Detailed Narrative
Q2 FY26 Financial Performance Overview
LT Foods achieved its highest ever quarterly revenue of ₹2,772 crores in Q2 FY26, representing a 30% year-on-year growth, with a normalized growth of 12% excluding Golden Star and U.S. Tariff. For the first half of FY26, revenue reached ₹5,273 crores, a 25% YoY increase (normalized 15%). EBITDA for Q2 FY26 was ₹316 crores, up 24% YoY, and ₹619 crores for H1 FY26, up 20% YoY. The company maintains a strong investment-grade credit rating of CRISIL AA- A1+ with a positive outlook.
Strategic Acquisitions and European Expansion
During the quarter, LT Foods strategically acquired Hungary-based Global Green Kft for an enterprise value of £25 million. This all-cash acquisition, which will be 100% owned by a fellow subsidiary, marks the company's entry into the £15 billion European processed can food market. The deal is expected to contribute an additional £40 million in revenue annually, subject to FDI approval, which is anticipated within 2-3 months. This move establishes a third manufacturing hub in Hungary, enhancing LT Foods' footprint across Central and Southern Europe.
Segmental and Geographical Performance
The Basmati and other specialty rice businesses recorded a 24% growth, or 11.4% normalized growth excluding Golden Star and U.S. tariff. The organic segment delivered a robust 26% year-on-year growth in H1 FY26. Geographically, North America accounts for 46% of revenue, growing 47% YoY (normalized 16%), with the Royal brand holding a 54% market share. India contributed 30% of revenue with 13% YoY growth, and Europe/UK contributed 15% with 31% YoY growth. The Middle East and rest of the world comprise 9% of revenue, with specific focus on building a sizable business in Saudi Arabia over the next five years.
Working Capital and Capital Structure
The company's working capital payable days increased by 15 days, attributed to better negotiations with vendors. LT Foods reported cash and bank balances of approximately ₹600 crores, alongside short-term borrowings of around ₹1,200 crores. Management clarified that cash in India, primarily for procurement, cannot be transferred to offset borrowings in foreign subsidiaries, which are used for working capital at an average blended cost of debt of about 7%.
PAT Margin Dynamics and Investments
The Q2 FY26 EBITDA margin saw a 60 bps decline to 11.4% from 12% in Q2 FY25, primarily due to increased brand investments and strategic digital initiatives. H1 FY26 PAT margin stood at 6.3%, down from 7.2% in the previous year. This compression was also influenced by the consolidation of Golden Star and initial underperformance in the organic segment. Despite this, the company's ROCE improved to 22%, reflecting efficient capital deployment.
U.S. Tariff and Organic Segment Challenges
The company is navigating U.S. tariffs, having partly passed on the initial 10% duty, but is still in negotiations for the 20-50% duties. The organic segment's margins were impacted by significant investments in European private label infrastructure and the need to use third-party operations due to capacity expansion. Additionally, the RTC/RTE segment faced production constraints, with a 6-9 month delay in commissioning a second unit, preventing the company from fully capitalizing on growing demand and delaying the segment's break-even target of ₹400 crores.