Detailed Narrative
Robust Volume Growth and Revenue Performance
Orkla India delivered a strong Q2 FY26, with revenue from operations reaching ₹650.3 crores, representing a 4.9% year-on-year growth. This was primarily driven by a robust volume growth of 7.7% in the quarter. For the first half of FY26, the company achieved an 8% volume growth, which is the highest in the last three financial years, indicating strong underlying demand.
Healthy Margins Despite One-Time Impacts
The company maintained a strong EBITDA margin of 16.9% in Q2 FY26, with H1 FY26 EBITDA margin at 17.8%, trending stronger than FY25. However, EBITDA was impacted by higher advertising costs due to an early festive season, one-time📎 GST 2.0 transition expenses, and a reduction in Production Linked Incentives (PLI). Excluding these one-time📎 factors, the adjusted EBITDA growth was 7.6% with an adjusted margin of 17.8%.
Strategic Focus on Deep Penetration in Core Markets
Orkla India's business model is built on the premise that 'food is local,' with 70% of its business originating from the four Southern states. The company aims to drive growth by increasing penetration and usage, exemplified by Karnataka's per capita sales of ₹110 in FY25, serving only 12 out of 260 possible sambar consumption occasions. This indicates significant headroom for growth by converting consumers from the unorganized segment and increasing product frequency and range.
Dynamic Category Performance: Convenience Foods Lead, Spices Face Deflation
The convenience foods category demonstrated robust growth of 19.2% in Q2 FY26, with the sweets/Mithai category growing significantly by 26.4% during the festive season. New product launches in convenience foods doubled over the last year, now contributing nearly 8% to category sales. In contrast, the spices category experienced soft value growth of 0.1% despite a 5.9% volume growth, primarily due to a 22-25% deflation in raw material prices over the last two years, which the company largely passed on to consumers for pure spices.
Expansion in International Business and Digital Commerce
The international business, primarily in GCC countries, grew by approximately 14.7% and contributes about 20% of total revenues, focusing on value-added convenience food plays. Digital commerce, encompassing both e-commerce and quick commerce, saw a 49% growth in the quarter and now accounts for roughly 10% of domestic sales. Quick commerce has become dominant, representing about 70% of digital sales, a trend expected to continue in large towns.
Distribution and Innovation Initiatives
The company is actively enhancing its distribution network, particularly for Eastern in Kerala, by splitting channels for spices and convenience foods, digitizing processes, and improving trade marketing. Innovation is focused on local cuisine needs, with new chilli variants launched for specific regions and convenience food products like 5-minute breakfast versions and ready-to-eat Mithai gaining strong consumer response.