PATANJALI - Patanjali Foods Limited Share Price

The management of Patanjali Foods Limited provided an optimistic outlook during the Q2 FY26 earnings conference call. They reported record financials, with Q2 revenue at approximately Rs. 9,798.84 crores, representing a year-on-year growth of 20.95%. EBITDA reached Rs. 603.32 crores, showing a 22.17% increase, and the EBITDA margin was 6.13%. The PAT for the quarter was positively impacted by tax refunds from previous years.

A significant change was made in the company's segmental classification, consolidating the food and FMCG categories into one unified FMCG segment to enhance growth and reflect the integrated nature of their operations. The half-year revenue from operations hit Rs. 18,564 crores with total EBITDA of Rs. 937.50 crores and a PAT of Rs. 697.09 crores.

Management highlighted the changes driven by GST reforms, anticipating a 300 to 400 basis points increase in volumes in the coming months, which is expected to significantly boost revenue. The festive season showed signs of improved consumer sentiment, encouraging further growth in urban and rural markets. The company aims to accelerate growth by enhancing market penetration and diversifying its product portfolio.

Looking ahead, the management expects to achieve a 50-50 revenue share between edible oils and FMCG businesses within four years, underscoring their confidence amid competition. They project an 8% to 10% growth in the food business and a 15% growth in the HPC (Household and Personal Care) business.

Question 1: "As FMCG and foods space gets more competitive, what is Patanjali doing to build a strong edge, not just through brand recall, but through something deeper that competitors cannot easily copy?"

Answer: We focus on our core values of natural, healthy, organic, and Ayurvedic products, which resonate with India's wellness movement. Our strategies involve quick product innovation, strong research and development, and leveraging the growing consumer inclination towards these values. We target 8-10% growth in food and 15% in HPC despite competition. Our nimble approach in bringing products to market allows us to adapt and capitalize on these trends effectively.

Question 2: "As input cost and demand patterns keep on shifting, how are you planning to protect the margins?"

Answer: We employ multiple strategies like hedging and inventory management to mitigate impact from fluctuating commodity prices. We aim to pass some cost increases onto consumers carefully. Additionally, we're investing in tech improvements, such as SAP HANA and AI, to enhance operational efficiency. Our focus on renewable energy also helps cut costs. These combined efforts support our goal of maintaining double-digit EBITDA margins even amidst market volatility.

Question 3: "By when do you think we will be able to achieve a 50:50 share between edible oils and FMCG business?"

Answer: We aim for a 50:50 revenue split within four years. Currently, edible oils contribute about 70% of our revenue. We project modest growth in edible oils at 2-4%, while FMCG will grow at 8-10% and HPC at 15%. As FMCG gains momentum, expectations are high that it will become more profitable and drive this revenue balance in the future.

Question 4: "What was the growth in volume sales in the edible oils segment this quarter on a Y-o-Y basis?"

Answer: On a sequential basis, we saw a growth of about 5% in volume from 4.59 lakh tons to 4.82 lakh tons this quarter. However, on a year-on-year basis, there's approximately a 7% decline, primarily due to the spike in prices which affected overall edible oil imports and sales industry-wide.

Question 5: "How have you managed to pass on the price increases in edible oils, and what benefits do you see from existing inventory?"

Answer: Passing price hikes is typically swift, but only for a few days. Our volume remains steady, but significant price spikes were noted during the quarter, impacting operational performance. We anticipate that with the upcoming festive season, we will see inventory turnover improve, thus helping us manage pricing better moving forward.

Question 6: "What percentage of your portfolio is impacted by the change in GST?"

Answer: Currently, approximately 85% of our portfolio is under the 5% GST bracket, with around 55% of our FMCG segment benefiting from this change. This tax reduction is expected to yield increased demand but may take time to fully materialize into sales growth.

Question 7: "What has been the nature of the increase in borrowing, given the large rise in gross debt?"

Answer: Our increased borrowings are largely due to working capital loans and development credit facilities from banks. The gross debt has risen significantly, primarily for financing working capital, which is crucial for supporting our ongoing business projects and operational needs.