Foods & Inns

Foods & Inns reported a steady Q3 FY26, with overall sales tonnage remaining flat, primarily attributed to deferred call-offs from US customers due to tariff uncertainty. Average realizations were lower year-on-year, reflecting sales from 2025 crop season inventory produced at significantly lower raw material costs. For the nine months ending December 31, 2025, revenue stood at INR580 crores, a decrease from INR610 crores in the previous year. Despite this, gross profit increased by 8.7% from INR216 crores to INR235 crores. However, EBITDA for the same period saw a decline of approximately INR10 crores, partly due to MTM forex losses and increased freight and operational expenses.

The frozen food business demonstrated robust growth momentum in Q3 FY26, with volumes increasing by approximately 35% year-on-year. For the nine-month period, volumes were up around 37% year-on-year. This growth was driven by improved realizations from value-added products within the frozen category. The company successfully commenced supplies to two large, financially strong airline customers during the quarter and remains optimistic about sustained global demand growth in this segment for the next 3 to 4 years.

In line with its focus on scalable and differentiated platforms, Foods & Inns initiated a spray drying capacity expansion of 120 metric tons per annum, with construction already in progress. The company is also advancing its international expansion in Tetra Recart, which generated around INR5 crores in revenue for the first nine months of FY26, with expectations of 5-6x volume growth next year. Further investments include automation, solar energy at its Vankal and Gonde plants, and the Pectin project, all aimed at enhancing efficiency, sustainability, and long-term value creation.

The Pectin project, which involved an investment of INR12-13 crores, is a high-end product with a significant market potential in India (INR350-400 crores). While the company has submitted samples and is awaiting commercial orders, significant sales are not expected until next year onwards, with initial commercial orders from a couple of customers anticipated in March. This delay is attributed to the extensive testing and formulation changes required by large clients, as Pectin is used in minimal quantities and requires thorough validation.

The US market constitutes approximately 10% of the company's overall annual volume. Q3 FY26 sales tonnage was impacted by deferred call-offs from US customers due to uncertainty surrounding tariffs. Historically, mango pulp tariffs peaked at 50%, then reduced to 25%. With recent developments, the tariff rate is expected to further decrease to 18-19%, pending formal notification. Management noted that customers were willing to absorb some tariff impact, and with clarity on refunds, dispatches are expected to resume soon.

The company's total debt stands at approximately INR460 crores, comprising both long-term (INR50 crores) and short-term working capital. Working capital increased from INR360 crores to INR410 crores, primarily due to inventory build-up for non-mango seasonal products like guava, tomato, chili, garlic, and ginger, which require stocking for 6-7 months. The cost of debt ranges from 9.2% to 9.8%, and the company holds a BBB rating from CRISIL. Approximately INR20 crores of long-term debt was repaid year-on-year.

The application for FY25 PLI incentive claims has been submitted, and the company is awaiting disbursement, which is expected soon. Management anticipates the FY26 PLI income to be similar to or slightly higher than the INR25 crores received in FY25. For the tomato business, crop procurement commenced with a slight delay but is progressing. The company has already achieved INR55 crores in revenue from tomato paste and related products over three quarters and expects a potential 20% increase, though specific order book figures were not disclosed due to ongoing negotiations and industry practice.