Venky's (India)

Venky's (India) experienced a challenging Q2 FY26, primarily due to an unexpected fall in profit margins within the poultry and poultry products segment. This led to significant lower realizations, with day-old broiler chicks seeing a decline of ₹10.74 per chick and CBF birds a decline of ₹17.93 per kg over the 6-month period. The overall impact on the top and bottom line from these lower realizations was estimated at ₹140 crores. The company noted that while cyclicality is common, this year's prices were unexpectedly poor, exacerbated by festivals and adverse weather conditions in the northern region.

The poultry segment, which recorded EBIT losses of approximately ₹58 crores in Q2 FY26, is anticipated to recover in the second half of the fiscal year. Management highlighted that poultry prices began to move positively from the last week of October, now exceeding production costs. They expect better realization and operating profitability in H2 FY26, aiming to not only cover losses but also generate profit. The company maintains significant capacity, with broiler segment utilization at 67% and layer segment at 75%, ready to capitalize on improved market conditions.

The Animal Health Products (AHP) segment demonstrated consistent growth, with revenue expected to reach ₹370-380 crores by FY26, up from ₹335 crores in FY25. This segment is considered stable and growing, with 45% of its business from outside customers and 55% from group companies. The Oilseed segment also showed continued improvement, with EBIT margins now close to 3%, though still below the previous range of 4.5-5.5%. The company's SPF segment and Oilseed segment currently operate at 50% and 50-55% capacity utilization respectively, indicating room for growth.

Raw material prices for key inputs like maize and soya have seen significant declines over the past six months. Maize prices reduced by ₹1,131 per metric ton, and soya prices by ₹7,163 per ton. Management expects these prices to remain stable for the next six months. While lower raw material costs are generally beneficial, the company emphasized that realization prices, rather than just input costs, are the primary driver of profitability in the poultry segment. The impact of these lower raw material prices on the cost of production is expected to be reflected in Q3 FY26.

The Quick Service Restaurant (QSR) segment is currently in a breakeven phase, facing stress similar to the poultry business due to low demand. Sales volume in the QSR segment declined in Q2 FY26. Regarding GST reduction, management clarified that while the price structure was revised, it does not directly impact their realization. However, they expect a positive impact on demand for their QSR plant, which should aid in its recovery in the second half of the year as poultry demand picks up.