Hindustan Foods Limited — Q1 FY26 earnings call

Call held 11 Aug 2025

Management summary

Hindustan Foods reported a strong Q1 FY26 with record profitability, driven by operational improvements in new facilities and the Footwear business, despite unseasonal rains impacting seasonal categories. The company achieved a 15% YoY revenue growth to INR 998 crores and significantly improved its net debt-to-equity ratio to 0.65. Management expressed confidence in achieving FY26 and FY27 targets, while acknowledging potential headwinds from global trade tariffs on the Footwear segment in H2.

Highlights

  • Achieved highest ever quarterly profit in Q1 FY26.

  • Total income grew 15% year-on-year to INR 998 crores.

  • EBITDA was up 10% to INR 84 crores.

  • PAT grew 17% to INR 32 crores.

  • Net debt to equity ratio reduced to 0.65.

  • Lucknow Ice Cream facility reached peak capacity and Nashik greenfield plant commenced production in May '25 with 15,000 KL capacity.

  • Shoe business posted its highest ever monthly sales in June '25.

  • New North ice cream facility expected to be operated in Q4 FY26 with an investment of INR 200 crores.

Concerns

  • Global Trade Scenario / Tariff Changes

Key financials

  1. Total Income ₹998 Cr +15%YoY
  2. EBITDA ₹84 Cr +10%YoY
  3. PBT ₹42 Cr +16%YoY
  4. PAT ₹32 Cr +17%YoY
  5. Net Debt to Equity Ratio 0.65

What they filed

Q1 FY27: revenue up 17.9%, net profit up 34.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue883 880 959 1,019 1,039 +18%1,044 +19%1,117 +16%1,201 +18%
EBITDA70 73 78 81 86 +23%95 +30%100 +28%100 +23%
Net profit23 29 32 32 35 +52%39 +34%42 +31%43 +34%
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.

Guidance & targets

Capacity

  • North Ice Cream Facility Operation Capacity · Q4 FY26 · High confidence Q4 FY '26
    This facility is expected to be operated in Q4 FY '26.

    — Ganesh Argekar, Executive Director

Market Share

  • Largest Ice Cream Contract Manufacturer Market Share · within the next 2 years · High confidence Largest in country
    we believe that we'll be the largest contract manufacturer of ice creams in the country within the next 2 years.

    — Ganesh Argekar, Executive Director

Profitability

  • Targeted ROE numbers Profitability · from FY '27 · High confidence Achieve targeted ROE
    We are optimistic of achieving the targeted ROE numbers from FY '27.

    — Mayank Samdani, Group Chief Financial Officer

Capex

  • Gross Block Capex · by FY '27 · High confidence INR 1,800 crores
    So we are looking at around INR2,000 crore capex by for '27. And right now, this is what we have in hand. We are continuing to assess the various greenfield, brownfield, and acquisition, but nothing specific to discuss right now. But as and when it comes, we'll know. We are looking beyond we are working towards the targets beyond '27 also, that is what I can talk about.

    — Mayank Samdani, Group Chief Financial Officer

  • Gross Block Capex · by FY '27 · High confidence INR 2,000 crores
    Broadly, the number that we currently have visibility is more like INR2,000 crore, which is by FY '27.

    — Sameer Kothari, Managing Director

  • North Ice Cream Facility Investment Capex · current plan · High confidence INR 200 crores
    the Board has authorized us to invest about INR200-odd crores in our North ice cream facility, which will take us to about INR1,700 crores.

    — Sameer Kothari, Managing Director

  • Shoe Business Investment Capex · current plan · High confidence INR 50 crores
    we have got the authorization to invest about INR50-odd crores in our Shoe business, which will take us towards INR1,750 crores.

    — Sameer Kothari, Managing Director

Contract Tenure

  • Average Dedicated Manufacturing Contract Tenure Contract Tenure · as of today · High confidence 8-9 years
    Out of the dedicated manufacturing assets that we have, our average contract tenure as of today will be between 8 and 9 years.

    — Sameer Kothari, Managing Director

Risks & concerns

  • Global Trade Scenario / Tariff Changes

    high

    Leads to ambiguity, potential headwinds for Footwear business in H2 FY26 as multinational customers reassess sourcing strategies due to tariffs (even though HFL's production is domestic). Raw material imports also affected.

    Management acknowledged, cautious

  • Unseasonal Rains / Seasonality

    medium

    Impacted demand in key seasonal categories like Ice Creams and Beverages in Q1 FY26, depressing turnover.

    Management acknowledged

  • Macroeconomic Environment / Escalating Trade Tensions

    medium

    Challenging macroeconomic environment marked by escalating trade tensions, but diversified product mix and business model provide shield.

    Management acknowledged, confident in resilience

  • FMCG Industry Slowdown

    medium

    Analyst raised concern about continued slowdown, management hopes for improvement and believes new avenues will drive growth.

    Analyst acknowledged, but hopeful for improvement

Areas of evasion (3)

  • specific segment profitability/sales numbers (e.g., for sports shoes)
  • quantification of seasonal impact on revenue
  • specific customer mix (D2C vs. incumbents)

Q&A highlights

2 direct, 1 evasive
Impact of Global Tariffs on Domestic Footwear Business Direct
The production that we do is 100% domestic. However, the customers that we produce for are all multinational customers... the tariff situation... will affect their sourcing strategies... there's a lot of ambiguity... small possibility of a Butterfly effect of the tariffs affecting the domestic demand as well.

Clarifies the indirect but significant risk global trade tensions pose to their domestic footwear business through multinational clients and imported raw materials, leading to H2 visibility issues.

Asked by Mayur Parkeria

Sports Shoe Business Profitability and Disclosure Policy Evasive
instead of getting into segment-wise or product-wise details, what we did in Q4 was we disclosed the quarterly turnover numbers and the capital allocated or capital employed for what we are calling as shared manufacturing versus dedicated manufacturing... we decided that we'll do this every 6 months in September and March figures because that's when we would be giving out the balance sheet numbers as well.

Management declined to provide specific profitability or sales numbers for the sports shoe business, citing a policy of disclosing shared vs. dedicated manufacturing data bi-annually, which limits granular insight for investors.

Asked by Akhil Parekh

Capital Allocation Strategy and Priorities Direct
our capital allocation guidelines is more based on the dedicated versus shared manufacturing, where if it is a take-or-pay and the guarantee on the capital, we can invest unlimited money in that... investment strategy is based on how secured the investment is.

Management clearly articulated their capital allocation philosophy, prioritizing investments with take-or-pay contracts and guaranteed capital returns, and specified near-term allocations to Ice Cream (INR 200 crores) and Shoes (INR 50 crores).

Asked by Sucrit D. Patil

3 min read 7 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

Hindustan Foods reported a robust Q1 FY26, achieving its highest-ever quarterly profit. Total income grew by 15% year-on-year to INR 998 crores, up from INR 871 crores in Q1 FY25. EBITDA increased by 10% to INR 84 crores, while Profit Before Tax (PBT) rose by 16% to INR 42 crores. Net Profit After Tax (PAT) also saw a significant 17% growth, reaching INR 32 crores, underscoring strong operational performance despite seasonal challenges.

Operational Highlights and Capacity Expansion

The quarter saw strong operational execution, with the Lucknow Ice Cream facility reaching peak capacity and the new Nashik greenfield plant commencing production in May '25, adding 15,000 KL capacity. The company is also developing a new facility in the North, expected to be operational in Q4 FY26, with an authorized investment of approximately INR 200 crores. These expansions are part of the strategy to become the largest contract manufacturer of ice creams in India within the next two years.

Footwear Business Performance and Outlook

The Footwear business demonstrated consistent progress, with the South facility ramping up as expected and achieving its highest-ever monthly sales in June '25. The company has authorized an additional investment of INR 50 crores in this segment. While the first half of FY26 has clear visibility, management expressed caution regarding the second half due to potential headwinds from global trade tariffs, which could indirectly impact multinational clients' sourcing strategies despite HFL's 100% domestic production.

Capital Allocation Strategy and Gross Block Targets

HFL's capital allocation strategy prioritizes dedicated manufacturing projects with take-or-pay agreements, allowing for potentially unlimited investment due to secured returns. The company's current gross block stands at approximately INR 1,491 crores. Management targets achieving an INR 1,800 crore gross block by FY27, with a broader vision to reach around INR 2,000 crores by the same period, driven by ongoing greenfield and brownfield expansions and a focus on achieving targeted ROE numbers from FY27.

Impact of Seasonality and Global Tariffs

Unseasonal rains in Q1 FY26 significantly impacted demand in seasonal categories like Ice Creams and Beverages, which was identified as the biggest factor affecting revenue numbers for the quarter, rather than deflation. Furthermore, the global trade scenario and escalating tariffs, particularly affecting multinational clients, introduce ambiguity for the second half of the financial year, especially for the Footwear business, due to potential shifts in sourcing strategies and raw material imports from countries like Vietnam and China.

Dedicated vs. Shared Manufacturing and Contract Tenures

The company employs both dedicated and shared manufacturing models, with dedicated contracts typically having an average tenure of 8-9 years, some extending to 10-15 years. Dedicated manufacturing is reserved for product categories with low disruption risk, backed by take-or-pay agreements that shield HFL from changes in consumer behavior. Newer or more volatile product categories, like powder hand wash, are handled through shared manufacturing facilities to offer flexibility, reflecting a strategic choice based on product maturity and disruption risk.

Competitive Landscape and Diversification

Hindustan Foods acknowledges a competitive contract manufacturing landscape but highlights its diversified portfolio across categories like Ice Creams, Home Care, and Sports Shoes as a key strength. This diversification means no single competitor operates across all their segments, providing a strategic advantage. The company remains agnostic to client types, engaging with both traditional incumbent brands and challenger D2C/digital-only brands, focusing on fulfilling their manufacturing requirements.

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