Foods and Inns Limited (507552) Earnings Call Transcript

So any tentative targets, say, from 12% last year to maybe...

I can never give you a percentage, my dear friend, I've always told you ours is a cost-plus model. So if the raw material cost goes to INR 100, say example, if my markup is 7, I give it at 107. If the raw material price is 50, if the markup is 7, I give it at 57. So the percentage will always vary. So there is no guidance that we will ever be able to give on the percentage. Only the absolute growth in gross profit is something that we will be targeting internally.

[Operator Instructions] The next question is from the line of [ Previ ] an individual investor.

Yes. So this is Previ. I have a few questions, like how much percentage of sales coming from United States of America?

Around $7 million to $8 million.

In terms of percentage, sir?

It will be around 8%.

8%. And do we have any impact of USA tariffs, recent tariffs announced, something like 25% now and going to be 50% starting from 27 August?

It's just too early to say because always, there will be a knee-jerk reaction, few customers are continuing with their shipment, few customers are keeping on hold for next couple of weeks. So I don't think it's the right time to give this answer whether there will be a long-term impact or not. But nevertheless, I'd like to highlight that we are in a food product and we have seen from the earlier also that these are the last item, which is generally getting affected for any cross-border relationship or whatever. So we don't see any major impact. In fact, the projection which we have received from the customers just before this additional tariff, almost 20%, 25% growth we could have expected in this year. But for the time being, everything is on hold. Basically, for any future projected volume is on hold, we are -- everybody has a clarity on what will be the final duty applicable for Indian food products, which you are supplying.

Excellent. And next question is like, do you have any plans of adding Mango jelly to your portfolio, which is very, very profitable, around INR 5,500 per kg in the market.

We are in a B2B company. So yes, we are applying to many companies who are doing mango jelly or mango-related products. But directly, we are not there where we'll be launching our own product in mango jelly brand or whatever. So we being a B2B company, I think our focus is very clear that we would like to grow in this segment, though in a small portion, we are also exploring in frozen category on B2C. And obviously, spice is another segment where we are doing the B2C. But on the mango and other fruit pulp, we would like to remain into the B2B segment only.

Great. And coming to the equity numbers, I see the equity is expanded from INR 5 crores in 2023 to INR 7.34 crores in 2025, do we have any further plans of increasing the equity by way of rights issue or something else?

We always explore all the opportunities, all the -- which is good for the organization. So as and when any development, definitely, all of you will come to look. But as of now, we have nothing to say more than that.

Because the equity is very, very less. INR 7 crores is nothing nowadays. And we have the huge debt, which -- why can't we reduce it by increasing the equity by rights issue?

I think only equity INR 7 crores may not be a right parameter to judge. You have to say, take the share premium total equity, what is being invested in the organization apart from the results from the profit. So you have to add the share premium.

The reason for this question is like a lot of big investors, HNIs or mutual funds, look for the big equity and big market cap. So the only way to reach that, that is INR 1,000 crores in cap or so, I feel equity is the right way to increase and liquidity will be increased, so please consider it.

I agree with you. That's why I told you that companies always explore multiple opportunities. And as and when we'll able to take some decision on this, any opportunity, we'll let you know.

[Operator Instructions] The next question is a follow-up question from the line of Amit Agicha from HG Hawa.

Sahyadri Farms in the same region has been a very good model in which they have set up like a cooperative of farmers and they export together and maintain the quality at their end. Sir, do we have any kind of expertise to do something similar? And if yes, what are the steps are we taking to increase the personnel in that category?

Very good question. I think this is a very interesting question, I must say. Yes, we are in this business in 55 years. We are having farmers tied up for mango and guava category for a long term and where we supply pesticide, controlled or pesticide residue product in U.S. or in globe, and that business is growing. And second important is Sahyadri is definitely, they have the direct tie up with a lot of farmers, specifically for the fresh food. Grapes is their main business. Told -- just informed you that a few minutes ago, the government is launching new, new cluster development program. So we are also exploring that opportunity through that scheme, if we can tie up larger numbers of farmers for any cluster development near to our factory, we are exploring all this thing. If everything good go, I think then probably we can also have this type of tie-up with such scale of farmers.

But sir, we would require a lot of earthy kind of individuals like Vilas Shinde, who would head this kind of thing. And this cannot be done by somebody who's from corporate India.

I would like to restrict all these comments. It's not the -- I am not -- I mean, as a company, we are not going to comment on this thing. But I, as an MD, I'm happy to just say that if we are in experience with 50 years in this business and commanding position to be the #1 processor. We should only strive to be better from where we are and not worry about who is operating how, so...

Sir, you did not allow me to complete my question, sir. My question was not about the present management. It was -- I was saying that if we want to do such a model, we will need some people who are amongst the farmers and maybe they could have some shareholding or some -- I don't know how we could incentivize them, but this is a huge opportunity, and this could be like the cooperative movement for milk, what it did for the cooperative movement, the same thing it could be done for fruits and vegetables. And as you rightly said, you are right there right with this 50, 55 years experience. And so much goodwill is also there for us from the farmers. So I think just a model that we could probably pick up and it just needs some personnel from what was -- what you could call the kind of the soil kind of people, is the Board of Directors thinking between those lines?

I think -- Moloy here. What I'd like to say, we are already having this type of tie-up in Konkan region for the mangos. And however, we are exploring the similar kind of tying up for other fruits and vegetables in that part and through FPOs. Now as you know, FPOs is one of the -- I mean, instrument, which will be very effective to have a larger kind of tying up with larger number of farmers. And we are exploring that opportunity through the government's cluster program, where government is also -- would like to associate all this thing. It's a very initial stage, so not the right time to tell all this thing. But we are also working through that cluster development program, almost similar like other competition, what they are doing it.

How has been our experience with the PLI scheme? And have we -- do we see any traction on the brand recognition of our products? And secondly, sir, how are we taking to the q-commerce opportunity? Do we have any kind of sales increase from these categories from our private labels? And you talked about spices, is there any different strategies that we will pursue to really push these prices in the Western India?

So I'll take this question. So under PLI, there were 2 categories in which we were actually selected. One was category 1 and another was, category 3. Category 3 was related to branding and marketing. And in branding and marketing, basically, we had committed to spend around INR 5.4 odd crores, but this was all to be spent outside India. We were, as a company, not 100% ready to spend that money because of our distribution systems not being in place in the branded retail level. So we haven't spent that money, and we are not claiming anything back from the government. So we were supposed to get around INR 2.7 crores back from the government on a spend of INR 5.4 crores. So with respect to that, we are not claiming anything from the government. But having said that, the other CapEx that we did are under category 1 of PLI, under which we are supposed to get INR 145-odd crores. We've already received INR 50 crores from the government of India and another INR 95-odd crores is pending to be received in the next 3 years.

[Operator Instructions] Next question is from the line of Amish Kanani from Knowise Investment Managers.

Sir, if you can give us some sense of the volume growth, if not the margin, I understand you said Totapuri variety prices of crashed, so one, if you can give us some sense of the volume growth this year? And second, in that context, should we assume the, say, gross profit margin per tonne to be similar and hence, the gross profit margin also similar for the year? And if you can give us some directionally some idea, and the third and the last question, sir, will be on the debt side, given that maybe our working capital debt will be low, if you can give us some sense of where it will probably peak?

So I think with respect to the current level of inventory, if I were to actually take whatever we have actually processed, then the working capital should have ideally peaked because the working capital requirement is quite -- yes, so the working capital debt should have already peaked with the current level of processing that we have already done. So that is number one. Sorry, I didn't catch your first 2 questions.

So I was saying, sir, one, should we -- can we guide -- can you guide us on the volume front? And maybe last year, if I remember correctly, we had 8% to 10% volume growth. Should we assume a similar kind of growth this year also?

Around 20% is what we are expecting internally. Unless, you can correct me on that if...

Yes, yes. That's our target, yes.

And sir, also, we wanted to know, you mentioned the gross profit margin is normally similar. But you also mentioned that this year first quarter the mix was on a lower variety or lower per tonne kind of a thing. So maybe this year, first quarter margin was a little lower. The question is, sir, with Totapuri variety going down, assuming that, that -- I'm not sure whether that will be at a higher price. In terms of our margins being -- should we assume the gross profit margin per tonne to be similar or better? If you can just directionally guide, that will be helpful.

It should be better. It should be better.

[Operator Instructions] The next question is a follow-up question from the line of Amit Agicha from HG Hawa.

What are our total export revenues as opposed to our total revenues? And secondly, sir, do we participate regularly in export based seminars, conferences, et cetera, with stalls there? And who are our buyers in export? Are they like distributors or are they retail chains and one more thing, will any of this rupee recent depreciation, will it go straight to the bottom line for us?

This is Moloy, I'll to you. Our export turnover out of our total turnover is around 35% to 38%.

Last year was 40%.

Last year, 40%. So that was a turnover for export. For the participation in exhibition, yes, this is one of the main platform where we always participate, there are 2 major food exhibition taking place across the world. One is -- every alternative year. One is the Cologne and Anuga food fair, another is SIAL in Paris, another food fair, both -- all -- every year, we participate, must be last 25, 30 years, we're participating. We also participate in Gulfood. These are the 3. Apart from this, we are exploring that from next year, if we can participate in U.S. because that market is also growing. So probably one of the U.S. food fair, we would like to exhibit there.

Are there any plans to increase more fruits intake also like guava is like a big share for us. So is there any plan to now process even more fruits and vegetables and also, sir, are we in talks with any kind of further MNCs also to do some contract manufacturing for them?

We do not do any contract manufacturing with any MNCs, just a buyer and seller association with us. And where we get our order and we supply is a long term, it must be 2 decades, 3 decades, we are coordinating like with Coca-Cola since 2006, we're supplying -- we must be supplying since 90s onward. So that relationship is continuing. And second is, yes, we always talked to most of the big brands to have any kind of association, development, our product, new product for them. In fact, I think it's a good forum, we must say that our new R&D center is likely to start in operation in another 1 month's time. It is in Nasik, where we are doing a centralized R&D, where all our product R&D center will be centralized and we will be jointly working with the customers to develop their product. They can visit our facility, develop their product before the commercial launch. So this is -- I think this will be a good help for us to future growth. And from the customer point of view, yes, we are supplying to any reputed brand internationally like Coca-Cola, Pepsico. Apart from that, any big ice team manufacturing unit, we are there. We are also working on tomato product like Unilever for their kitchen brand. So these are the companies are there. If you see our top 10 customer or top 12 customer, these are all Fortune 500 companies who contribute more than 65% to 70%...

And sir, what would be the contribution of our top 10 customers to our total revenue?

Around -- top 12 will be around 65% to 70%.

That's very good. So just like we are so active in mango, tomato and guava. Is there any plan to add more fruits to this?

We are...

Or we would like to go deeper in these categories only?

No. These categories, definitely we are going more and more whatever value addition we can do, but new, new products also we are exploring, especially on Jamun is one of the products we are trying to see any opportunity. We see some traction on this segment. But we are working on vegetable slide in a big way because frozen category in our business is growing last 3 years in a significant pace. And we are adding more and more product in the frozen category, like frozen vegetables in India, from India, it's a big market, not only for the India diaspora, but also for the European and U.S. mainstream business. And we would like to take this opportunity. Hence, contract forming of the frozen vegetable category is the main focus for us. We are working with the farmers for pesticide control product and which is growing in a big way.

And sir, my question about q-commerce remained unanswered. Are we trying to get into those because now distribution is generally democratize. So a strong product company like yours should be able to sell even India retail quite easily.

Sir, as I think I told earlier also that we are not in B2C segment, our main focus in B2B. However, for the q-commerce, we are working with few reputed brands in q-commerce to tap for them and distribute. So not in our own brand, maybe in their other brands.

Their private labels will be done by us.

I mean just to elaborate on your earlier question, any Fortune 500 beverage manufacturers globally is someone whom we actually supply to as of today. And I mean, with respect to the product portfolio that you were actually mentioning apart from mango, we also -- I mean the mango, tomato and guava are the major ones, but we also do banana, papaya chilli, garlic, all these products are also there in our portfolio. So Capitol Food actually does a lot of chilli and garlic from us as such for their branded products. So we do sell to them.

And sir, can our spices not also be an entire separate large business on its own because now it's actually only INR 21 crores and with our kind of product procurement, et cetera, I mean, this category itself could be like a INR 1,000 crore category even, say, in like 10 to 15 years from today.

We have definitely underperformed. The first couple of years, I mean it was basically because of COVID that we didn't want to go big, but after that, we have now put the people into place, but the results have not yet started coming. So we have underperformed for sure, but we have larger numbers in sights for us.

And sir, how soon do we change people, if the results don't come in?

That's a tough question. It's not always about -- I mean, just getting the timing right. It is about believing in people as well.

[Operator Instructions] Due to time constrains, that was the last question. I now hand the conference over to the management for the closing comments. Over to you, sir.

Thank you so much, guys. I would like to thank each and every one of you for your support and your invaluable questions and presence on this call. Now I request the moderator to close this forum and wish you all a great evening.

Thank you, management members. On behalf of Foods and Inns, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.

Thank you so much.