ADF Foods — Q2 FY26 earnings call

Call held 10 Nov 2025

Management summary

ADF Foods reported a strong Q2 FY26 with standalone revenue growing 11.5% YoY to INR 140.1 crores and consolidated PAT increasing 34.2% to INR 26.4 crores. This performance was driven by improved product mix, prudent cost optimization, and favorable foreign exchange gains, leading to significant margin expansion. The company also made progress in market penetration with new listings in Costco and advanced the Surat Greenfield facility towards H2 FY26 commissioning, despite ongoing uncertainty regarding US tariffs.

Highlights

  • Standalone revenue grew by 11.5% YoY to INR 140.1 crores in Q2 FY26.

  • Consolidated PAT for Q2 FY26 increased by 34.2% to INR 26.4 crores, with a PAT margin of 16.2%.

  • Standalone EBITDA margin for Q2 FY26 was 26.9%, an increase of 490 bps YoY and 450 bps QoQ.

  • Secured listings in Costco US (Texas, Chicago) and Australia for Truly Indian and Ashoka brands.

  • Company maintains a net debt-free balance sheet with a robust net cash balance of INR 89 crores.

Concerns

  • Continued uncertainty around US tariffs, though management states tariffs are passed on to consumers.

  • Potential demand slowdown in the US due to inflation and consumer sentiment, though management views it as an opportunity for home consumption of their products.

Key financials

  1. Consolidated Revenue ₹162.6 Cr +0.8%YoY
  2. Consolidated EBITDA ₹35.8 Cr +29.1%YoY
  3. Consolidated EBITDA Margin 22%
  4. Consolidated PAT ₹26.4 Cr +34.2%YoY
  5. Consolidated PAT Margin 16.2%
  6. Standalone Revenue ₹140.1 Cr +11.5%YoY
  7. Standalone EBITDA ₹37.7 Cr +36.1%YoY
  8. Standalone EBITDA Margin 26.9%

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 plant completion and commissioning
    The company's capital expenditure program is on track. The Surat Greenfield plant is nearing completion and expected to commence operations in H2 FY '26.
  • Debt Debt disclosed
    The company's financial position also remains strong, with a net debt free balance sheet and robust net cash balance of INR 89 crores.
  • Liquidity Cash ₹89 Cr Robust net cash balance.
    The company's financial position also remains strong, with a net debt free balance sheet and robust net cash balance of INR 89 crores.

Guidance & targets

Top Line

  • Revenue Top Line · FY27 · High confidence INR 1,000 crores
    But we are anyway still on target to reach to INR 1,000 crores by FY '27.

    — Shardul Doshi

Margin

  • EBITDA Margin Margin · Ongoing · Medium confidence upwards of high teens (at least 1-2% higher)

    Previously high teens → upwards of high teens (at least 1-2% higher)

    I think, our guidance now is that we will be upwards of that. We will have to see how much, but maybe 1% or 2% or at least is what we feel.

    — Shardul Doshi

  • Distribution Business Margin Margin · This year · High confidence 14-15%
    As far as margin is concerned, distribution business, we have been maintaining around, say, 12% to 14% on an ongoing basis. We are better off in last few quarters. But I think steady state affair, we expect this to remain in the range of like 14% - 15%, at least for this year.

    — Shardul Doshi

Capacity

  • Surat Facility Peak Revenue Realization Capacity · Full capacity (3-4 quarters post commissioning) · High confidence INR 250 cr
    Okay. And since the peak realization, like potential revenue for Surat facility will be INR 250 cr, so what can be expected in FY '27 itself? Surat will take some time to ramp up to that capacity, right? I think in terms of, like, of course, capacity will be available, but we will take at least three quarters, four quarters to reach the full capacity.

    — Prem Soni, Shardul Doshi

Sales

  • India Business Revenue Sales · Next three to four years · High confidence INR 100 crore
    And in terms of goal, we are looking at building about INR 100 crore business in the next three years to four years in a gradual phase manner.

    — Sumer Thakkar

What to watch in Q3 FY26

Surat Greenfield Plant Commissioning

H2 FY26
Current Nearing completion
Target Commence operations

Why it matters

Commissioning of the new plant is crucial for expanding frozen product capacity and driving future revenue and margin growth.

The Surat Greenfield plant is nearing completion and remains on schedule to commence operations in the second half of FY '26.

Risks & concerns

  • US Tariffs Uncertainty

    medium

    Continued uncertainty around US tariffs, though company passes costs to consumers and expects government resolution soon.

    Management acknowledged

  • Consumer Demand Slowdown in US

    low

    Analyst noted demand slowdown in US fast food chains; management believes it benefits packaged food as consumers eat more at home and find ADF's price points attractive.

    Analyst downplayed

Q&A highlights

6 direct
Costco Retail Partnership and Product Listings Direct
So, this is across two countries. So, this is Costco Australia as well as Costco US For Costco US, it is Texas and Chicago. So, Texas is actually one of the biggest divisions, which is around approximately 52 stores. We are present across all 52 stores, this is with Truly Indian. So, some of the buyers, especially Australia, prefer the Ashoka brand. So, in Australia, it is under Ashoka, but in the US, it is mostly Truly Indian. There is one SKU under Ashoka. ... currently, in the most SKUs we have listed, it is about four SKUs in terms of shelf space with Costco Texas.

Reveals details of new major retail channel entry, including specific brands, locations, and initial SKU count, indicating future growth potential.

Asked by Rishi Maheshwari

Impact of US Tariffs and Pricing Strategy Direct
As far as tariff is concerned, right now, we have passed on. We are not taking anything. Basically, we are selling at the same price at which we were selling it before to the distributors. And then onwards, they are also selling it. So, basically, any tariff which will be borne by the distributors will be passed on to the consumers into this market. ... Also, I think it is expected that government is working very hard to close the deal with US So, hopefully that should also be in place in a couple of weeks is the expectation.

Clarifies the company's approach to tariffs (passing on costs) and provides an outlook on potential resolution, addressing a key external risk.

Asked by Rishi Maheshwari

Drivers of Gross Margin Improvement Direct
So, typically, what happens, it gets initially when there is a foreign currency fluctuation happens, partly it gets into gross margin and partly it gets into other income. And after a quarter or so, everything gets into the sales and gross margin. That is how the accounting generally happens. ... And as far as price increase, I think though we have not taken any price increase, automatically with the foreign exchange or rupee depreciation, which has happened, we get the better realization on our sales.

Explains that margin improvement is due to better sales mix and favorable foreign exchange, rather than direct price increases or raw material cost reductions, providing clarity on profitability drivers.

Asked by Vishal Shah

Impact of UK-India Free Trade Agreement (FTA) Direct
So, I mean, similar to what Shardul just said, currently, I mean, before the, the FTA still has not been signed. I think it will only come into effect in the next three months to six months. And so currently, we pay, we pay duties in the range of 4% to 15%. Once the FTA comes in, it will effectively go down to zero, which we will pass on 100% to the consumer. So, because the end retail prices will reduce, not substantially, but they will still reduce, we are hoping that will positively impact demand.

Outlines the potential positive impact of the upcoming FTA on demand due to reduced retail prices, offering a future growth catalyst.

Asked by Anand

Raw Material Costs and Sales Growth Quality Partial
So, they are not really substantially different. If you see there is, but of course there is 2% drop in our COGS when you look at the standalone, which is your manufacturing business. And I guess you are referring to that. So, it is not that raw material prices have come down, but it is also the better sales mix, which we have that is really contributing to this drop. ... So, Q2 of last financial year was one of the best quarters which we had. And in this quarter, I think we have to see that if you look at our manufacturing piece that has increased its share. And we have got the listing. So, hopefully, this will translate into better top line now in the quarters to come in.

Clarifies that raw material costs haven't significantly dropped, attributing COGS reduction to sales mix, and explains Q2 sales growth in context of prior year's strong Q2.

Asked by Shalini Gupta

Surat Facility Ramp-up Timeline and Capacity Utilization Direct
Surat will take some time to ramp up to that capacity, right? I think in terms of, like, of course, capacity will be available, but we will take at least three quarters, four quarters to reach the full capacity.

Provides a clear timeline for the new Surat facility to reach full operational capacity, which is crucial for future revenue and margin contributions.

Asked by Prem Soni

India Market Strategy and ADF Soul Brand Direct
So, I mean, India, as I am sure you know, is a huge market. Our strategy for India is more on the quick commerce and modern trade side. We do not want to get into general trade. Our product range is more for urban India. And in terms of goal, we are looking at building about INR 100 crore business in the next three years to four years in a gradual phase manner.

Outlines the company's specific strategy for the Indian market, focusing on modern trade and quick commerce for urban consumers, with a clear revenue target.

Asked by Prem Soni

2 min read 6 chapters

Detailed narrative

Strong Q2 FY26 Financial Performance

ADF Foods delivered robust financial results in Q2 FY26. Standalone revenue increased by 11.5% year-on-year to INR 140.1 crores, while consolidated revenue grew by 0.8% to INR 162.6 crores. Profitability saw significant improvement, with standalone EBITDA margin expanding by 490 bps YoY to 26.9%, and consolidated EBITDA margin reaching 22%, up 480 bps YoY. Consolidated PAT rose by 34.2% to INR 26.4 crores, reflecting enhanced operational efficiency and a favorable product mix.

Brand Refresh and Market Penetration

The company executed vibrant brand refreshes for its flagship Ashoka brand, emphasizing bold flavors and Desi identity, and for Truly Indian, inspired by rich Indian colors and street-style spirit. These initiatives supported deeper market penetration, notably with new product listings in key retail outlets. The Truly Indian brand secured presence in Costco US (Texas and Chicago, across 52 stores) with four SKUs, while Ashoka gained listings in Costco Australia, marking significant distribution expansion.

Operational Efficiency and Margin Drivers

Margin expansion was primarily driven by a better product mix, with increased contribution from higher-margin frozen products, and prudent cost optimization. Favorable foreign exchange gains also contributed to improved realizations, with approximately INR 4 crores in forex gain recognized in other income and a couple of crores impacting the top line. The company emphasized that tariffs were passed on to consumers, not absorbed, maintaining pricing integrity.

Surat Greenfield Facility Update

The Surat Greenfield plant is nearing completion, with operations on track to commence in the second half of FY26. This facility is dedicated to frozen products, primarily for the Ashoka and Truly Indian brands, catering to all existing markets including North America, UK, Europe, Middle East, and Australia. Management anticipates it will take three to four quarters to reach its peak revenue realization potential of INR 250 crores.

Navigating US Tariffs and Anticipating UK-India FTA

ADF Foods continues to monitor the dynamic US tariff situation, passing on any tariff costs to consumers. Management expressed optimism for a government resolution within weeks. Looking ahead, the company expects the UK-India Free Trade Agreement, anticipated in the next 3-6 months, to eliminate current duties (4-15%). This reduction will be fully passed to consumers, potentially boosting demand due to lower retail prices.

Strategic Focus on India Market

The company is strategically expanding its focus on the Indian market, targeting urban consumers through quick commerce and modern trade channels, rather than general trade. This approach aims to build an INR 100 crore business within the next three to four years, leveraging its product range suited for urban Indian preferences.

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