Detailed Narrative
FY25 Close: Navigating Inflation with Cost Discipline
FY25 was defined by severe commodity inflation (palm oil +54%, cocoa +83%, wheat +12%, milk +21%) forcing significant price increases. Revenue grew 6% to Rs 17,535 crores with Q4 at 9% being the 7-quarter high. PAT grew only 3% as cost pressures were partially offset by a record cost savings program (9x of FY14 base, 2.5% of revenue). Key savings came from Maharashtra ultra-mega project fiscal incentives, UP Greenfield approvals, value engineering, and buying efficiencies.
Adjacencies Scaling but Mix Unchanged
The adjacency portfolio remains at 25% of revenue despite years of focus. However, individual categories are gaining scale: Croissant near Rs 200 crores (3x biscuit growth), milkshakes past Rs 200 crores, wafers crossing Rs 100 crores. Cake, rusk, dairy, and bread are each ~$100M. Multiple relaunches in Q4 (cake with new recipe/packaging, cheese with uniform channel pricing, rusk with new pack design). Management targets 1:1.5 growth differential between biscuits and adjacencies.
Distribution and Channel Evolution
Direct reach at 28.7 lakh outlets (up from 27.9 lakh), total reach ~6.5 million out of 9 million outlet category universe. Route-to-market project driving depth at high-potential outlets and width in rural. E-commerce/q-commerce at 4% of sales growing 7.5x vs other channels. Q-commerce profitability in same ballpark as company average. Digital-first launches (Choco Frames/Harry Potter) proving the model. Management expects e-com to reach 8% in 3 years.
Capital Allocation and M&A Philosophy
Management expressed strong discipline on capital allocation. On inorganic opportunities, Varun Berry questioned whether recent FMCG acquisitions (Capital Foods, Plix) have delivered returns. Preference is to grow organically within existing categories. FY25 saw significant capex in TN, UP plants and Odisha capacity enhancement. State fiscal incentives (Ranjangaon ultra-mega through 2037-38) provide meaningful cost support.