Hindustan Foods

Hindustan Foods achieved a significant milestone in Q2 FY26, crossing ₹1,000 crores in quarterly revenue for the first time, reaching ₹1,043 crores, an 18% YoY increase. This strong performance contributed to H1 FY26 total income of ₹2,041 crores, up 16% YoY. Profitability also saw robust growth, with Q2 EBITDA rising 24% to ₹90 crores and PAT surging 54% to ₹35 crores. For H1, EBITDA grew 17% to ₹173 crores and PAT increased 33% to ₹67 crores, reflecting sustained operational efficiency and improved cost management.

The company's growth over the last four years, with a compounded growth of 22% in revenues, 32% in EBITDA, and 30% in PAT, is attributed to strategic diversification across product categories like foods and beverages, ice creams, healthcare, and footwear. HFL has successfully added new-age brands while retaining large FMCG incumbents. The business model is evolving from primarily dedicated manufacturing to increased exposure to shared manufacturing, which management believes will improve returns and performance parameters, with Q2 results being the first tangible outcome.

Hindustan Foods is aggressively expanding its capacity, with ₹550 crores plus new capacity advancing towards commissioning in the next couple of quarters, in addition to ₹200 crores commercialized in H1 FY26. Specific authorizations include ₹120 crores for Home and Personal Care greenfield/brownfield projects, ₹80 crores for Foods & Beverages expansion (flavored yogurt, bottled water), and ₹30 crores for Healthcare at Baddi. Existing capex of ₹300 crores for Ice Cream facilities (Panipat, Sandila, Nashik) is on track, with Panipat expected to start commercial production by Q4 FY26 and reach full capacity by Q1 FY27.

The Shoes division delivered its highest-ever quarterly revenue of ₹133 crores in Q2 FY26 and is now PAT positive after incurring losses last year. Management confirmed that the 'worst is behind us' regarding supply chain and new capacity ramp-up issues. The target is for the shoe business to achieve close to 5% PAT once it reaches optimum levels, which is expected 'sooner than later.' The company continues to allocate capital to this business, indicating confidence in its growth potential.

HFL is pursuing a backward integration strategy in the ice cream vertical, having recently acquired a cone manufacturing plant and a sticks plant. These acquisitions are expected to generate approximately ₹50 crores in turnover from cones and ₹10 crores from sticks annually. Management emphasized that this move is symbolic of shifting towards a vendor relationship model, allowing for gross and net margin responsibility and operating leverage benefits. The company also anticipates significant benefits from GST rationalization in ice creams and bottled beverages, expecting increased consumption and a level playing field against unorganized players.

As of September 30, 2025, Hindustan Foods maintained a strong financial position with ₹162 crores in cash and cash equivalents and a comfortable net debt to equity ratio of 0.67. Net cash flow from operations rose nearly 50% YoY to ₹109 crores in H1 FY26. The company is well-equipped to fund the planned ₹550 crores capex through a mix of internal accruals and prudent debt, with the Board approving a debt-equity ratio up to 1:1. Management aims to generate approximately ₹200-225 crores in annual cash flow from operations.

Management acknowledged analyst concerns regarding the market's valuation of Hindustan Foods since 2021, stating they 'completely understand your question.' While they cannot directly address market valuation, they committed to improving disclosures and better explaining their business model, starting with the revised investor presentation. They also highlighted their efforts to adapt to the evolving FMCG ecosystem, including engaging with newer brands, increasing wallet share with traditional incumbents, and allocating capital to high-growth segments.