ADF Foods — Q1 FY26 earnings call

Call held 1 Aug 2025

Management summary

ADF Foods reported a resilient Q1 FY26 with consolidated revenue growing 9.3% YoY to ₹132.9 crores and EBITDA increasing 20% YoY to ₹23.5 crores, despite global economic uncertainties and rising input costs. Strategic initiatives, including sales team reorganization and brand refreshes, are yielding positive results with new listings. Capacity expansion at the Surat Greenfield facility is on track for H2 FY26, and the company maintains a strong financial position with ₹95 crores in net cash.

Highlights

  • Consolidated revenue of ₹132.9 crores, up 9.3% YoY.

  • Consolidated EBITDA of ₹23.5 crores, up 20% YoY, with margin at 17.7% (up 160 bps YoY).

  • Successful brand refresh for Truly Indian, receiving encouraging feedback.

  • Strategic reorganization of US sales team and new team in Australia yielding positive outcomes and new listings.

  • Surat Greenfield facility (₹90 crores capex) on track to commence operations in H2 FY26.

  • Net debt-free balance sheet with a net cash balance of ₹95 crores.

Concerns

  • Consolidated PAT decreased 7.3% QoQ to ₹15.2 crores.

  • Global economic uncertainties, tariffs, and seasonal fluctuations impacted Q1 performance.

  • GPCB notice in April impacted Nadiad factory production, affecting Q1 sales.

  • Soul brand plan toned down from ₹100 crores to ₹50-75 crores due to slower-than-expected progress.

Key financials

  1. Consolidated Revenue ₹132.9 Cr +9.3%YoY
  2. Consolidated EBITDA ₹23.5 Cr +20%YoY
  3. Consolidated EBITDA Margin 17.7%
  4. Consolidated PAT ₹15.2 Cr +5.9%YoY
  5. Consolidated PAT Margin 11.5%
  6. Stand-alone Revenue ₹100.3 Cr +3.4%YoY
  7. Stand-alone EBITDA ₹22.5 Cr -1.3%YoY
  8. Stand-alone EBITDA Margin 22.4%
  9. Stand-alone PAT ₹17 Cr
  10. Stand-alone PAT Margin 16.9%
  11. PLI Received ₹2.5 Cr
  12. Stand-alone Freight Cost (% Revenue) 6%
  13. Total Marketing Spend (% Revenue) 7.8%

What they filed

Q1 FY27: revenue up 25.6%, net profit up 13.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue161 147 159 133 163 +1%191 +30%197 +24%167 +26%
EBITDA28 26 25 24 36 +29%37 +42%34 +36%30 +25%
Net profit20 19 16 15 26 +30%22 +16%26 +63%17 +13%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex Capex disclosed
    • Surat Greenfield facility (Phase 1, 10,000 MT capacity, new frozen product line) ₹90 Cr
    • Brownfield projects at Nadiad and Nasik factories ₹50 Cr
    So Shalini, for our Surat Greenfield, there is an INR90 crores capex, which is planned and almost 90% of that is already committed. We have already spent 50% of that. And we expect this plant to become operational in Q3. So by then, we should be in a position to spend the rest of the capex also. While other than this also, there are certain brownfield projects, which are going on in our both the factories at Nadiad and Nasik, which is to an extent of almost INR50 crores. And I'll say half of that is also spent by now and balance will be spent in the current financial year.
  • Debt Debt disclosed
    The company's financial position also remains strong with a net debt-free balance sheet and a robust net cash balance of INR95 crores.
  • Liquidity Cash ₹95 Cr
    The company's financial position also remains strong with a net debt-free balance sheet and a robust net cash balance of INR95 crores.

Guidance & targets

Profitability

  • Distribution Business Yearly Margin Profitability · yearly · Medium confidence 12-14%
    However, I think from estimate perspective, you should still keep around -- between 12% to 14% yearly margin from the distribution business.

    — Shardul Doshi

Capacity

  • Surat Plant Breakeven Capacity · after production starts · High confidence Year 2
    So we expect to get in year 2 on a breakeven situation after we've started production.

    — Bimal Thakkar

Revenue

  • Soul Brand 3-Year Plan Revenue · 3 years · Medium confidence ₹50-75 crores

    Previously ₹100 crores → ₹50-75 crores

    But the INR100 crores plan, which we had for 3 years, that has been toned down to anywhere between INR50 crores to INR75 crores.

    — Bimal Thakkar

  • FY27 Revenue Target Margins Revenue · FY27 · Medium confidence same kind of margins
    And in terms of the margin guidance, I mean, as of now, we remain fairly confident of achieving the same kind of margins that we have up for getting to the INR1,000 crores.

    — Bimal Thakkar

Operating Expenses

  • Marketing Cost (% of Top Line) Operating Expenses · ongoing · High confidence 7-8%
    Yes. So marketing cost, our budget will remain in the level of 7% to 8% of our top line. That's what we expect, because right now, our investment mode is on as well as both the brands, Truly Indian and Soul are concerned, and we continue to spend money even on the Ashoka brand.

    — Shardul Doshi

  • Freight Cost (% of Top Line) Operating Expenses · ongoing · High confidence 6-7%
    And secondly, on the freight cost, there is no, see, budget-wise, we have maintained around 6% to 7% for it. In quarter 1, it was around 6% for us. But this is variable. I think what we have seen is this keeps going up and down. So on an overall basis, if it remains below 8%, that's good for us.

    — Shardul Doshi

  • Long-term Ad Spend (% of Revenue) Operating Expenses · as revenue grows · Medium confidence 5%
    Yes, yes. Of course, as the revenue grows, the ad spend also in terms of percentage would reduce. And we expect it to go down to around 5%. That would be the ideal state we would like to be at.

    — Bimal Thakkar

PLI

  • PLI Scheme Utilization PLI · 5 years · High confidence ₹63 crores
    So to answer your PLI question, we've got INR63 crores, which has been sanctioned to us by the government. And we hope to utilize the entire INR63 crores in these 5 years that we can -- as per the sanction.

    — Bimal Thakkar

What to watch in Q2 FY26

Surat Greenfield facility commissioning

H2 FY26
Current Progressing as planned, 50% of ₹90 crores capex spent
Target Commercial operations commence

Why it matters

This new facility will add significant capacity (10,000 MT) and introduce new frozen product lines, crucial for future growth and diversification.

The expansion of the Surat Greenfield facility is progressing as planned and is on track to commence operations in the second half of FY '26.

Risks & concerns

  • Potential US tariffs on imports

    high

    Situation remains dynamic; company plans to pass on increases across channels rather than fully absorb them, but final impact is uncertain.

    Both acknowledged

  • Global economic uncertainties, tariffs, and seasonal fluctuations

    medium

    Impacted Q1 performance, but mitigated through disciplined cost management and operational efficiencies.

    Management acknowledged

  • Rising input costs

    medium

    Impacted Q1 profitability despite ongoing brand investments, managed through cost controls.

    Management acknowledged

  • GPCB notice impacting Nadiad factory production

    medium

    Affected production capacity in April, impacting Q1 sales, but production is now back to normal.

    Management acknowledged

Q&A highlights

7 direct
New listings for Ashoka and Truly Indian brands Direct
The new listings, which we've got are in Australia, in UK and in the U.S. These are with large retail chains, club stores like Costco, that is for Australia and U.S. And we've got some additional listings in the UK in Tesco.

Provides specific details on market expansion and new retail partnerships for key brands, indicating future growth drivers.

Asked by Shalini Gupta

Breakdown of freight cost and brand promotion expense Direct
So the freight cost is around -- of my stand-alone revenue is almost around 6%, while our total marketing spend, which includes the Truly Indian and Soul brand also is almost 7.8%.

Clarifies the allocation of significant operating expenses, highlighting the company's investment in marketing and brand building.

Asked by Shalini Gupta

Strategy for handling potential US tariffs Partial
The situation still remains dynamic and we're still waiting to see what's actually going to come into fruition... But no, we will definitely not absorb the entire increase across all our various products that go to the U.S. We might strategically choose to absorb some of them for some key products that we want to grow, but it's still subject to what policies actually come into effect. But we have the flexibility of passing on that increase across the channels.

Addresses a significant geopolitical risk, outlining a flexible strategy to pass on costs rather than full absorption, which could impact margins.

Asked by Shalini Gupta

Reasons for Ashoka brand's growth slowdown and remedial actions Direct
We were doing some reorganization of some certain distributors, adding some more distributors in certain markets, taking out some existing distributors. So all that was the reason why you had seen a slight slowdown on the Ashoka side, plus also our sales team reorganization happened in the U.S. All that has happened now, and we're very confident in the coming -- I mean, we are already seeing results from this last quarter, things are getting better.

Explains past challenges for a core brand and confirms that corrective measures, including sales team reorganization, are now yielding positive results.

Asked by Kumar Saurabh

Update on Soul brand performance and revised revenue targets Direct
On the Soul brand, it has not gone as we had planned earlier. That's why we did a revision on our 3-year forecast... But the INR100 crores plan, which we had for 3 years, that has been toned down to anywhere between INR50 crores to INR75 crores.

Provides transparency on a new brand's underperformance against initial targets and a more conservative, yet still significant, revised outlook.

Asked by Kumar Saurabh

Capacity and product mix for the new Surat facility Direct
In that facility, also, we are looking at certain frozen products, which are currently not being done in the Nadiad factory. So there's a new product line, which we are doing there. And some of the products which we are doing in Nadiad, we've enhanced capacity... it will be around 10,000 metric tons capacity, and this is Phase 1, which we are constructing right now.

Details the strategic expansion into new product categories (frozen) and significant capacity addition, indicating future growth drivers and diversification.

Asked by Param Vora

Expected growth trajectory for the distribution business Direct
As Shardul mentioned, we've now received the full U.S. only from the last quarter onwards, right? So we will start seeing traction and growth in the coming quarters. Typically, there is like a slowdown in the first quarter for us always historically as well. So, from the second quarter onwards, we should start seeing the growth.

Clarifies the timing of expected growth from expanded US distribution rights, linking it to historical seasonality and future traction.

Asked by Pallavi Deshpande

Long-term advertising spend as a percentage of revenue Direct
As the revenue grows, the ad spend also in terms of percentage would reduce. And we expect it to go down to around 5%. That would be the ideal state we would like to be at.

Outlines a long-term strategic target for advertising efficiency, implying future margin expansion as the company achieves greater scale.

Asked by Pallavi Deshpande

3 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview

ADF Foods reported a consolidated revenue of INR 132.9 crores in Q1 FY26, marking a 9.3% year-on-year increase despite global economic uncertainties and seasonal fluctuations. Consolidated EBITDA stood at INR 23.5 crores, reflecting a healthy margin of 17.7% and a 20% year-on-year growth. However, consolidated PAT saw a 7.3% quarter-on-quarter decrease to INR 15.2 crores, with a margin of 11.5%. Stand-alone revenues were INR 100.3 crores, growing 3.4% YoY, with a PAT of INR 17 crores and a margin of 16.9%.

Brand & Market Initiatives

The company successfully completed a brand refresh for 'Truly Indian,' showcasing its updated identity at a prominent food exhibition, receiving encouraging feedback. The refreshed packaging is set to roll out in Q3 FY26, expected to boost brand traction. New listings for Ashoka and Truly Indian have been secured in major retail chains, including Costco in Australia and the U.S., and Tesco in the UK, with products becoming available from September/October onwards. The 'Truly Indian' brand is now available in 1,600 stores across the USA.

Operational Efficiency & Cost Management

ADF Foods effectively mitigated challenges from rising input costs and global uncertainties through disciplined cost management and enhanced operational efficiencies. The company's stand-alone freight cost was approximately 6% of revenue, while total marketing spend, including Truly Indian and Soul, was around 7.8%. Management aims to maintain marketing costs at 7-8% of the top line and freight costs at 6-7%, ideally below 8%, to protect profitability.

Capacity Expansion & Capital Expenditure

The expansion of the Surat Greenfield facility is progressing as planned, with INR 90 crores capex allocated, 90% committed, and 50% already spent. This facility, expected to commence operations in H2 FY26, will add around 10,000 metric tons of capacity in Phase 1 and introduce new frozen product lines not currently produced at Nadiad. Additionally, brownfield projects at Nadiad and Nasik factories involve approximately INR 50 crores in capex, with half already utilized, further enhancing capacity.

Tariff Impact & Strategy

Management acknowledged the dynamic situation regarding potential US tariffs, noting that while the situation is still evolving, they do not intend to absorb the entire increase. The strategy involves passing on the increase across the value chain, including to retailers and distributors, for most products. For key growth products, the company might strategically absorb some portion, but the overall aim is to maintain flexibility in pricing to manage profitability.

Distribution & Sales Reorganization

A strategic reorganization of the sales team in the U.S. and the formation of a new team in Australia have begun to yield positive outcomes, particularly in securing new listings. This reorganization, along with changes in distributor networks, had caused a slight slowdown in the Ashoka brand previously, but management is now confident in renewed growth for Ashoka in the coming quarters. The full impact of expanded US distribution rights is expected to drive growth from Q2 FY26 onwards.

Brand Performance Updates

While Ashoka's growth was impacted by sales team reorganization, it is now showing signs of recovery, with management confident in future growth. The 'Soul' brand, however, has not performed as initially planned, leading to a revision of its 3-year forecast from INR 100 crores to INR 50-75 crores. Despite this, the brand has recently secured listings in modern trade and quick commerce, with encouraging initial responses, and management remains confident in its potential in the Indian market.

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