Detailed Narrative
Q3 FY25 Performance and Domestic Demand
Foods & Inns experienced slow domestic call-offs in Q3 FY25, although a silver lining emerged with rapid call-offs starting in late December and continuing into Q4. Export shipment backlogs from Q1 and Q2 were cleared, contributing to tonnage growth. The company reported INR4.2 crores in forex MTM losses, which impacted EBITDA margins and other expenses for the quarter, though these were noted as notional.
Capacity Expansion and Utilization
The company has significantly expanded its tomato processing capacity, which has been running at full utilization since December. This expansion is expected to more than double revenue from the tomato sector compared to last year. Additionally, the new pastry line is performing well, with plans to double its capacity by the end of February 2025, and the spray drying expanded capacity has also reached full utilization since December.
New Product Development and Market Traction
Foods & Inns is actively pursuing new product development, particularly in Tetra Recart packaging. Product testing with brands is ongoing, with the aim of garnering traction in FY26 for products offering a shelf life of up to two years without preservatives. The company is also leveraging its own brands and a master chef collaboration to launch new products in the retail market.
Kusum Spices Business Strategy and Growth
The Kusum Spices business, acquired with a turnover of INR16-17 crores, is targeted to grow to INR100 crores. The strategy involves dual expansion: geographical expansion in the domestic retail market, starting with Mumbai and extending to Goa and Hyderabad, and penetration into export markets with pesticide-residue-free products, which requires contract farming and a longer development cycle.
Capital Structure and Finance Costs
The company's capital structure includes approximately INR360 crores in working capital debt and INR70 crores in long-term debt. Finance costs have increased, with INR2.5 crores of extra capex-related interest cost hitting the P&L from new Greenfield and non-PLI capex that became operational. Funds from a preferential allotment were utilized for both working capital and capex requirements.
Long-Term Outlook and Margin Focus
Foods & Inns has an internal target to achieve INR1,700-odd crores in revenue by FY27, supported by ongoing capacity expansions. Management emphasized a cost-plus business model and a continuous focus on improving EBITDA margins, noting that recent quarters have shown improvement. The company aims to reduce debt by scaling the business and enhancing profitability.