ADF Foods

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%.

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.

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.

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.

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.

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.

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.