Foods & Inns Q1 FY27 earnings call

Foods & Inns Limited experienced a mixed Q1 FY27. While the company saw encouraging trends in mango production with good quality and reasonable prices, export dispatches were significantly slowed. This slowdown was primarily due to vessel non-availability and a substantial increase in ocean freight, leading to delayed call-offs and a blockage in working capital, which in turn incurred higher interest costs. Despite these challenges, management noted that no orders have been cancelled, and customers remain committed.

The frozen food segment continues to be a strong growth area for Foods & Inns. It recorded a 20% growth in Q1 FY27 and has maintained a 30% CAGR over the last two years. Last year, the segment generated approximately USD 12 million, with Q1 FY27 expecting USD 3 million, projecting over 20% growth for the current year. The company aims to expand this segment to over USD 30 million within the next three years and is actively expanding capacity to meet the growing demand, particularly in export markets like the USA, UK, and Canada.

Commercial production for the pectin segment has commenced, with several big export brands showing interest and receiving samples. While the approval process is lengthy due to consumer testing, management anticipates good opportunities from October/November onwards. In its branded portfolio, Kusum spices grew by 14.7% year-on-year, and the company is exploring joint ventures for high-margin consumer products under brands like Green Top in various geographies, aiming to leverage its manufacturing capabilities.

The company's top line has remained stagnant for the past four years, staying below INR 1,000 crores. Management clarified that this is due to value degrowth rather than volume decline, primarily driven by a drastic reduction in raw material prices. For instance, the average price of mango, a key raw material, dropped from INR 25 to INR 6 per kg. This reduction in raw material costs automatically led to a lower final realizable price, impacting the reported sales value despite an increase in sales volume.

The domestic market is expected to provide a strong counterbalance to export challenges. Foods & Inns secured a higher order from Coca-Cola's Maaza, which celebrated its 50th anniversary. Management anticipates favorable climate conditions due to the El Nino effect will boost juice and drinks consumption in India, supporting domestic volume growth. The company remains bullish on the overall scenario, expecting that any lower call-offs in one quarter can be made up in subsequent quarters.

Discussions around capital allocation included plans to expand capacity for the frozen food segment. The promoter group currently maintains over 25% holding. Milan Dalal noted that he had participated in an open offer at INR 150 per share two years prior, and the current price is about one-third of that, making it an 'attractive purchase.' He indicated that while he has made small purchases, the company would explore opportunities to increase promoter holding, including considering suggestions for a preferential issue if it benefits minority shareholders.