PATANJALINSENovember 16, 2022

Patanjali Foods Limited

8,781words
118turns
13analyst exchanges
4executives
Management on call
Dhiraj Mistry
ANTIQUE STOCK BROKING LIMITED
Sanjeev Asthana
CHIEF EXECUTIVE
Kumar Rajesh
CHIEF FINANCIAL OFFICER
Chintan Kotak
INVESTOR RELATIONS - PATANJALI FOODS LIMITED
Key numbers — 40 extracted
₹8,500 thousand
lts were, some of the main highlights and where we stand in the business today. We had revenue of ₹8,500 thousand Crores. We had an EBITDA of about ₹205 Crores and a PAT of ₹112 Crores. This breakup broadly some
₹205 Crore
stand in the business today. We had revenue of ₹8,500 thousand Crores. We had an EBITDA of about ₹205 Crores and a PAT of ₹112 Crores. This breakup broadly some of the big businesses I will speak about. In
₹112 Crore
day. We had revenue of ₹8,500 thousand Crores. We had an EBITDA of about ₹205 Crores and a PAT of ₹112 Crores. This breakup broadly some of the big businesses I will speak about. In the oil and vanaspati se
₹5,900 Crore
broadly some of the big businesses I will speak about. In the oil and vanaspati segment, we had ~₹5,900 Crores of revenue. I am just rounding of the numbers. We had a negative EBITDA of ₹450 Crores which is
₹450 Crore
e had ~₹5,900 Crores of revenue. I am just rounding of the numbers. We had a negative EBITDA of ₹450 Crores which is about 7.63%. In the foods business we clocked ~₹2,400 Crores which was very substantial
7.63%
evenue. I am just rounding of the numbers. We had a negative EBITDA of ₹450 Crores which is about 7.63%. In the foods business we clocked ~₹2,400 Crores which was very substantial uptick. This was larg
₹2,400 Crore
. We had a negative EBITDA of ₹450 Crores which is about 7.63%. In the foods business we clocked ~₹2,400 Crores which was very substantial uptick. This was largely driven by one big factor that the foods bu
₹1,600 Crore
from Patanjali Ayurved which got integrated from July 1st came into unfold on which we did about ₹1,600 Crores of revenue. We had an EBITDA of ₹460 Crores and we had a margin construct of 28.8% on this. Nutr
₹460 Crore
rom July 1st came into unfold on which we did about ₹1,600 Crores of revenue. We had an EBITDA of ₹460 Crores and we had a margin construct of 28.8% on this. Nutraceuticals also was a big uptick we did ₹400
28.8%
about ₹1,600 Crores of revenue. We had an EBITDA of ₹460 Crores and we had a margin construct of 28.8% on this. Nutraceuticals also was a big uptick we did ₹400 Crores of revenue, ~₹140 Crores of EBIT
₹400 Crore
rores and we had a margin construct of 28.8% on this. Nutraceuticals also was a big uptick we did ₹400 Crores of revenue, ~₹140 Crores of EBITDA about 35% of margin and then of course we have other business
₹140 Crore
construct of 28.8% on this. Nutraceuticals also was a big uptick we did ₹400 Crores of revenue, ~₹140 Crores of EBITDA about 35% of margin and then of course we have other businesses like biscuit and consu
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Guidance — 20 items
Mr. Sanjeev Asthana
opening
“Kumar Rajesh is there on the call as well so anything that you may have we will be happy to answer those.”
Mr. Sanjeev Asthana
qa
“So, there will be some tapering off and I think we should get back to about 15% to 18% margin run rate what we had originally mentioned also which could go to 20% but broadly that will be the margin rate at which we will run between 18% to 20% depending on a particular quarter but we should have the run rate on the business.”
Mr. Sanjeev Asthana
qa
“So, we always maintain that our typical margin on the business is between 2 and 4% and where we on account of the good brand and distribution that we had we were close to 4% that was clear cut objective which the management has so 5% will be perhaps on the higher side but 4% certainly that objective that we have and we want to work towards it.”
Mr. Saurav Jalan
qa
“For the year ending FY2023 we expect to reach the positive like last year.”
Mr. Ankush Agarwal
qa
“Sir again on the receivable so this increase rate that we have so is it a onetime thing and in the coming quarters we would be reducing that credit period or this will be sustained.”
Mr. Kumar Rajesh
qa
“Ankush Agarwal: No not the amount obviously our food business itself has grown substantially so the amount I am not talking about that but the kind of credit period so it was alluded that due to the festive season and first time that you are disturbing this products you have to offer higher credit period so over time as you settle down do you expect to reduce this credit period or do you think it will sustain for couple of more quarters.”
Mr. Kumar Rajesh
qa
“It will be recovered within the last quarter of this financial year.”
Mr. Kumar Rajesh
qa
“Sir for the oil business this quarter was obviously one off but now since the price is relatively stabilized so from Q3 onwards do we expect stable business in the oil.”
Mr. Kumar Rajesh
qa
“Sanjeev Asthana: No, I do not anticipate any big challenge.”
Mr. Kumar Rajesh
qa
“I think the volatility witnessed was unprecedented but I think this quarter looks reasonable and positive and likewise next quarter should also be reasonable and positive but we should be pretty much consistent on our business run rate and the profit targets.”
Risks & concerns — 6 flagged
It was 15% when we acquired from Patanjali, but our effort is to take it closer to 18% and that is the work which we do but to maintain this rate of 25% plus will perhaps be a challenge.
— Mr. Ajay Sharma
Sanjeev Asthana: No, I do not anticipate any big challenge.
— Mr. Kumar Rajesh
Nutraceuticals as you know maintaining the current quarter sales would be very difficult to accomplish, but I would imagine nutraceutical business overall for this year we should target anywhere between ₹700 to ₹800 Crores of revenue.
— Mr. Sanjeev Asthana
On the distribution side we continue to work actively on building up a healthy pipeline of the new products on the nutraceutical side on the food business so that is evolving and developing so I am reasonably confident that one quarter one off challenge in the world at large should be behind us and we should be able to manage it.
— Mr. Sanjeev Asthana
Rajesh I think it has been a mixed quarter and I think it has been a very volatile quarter and we can understand the reason why the inventory losses came but I would like to touch upon the food business how is the way we look at the business that the segment has about ₹2,700 Crores of capital employed against which you have a segment of liability of close to ₹1,300 Crores.
— Mr. R Kothari
Number one, I will address the more difficult part of the equation that in terms of how do we manage the oil business.
— Mr. Sanjeev Asthana
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Q&A — 13 exchanges
Q
The food segment which got transferred from Patanjali Ayurved Limited made a turnover of ₹1,241 Crores in this quarter and honey and atta we previously took over from the PAL that made a revenue of ₹192 Crores. The traditional soya and TSP made a revenue of ₹169 Crores. These all is equivalent to ₹1,600 Crores and ₹400 is nutraceutical, biscuit, breakfast cereals and noodles makes it ₹354 Crores. So, these all together makes ₹2,399 Crores of revenue.
Mr. Ankush Agarwal
So, Sir how sustainable is this number especially in terms of margin because when we applied for the food business that time we were talking about ₹1,200 Crores kind of quarterly run rate but now we are almost touching ₹2,400 Crores. No. ₹2,400 Crores includes food segment and others. Others include nutraceutical some part of oleochemical and soup noodles also which is 43 Crores but food business… So your comment was excluding nutraceutical is what you are saying. Just quickly I will take a jab at the answer. So, ₹2,400 Crores is the overall segmental revenue of the food business which does in
Q
Sir, as you have mentioned about distribution and new sales initiative so if you can throw light on the same.
Mr. Sanjeev Asthana
Patanjali has a large base of yog karikarthar a direct channel who have got direct access to the consumers so there is a lot of effort which is going in two areas especially on the foods and nutraceuticals that going through the traditional channels is obviously a route which is available but also building that channel up to push for sales directly to the consumers since they interact and if my number is right it is almost 1 lakh plus are the number of people who directly interact and interface with a very large base of consumers themselves who are followers of everything that Patanjali does s
Q
Hello Sir and congratulations to the entire team for excellent set of numbers. Sir two questions firstly, can you help me again with the margin on the acquired food business the ₹1,600 Crores revenue.
Mr. Kumar Rajesh
Acquired food business from PAL, Patanjali Ayurved Limited. Yes. So the acquired food business from PAL in the current quarter contributes revenue of ₹1,241 Crores and after including honey and atta and TSP and buddy this is near about 1600 Crores and contributes to a margin of ₹1,600Crores. Got it Sir and just wanted to understand what is the corresponding number of revenue in the previous year for this acquired business just wanted to know what is the growth in the acquired business compared to last year. See previous year it was not a part of our company. This was in the segment of Patanjal
Q
I wanted to check for this ₹1,241 Crores sales what was the EBITDA corresponding to that.
Mr. Kumar Rajesh
25.5% as explained by Asthana Sir. Okay so when was this supposed to be acquired, the EBITDA was 15% which is now 25%. 15 to 20% it was at that point of time. I think it was around ₹600 Crores on turnover of ₹4,000 Crores right. I am just wondering Asthana Sir did say something about festive and all that but what explains margin expansion from 15%, 16% to 25% is that like a one-off benefit on the raw material side or what basically. Mr. Sanjeev Asthana: We got a big benefit on the ability to pass on at a premium to the consumers because the Diwali demand was exponential this year and the last
Q
Asthana ji I am little bit confused on the oil business ₹200 Crores was actually realized losses and about ₹250 Crores of unrealized mark to market losses right.
Mr. Sanjeev Asthana
That is the exact break up. Okay thank you.
Q
Good morning Sir. Thanks for the opportunity. Sir my question is regarding the different business segments. Sir if we look at the food and nutraceutical business it is much more stable and has better margins and there is visibility of growth and consistency but if we look at the edible oil business it has an inherent volatility due to macro factors, government policies of the exporting countries of CPO so Sir have we given any thought to demerge this two business because at the current rate it seems that food and nutraceutical business can itself generate a PAT of around ₹1,500 to 2,000 Crores
Mr. Sanjeev Asthana
So right now there is no thought and no such idea we have because we have great strength in the distribution and these businesses of food and nutraceutical also benefit immensely from the oil business also that we have and the synergies between the businesses, the synergy between the teams, the cost structure that we are able to maintain and the infra that we have, it is a good business, so there might be volatility but in terms of return on capital and the number of times we can rotate the capital on the edible oil business is pretty healthy. So our effort has to be if we can rotate this capi
Q
Thank you for the followup. Sir again on the receivable so this increase rate that we have so is it a onetime thing and in the coming quarters we would be reducing that credit period or this will be sustained.
Mr. Kumar Rajesh
Some of the amount maybe sustained for a year. Mr. Ankush Agarwal: No not the amount obviously our food business itself has grown substantially so the amount I am not talking about that but the kind of credit period so it was alluded that due to the festive season and first time that you are disturbing this products you have to offer higher credit period so over time as you settle down do you expect to reduce this credit period or do you think it will sustain for couple of more quarters. It will be recovered within the last quarter of this financial year. But obviously we will have to extend s
Q
In this third quarter we should be able close to about 5 to 7% growth we should get over 4.5 lakh tonne, my estimation. Again, one small correction I am saying that we got of a massive spike in purchases in Diwali across the board for everything so that I think it we should do this quarter. We should again be able to match it to 4.5 lakh tonnes and maybe some growth in that. Mr. Kuldeep Gangwar: No I was asking about Q2. Q2 it was Y-o-Y 10% volume growth.
Mr. Sanjeev Asthana
It was more than 10%. Mr. Kuldeep Gangwar: Second part like food business what should be the growth expectation in coming quarters or years like run rate basis. See foods minus the nutrela and earlier products what we had. The purely the acquired part of the business that we are speaking about when we took over that business it had a run rate of about ₹1,000 Crores a quarter. Our target is that we should be able to grow that between 10 to 15% consistently over that so again as we mentioned earlier that the foods in the last quarter because of the early thing which was there but our expectation
Q
Just wanted to understand about the nutraceutical business so this quarter we have done around ₹400 Crores of revenue with 35% margin so is this like now the new quarterly run rate for the nutraceutical business considering the last year revenue base was very small so what kind of revenue are you looking for nutraceutical segment for this year and next year.
Mr. Sanjeev Asthana
So, nutraceuticals the last quarter was obviously a very bumper quarter. It was aided by several steps including as you mentioned earlier that direct channel sales opening up so we are reasonably confident that we want to maintain run rate of 10% to 15% growth. Market is growing almost at 20% and over and above the market rate so we should be in a very healthy footing directionally. Nutraceuticals as you know maintaining the current quarter sales would be very difficult to accomplish, but I would imagine nutraceutical business overall for this year we should target anywhere between ₹700 to ₹80
Q
Hi Sanjeev Sir can you throw light in terms of what is absolute number of EBITDA we are expecting for 2023 and 2024 including food and non food business and what can be in 2024 for also the EBITDA in absolute terms for the food business if you can throw some light, overall EBITDA and how much it is contributing from the food business.
Mr. Sanjeev Asthana
So broadly Amit in terms of the next year 2023-2024 our target is that we should clearly and that is an objective I am laying out that we should be in the range of ₹2,200 to ₹2,400 Crores of EBITDA margin is what the company is targeting for next year. How much will be contributed from food business, non oil. So, the objective is and without going into the specifics of which business generates what our objective is that food business from the turnover perspective next year should be closer to about 25%, but from a margin contribution should be about 50% of the company’s profits. Understood and
Q
You said that you had a turnover of almost ₹350 Crores in biscuits so what kind of margins to move again in biscuit business.
Mr. Sanjeev Asthana
So, biscuits typically our margin construct is 8 to 10%. Last quarter especially we had this because of high commodity prices on all three. Sugar was stable but oil and wheat prices were high so that is why it got impacted but last quarter to answer your question specifically we made 5.5% margin on that but typically it is about 10% business. In your opening comments that oleo chemicals have turned into FMCG and other segments so what is the contribution of oleo chemical in this quarter. Mr. Sanjeev Asthana: Rajesh ji can answer that but it is very, very small. It is insignificant. It is good
Q
Mr. Asthana and Mr. Rajesh I think it has been a mixed quarter and I think it has been a very volatile quarter and we can understand the reason why the inventory losses came but I would like to touch upon the food business how is the way we look at the business that the segment has about ₹2,700 Crores of capital employed against which you have a segment of liability of close to ₹1,300 Crores. The way my maths work is that there is a net capital employed of ₹1,400 Crores in your food business. If you see the current quarter the EBITDA is in the range of ₹600 odd Crores maybe this is an exceptio
Mr. Kumar Rajesh
So just I would like to mention here this business is acquired first time when we are doing this business first time here. So our debtors and creditors position relating to food business has been increased so that contributes to the overall capital employed and it will be normalized in due course obviously. As I have also mentioned in this call earlier that by the end of this year it will be normalized but some capital employed obviously will be there due to the nature of this business. We will have to extend some credit so obviously correspondingly we got the credit from the suppliers and ven
Q
Thank you and firstly my sincere thanks to all the investors who have joined the call today. I would like to summarize with couple of key points to leave you all with. Number one, I will address the more difficult part of the equation that in terms of how do we manage the oil business. We have got very strong governance around the hedging policy, hedging strategy so the company follows that strictly as to all the controls which are world class system has. We all have very good backgrounds from all these companies and we have demonstrated that earlier and this exactly will be maintained so whet
Management
Speaking time
Mr. Kumar Rajesh
26
Mr. Sanjeev Asthana
23
Moderator
15
Mr. Ketan Gindoria
9
Mr. Ajay Sharma
9
Mr. Dhiraj Mistry
7
Mr. Ankush Agarwal
7
Mr. Amit Dange
6
Mr. Bharat Shah
5
Mr. Saurav Jalan
5
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Opening remarks
Mr. Dhiraj Mistry
Thank you. Good morning all and welcome to the call. First of all I would like to thank the management of Patanjali Foods Limited to allow us to host the call. We have with us Mr. Sanjeev Asthana - Chief Executive Officer, Mr. Kumar Rajesh - Chief Financial Officer and Mr. Chintan Kotak – Investor Relations. Without further ado I would like to handover the call to the management for their opening remarks. Thank you.
Mr. Sanjeev Asthana
Thank you very much and good morning to everyone who has joined the call. I will give a brief summary of how the Q2 results were, some of the main highlights and where we stand in the business today. We had revenue of ₹8,500 thousand Crores. We had an EBITDA of about ₹205 Crores and a PAT of ₹112 Crores. This breakup broadly some of the big businesses I will speak about. In the oil and vanaspati segment, we had ~₹5,900 Crores of revenue. I am just rounding of the numbers. We had a negative EBITDA of ₹450 Crores which is about 7.63%. In the foods business we clocked ~₹2,400 Crores which was very substantial uptick. This was largely driven by one big factor that the foods business from Patanjali Ayurved which got integrated from July 1st came into unfold on which we did about ₹1,600 Crores of revenue. We had an EBITDA of ₹460 Crores and we had a margin construct of 28.8% on this. Nutraceuticals also was a big uptick we did ₹400 Crores of revenue, ~₹140 Crores of EBITDA about 35% of margi
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