PATANJALI - Patanjali Foods Limited Share Price

Management Outlook:
Patanjali Foods remains cautiously optimistic for Q4 FY25, anticipating improved consumer demand due to easing inflation (CPI expected ~4.5%) and income tax cuts boosting disposable income. Urban demand recovery is expected to align with economic stabilization, while rural demand is projected to sustain momentum, supported by government MSP hikes and agricultural initiatives. The company aims to strengthen its FMCG portfolio, targeting 50% contribution from Foods/FMCG in 4 years, leveraging HPC integration and premiumization.

Key Highlights:

1. Financial Performance: Record Q3 revenue (INR 9,103 cr), EBITDA growth (+48.8% YoY), and PAT (+71.3% YoY).
2. Segmental Growth:
   • Edible Oils: Revenue of INR 6,717 cr (5.42% margin), driven by price hikes despite volume declines.
   • Foods/FMCG: Revenue of INR 2,038 cr (7.53% margin); staples faced margin compression (rising wheat/palm costs).
   • HPC Integration: Contributed INR 420 cr in Q3; operational synergies expected to scale by Q4.
3. Strategic Focus:
   • Expand digital/e-commerce channels (8% of sales, targeting 12%).
   • Boost marketing spend (2.5% of revenue) for brand recall.
   • Strengthen palm oil self-reliance (87k hectares under cultivation, targeting 0.5M hectares in 5 years).
4. Demand Trends: Urban slowdown (pressure on ghee/biscuits) vs. stable rural traction; nutraceuticals and honey showed robust growth.
5. Government Tailwinds: INR 10k cr allocation to National Edible Oil Mission aligns with long-term supply-chain goals.

Near-Term Priorities: Margin recovery in staples, HPC scaling, and cost optimization amid volatile commodity prices.

Question 1:
"Congrats on a good set of numbers. Sir, my first question is on what would be the volume growth in our oil business and realization because given the inflation which we have witnessed in the oil business, would you split your revenue growth in volume and pricing?"

Answer Summary:
Volume compression occurred due to price hikes: palm oil volumes dropped 40,000 tons QoQ, soybean by 5,000 tons, and sunflower by 7,000 tons. Total oil volume was 5.8 lakh tons in Q3 (vs. 6.07 lakh tons in Q2). Revenue growth was driven by price hikes (partly due to import duty increases) rather than volumes. Palm oil's premium pricing over soybean/sunflower reduced institutional demand. Margins improved to 5.42% (INR 364 crore EBITDA), partly due to a one-off INR 60"“65 crore inventory gain. Future margins are expected to stabilize at 4"“5%.

Question 2:
"Got it. Got it. And second is for the margin for the oil business, we have seen good improvement in our oil business. So I would like to know, is there any one-off in this where you have realized some inventory gain or anything like that? Or this kind of margin is quite sustainable going ahead?"

Answer Summary:
EBITDA margin of 5.42% included a one-off inventory gain of ~INR 60"“65 crore. Underlying margins remain healthy due to price pass-through and lower hedge ratios (10% in Q3). Margins are projected to normalize to 4"“5%, with nine-month FY25 margins at 4.65%, reflecting stable trends.

Question 3:
"Sir, now the HPC integration is complete, is there any operational synergies still to be done or whether we are done with the operational synergy and we can expect full performance from 4Q onwards and the margin profile for the same as well?"

Answer Summary:
HPC integration (effective 1 November 2024) is largely complete, with IT, distribution, and teams aligned. Minor operational streamlining remains, but Q4 is expected to reflect full-scale performance. Synergies (e.g., distribution efficiency) may take 15"“18 months.

Question 4:
"Sir, any update on the ghee as last quarter, you had said that we are restrategizing ghee. So what is happening on that right now?"

Answer Summary:
Ghee revenue was flat at INR 356 crore (vs. INR 355 crore in Q2) due to muted urban demand. Winter typically boosts sales, but high prices and urban spending pressures caused stagnation. Distribution expansion and SKU diversification are underway, with recovery anticipated post-budget.

Question 5:
"Sir, can you please provide the split of food between, say, specialty food and staples? And second point like in the press release, you have mentioned that 2.5% was the A&P expenditure. So it is proportion to overall company sales, how we should read it?"

Answer Summary:
Foods revenue split: staples (INR 744 crore, -4.7% margin due to rice price volatility) and ethnic foods (INR 744 crore, 19% margin). A&P spend was 2.5% of total revenue (INR 226 crore), the highest in 10 quarters, aimed at brand-building. Staples' margin dip is temporary, with stabilization expected.

Question 6:
"Sir, my question was on Home and Personal Care business, where you have specified that dental care was about INR 223.47 crores of sales. How should we see it? At what rate it would have grown? How has been the performance in terms of market share?"

Answer Summary:
HPC's dental care revenue was INR 223 crore (two months post-integration). Growth is projected at 10"“12% with new product launches and expanded distribution. Margins are healthy, with operational synergies expected to stabilize by Q4.

Question 7:
"On the Biscuits division, INR 395.37 crores of sales and 1.64% year-on-year growth. The largest player in this category, they have grown by about 6%... why this muted growth?"

Answer Summary:
Biscuit growth slowed to 1.64% YoY (6% annual target) due to input cost inflation (palm oil +30%, wheat +12%) and no price hikes. Volume-driven growth faced headwinds, but premiumization and distribution expansion (target: 2 million retail outlets) aim to revive growth to 15% in FY26. Margins stayed healthy at 11.51%.

Question 8:
"Sir, how has the January been with respect to demand? And how is it looking for rural and urban both?"

Answer Summary:
January demand remained sluggish in urban areas, while rural demand stayed stable. Urban recovery is anticipated post-budget (tax cuts, inflation easing). Rural demand is bolstered by MSP hikes and government schemes, with sustained momentum expected.

Question 9:
"Can you give guidance on distribution, how it's working for us with the modern trade and general trade? How are the margins here, inventory days and demand from this channel?"

Answer Summary:
8% of sales come from modern trade/e-commerce (target: 12%). Edible oils contribute 5%, biscuits 3%, and Nutrela 9% via these channels. Margin improvements focus on quick commerce expansion, social media investments, and premium SKUs. Rural distribution is expanding in underpenetrated regions (South, East, Northeast).