PATANJALI - Patanjali Foods Limited Share Price

In the Q1 FY '26 earnings call, management of Patanjali Foods Limited outlined an optimistic outlook, anticipating a stronger second half of the fiscal year driven by favorable macroeconomic factors. Key points made during the call included:

1. Revenue Growth: The company reported a revenue of approximately INR 8,900 crores, a year-on-year growth of 24%. The edible oil segment showed a revenue of INR 6,685 crores with a 25% year-on-year increase.

2. Segment Performance & Profit Margins:

   • Edible Oils: The EBITDA margin was 1.78%, impacted by buyers deferring procurement due to expected price stabilization.
   • HPC Segment: Achieved a healthy quarterly revenue of INR 639 crores, with an EBITDA margin of 18.7%.
   • Nutraceuticals: Reported year-on-year growth of 37.6% with a restructuring leading to positive EBITDA.

3. Future Projections: Management reiterated guidance for the FMCG segment, expecting an 8%-10% growth and a robust 15% growth in the HPC segment. The edible oils sector is expected to maintain a volume growth of 2%-3% with margins around 4%.

4. Market Conditions: Management noted evolving demand trends with rural markets outpacing urban ones and indicated that urban consumption is beginning to recover as inflation eases.

5. Strategic Focus: The company aims to reposition itself towards wellness and functional food products, targeting a balance of 50% revenue from FMCG and 50% from edible oils in five years. Management plans to enhance brand building and distribution strategies.

In conclusion, management highlighted that they are well-positioned to navigate market dynamics and plan to leverage changes in consumer behavior towards affordable products and smaller packs.

Questions and Answers from the Q&A Section of Patanjali Foods Limited Q1 FY26 Earnings Conference Call:

1. Question: As Patanjali aims to make FMCG half of its turnover, how are you thinking about evolving the brand architecture and product portfolio to win in premium urban categories?

   Answer: We are committed to achieving a 50-50 revenue split between edible oils and FMCG products. Our strategy includes acquiring leading businesses and evolving towards a wellness-first lifestyle brand. We are focusing on health, nutrition, and Ayurvedic principles across all our products. New product developments align with this, and I'm confident in our path to this goal over the next few years.

2. Question: How do you internally evaluate ROI across media spend, channel expansion, and innovation while balancing short-term volume lift with long-term brand equity and margin expansion?

   Answer: We measure ROI on ad spend to ensure immediate sales uplift correlates to expenses. Over the long term, we aim for FMCG margins of 8-10% and 2-4% for edible oils. Our goal is to achieve revenue growth of INR 50,000 crores, split equally between FMCG and edible oils, while improving overall EBITDA margins towards double digits.

3. Question: How much market share have new-age or regional players taken from Patanjali across products?

   Answer: New-age players have made some inroads, but not significantly at Patanjali's expense. Our unique positioning and strong customer base remain intact. We actively attract new customers, especially younger demographics interested in wellness and Ayurveda, and I don't foresee significant market share loss at this time.

4. Question: Can you elaborate on the green shoots observed in urban India and provide specific examples?

   Answer: We see signs of recovery in urban consumer demand, particularly due to easing inflation. Improved commodity prices are allowing companies to pass savings to consumers, leading to anticipated growth in food demand. Urban markets are slowly stabilizing as we head into peak consumption periods.

5. Question: What guidance do you have for growth contribution from urban markets to your top line and margins?

   Answer: We project 8-10% growth in the FMCG segment overall this year, with HPC growing at 15% and edible oils between 2-3%. While we're focused on maintaining margins, we're willing to compromise on low-margin staples to elevate overall profitability in more lucrative categories.

6. Question: Are you exploring any inorganic opportunities for growth beyond your current group expansions?

   Answer: We remain open to strategic acquisitions that align with our brand values and capabilities. While our D2C portfolio is solid, it is currently under 1% of revenue. We're selectively exploring but focusing on growing existing segments organically due to lower costs. There are no immediate inorganic plans in progress.

7. Question: For the biscuits segment, are you expecting the momentum of growth to continue?

   Answer: Yes, we are targeting continued double-digit growth in our biscuits segment, driven by effective branding and market penetration strategies. We have set a target of achieving around 10% year-on-year growth consistently.

8. Question: What is your current view on the revenue and margins from staples, considering the government intervention?

   Answer: Currently, staple revenue is approximately INR 616 crores. We are cautious due to government policy impacts but value the brand equity gained from having staples in homes. Margins can fluctuate, but we typically aim for around 3-4%, and we don't intend to sacrifice profitability for top-line revenue in this segment.