Bikaji Foods International Q1 FY27 earnings call

Bikaji Foods reported a top-line value growth of 12.5% and a volume growth of 7.7% for Q1 FY27. The quarter was characterized by two distinct halves; the first 45 days experienced supply and production issues due to the Chairman's demise and Bengal elections, impacting pan-India operations. Despite these initial headwinds, the company saw strong demand across all product ranges in the latter half of the quarter, leading to an overall EBITDA margin of 13.5%, an improvement from 12.2% in the previous quarter.

The company continued its focus on increasing direct coverage, expanding its direct reach to 3,70,000 outlets by adding 17,000 new outlets in Q1. This expansion is a key growth driver. Geographically, focus states demonstrated robust growth of 19%, while core states grew by 11% and other states by 5.6%. The retail business, particularly through THF stores, grew significantly by 71.8% year-on-year, with plans to open 10 new stores this year, targeting 35 stores by year-end and 50 stores in the next 2.5-3 years.

Bikaji made significant marketing investments in Q1 to build momentum for the upcoming festive season. This included the Pankaj Tripathi campaign for UP, new product launches in the Western Snacks range, and participation in international exhibitions. These investments contributed to a slight dip in EBITDA compared to gross margins, but are expected to yield returns in the festive period. The company aims to maintain its overall A&P spend at close to 2% of revenue for the year.

Segment-wise, Western Snacks showed strong growth at 21.3%, followed by Ethnic Snacks at 11.4%. Sweets grew by 4.4%. However, the Papad segment faced challenges, declining by 6.5% due to early monsoons impacting handmade production. The company is experiencing multiple input cost pressures, including edible oil, pulses (moth dal, chana dal), and coal, which have led to two price increases in the last four months to pass on costs to consumers. Despite this, the company plans to maintain current pricing until Diwali.

The Q-commerce channel is a significant growth area for Bikaji, with the company reporting upwards of 100% growth in this segment for Q1. Management believes that established brands hold an advantage over private labels in this channel. In international markets, exports experienced a flattish to negative growth of 2.2%, primarily due to U.S. tariff disturbances and a 2-3x increase in crude oil prices impacting freight costs. The company expects long-term export growth of 25-30% and anticipates the US business to grow 3x in the next two years, contributing 5.56% to overall business in 3-4 years.

Bikaji is progressing with its joint venture in Nepal, with plant construction nearing completion. Both parties are investing INR15 Crores each, and the plant is expected to be operational in 8-9 months. This local production initiative aims to save on import duties and enhance competitiveness in the Nepal market. Additionally, the company is investing in a new ASRS facility in Bikaner, covering 1 lakh square feet, to improve supply chain efficiency and stock levels, adding 1.2-1.3 lakh cartons of capacity.