. And in fact, we are doing some marketing activity as well, sponsoring one of their cricket leagues, which is going live on October 26 this year. So and Vietnam, again, we are trying to build the branded business. Hopefully, in a quarter or so, we will start seeding the market or at least test marketing some of the stuff there. So lots of these things are happening even Middle East. In fact, our team is going next week to meet a couple of distributors to see what all things we can do there. So yes, so this is a little brief on our efforts on the international B2C front.

31:08 Got it, sir. So apart from this INR25 crores to INR30 crores of per call that you quantified, overall, what is the estimate of the overall... These are all negligible. These are all just seeding happening, maybe a couple of crore or INR 2 crores more of billing could come. But that we'll see. But not very worthwhile as of now because these are all seeding activities that we are doing. So currently, if I say that probably the international branded business would be maybe INR 30 crores, 35 crores, would that be a correct assumption? Yes, around INR 30 crores you can take that. Next question is from the line of Akhil Parekh from three sixty one Capital. Please go ahead.

32:02 Hi. Thanks for the opportunity. I think it's fairly resilient performance in tough times. So my question is on the branded business. Forecast is just... I think COVID I'm so sorry to interrupt, mister Pare. If you're using any external device to speak, can you please disconnect it and use your handset mode? Sir, is it better? Hello? Yes. Better. Yes. Yes. Better. Uh-huh. Okay. Okay. So this is randit. There's no... Randit for 5,600 odd crore last quarter, right, for the full year '27. We maintain that for first half was $252.61 crore. How much did we... What did we... We guided $5.50. Yeah. $5.56. Yeah. Yeah. So that will remain because, Abhi, you know, the sales increases in...

32:49 I told that in India, there is a bit of seasonality. So the sales will increase in the third and fourth quarter. So that guidance, we are we are we are maintaining that. And sir, anything on the market share gains, like good commerce you had highlighted, we are closer to double digits, and I can see, you know, fully on quick commerce players including Amazon. Yeah. Any any update on the market share gains for the market share gains on the quick commerce channel? Nothing significant, actually. Can't remember the last time when we spoke, the kind of numbers that we had given. So there is a constant increase. So it's there. This quarter, I can't say that from last quarter, there has been a lot of increase.

33:35 We continue to maintain that kind of a momentum. And we are trying to see that in platforms where we still are weak or geographies where we are weak, how can we increase that? Sure. Sure. That's all from my side. Thank you so much. Thank you. Thank you. You. Next question is from the line of Soham Samanta from Motilal Uzwal Financial Services Limited. Please go ahead. Yeah. Thank you very much for the opportunity, sir. Couple of questions. One is that when you are saying that HPC expansion will be coming maybe next one and a half year down the line. So is there anything we have thought? Is it more than 10,000 plus ton or... I mean, any thought over there? Or where do you think the third party we can manage? Is it in in this Vietnam or any other country we're looking?

34:29 So we have not decided, so I can't give you a very definitive answer, but it won't be 10,000 tons. Generally, FD, if you would have noticed, we generally have added 66,000 tons every time we have expanded capacity. So most likely, if at all, we were to add capacity, we'll be in that range of 6,000, right? Now whether it will be in Vietnam or India, both places we are we can do expansion because at both places, we can do brownfield expansion of another 6,000 tonnes. So let us see how things pan out. We haven't taken a call. As in when we do it, we will keep you informed. And second, is that when if you look last almost a year, coffee prices destabilized or coming down. So isn't the only reason that people are shifting from HTC to HTC or some actual innovation is going on in the coffee market?

35:24 No, no. Actually, that's not the reason. It's not because of coffee prices. What I had told earlier is that what happens is that when the coffee prices come down, obviously, the end prices also come down, right? And for especially when the prices come down for premium products, there is a tendency, it's not just coffee for any product in the premium segment pricing comes down, there is a tendency for people to upgrade, right? And premiumization happens. This is happening, you know, across categories. We are seeing that there is a trend of premiumization that is happening. So that is happening in coffee as well. So we are seeing that trend, and this trend got a little accentuated when the coffee prices started coming down. So that was the correlation we were trying to kind of form. And as of now, the momentum for FDC is still there. So we are looking forward that this momentum could continue. And accordingly, we'll have to take calls on how do we kind of supplement our capacity on that front.

36:24 Thank you very much, sir. Thank you. Next question is from the line of Bhavya Sonawala from Samasa Capital. Please go ahead. Yes. Thank you for the opportunity. Am I audible? Yes. Yes, Bhavya, you're audible. Yes. Just one question. I think previously you have mentioned that in terms of our capacity or in terms of supply globally, we are high single digit, right, about 9%, 10% of capacity globally that we have. Just on a longer term view, just trying to understand when do we see this coffee kind of maturing and when do we see another adjacency that you've talked about previously coming kind of take hold of growth? Is it too early to think about that and we see enough growth coming from COFFEE itself? So can you kind of talk about that?

37:20 So Bhavya, I think, yes, it is too early because we think single digit, as you rightly pointed out, single digit in the market share in the B2B segment globally. There is enough and ample scope to grow. And we have been saying that we are seeding a lot of growth initiatives across the globe to make sure that this growth momentum, at least in the medium term keeps growing at the rate that we have been guiding of around 15% or so. So that should stay intact. But at the same time, the other initiatives that we are building like the B2C initiative or getting into some of the other categories in the FMCG space. Hopefully by that time when we have kind of seen that, okay, the growth could kind of come down once we have attained maybe a 14%, 15% market share globally in the B2B side.

38:16 Then hopefully these initiatives itself will become big enough to drive the growth for the overall company. So again, we have been thinking both short, medium and long term to make sure that in the long term as well, the growth momentum is intact. Understood, sir. Thank you. That was just my question. Thank you. Thank you. Next question is from the line of Akshay Chandak from ICICI Lombard. Please go ahead. Yeah. Hi, sir. So as we are planning to add capacity in FDC maybe in one or two years when the capacities are utilized, so just generally wanted to understand what is the lead time in FDC machines?

39:08 Generally, you know, it will take nine to twelve months to put the project. Okay. And machines availability is not a issue in FDC? That's not an issue. Yeah. Machines availability is not the issue. Where we source? So we source from many... The thing. You know, I've I've been telling you that when we put up a project, we don't take the, you know, the full thing from just one supplier. So we take there are suppliers in Brazil, there are suppliers in Europe from where we could source the roasters. And then we do a lot of work on the line, internal work also we do in terms of our extraction capabilities and all. So there are many source points and there is not one single supplier that we are dependent on.

40:05 Institutional. Just a couple of things. On the capacity expansion side, if you can help us understand for the FD capacity expansion to 6,000 tonne or what the number that we do, is there any meaningful difference on the CapEx cost compared to what we did earlier? I don't think so. Maybe we can add some inflation cost to that, but it won't be very different from what we did around maybe INR500 odd crores we did last time, if I'm not wrong. So it will be that range itself. Got it. Got it. Fair enough. And second question is on the B2C side. So we were doing lot of this Malguri brand related trials across the touch points. What is the feedback that you're getting and anything incrementally that you can share on the Malguri or any additional trials that we are planning?

41:05 So two things I think Deepak we have spoken about. One was Malgudi snacks and while we are still in the test market stage, but we have added more couple of more products and we'll be adding we added one more product, which is the Ramachips to the portfolio and we're adding a couple of more in this by this quarter end as well. And the response has been pretty encouraging. We have seen decent amount of off takes that have started coming in. Although it is very small, so once we scale it up, that will be the real test. But on the test market front, we have got very encouraging response. And on the Continental, we had if you remember, we have spoken about the key segment that we are getting into. And from there also, we are getting pretty decent response and we were very pleasantly surprised because there are some pockets where Continental now has got very good brand equity. And that brand equity and distribution that we have is rubbing on to some of these categories and we are seeing good amount of optics as well. So hopefully, these look to be good to expand from here on. We'll take a little more time to just make sure that everything is right in terms of one product and the optics happening and then we will kind of expand. So I think the responses have been pretty good.

42:26 Got it. Got it. Thanks a lot and all the best for the quarter, sir. Thank you. Thank you, Deepak. Thank you. Next question is from the line of Deepak from Sundara Mutual Fund. Please go ahead. Yes. Thank you for the opportunity. Am I audible? Yes. Deepak, you are audible. Yes. Hi, sir. First of all, congratulation on once again delivering a double digit sort of volume growth and continue to gain market share. So I had two questions. So my first question is on, again, the other expenses front. So this quarter, we have seen a sharp increase in other expenses, let's say, at around INR 200 crore in absolute terms. Now if I have to further break it down, all this incremental other expenses spike is coming from our stand alone entity. So just wanted to clarify, is it because that in this quarter, we have upped our marketing spend to grow our Continental brand business? And do we expect some sort of normalization in Q3 quarter onwards?

43:23 So two things, Deepak. I think one thing you mentioned, but let me start first with you guys got 10% volume growth, right? So the 10% volume growth will mean that there will be 10% increase in the cost. So that is one reason why it increased. Second, you're right, we have been kind of increasing our marketing spends to make sure that we keep gaining market share and be aggressive in the domestic market. So that is also there. So and the third thing is that there has been a bit of increase in the freight and fuel cost that has also contributed to this. So if you add all of these three reasons, none of them very significant, but all of them three added as you will see the increase. And also I had explained in one of my to answer one of the previous questions, which are similar to what you've asked is that even if you pass on the freight costs in terms of the CIF contracts, it gets added to the top line. So ultimately, the profit on a per kilo basis remains intact.

44:25 So that's the thing. So there is nothing, Matav, I don't see I don't know whether I should say whether it will normalize or not normalize. To me, is actually normalized now it's now only. So what I'd say is that as we are guiding that 15% volume growth, we'll give you that similar kind of EBITDA growth also because our EBITDA per kilo will more or less remain intact. Got it. So we are confident that we'll be able to maintain that 130 to 140 Absolutely. Per And second question, because since we are growing our volume in double digit, if I do a simple back calculation, by FY 'twenty eight, we'll be reaching a sort of optimal capacity utilization at 85%, 90%.

45:11 Right? And I'm pretty sure that CCL as a company, you would want to continue that double digit growth rate beyond FY '28 also. And given that given that we have a lead time of nine to twelve months, be it FDC or SDC, would it be fair to assume that we should expect some kind of capacity expansion announcement, let's say, by Q4 of this fiscal year, provided that we have an aspiration to grow at double digit beyond FY 'twenty eight and the lead time of twelve months? So absolutely, you're right. But just a small caveat to this. Let's say, I also spoke about doing some strategic partnerships and all that. So you are right, by Q4 or Q1 of next year, either we decide upon the capacity expansion or at least in the FDC front or we say that, okay, at least for the another year or so, we probably will supplement the capacity to some strategic tie up till we are very confident for the next expansion.

46:14 So both the things are possible. So you're absolutely right. We should be hearing something at least end of Q4 or starting Q1 next year. Okay. And sir, when you talk about this strategy expansion, I presume that it will be more like in contract manufacturing arrangement rather than a JV route where you will be contributing equity. I just wanted to understand that. Could be both. We can't... I can't say what route we'll we'll go. Okay. Because now in a position where we can at least evaluate, you know, maybe four years or five years down the line, an equity route, I would have said no upfront. But today, considering the strength of our balance sheet and the way things are going and the cash generation that is happening with the current business, I think whatever at least we are in a position to evaluate various options and take a call whichever suits us best at that point of time.

47:10 Got it. Got it. But our aspiration stays in fact that we want to grow our volume at double digit even beyond that. Absolutely. Absolutely. That is the aspiration and we want to make sure that we feel that aspiration through whatever means and ways that we can either to our own capacity or strategic tie up, both by contract manufacturing or any joint venture or anything like that. So we'll keep our options open is what I'm trying to say. Okay. And sir, when we talk about strategic partnership, would it be fair to assume that because it's a strategic partnership there, our margins could be little lower than what we are doing on our own standalone basis? It could be, could be. But again, for as I was telling for FDC, we make sure that at least there is a certain amount of confidence and an underwriting of the volumes before we go ahead and put a plant because these plants are, you know, expensive in the sense that you have to keep running this plant 20 fourseven.

48:07 So you can't keep at least right from the word go, you need to make sure that at least 30% to 50% of the capacity is underwritten. So that is why we keep a little more cautious step when it comes to FBC. Sure. Sure, sir. Very helpful, and all the best for the future. Thank you. Thank you. Thank you. Next question is from the line of Nithya from Kamayakya. Please go ahead. Hi, sir. Thanks for the opportunity. Just wanted to know more about if there are any plans for any kind of acquisition considering our balance sheet is a lot stronger? So we are evaluating. We are not saying that definitely we want to do an acquisition, but it's something which is worthwhile and it is well priced and fits into our strategic thinking and the way forward that we have decided for ourselves. If something lucrative comes our way, we'll definitely evaluate and be happy to do that. And is the priority more towards something that is non coffee, like, you know, adjacencies to your existing business? So that would be a more ideal fit for acquisitions, or would it be something more along the coffee space internationally?

49:24 So both is possible. If there is some coffee like we did with Percol, if there is some other brand that is available, international valuations are generally quite lucrative. So if any coffee brand comes our way, which we think is kind of worthwhile taking it forward. So we will be open to that as well. And even in India, at least, the adjacencies are also something that we are keen to look at. So can we expect something in the current financial year itself? Or is there a while for it according to your broader idea? So I don't think so, Manav, you'll be able to answer that because you never know what comes your way. These are acquisitions are very... Is a matter of, you know, huge amount of not just strategic intent, but also requires a lot of due diligence and other aspects as well. So I would be it will be difficult for me to comment whether something is coming this year or next year.

50:23 Got it, sir. And congrats for another set of good numbers. Thank you. Thank you. Next question is from the line of Ashish Ugandlaval from InvestQ PMS. Please go ahead. Yes. Sir, just one question on the gross margins for this quarter. I don't know whether I missed a point on that, but when I calculated for this quarter, comes to like 62%, and it's down about 200 basis points or 300 basis points Y o Y or Q o Q. So in a declining coffee price or a stable coffee price environment, why should this happen is my question because you stated EBITDA on 135 to 140 per kg remains intact, right? So what where am I missing a point?

51:10 So you're not missing a point. Very simply, one, don't look at gross margins because what happens is that a lot of our contracts are FOB, then it gets converted sometimes to CIS and things like that, which will make the gross margins look a little different from each other. What you should look at is the EBITDA. Yes, there is a little bit of a lesser, if you were to track our performance for last many, many quarters, you would have seen that our EBITDA has always grown higher than the volume growth for many, many quarters. This quarter, there was a little maybe because the EBITDA grew by 9.5% and our volume growth was between 10% to 15%, which means that there is a little dip. But that is explainable because a lot goes into deciding the EBITDA, the product mix, the kind of small pack, large packs proportions and things like that. The premium customers versus premium blend versus not so premium blend. So there are many factors that go and a quarter, there could be a little ups and downs here, but the long term guidance that we have given.

52:12 And in the past also, if you were to see our guidance, we kind of stuck with that. And this year also, we're saying that we'll be 15% volume and a similar EBITDA growth will happen and that we are fully on track. And sir, is there anything to judge on the near future of the coffee prices? Because mean, historically, it's always been a guess, which may sometimes comes right, sometimes comes wrong, given the complexities. But from a production perspective or a crop perspective, is there anything fundamentally to take away how it could be for the next six months, nine months? I understand the speculative part of it, but on the story on the production and fundamentals of the availability of the supply demand basically.

52:58 So the exact picture, we'll know in December because as I was telling you a while earlier that there has been a mixed report. There have been of course, there have been reports of El Nino and that is that we are seeing in the Southeast Asian markets, the agri crops have taken a hit. And Vietnam is the next crop that is going to come for coffee. And the El Nino ginger is there as well. So that's on the bad news side part of it. The good news is that there's also reports that the crop till now has been holding up reasonably good. There is looks like there will be a good harvest. And the good point is that even pre harvest the even at a speculative level, the prices haven't shot up to alarming levels. So at least on a personal level, and that's my personal view that things look far more settled than what the news is coming around. So hopefully, we will see a settled price only after December. But again, these are my personal views. We'll have to wait and watch for December to see exact trends how they are emerging.

54:11 Okay. So whatever you are collecting from I'm sorry to interrupt, Ashish. Please reach out to you for more questions. Okay. You. Ladies and gentlemen, we request you to kindly restrict your questions to one only. We will take our next question from the line of Manish Mahavir from Antique Stock Broking Limited. Please go ahead. Yes. Hi, Praveen. Hi, I'm audible. Yes. Yes, Manish. We're audible. Yes. So just on the bond book and getting question. In the other expenditure, I think a couple of questions came, right? Just wanted to know what is the ForEx gain last year in the second quarter and this year, second quarter? Why not go to the... Why I'm asking because cash flow, if I look at your cash flow, right, generally, in first half of the last year in your cash flow, your ForEx gain was around INR 40 odd crores, INR 39 odd crores. And this is around 11 crores was the number, right? So that is a that is a same impact on the P and L, I think so that could lead to some drop in your EBITDA per kg and the other expenditure increase.

55:10 Yes. I got that number. So that advantage a little advantage was there in the last year, built into the basis. But if you remember, Manish, we have said that even beyond those advantages, what we had guided that we still will grow at 15%, and that is what we are kind of sticking into it without going into the nitty gritty. Again, there are things which push pull us down, there are things which push us up, but Motamuti at 15% is what we are guiding. But you're right. Your observations are right. Okay. And secondly, on the extension of this question, basically, EBITDA per ton, usually through the last maybe five, six quarter, we're consistently hitting the INR 130,140 per kg of EBITDA, right?

56:04 I wanted to know, at once we reach towards the 77,000 tonne of metric ton capacity full utilization, what could be the EBITDA per ton or per kg you expect? So Manish, I again, the cost of repeating, I don't see significant change from here because see, if you see at our FD utilization is better, which means that already in the base, the proportion of FD is higher. So maybe the product mix advantage may not be there. But at the same time, a betterment in terms of small pack volumes, betterment in terms of better specialty coffee, the domestic incremental volumes are coming at a much better clip now. So all of that will help us better it. But again, product mix, don't see much of an advantage coming from that front. And therefore, I don't see much of a change in EBITDA per kilo going forward from here.

57:07 Next question is from the line of Naveen Kaushik from iThought PMS. Please go ahead. Yeah. Am I audible? Yeah. Yeah. You're audible. Yeah. Yeah. Congratulations on a good performance for the quarter, sir. I just had one question regarding our comfort of, you know, tying up with third party partners for FPC capacity. So my understanding is that the ramp up or rather the, like, traction we've been seeing that this year has only been accelerating. So in an environment, let's just say that we're seeing interest rates also in shops slowly And, like, the, you know, the Vietnam crop is still, like, uncertainty when it comes to, like, you know, the next one year or so. So in an environment where we'll have to make a very conscious decision about allocating capital towards, you know, working capital or debt reduction or, like, you know, a potential m and a. And if you still look at our opportunity or capacity addition, how will we exactly make the decision, and how comfortable will we be when it comes to, you know, keeping the third party, you know, stuff going on?

58:20 How long will we be okay with that process? Do you want to bring it back inside and manufacture on our own. So, again, you know, the third party or, let's say, the contractual manufacturing or the strategic tie up, whatever is there, strategic tie up, if it is, you know, if it about a joint venture or something, of of course, that becomes long term. But apart from that, the other things will obviously be short term. It won't be very long term. It's only to make sure that we don't fall short of capacity if there are growth opportunities. So that will be very, very opportunistic in nature. The only reason why we do that is that because that helps us get that confidence that the capacity, the new capacity that we may end up putting, there is a certain underwriting of the capacity that happens. And therefore, we are confident that the new capacity is worth putting. And now capital allocation, yes, you're right, there we require capital allocation for, let's say, if the coffee prices were to increase to make sure that working capital is intact.

59:23 And at the same time, if you were to put it on the CapEx, then that also goes up a challenge. But considering the kind of balance sheet position that we are in, I think that shouldn't be a problem at least in terms of deciding one versus the other, right? So there could be a scenario wherein both the things are happening in terms of coffee prices also increasing and therefore we require more of working capital at the same time we want to put CapEx. I think both are possible and we will be able to do that. You are seeing that already there is enough cash flow in the system. There is enough cushion of cash in the system. So none of the things will be either or and therefore capital allocation will not be a problem or will not come in our way of fueling growth.

1:00:14 Thank you, sir. Ladies and gentlemen, we will take that as the last question for today. I now hand it back to the management team for closing comments. Thank you all for joining the call. Wishing you all very happy festivities, and we will look forward to connect with you after the third quarter results. And thank you team Ashika for holding this call. Thank you. Thank you. On behalf of Ashika Institutional Equities, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.