ADF Foods — Q4 FY25 earnings call

Call held 15 May 2025

Management summary

ADF Foods reported a mixed Q4 and FY25, with strong top-line growth driven by Truly Indian and other markets, but consolidated profitability was impacted by rising costs and significant brand-building investments. The company remains focused on strategic investments in brands and manufacturing capabilities, targeting INR 1,000 crores revenue by FY27 with high teens EBITDA margins, while addressing challenges in key markets like the US.

Highlights

  • Consolidated revenue for FY25 increased by 13.3% YoY to INR 589.6 crores.

  • Truly Indian brand saw a fourfold increase in top line in FY25 and is projected to grow over 100% in the US in FY26.

  • Company maintains a net debt-free status with a cash balance of INR 118 crores.

  • Expansion of Surat Greenfield facility is on schedule, expected to begin operations by H2 FY26.

  • Ashoka brand is expected to return to mid-teens growth in the US for FY26 after strategic adjustments.

Concerns

  • Consolidated EBITDA for FY25 decreased by 6.3% YoY to INR 98.3 crores, with margin compressing by 350 bps to 16.7%.

  • Consolidated PAT for FY25 decreased by 6.2% YoY to INR 69.2 crores.

  • Ashoka brand experienced flat growth in the US market during FY25.

  • Soul brand underperformed against expectations, achieving only INR 6 crores in top line for FY25.

  • Rising raw material, labor, and freight costs impacted gross profit margin by 1.25% and added 1.4% respectively.

Key financials

2 periods

Q4 FY25

  • Consolidated Revenue
    ₹159.1 Cr
    YoY +3.5% QoQ +7.9%
  • Consolidated EBITDA
    ₹24.6 Cr
    YoY -28.1% QoQ -6.5%
  • Consolidated EBITDA Margin
    15.5%
  • Consolidated PAT
    ₹16.4 Cr
    YoY -34.4% QoQ -12.5%

FY25

  • Consolidated Revenue
    ₹589.6 Cr
    YoY +13.3%
  • Consolidated EBITDA
    ₹98.3 Cr
    YoY -6.3%
  • Consolidated EBITDA Margin
    16.7%
  • Consolidated PAT
    ₹69.2 Cr
    YoY -6.2%

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 ₹100 Cr Partially through nominal debt for government subsidies, otherwise through internal accruals.
    • Surat Greenfield facility expansion ₹100 Cr
    • Brownfield expansions (totaling INR 50 crores in FY25) ₹50 Cr
    Our capital expenditure program is proceeding according to schedule with investment of around INR 50 crores in FY '25. The expansion of our Surat Greenfield facility is also progressing well and remains on schedule for commissioning in second half of financial year 2026. Our balance sheet remains net debt-free as of today with a strong cash balance of INR118 crores. We continue to strategically invest in our manufacturing capabilities and brand-building initiatives to drive greater long-term returns. So we have undertaken for the Surat factory, the capex plan was about INR 100 crores. We've done some expansion -- I mean, some brownfield expansions, which all would end up at about INR50 crores total. So in this year, we are looking at another so a total of INR 150 crores between last year and this year is what we are planning. We have adequate funding for that. We have enough cash flows for that. So we will be taking some debt because there are certain government subsidies, which we are getting in the Surat plant for which we need to show some debt. So there will be a nominal debt, which we will take. But otherwise, everything will be funded through internal accruals.
  • Debt Net ₹0 Cr
    Our balance sheet remains net debt-free as of today with a strong cash balance of INR118 crores. So we will be taking some debt because there are certain government subsidies, which we are getting in the Surat plant for which we need to show some debt. So there will be a nominal debt, which we will take.
  • Liquidity Cash ₹118 Cr Strong cash balance supports capital expenditure plans.
    Our balance sheet remains net debt-free as of today with a strong cash balance of INR118 crores.

Guidance & targets

Revenue

  • Consolidated Revenue Revenue · FY27 · High confidence INR 1,000 crores
    Our focus is on the top line as we our target is to reach INR 1,000 crores by FY '27.

    — Shardul Doshi

Profitability

  • EBITDA Margin Profitability · Ongoing · High confidence high teens
    Our EBITDA margin should be in high teens.

    — Shardul Doshi

Brand Growth

  • Truly Indian brand growth in US Brand Growth · FY26 · High confidence upwards of 100%
    And the Truly Indian brand, even in the US, which last year grew by about 4x, though it was on a very small base. This year, we are expecting it to grow upwards of 100% in the US.

    — Bimal Thakkar

  • Ashoka brand growth in US Brand Growth · FY26 · High confidence mid-teens
    we feel confident that the brand will be backed up to the mid-teens in the US for this current financial year.

    — Bimal Thakkar

  • Soul brand revenue Brand Growth · next 3 years · Medium confidence INR 50-75 crores
    So in the next 3 years, our guidance for this brand will be anywhere between INR50 crores to INR75 crores as we feel the Indian market will still take time.

    — Bimal Thakkar

Market Growth

  • US market growth Market Growth · FY26 · High confidence 20%
    US continues to be our biggest market, which we feel confident of being able to grow by 20%.

    — Bimal Thakkar

  • Australia market growth Market Growth · FY26 · High confidence 40-50%
    Australia, we feel fairly confident that we will be able to grow by about 40%, 50% this year.

    — Bimal Thakkar

What to watch in Q1 FY26

Ashoka brand growth in US

Next quarter (FY26)
Current Flat growth in FY25
Target Mid-teens growth in FY26

Why it matters

Recovery of the flagship brand in its largest market is crucial for overall revenue growth.

Ashoka brand... will be backed up to the mid-teens in the US for this current financial year.

Risks & concerns

  • Rising raw material and labor costs

    medium

    Increased raw material costs due to inflation impacted gross profit margin by 1.25%, and labor costs by 1%.

    Management acknowledged

  • Increased expenditures in brand and marketing

    medium

    Significant investments in new brands (Soul, Truly Indian) contributed to EBITDA reduction, with INR 15 crores spent on brand building.

    Management acknowledged

  • US 10% tariffs

    medium

    A 10% tariff applicable from end of May 2025 will be partially absorbed and partially passed through the value chain.

    Management acknowledged

  • Ashoka brand flat growth in US

    medium

    Ashoka brand experienced flat growth in the US market due to sales team and distribution structure changes, though expected to recover to mid-teens growth in FY26.

    Management acknowledged

  • Soul brand underperformance

    medium

    ADF Soul underperformed expectations, achieving only INR 6 crores in top line, necessitating a more cautious strategic approach.

    Management acknowledged

  • GPCB notice for Nadiad facility

    low

    Received a GPCB notice but secured a 3-month extension and the facility remains operational with corrective actions underway.

    Management acknowledged

Q&A highlights

5 direct
PAT growth expectations for FY26 Partial
Our focus is on the top line as we our target is to reach INR 1,000 crores by FY '27. I think that's something which stands. Our investments are going to continue on brand for both the brands, Soul as well as for Truly Indian. Even the raw material prices, which we have seen going up in the last quarter, we are seeing -- I think some pressure is now reducing on the raw material prices. So hopefully, we should be back to our high teens number, which is, say, around 18%-odd overall business at the EBITDA level.

Analyst sought specific PAT growth, but management redirected to top-line and EBITDA margin targets, implying PAT will follow from these.

Asked by Amit Agicha

Nadiad facility operational status post GPCB notice Direct
So that is -- the facility is working. We've got a 3-month extension, and we hope to comply with all the requirements of GPCB within that time. So the factory is operational. We didn't have a shutdown at all for even a single day.

Clarifies that the Nadiad plant is operational and the company is addressing regulatory compliance without disruption.

Asked by Amit Agicha

Inability to pass on rising costs to buyers Partial
To some extent, we were not, yes, you're right. But there was a lot of investment which was done in the new brands, right? So to that extent, that was one of the main reasons also for the reduction in EBITDA. So the raw material and the cost in labor had come up, but with better product mix, we were still able to maintain our gross margins to the maximum possible extent. But a lot of the investments on the brand building for the 2 new brands was the reason for a reduction on the EBITDA.

Management acknowledges some inability to pass on costs but emphasizes brand building investments as a primary driver for EBITDA reduction, rather than just cost absorption.

Asked by Ravi Naredi

Brand building spend and expected impact on revenue growth Direct
So the brand building was primarily, the monies were spent more on social media and digital marketing for both our brands, Soul, which is for India and the Truly Indian brand, which was launched in the US. So that's where primarily the monies were spent. And the Truly Indian brand, even in the US, which last year grew by about 4x, though it was on a very small base. This year, we are expecting it to grow upwards of 100% in the US.

Provides details on the allocation of brand building funds and specific growth expectations for the Truly Indian brand in the US market.

Asked by Pallavi

Impact of US 10% tariffs Direct
At the moment, there is a 10% tariff, which gets applicable from end of this month, I believe. So at the moment, there are no plans of -- with better cost controls, we should be able to absorb part of these tariffs ourselves. And some of the other part of this tariff will be passed on to through the value chain, which would be some taken by the distributors, some by the retailers and minimal passed on to the consumer.

Management outlines their strategy to mitigate the impact of new US tariffs through partial absorption and passing on costs through the value chain.

Asked by Pallavi

B2B vs B2C business breakup and margins Direct
So at the moment, about 70% of our business is our own brands and about 30% is B2B, which is B2B and private label. Yes. So the margins, even in our B2B and private label business, because these are value-added products, we still work on healthy margins. The margins are, gross margins is about 30-odd percent. And on our brands, the margins go from 40% to 60% on our own branded business.

Provides a clear breakdown of revenue mix and associated gross margin profiles for different business segments.

Asked by Pallavi

Reasons for Ashoka's flat US growth and revised Soul brand targets Direct
So the Ashoka brand continues to remain our flagship brand. The brand has grown in high teens across all other markets. US for us, for the Ashoka brand has been the main market. So it's at a very high base. And this year, we saw a flat growth of Ashoka in the US market. There are a few reasons for that. There are certain changes which we have now made in our sales team, in our distribution structure, and we feel confident that the brand will be backed up to the mid-teens in the US for this current financial year. And as far as the Soul brand goes, the Indian market has -- I mean, we've had a very good response with the brand. And we've just recently in February of this year, launched some frozen products as well in the Indian market in some select modern trade stores. We feel this market will need some more time for getting us to the INR100 crores. So in the next 3 years, our guidance for this brand will be anywhere between INR50 crores to INR75 crores as we feel the Indian market will still take time.

Explains the specific issues affecting Ashoka's US performance and provides a more realistic, longer-term target for the Soul brand.

Asked by Priyam Shah

Replication of US cold chain model in other markets Partial
Well, we've still got -- we would like to do that later on in -- probably in Australia or in the UK. But just now, we just want to focus on the US market because we have opportunities of having more distribution centers in the US itself. So, until we exploit the US fully, we don't want to move elsewhere at the moment.

Indicates strategic focus on fully penetrating the US market before expanding complex logistics models to other geographies.

Asked by Amit Agicha

3 min read 6 chapters

Detailed narrative

FY25 Financial Performance Overview

ADF Foods reported consolidated revenues of INR 589.6 crores for FY25, marking a 13.3% year-on-year increase. However, consolidated EBITDA stood at INR 98.3 crores, a 6.3% decrease year-on-year, resulting in an EBITDA margin of 16.7%, a 350 basis point reduction. Consolidated PAT for the year was INR 69.2 crores, a 6.2% decline, with a PAT margin of 11.7%. The decline in profitability was primarily attributed to rising raw material and labor costs, as well as increased brand-building expenditures.

Q4 FY25 Performance and Margin Pressures

For Q4 FY25, consolidated revenues reached INR 159.1 crores, a 3.5% year-on-year increase and 7.9% quarter-on-quarter growth. Consolidated EBITDA for the quarter was INR 24.6 crores, a significant 28.1% year-on-year decrease, with an EBITDA margin of 15.5%. Consolidated PAT for Q4 was INR 16.4 crores, a 34.4% year-on-year decrease. Management noted that while better cost management helped, the overall impact on EBITDA margin was a 260 basis point decrease year-on-year for standalone operations due to raw material, labor, and freight cost increases.

Brand Strategy and Market Performance

The flagship Ashoka brand showed steady growth in markets outside the US, but experienced flat growth in the US due to strategic adjustments in sales force and distributor levels. The Truly Indian brand achieved a fourfold increase in top line in FY25, driven by new listings and retail chain additions like Safeway and Albertsons, and is expected to grow over 100% in the US in FY26. The India-focused ADF Soul brand launched a frozen range and is available through quick commerce and modern trade, with a target of INR 50-75 crores in the next three years, though it underperformed expectations in FY25 with INR 6 crores revenue.

Capital Expenditure and Funding

The company's capital expenditure program is on schedule, with approximately INR 50 crores invested in FY25 for brownfield expansions. An additional INR 100 crores is planned for FY26, primarily for the Surat Greenfield facility expansion, which is expected to begin operations by the second half of FY26. ADF Foods remains net debt-free with a strong cash balance of INR 118 crores. Funding for capex will primarily come from internal accruals, with nominal debt potentially taken to leverage government subsidies for the Surat plant.

Distribution Business and Tariffs

ADF Foods secured nationwide distribution rights for Lipton teas in the US, which is expected to drive organic growth. The company's business mix is approximately 70% own brands (B2C) and 30% B2B/private label, with gross margins ranging from 40-60% for own brands and around 30% for B2B. A 10% US tariff is expected to be applicable from the end of May 2025; management plans to absorb part of this and pass the remainder through the value chain to distributors and retailers.

Outlook and Growth Targets

ADF Foods aims to achieve INR 1,000 crores in consolidated revenue by FY27, with EBITDA margins maintained in the high teens. The company anticipates mid-teens growth for the Ashoka brand in the US and over 100% growth for the Truly Indian brand in the US for FY26. Other markets like Australia are projected to grow by 40-50% in FY26. The company continues to invest in brand development and enhancement of its management team to drive long-term sustainable financial growth.

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