Bikaji Foods International Limited — Q3 FY25 earnings call

Call held 7 Feb 2025

Management summary

Bikaji delivered a resilient quarter with 14.5% revenue growth despite a challenging FMCG environment and significant input cost inflation in palm oil and potatoes. Management prioritized bottom-line protection by subduing western snack production and implementing price hikes. While reported volume growth appeared low at 3%, the adjusted revenue volume growth of 8% suggests healthy underlying demand and successful distribution expansion.

Highlights

  • Revenue from operations grew 14.5% YoY in Q3 FY25, with YTD revenue growth at 17.1%.

  • Reported volume growth was 3%, but management highlighted 'revenue volume growth' of 8% after adjusting for last year's 10% extra grammage promotion.

  • EBITDA margins stood at 11.1%, facing pressure from a sudden spike in palm oil and potato prices.

  • Gross margins were approximately 32% for the quarter, with a target to return to 30-31% levels in the coming months.

  • Western snacks growth was flat at 0.8% as a conscious management call to subdue production due to high input costs (potato and oil).

  • Direct reach expanded to nearly 3 lakh outlets, with 38,000 new outlets added YTD against a full-year target of 50,000.

  • Exports showed strong momentum, growing at 32.6% YoY during the quarter.

Concerns

  • Input Cost Inflation (Palm Oil and Potato)

Key financials

  1. Revenue Growth 14.5% +14.5%YoY
  2. EBITDA Margin 11.1%
  3. Gross Margin 32%
  4. Reported Volume Growth 3% +3%YoY
  5. Revenue Volume Growth 8% +8%YoY

What they filed

Q1 FY27: revenue up 8.7%, net profit up 3.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue713 676 585 624 796 +12%731 +8%667 +14%678 +9%
EBITDA109 56 79 99 130 +19%95 +70%91 +15%99 +0%
Net profit72 31 48 63 78 +8%65 +110%64 +33%65 +3%
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.

Segment breakdown

SegmentRevenue GrowthYTD Revenue Growth
Ethnic Snacks10.5%12.2%
Packaged Sweets11.2%17.5%
Western Snacks80%16.5%
Papad9.6%15.3%

Guidance & targets

Volume

  • Volume Growth Target Volume · next 3-4 years · High confidence 13-14%
    our target is to grow volume-wise by 13%-14%, that's what our target is... for next three, four years.

    — Rishabh Jain, CFO

Margin

  • Gross Margin Band Margin · next 3-4 months · Medium confidence 30-31%
    we are hopeful that we will again come in gross margin of close to 30%- 31%. In the next three to four months, we will be working to reach at a gross margin of 30%-31%

    — Rishabh Jain, CFO

  • ASP Growth Margin · Q4 FY25 · Medium confidence 3-3.5%
    now 3%-3.5% kind of a growth you will see, that is ASP growth.

    — Manoj Verma, COO

Revenue

  • Hazelnut Company Top Line Revenue · FY26 · Medium confidence ₹90-100 Crores
    we see that in next year, it will be close to between Rs. 90-100 Crores top line that can that brand can give

    — Rishabh Jain, CFO

Capex

  • Annual Capex Capex · FY26 · High confidence ₹40-50 Crores
    we see close to Rs. 40-50 Crores of CAPEX largely to build efficiency in the system, that’s what we will do next year.

    — Rishabh Jain, CFO

Market Share

  • Direct Reach Expansion Market Share · FY25 · High confidence 3 Lakh outlets
    our drive is, to have close to 3 Lakh outlets this year. And that's what our target was in this year.

    — Rishabh Jain, CFO

Risks & concerns

  • Input Cost Inflation (Palm Oil and Potato)

    high

    Palm oil prices spiked from 100 to 140 per barrel; potato prices also increased substantially, impacting gross margins.

    Management acknowledged

  • Slowdown in FMCG Consumption

    medium

    Management noted a challenging quarter for FMCG but sees positive trends starting in January/Q4.

    Both acknowledged

  • Competition from Regional Players

    low

    Management views the weeding out of smaller players during inflationary periods as an ongoing cycle that benefits organized brands.

    Analyst downplayed

Areas of evasion (1)

  • Specific gross margins across individual product categories were not disclosed.

Q&A highlights

3 direct
Divergence between reported volume growth and revenue volume growth Direct
It is because on the back of last year Quarter 3 within 10% extra was going, so 10% was non-revenue volume... revenue volume growth is 8% for us.

Explains why the headline 3% volume growth is misleading and that underlying consumption is stronger than it appears.

Asked by Abneesh Roy

Impact of input cost inflation and pricing strategy Direct
we will do 1%-1.5% price increase in Feb and March first week... we are hopeful that we will again come in gross margin of close to 30%- 31%.

Confirms management's intent to protect margins through further pricing action despite the challenging demand environment.

Asked by Percy Panthaki

Subdued growth in Western Snacks Direct
largely 3rd Quarter due to palm oil and potato price increase... we stopped manufacturing of or reduced manufacturing of western snacks specifically. And, that's what have resulted in zero growth.

Reveals a deliberate strategic choice to sacrifice revenue in a low-margin segment to protect overall profitability during a commodity spike.

Asked by Sunil Shah

2 min read 5 chapters

Detailed narrative

Strategic Margin Protection Amidst Commodity Volatility

Bikaji faced significant headwinds in Q3 FY25 as palm oil prices surged from 100 to 140 per barrel and potato prices rose sharply. In response, management took a 'conscious call' to subdue production of Western snacks, which grew at a flat 0.8% compared to 16.5% YTD. This strategy, combined with a 2-2.5% price hike in October and another 1-1.5% planned for February/March, aims to restore gross margins to the 30-31% range within the next few months.

Underlying Volume Strength Masked by Base Effects

While reported volume growth was a modest 3%, management clarified that 'revenue volume growth' was actually 8%. The discrepancy stems from a 10% extra grammage promotion run in the previous year's base quarter, which inflated base volumes without contributing to revenue. Adjusting for this, the core business shows healthy traction, particularly in Ethnic Snacks (10.5% growth) and Packaged Sweets (11.2% growth).

Distribution Expansion and Direct Reach Focus

The company continues its aggressive push into direct distribution, reaching nearly 3 lakh direct outlets. They have added 38,000 new outlets YTD and remain on track to hit their annual target of 50,000. Total distribution now spans 7.5 million outlets, with management emphasizing that increasing direct reach is a fundamental pillar for their long-term 13-14% volume growth target.

Hazelnut Acquisition and Future Growth Levers

The recently acquired Hazelnut brand is expected to contribute ₹90-100 crores to the top line in FY26. Management noted that the brand already has good packing facilities and will require minimal incremental CAPEX from Bikaji. Additionally, the company is piloting its first QSR outlet in Sikar, Rajasthan, as a new customer engagement vehicle, though major expansion in this segment is not planned for the immediate term.

Positive Outlook for Q4 and Beyond

Despite a challenging Q3, management expressed optimism for Q4, citing improving consumption trends in January and a 'good crop' year for key commodities like moth dal, potato, and peanuts. Moth dal prices are expected to see a 14-15% reduction compared to last year. The company plans a modest ₹40-50 crore CAPEX for FY26, focused primarily on building system efficiencies rather than major capacity additions.

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