AWL Agri Business (NSE:AWL) Q2 2026 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the AWL Agri Business Limited Q2 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. From ICC Securities. Thank you, and over to you, sir. Yep. Thank you, Steve. Hello, and good evening, everyone present on the call. I, on behalf of ICIC Securities, welcome you on AWL Agri Business Limited's q two FY twenty seven earnings call.

0:50 I would like to thank the management for giving this opportunity of hosting the call to us. From the management, we have Mr. Srikanth Kanhari, CEO and MD and Mr. Pankaj Goel, CFO. I will now hand the call over to the management for any opening remarks. Thank you, and over to you, sir. Hi. Good evening, everyone, and thank you for joining us for AWL's Q2 FY 'twenty seven earnings conference call. On behalf of AWL, I extend a warm welcome to all of you for our Q2 FY 'twenty seven earnings conference call. Joining me today are members of our leadership team who will also be available to address your questions during the Q and A session following my remarks. We have delivered a strong performance in Q2 FY 'twenty seven with consolidated revenue growing 26% year on year to INR 22,202 crores supported by underlying volume growth of 14%.

1:50 Importantly, this growth was accompanied by healthy operating profitability, reflecting the strength of our diversified portfolio and continued exhibition across businesses. Our food and FMCG business remained a key growth driver, delivering 32% revenue growth and crossing INR 2,200 crores in quarterly revenues. Let me begin with our food and FMCG business, which remains at the center of our long term growth strategy. Our strategy remains clear to build one of India's largest and most trusted food platform and deli essentials and center of the plate categories. We see significant opportunities as consumption increasingly shifts towards branded and packaged foods, particularly across the staples such as rice, wheat flour, pulses, besan and sugar.

2:41 During the quarter, growth remained broad based across our food portfolio. Our rice and flour businesses maintained double digit revenue growth. Within rice, our basmati portfolio continued to gain market share while Covinul also delivered double digit revenue growth. We are particularly encouraged by performance of Fortune pulses, which grew over 40% year on year with quarterly revenue crossing higher than 100. Pulses remain a largely unorganized category with significant headroom for branded penetration. We are strengthening our regional assortment and expanding distribution, including through peak commerce to capture this opportunity. Our health and convenience portfolio is also gaining meaningfully with LTM revenues exceeding INR 1,400 crores.

3:34 We continue to expand our offering across premium health oriented, and convenient food products supported by innovations such as multigrain atta, olive oil, cold pressed mustard oil, and other differentiated products. The larger opportunity for AWL is to build multiple scalable food categories, leveraging our trusted brands, integrated manufacturing capabilities and extensive distribution network. Moving to edible oils, the business delivered a 5% volume growth during the quarter. Despite a challenging operating environment, we maintained our market share supported by growth in domestic oils, particularly mustard, groundnut and cottonseed oil. Our focus remains on protecting our market leadership, strengthening our branded and premium portfolio and maintaining disciplined execution in a dynamic commodity environment.

4:29 Industry Assignation delivered another strong quarter with volume growth of 25% supported by continued momentum in Oleochemicals and Specialty Chemicals. Oleochemicals and Specialty Chemicals now contributes around 45% of segment revenue, reflecting the increased importance of this business. Our focus is on scaling the value added specialty chemical portfolio, leveraging our backward integration, manufacturing scale and access to Wilmer Group's global R and D and combination capabilities. We see this as an important long term growth and profitable driver of AWL. Coming to our distribution and channel strategy, our direct retail reach now stands at 9.7 lakh outlets, while our total retail reach remains at around 26 lakh outlet.

5:21 Our focus is increasingly shifting towards improving throughput of outlet productivity and distribution efficiencies. Within our channel, ClickCommerce continued to deliver a strong growth of 40% year on year. We remain focused on improving assortment, visibility and availability across leading platforms, particularly for our packaged food portfolio. Our Forika business grew 22% with LTM revenue crossing INR 800 crores, while branded export delivered strong growth of 72% year on year. These channels are becoming increasingly important in expanding the reach of our brands and creating additional growth opportunities for our food and FMCG portfolio.

6:07 Before discussing our financial performance, I would like to briefly reiterate our approach to reporting profitability. We have been disclosing normalized gross profit and EBITDA to better reflect our underlying operating profitability. Under the Indian accounting standards, gain or losses on commodity derivatives used to hedge underlying raw material exposures are classified under other income or other expenses, although they form an integral part of our operating profitability. Accordingly, our normalized gross profit and net EBITDA are calculated after incorporating these derivative gains and losses. Coming to our financial performance for quarter two FY twenty seven, consolidated revenue grew 26% year on year to INR 22,202 crores supported by underlying volume growth of 14%.

6:59 Normalized operating EBITDA grew 11% year on year to INR $6.23 crores, reflecting continued profitable growth across our diversified businesses. Profit before tax grew 4% year on year to INR $3.44 crore, while profit after tax stood at INR $2.39 crore, marginally lower by 2% year on year. The marginal decline impact was primarily attributed to minimum corporate tax computed on revenue of Bangladesh subsidiary under local regulations, which impacted consolidated tax expense during the quarter. For h one FY twenty seven, consolidated revenue grew 22% to INR 42,250 crores supported by underlying volume growth of 11%.

7:47 Normalized operating EBITDA increased 25% to INR 1,378 crores. Profit before tax grew 27% to INR 822 crores, while profit after tax grew 22 to INR 591 crores. Coming to segment wise profitability, in food and FMCG, quarterly revenue grew 32% year on year to INR 2,215 crores with an EBITDA margin of 3.2% in line with our FY twenty seven guidance range of 3% to 4%. As we continue to scale our packaged food portfolio, our focus remains on improving profitability through operating leverage, better product mix, and distribution efficiencies.

8:32 We expect margin to improve progressively from these levels with an aspiration to move towards high single digit margin over the medium term beginning FY twenty eight onwards. In Edible Oil, EBITDA stood at approx... INR 4,100 per MT during the quarter, again, in line with our guided range of 4,000 to 4,500 per MT. This reflects the disciplined pricing, effective sourcing, and stable operating performance despite volatility in the commodity environment. Industry initial delivered EBITDA of INR 4,300 per metric ton, well ahead of our guidance range of INR 3,000 to 3,500 per NT.

9:18 The stronger profitability was supported by an improving product mix, particularly the increasing contribution from oleochemicals and specialty chemicals, which accounted for 45% of the segment revenue. Outlook. Looking ahead, our operating priorities remain broadly unchanged, and we remain confident about AWL's growth trajectory. Our priorities are clear, accelerate the scale up of our food and FMCG business, strengthen our leadership in edible oil, expand our value added oleo chemicals and specialty chemicals portfolio, and improve profitability through scale and operating efficiencies. For food and FMCG, we remain focused on sustaining strong revenue growth while maintaining margin within our guided range of 3% to 4% for FY twenty seven.

10:09 Over the medium term, we expect profitability to improve as our portfolio is scaled and operating efficiencies strengthen. In AWL Agri, we continue to guide on mid single digit volume growth, gradual uptick in market share and maintaining EBITDA per ton within our guided range of 4,000 to 4,500 per metric ton. For industry essentials, we expect the increasing contribution of value added oleochemicals and specialty chemicals to support profitability while continuing to work towards our guided operating parameters. Overall, our focus remains on delivering sustainable and profitable growth with food and FMCG becoming an increasingly important contributor to AWS scaling and earnings over time.

10:59 We believe our strong brand, integrated manufacturing platform, and extensive distribution network position us well to capture the growing opportunity in India's packaged food market and create sustainable long term value. With that, we can now open the floor for questions. Thank you. Thank you, sir. We will now begin with the question and answer session. Session. The first question comes from the line of Dheeraj Mistry with Jefferies.

12:02 Sir, my first question is on your cash flow where we see that there is a INR 600 crore increase in inventory. And because of that, our operating cash flow has become negative for this... For first half. What is the reason behind that? See, the inventory increase, of course, is a buildup in... Buildup because of the fact that we had a sluggish September, number one. And number two, also, to some extent, the kind of supply chain disruption that we are witnessing in the sunflower particularly. So company is actually building little more inventory on sunflower so that we don't go out of the market given the fact that we have a very strong brand as far as Sunflower is concerned. So this is one part of it. So because of that, the inventory buildup... Actually, inventories have gone up by 6,000 crore, not 600 crore.

12:56 And that is primarily been then funded through a working capital line. So... And that's why the lines which funded this 6,000 crore is more of a funded lines and therefore gone into cash flow presentation into the financing part of it. And therefore, the cash flow from the operation is shown as negative. But it's it's something which gets corrected in this upcoming quarter, which is o and d. So on an annualized basis, we expect that the inventory level should come down to normalized level? Yes. Yes. Very much. And finance cost increases also because of that? Yes. It is because of that. But in in our scheme of the thing, most of the finance cost which increase, we recover it in our pricing part. And therefore, in spite of increasing finance cost, will see that profitability has not been impacted as such.

13:48 Got it. Got it. And sir, we have seen that last quarter we were at EBITDA margin of almost 2% and now it has dropped to 1.1 or 1.2%. Like, for the full year basis, what kind of EBITDA we can assume for AWL? I understand that you guide for absolute EBITDA per ton. But from the margin perspective, how do you see and how's the overall pricing to play out during the festival period of time? See, I'll tell you. If you if you look at a run rate of revenue, we are already at 42,000 crore of revenue right now. Okay?

14:34 And if this run rate continues the way it is, I think we should be close to 85,000 crore of revenue. And with the kind of rate which we are looking at as far as the EBITDA is concerned, we are we are there with the guidance. Think EBITDA margin right now, it is at 2.6. And maybe full year also, we can be close to 3% kind of number we can look at. This you are talking on overall company level. Right? This I'm talking on overall company level because because if you if you ask for me for edible oil, I would speak in per ton basis. Per ton basis. Yeah. But in food, we don't look at per ton now. We look at only a percentage.

15:25 But with this, I think we should end the year at close to INR 2,600 crore of EBITDA on INR 85,000 crore will turn out to be close to 3% kind of number. Got it. Got it. And can you throw some light on Oleo Chemical and what kind of although you have given your guidance in terms of Oleo Chemical, but this kind of profitability and growth rate is sustainable over the medium term basis? No. I don't I don't think this 26% kind of growth in oleochemical is sustainable. This is... See, oleochemical has got a two two... Three parts to it. One is, of course, oleo. Sorry. Industry... Sir, you are you are asking for oleo chemical or industry? Essential. Industry industry. Industry retail has got a three segment to it. One is, of course, oleo chemical, one is castor, and one is your devoid cakes of mustard and soya, so I think. Now this devoid cake of mustard and soya is is is all depends. It's a very dynamic. I mean, if you have a parity, normally, do. Otherwise, you don't don't do.

16:28 This time, we had some parity, and therefore, we did this, and therefore, this underlying growth of 26%. But going... We always give a guidance of, you know, high single digit or low double digit kind of growth for the industrial which which we should continue in h two. And therefore, blended growth for the full year should not be should not be kind of 20. So the 20 degree is not a sustainable one. This is a one off in this quarter. In coming quarters, we should be there at 11 to 10, 11% line of number. Got it. Got it. And lastly, on overall demand and supply perspective, given that we have very bad monsoon during the year And now that festival season, harvest season is coming and everything, how do you see the commodity price playing out in India? And have you seen any impact in terms of demand, especially in the rural or urban market?

17:29 Would you like to highlight something on demand also and supply issues perspective also? Okay. I can give you some sense on how did we fare as well as the rural and urban is concerned when it comes to q q two and h one h one particularly. See, for us, the urban grew better than rural. Fact number one. But the difference between both is not that staggering. I mean, rural grew little less than urban for us. So, yes, there is some kind of pressure which we saw on the rural number one. Number two, with this deficit in rainfall of 12, 13% overall India and then couple of territories experiencing deficit more than 30, 35, 40% also.

18:25 And with the weak growing areas of, like, Rajasthan, Haryana, Punjab, where deficit, I I understand, is more than 30%. So, therefore, the increase may have some impact on the Kharif harvest and the ruby sowing. So I... I'll keep my fingers crossed at this point of time because India somehow has become very well... I would not say very well, but reasonably good irrigated country as compared to the last fifteen, twenty years. And therefore, many a times we have seen that shortfall in the rainfall is recovered by the irrigation. So, like, areas of Rajasthan, Haryana, Punjab, they are quite very well irrigated areas. I hope they will recover it, any rainfall shortage. But having said that, any impact of this coming on Kharif crop and Ravi sowing may have impact on the demand for sure.

19:20 And rural, as I said to you, rural, we have already seen less than urban for us. And if this happens, then we may see some sluggishness in the rural demand. The inflation is under... Again, another spoil factor which is going on right now, which is sitting at a very high with headline CPI touching close to 6% as we speak today. And within that CPI, 6% food inflation is already at seven, seven and a half percent kind of level. So if that's kind of all these things, parameters continues away, we may see some bit of sluggishness in demand. But, fortunately, now India is getting into this festive season. You know? So the festivities will also spike in some demand and which may negate these kind of pressures. So we are hoping that we should continue to get that volume growth of mid single digit or a high single digit for overall scheme of the things for AWL in h two.

20:30 Got it. Got it. Thank you very much. I will call back in the queue. Thank you. The next question comes from the line of with ICC Securities. Please go ahead. Hi. Can you hear me? Yeah. Hello? Yeah. So just a couple of questions. Firstly, congratulations on good results. Could you give us some color on the export business? So I think branded exports have grown at 59%. So what markets are driving these exports, and how big is this opportunity? See, export is growing quite fast for us. We we actually have started concentrating more on the branded export in last couple of years. And our target markets basically are the markets where you have...

21:22 With concentration of Indian diaspora, which is US, UK, Europe, Australia, and to some extent, the Indian Subcontinent also. And we are getting quite good response from there because Fortune remains a well known brand in India, and therefore, all people who have gone... Moved out of India and there, they are quite familiar with Fortune and are giving good good demand to our products. This is... This business is is... Right now, it has a very low base. I mean, we we are doing it close to 800 crore kind of number in the branded exports. But this is soon in next couple of years going to be quite significant for us, not only on the top line, but also on volume because... On the bottom line because it's a very margin accretive business given the fact that you get quite a good premium out of export business.

22:18 Okay. Got it. Thank you. And just one more question. I think the government is implementing standardized tax sizes from September. So is... Do you see any impact on the industry, and is it, like, a favorable thing for companies like us? Yeah. The standard type is always favorable for branded companies like us because then you have a value level playing field across. And standardized pack will also, to some extent, increase the volumes for us. Because last full year, we had seen that lot of different size of tax sizes are going and was first time seen in the industry, which was never seen earlier. With standardized tax coming in, I think it will boost volume growth, number one, and also it's good for companies like us because now nobody can play around with the damage and sell the product at a lower price on the face of it. Yeah.

23:16 Alright. Thank you. The next question comes from the line of Dinesh Doshi with Prospero Tree AMC. Sir, just you have mentioned that in the second half, you may witness the company may witness the higher single digit volume growth. In response to the answer was that shortfall of rain. So are you sure that in spite of the lower roller demand, we can report the higher single digit volume growth in the second half?

24:08 See, if you look at h one, h one, we delivered 11% volume growth. Okay? Now h two, as I said earlier also, h two is generally a festive season, okay, in India. And therefore, the... Usually, the... There is a pent up demand at least for the food products. I'm not talking of the FMCG product, which are kind of discretionary FMCG product. So there is a differentiation between FMCG, which is a discretionary, and there is a FMCG food FMCG, which is a daily essential products. Right? You know? So going on that, I feel while we have delivered h 111%, I think full year we should be there at eight, 9% kind of number. Okay. And, sir, at the console level for the... This quarter, quarter two, the revenue growth is around 26%.

24:58 Volume growth is 14%, but our PBT growth is only 6%. I am also aware that you are suggesting the margin per ton, but PBT growth is not matching even the volume growth. Why, sir? See, there are... In our scheme of the things I tell you, there are a lot of things which keep moving from one quarter to another quarter because because there is something called mark to market gain, which is there. And since you have to declare the result by taking cutoff for a particular quarter or half, you declare the number. And therefore, lot many times, the mark to market gains or losses either moves between one quarter to another quarter, and, therefore, you will see the h one number is quite better than the quarter two.

25:48 And when you look at a longer period of two quarters, three quarters, four quarters, everything gets normalized. And, sir, in government has reduced the import duty on the edible oil in the last week of the September, and since we are maintaining the higher inventory, will it impact our profitability in the coming quarter? It will not impact the profitability as such because because of the fact that we have a brand in front of us. And it impacts to usually, the players where... Who don't have a brand equity in the market, and therefore, you can sustain the prices at which you have maybe bought the inventory. Yes. There might be some impact, but I think we should be able to recover everything from our pricing. And that's what we are saying that our h two should be similar to what which we have delivered in h one.

26:44 Yeah. And if permit me, which which product is the Madur we we are selling other than the sugar? Madur, right now, we are selling only sugar. We have not expanded it to any other product. Right now, it is only for the sugar which we are selling. Okay, sir. Thank you. Thank you. And all the best, sir, and happy Diwali in advance. Thank you. Thank you. The next question comes from the line of Vinay Shukla with PhillipCapital India. Just quickly on Parmal prices. So given the El Nino is quite interesting in Indonesia, so just wanted to know, do you see any kind of threat on production side in the coming quarter?

27:36 And also on the wheat prices, what will be the expected installation in wheat prices in 3Q and 4Q? Sorry, Jose. Your question... First question was on Alnino in Indonesia and impact on the palm oil prices. Yes, sir. And second was on the wheat prices. Correct, sir. See, as you know, in Indonesia is, of course, it is quietly talked about subject nowadays. And, I mean, whatever we have heard from experts commenting on this, I think the palm outlook may not be that... May be bullish, but not that bullish, and therefore, you may have some impact of production because of the.

28:24 Given that, yes, in near term, you may see some bullishness in palm oil, but not the very high bullishness, which which is what which is what generally the commentary is going on around the commodity world as we speak today. And we are prepared for that given the fact that we have a quite a strong risk management structure, so we read the market carefully and accordingly take our calls. Number two, on wheat, yes, sir. Currently, the prices are going up for the wheat, and in fact, it is good for us given the fact that we carry good amount of inventory to ensure that our products delivered is at the same quality across the year, and we are able to recover the carry.

29:09 So it is a different fact that government of India today is holding sizably good amount of wheat stocks, and they have all all the levers available with them to check the going going up wheat prices. But as I said in... To to answer earlier earlier question also, if you have a brand equity in place, normally, any bullishness in the price going up or going down in a... On a bearish market, I don't impact too much on our scheme of the things. Understood, sir. So just just follow-up on the website, sir, that even there is expectation of weaker Ravi season. So can we expect maybe after a couple of quarters, we could expect sizable inflation in these prices also?

30:11 Yeah. Right now, it is very difficult for anyone to, you know, predict on this because the heavy sowing is, I think, is yet to happen, actually. Heavy sowing will happen in next couple of days. So nobody knows what is going to actually the moisture levels of the soil while it is all very low, which has been reported. Unless you have these basic in hand, I don't think we can predict any outlook on prices or outlook on production, anything else. Yeah. Okay. And lastly, specifically on the FMCG and core business. So any... Can you able to share the near term strategy or gameplay to offset the rural slowdown impact on our business? Already, you have mentioned high single digit type of growth.

30:57 But is it a kind of a blended high single digit growth, or will it be more of a business? Yeah. Carry on. Carry on. Sorry. So food will continue to grow at double digit. I mean, this quarter, we delivered 28% of growth. And so I think food, we don't see any issue that we will continue. And if you look at h one also, the the growth of volume growth is 24%, revenue growth is 27%. So the food business, our growth of 25 plus percent of revenue should continue either way. And the strategy is very simple because packed food is very, very prevalent on the modern trade and alternate channels including ecom and bigcom. So we are investing quite heavily on these channels. We are also investing on urban towns where these products are being bought more.

31:57 So we will go with that strategy, and I hope... And then the strategy is working also for us, and we we hope that we will continue to work for us. Okay. So is it possible to get some channel mix for food and FMCG business? This is the last question from my side. Yeah. So the so the food and FMCG business, we... You can have the 75% is coming from a general trade and 20% from the alternate channel, but the growth is actually... The the growing channel is alternate channel rather than a than a general trade. General trade is also growing, but alternate channel is growing far far more than that. Understood. Understood. Understood. Thank you so much. Thank you.

32:43 The next question comes from the line of Madhu Rathi with Counter Cyclical Investments. Please go ahead. Sir, I wanted to understand regarding our net debt and this INR8500 of trade receivables. Should we... How should we include this in net debt calculation, if you can help me understand? Sorry. Come again? Sir, I sir, I wanted to understand what is our current net debt and this 8,500 crores of trade credit. How should we consider this number when calculating net debt going forward? See the see the net. See, this 8,500 or trade credit is nothing but a supplier's credit which we obtain for our imports.

33:29 Okay. And it's not basically a fund based fund based line which we have used from the market. I think for for calculating net debt, this this 8,500 should not be considered. Got it. So this is not a working capital line. Is that a fair understanding? No. These are working capital lines, but, actually, these are nonfunded working capital lines in a sense. The funds doesn't get committed on the day one. So the funds get committed only on the day when you pay, actually. So it's only a letter of credits which have been issued and therefore a trade credit. And therefore, it's not a funded line. That's what I'm saying. Got it. And, sir, is there any plans to demerge our industry essentials or the Oreo chemical business?

34:21 No. I don't think there is any plan. It's a very significant part of our business given the fact that it's a forward integration for us of a palm refining. And it's a integral part of entire value chain of the business which we capture for the palm particularly. Got it. Sir, just one final suggestion would be if the management can consider a share buyback as our share is available at a very favorable valuation. So that is it from my end. Thank you so much and all the best. Thank you. Thank you. The next question comes from the line of Anikat Kamli with ICIC Securities. Please go ahead. Yes. Hi, sir. Congrats on a very good set of numbers.

35:07 So congrats on... Also congrats on good numbers and tops. So my question was on tops regarding what would be the geographical breakup because during acquisition, I remember it was mostly North India and Central India product. How is the distribution expansion happening, and what is the progress on it? No. See, right now, see, it's almost more than a year since we acquired JD Foods, which which has got a brand called Topps. And at the time of acquisition also, we had said that this company right now predominantly is into the North and basically North India. And given the fact that AWL itself is very strong in North, we want to first leverage our distribution itself to make this company more stronger in North itself before we try out any other markets.

36:06 Having said that, we have been able to leverage AWS distribution, and, of course, the growth is significantly good there. We have been growing at plus of 25% in JD Foods, and we have been able to maintain the margins also, which were there. Having said that, yes, now the geographies needs to be expanded. Now we have started working particularly on the East Part Of India and the Central Part Of India. So these are the two territories that we would be targeting in next maybe one, one and a half years and continue to put our trust on the North itself because North still not yet fully completed. There's still huge amount of scope, which is still left in North itself for the company.

36:53 Plus these two markets, East and Central will come. Once these are stabilized, maybe we will think of West and going to the South. Okay, sir. Thank you. And just one more question on food and FMCG. You mentioned about the channel mix. What would be the profitability? If you can just rank the channels according to profit. Channels are, see, more or less similar. I mean, whether it is a GT or any alternate channel, the profitability right now more or less remains same, while alternate channel is more profitable. But since since we are investing in these channels on various promotions, themes, searches, fill rate. There are a lot of things which we have to spend amongst, and therefore, the profitability is more or less similar to what we see in general trade as well as alternate channel.

37:49 Okay, sir. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Okay. Thanks, everyone, for joining the call and taking taking this opportunity to ask questions to us. If at all you still have any questions left, do write to our investor relation team, and they will certainly respond to your questions in more detail. Thank you very much, and have a good good night. Thank you, sir. On behalf of ICC Security, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.