Double-digit revenue growth masks margin compression from inflation

Delivered revenue growth 19.4% YoY with stated 2.9% volume growth

124 Cr EBITDA / 776.2 Cr revenue = 15.97% margin, aligns with delivered OPM of 16.2%

Delivered PAT YoY growth exactly 19.2%, matches stated driver attribution

Delivered spice segment showed growth with pricing actions; 48% YoY spice commodity inflation cited

Management claims 15.9% margin vs prior year, acknowledging inflation-driven compression

Q2 volume growth 2.9%, sequential improvement from Q1 (prior call noted volume challenges). Shows pricing actions are not derailing demand as feared.

Despite 19.4% revenue growth, EBITDA margin only 15.9% vs FY26 levels. Management reiterates inflation headwinds will persist; no margin expansion guidance quantified.

Digital revenue from rest-of-India +33.6% YoY in Q2, up from +8.9% contribution in Q1 FY27. Project Bolt investment showing early ROI.

International business grew 11.7% in Q2 vs ambition for higher; GCC delivered 22.7% but geopolitical volatility noted as ongoing headwind.

We exclude finance costs, fair value loss on financial instruments, and foreign exchange loss from EBITDA, as per Ind-AS. We also exclude exceptional items and depreciation from EBIT to arrive at EBITDA.

We don't provide category-level volume numbers, but seen positive growth in both spices and convenience foods. Spice volume moderated due to ~20% inflation, but convenience foods showed better volume progression.

For pure spices, we track commodity prices directly. For blended spices, we use calibrated approach balancing volume and margin. Pricing actions are over 20% in spices. Approximately 48% YoY inflation in key commodities like chili and coriander; spice price stocks are now stable after crop cycle stabilization.

Pricing is led by market leaders; followers tend to follow within 21-30 days. Brands benchmark to wholesale prices. We've maintained pricing discipline. Long-term, brands regain share after price adjustments normalize. Volumes, ex-Kerala, have remained stable.

We've completed convenience food distribution separation (done June 2026). Built dedicated convenience food network. For modern trade, 50% program completion targeted for December 2026. Effective coverage improved ~10%, sales productivity up 1.27x. Spice distribution restructuring in 2 northernmost Kerala districts underway. Benefits to build progressively through March 2027.

Wet batter was Bangalore-only until model stabilized 3 months ago. Now scaling to Hyderabad; already picked up 5-7% market share. Objective is to stabilize Hyderabad, then scale to large cities. Focus on digital commerce scaling; rest-of-India wet batter sales up 33.6% YoY from improving digital channel.

Through Project Bolt, we're present in ~240 towns rest-of-India via quick commerce. Organized market has shifted 30-35% → ~40% in past 5 years in South; ~40% organized overall. We see opportunity to build presence in breakfast, wet batter, and sweets through quick commerce. Digital commerce revenue +33.6% YoY, faster than traditional channels. 3 focus categories: breakfast (dry batter, wet batter), sweets (15 new launches Q2), meals (MTR, Rasoi Magic). Competitive intensity varies; dry batter/breakfast dominated, wet batter competitive but we're #2, sweets growing with regional players.

Aspirations are beyond 10-12%. Historical data shows ~8% volume growth in deflationary cycles. In moderate inflation (5-7%), we estimate 8-10% volume growth possible. Pricing power exists for spices (2-3% annually), but blended spices provide 2-3% pricing room. Data on narrow timeframe. Sector contributes 2.5-3% consumption; modest pricing power due to consumer affordability constraints. We believe pricing power of 2-3% annually is achievable most of the time.

Reiterates aspiration for 10%+ growth. Prior call same messaging. Delivered 19.4% Q2 YoY supports this multi-year ambition but not a binding forward guide.

No specific FY27 margin target. Management states EBITDA margin 100 bps lower YoY due to inflation. Calibrated pricing balancing volume and competitiveness. Full benefits of Kerala restructuring and Project Bolt to build progressively.

Project Bolt in final quarter of implementation; expected to complete by March 2027 benefits rollout. Kerala restructuring expected to complete by March 2027.

Spice commodities (chili, coriander) up 48% YoY. Company took 20% pricing, limiting volume growth. Elasticity at ~2-3% limits future pricing and margin expansion.

EBITDA growth (12.6%) significantly trails revenue growth (19.4%), signaling pricing actions not fully offsetting inflation. EBITDA margin down 100 bps YoY to 15.9% despite 20% pricing.

Pricing actions and inflation moderating volume growth. Analyst Saurabh Beria highlighted competitive intensity in wet batter, sweets, and meals segments. Price-led competition may force margin sacrifice.

Kenya distribution restructuring expected through March 2027. Transition from legacy blended network to specialized channels (convenience food, modern trade, spice) creating near-term disruption. Benefits delayed until restructuring completion.

International business (11.7% growth) exposed to GCC volatility. Despite strong GCC growth (22.7%), geopolitical risks acknowledged. Macro inflation cycles limit pricing power in commodity categories.