Bikaji Foods International (NSE:BIKAJI) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to BIKAJI Foods International Limited q two FY twenty seven earnings conference call. As a reminder, all participant lines will be in the 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 mister. Thank you and over to you sir. Thank you. Good afternoon everyone. Thank you for joining us for Bikaji Foods International q two FY twenty seven earnings conference call. From the management team, we have with us, mister CFO and mister COO.

0:50 I now request mister to take us through the pre opening remarks. After which, we can open the floor for question and answer session. Thank you, and over to you, sir. And wish you wish you all a happy. From Bikaji lines, this quarter has been extremely encouraging. Our top line growth is close to 13% in quarter two. And this this quarter is going to last year, Diwali was in quarter quarter two. But initially, Diwali shifted towards quarter three. So if you look at only snacking business, so snacking growth is close to 202020% plus, 22% value growth of snacking. And order volume growth in snacking is close to 15% plus, but since overall value volume growth is 5%. So shifting of three... Sweeping lifting has changed overall quarter, but when we when we... Looking at quarter two and quarter three, overall, the result is quite encouraging.

1:46 From snacking, overall growth perspective, for the go to market in snacking has grown 20% plus versus focus market 35% plus plus in snacking business. When we look at quarter two and quarter three combined, so earlier, we are we are targeting 15% plus growth at YTD level. But looking at quarter... October has been passed by year at '6 November. So we we are looking at high teen growth at a year, YTD level. We are looking at 17% plus growth at YTD level. That's what that's what we are currently looking at. From sweep shifting also, what we're seeing that quarter two, three, three fifteen others are in negative, but quarter two, quarter three combined, the the result is quite same. The result changed. And and also, there has been quite encouraging. We're seeing good demand across from central trade, modern trade, and across all channels.

2:39 From bottom line perspective, our gross margin in product product was 34.4%. And overall, what we've seen at stand alone levels, when we're post banking business, we've seen close to 1.7% of gross margin hit, when we've seen a gross margin. So largely, what we're seeing that overall, we are seeing multiple price increases at all key raw materials from from end market level. And overall, this year due to a bad drop, we're seeing good price increase in all process. And in July or August, when we closed all the modern trade deals and we're staying in everything, closed all the MRT. So we'll not increase the prices in September, October. But, yeah, immediately after this, we are being... We're taking price correction of close to 3% just for the value. We increase the MRP, and price session will be done just for the value. But quarter two quarter two, we've seen some price in gross margin as well as EBITDA.

3:32 Overall, price rise will be 3% from fifteen... Two fifteen November. But overall, what is... What we're looking at, let's say, after the crude reduction of... Price of crude reduction in decrease and packing material loss is also softening and edible oil price is also softening with 3% to 4% prices in softened in last two weeks. So despite increase and softening of packing material, edible oil prices plus new crop will come in, so overall complete price impact will come in fourth quarter. So from direct coverage lens... So, Manoj, you can take on distribution coverage. Sir, hello? You are not audible.

4:40 Oh, sorry. Hello? Am I audible now? Yes, sir. Yeah. So good afternoon, everyone. While we spoke about the... You know, gave him understanding on how that we are looking at in terms of our top line. But the drivers of this top line is certainly the most important, the SMB element, which is about increasing continued coverage in this quarter as well, we added growth to about 20,000 outlets. And by end of the year, we are poised to over deliver the numbers what we call for ourselves in the beginning of the year. In terms of demand, creating demand, we did quite many initiatives in this quarter. So first and foremost was to drive on the small pack, what we call them as OTG.

5:32 OTG pack, which is 5 and 10 rupees for us. We did a Paytm campaign wherein, you know, you get a payback... Cashback of as much amount in collaboration with the Paytm team. They're extremely well. We did it on over 33 SKUs created some new films, TVCs with on a different kind of automatic ad on Robo... RoboCad. So we created 11 films and featured 13 plus products in this films across prime time and many of the channels there.

6:27 Also, and as part of our marketing initiative, we did a tag with all the loop then and did some of the extension of our campaign work we have done last year, because we saw the... And then because we also... I mean, I mean, she loves Bikaji and. So we extended that stuff. On KBC, we were there on on the prime time wherein our wish pay dip were also given to the winners of that stuff. So our social media cost, Talking about the performance, in quarter two, if you look at... I mean, I... Will be repetitive what we just said. So volume growth overall, if you look at it, 5%.

7:14 But the four business, which is our snacking, so ethnic snack and western snack. Ethnic snack grew at 19.7% in this quarter, western snack, a 44% growth in this quarter. Overall, growth looks a little muted on the back of package fee, which which is is the shift which has moved from quarter two to quarter three. So the catch up, you know, one would see it in the quarter three, and this is what we've always have been talking about that fees business and gifting is to be low... Look summation of quarter two and quarter three. Now with this shift, there is a slight stuff if you look at that quarter two or year on year. So last year quarter versus this year quarter two. So the role of package...

8:05 The role of ethnic snack or the western snack is by far high. That is just an outcome of because we still move. Otherwise, broadly, picture remains as Focus market market performance, focus has grown at 7.6, core has grown at 17.5, and the others are looking at a degrowth. But just to call out, the contribution of speed and gifting is high... Highest in the reverse order. So highest in other states, then focus and then for. And that's what is the the reflection in these numbers. Otherwise, if we knock off these weeks and get in, the numbers look exactly in line with what we have been talking about.

8:58 So, again, the impact of family pack have grown less. This again, as I've... You know, again, the impact of fees moving to the next quarter. But in first fact, if you look at the the fantastic growth approach of 20%, which is five and ten, the fact, and also where we did the premium offer. Over to you, Rishab, I think broadly have covered on distribution business. So from a retail business perspective, we have the... Our current store current store is 34. And in in this balance in last six months, we've opened six more... Five, six more stores. So we'll be at 40 by end of this year. And our overall business contribution is... We've grown at 68% in quarter in quarter...

9:50 58% in quarter two and overall 64%. So overall, at a yearly level, we've been doing it at same same pace in the last six months when October is peaking for retail season, and this year, October and November will be for retail operation. And the is doing amazingly good job for us. We also opened Bikaji Food in in September, May, and this is very well. From overall bottom line perspective, so the overall gross margin increased at the standard level is hit by close to 1.7%, and overall EBITDA is close to 12.6 at the overall company level. That's all the presentation. Thank you. Thank you very much.

10:47 So should I start the question and answer session? Yeah. Please. Okay. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assemble. The first question is from the line of from Philip Capital India. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity.

11:36 First question on the focus market. Since the the growth in focus market has been quite low. So in previous quarter, 8%, first half growth was 2%. Even when I look at your three q twenty six, think it's two to 7%. So just wanted to understand that the focus market was impacted just only because of the package, should the demand shift take you? Or also, there is some of the competition factor from the other regional player? And secondly, and also if if you were able to share the... What kind of percentages like that? What percentage of the sales of package where it's coming from the focus market? Okay. So one is, if you look at, you know, in terms of focus market, you have outperformed in all the focus markets. So there's absolutely no impact. I mean, thirdly, competition is strong, which has always been. But in terms of that, have lost some... We... I mean, we have not witnessed any of the weaker growth in any of these focus days. So this solely is an impact of gifting and and free.

12:48 Now to your question on how much do they contribute. So if you look at enough overall business contributions, it is about 12 and a half percent. And now if you look at that a full year level is our sweet contribution. Whereas if you look at in focus rate, the contribution is 25%. It's two s of that stuff. And then the other states, it's even higher. And hence, in the fourth state, it's much less. So that's the kind of impact. Understood, sir. So from a second half second half management perspective, what kind of growth should we expect on overall company level and also for a focus market? So focus market should be growing upwards of 20%, 22, 23% kind of, and overall growth company, what we are looking at is a is high fee score.

13:44 For second half? No. That content overall. So it's certainly IT for plus 20 in second half overall as a company. A full year level, we will close the year in a on a IT support of 17%. And, also, just wanted to understand, you have seen some mention about October in terms of demand rises for global. So were you were you able to share any quantum of growth? Will it be more than 50% or any idea or any qualitative or quantitative basis for the October month and going forward, ma'am? Sir, purely, what we can give you a guidance to work is we can talk about because October is passed. Right? So the momentum on our snacking business continues, you know, booking growth, what we have seen, which is demanding.

14:33 That's one. And, of course, we certainly is a, you know, a very, very high figure, but that is a shift of, you know, which moved from this September to October. That's the reason. But, yes, you said, if I look at month on a y o y basis, it would be upwards of 50%, sir. Understood. Let's ask question on margin sector. Can we expect on a to implement on margin level because of the improvement on product level and also we have taken a pricing increase to flow through of our previous quarter pricing increase coupled with the new pricing that we are making, maybe 40, 50% in this in. So what would the what would be the gross margin expansion could we see next quarter on this level? So full price impact of price increase in quarter this quarter three will come in quarter four. So we'll be taking price increase and we'll get forty five days off in this quarter. So next next quarter will be full of price increase. Also this quarter, are in September also we were not at a major price rise versus cost pressure was high.

15:36 So and now we are seeing some softening of credit prices, the crude has came down, so some technical prices softened. So overall, what we've seen looking at this quarter four will be normalized margin and will will go with high for next year from a gross margin and EBITDA perspective. Quarter three will be largely in pressure, but quarter four will be normalized gross margin in EBITDA. Understood, sir. Very helpful, sir. Thank you so much. Thank you. Thank you. The next question is from the line of from. Please go ahead. Thank you. Some of the categories, have told us that out of home consumption last few months in q two and q one got impacted because severe heat wave was there. If you if you could clarify in your category how much is the impact of out of home travel consumption, etcetera, do you think there is there is any significant impact or all this because of the festival change, this slower volume growth is there?

16:45 So, Abhish, if we look at out of home or what we call five and ten single conversion stuff, so they've grown faster knowing that stuff. So we did not see any impact on that stuff. Can we say our western snack grew at 44%? I mean, they're primarily or the most of it is the on the go or out of home transaction and all. And similarly, in our ethnic snack or the traditional snack when we see, so we have done fairly well. So for us, we as an organization did not felt as much heat on this time. Sure. Second and last question, lot of other FMCG categories, we have seen sharp price hike. For example, detergent and even in the slightly adjacent category, like, paints, etcetera, we are seeing double digit hike.

17:35 So I wanted to understand, is the competitive scenario a bit higher than, say, two years back? And how has the the number one player taken or are they also taking similar, say, three and a half percent price hike and similar date? And, generally, local players lose market share when this kind of shop inflation happen. So any time you are seeing there or it's as fierce competition from local players as earlier? Yeah. So, Abhish, on your first point, in terms of, I think, that's not an apple to apple comparison when you look at home care versus the food food strategy. Right? So that's one. Second is, it so happens that, you know, during festive time. So we are same products getting to our gift boxes, and this preparation starts much earlier than it actually starts going to distributor or to the sales.

18:28 So now after product, when it's already done, so it becomes now extremely extremely difficult of concluding if we rise to take the price side and make profit. So that's the hard call one is to take and keep up the momentum. So therefore, you know, those as sharp or across price increase could not have been taken. And this is what Krishna has just said that immediately after the one before maybe about fifth... You know, so November 15 onwards, you will see all MRPs going up and all this stuff. That's one. So against competition, if you look at... So I think this is not a choice you will see across that these prices would be going up because end of the day, commodities and all this stuff, no good impact them as well as much besides the efficiency improvement, whatever one would do. The third thing, you know, you spoke about was on...

19:21 The third question was? Sorry. Sorry, Abhish. If you can please repeat, sir, that is the third point you asked was. I'm sorry to interrupt you, sir. You're not audible. You're sounding very distant. Yeah. Is it better now? Yeah. It is okay. So for that, so in the price tag points of five and ten, how much gram is cut you're planning or already have taken? So it will be about a gram. So which would be about three to 4% kind of on a weighted average on the small side. Okay. Understood. That's a quick question. Thank you.

20:10 Yeah. Thank you. The next question is from the line of from. Please go ahead. Hi,. Thank you, and good afternoon. Manoj, this shift in Diwali, which has happened understandably, most of the sectors has been pointing out. But for us, the gifting and February season is also a very strong sales in terms of overall packs and even fleet market. So I'm just looking at on a base of 18, 19% of fleet contribution. Is the indicative growth is much higher and sharper in this quarter? Because I also see there is a sweet...

21:01 There is an inflation which is setting. So have you taken also the position that these price increase will happen after 14, or you are dispatching with the price increases? So, Shri, we do not sit on high inventory. So now the last would be only two days at the max. So fifteenth onwards, you'll see that stocks moving out of our factories with these amount. It may be on the shelf, you will see a delay of five, seven days, but from complete July date standpoint, so fifteenth would be the date. Okay. And the first question, yes, you will see quarter three growth would be far far higher. So which will make up as of YTD December, the numbers would look drastically different. Yeah. I I understand that because all these main players are talking big numbers and they make contribution.

21:52 Yeah. So I I am saying because you already have established network, you would definitely have a better group. Yeah. Okay. Mister, my second question is on the inflation. What is... Because I just was looking at prices, which should be about $85.90 rupees, which has already suddenly gone up to $1.35. So is that inflation is also considering? So my question here is two parts. What is the weighted inflation we are having? And will this 3% will help us to recoup substantial part, or is there any sort of the price increases that are required in December? So, Sirish, so this three three and three three and a half percent price increase will will manage because what we are looking at, level of price is also softening.

22:37 And fourth quarter, the food is coming down, so packing material also softening. And like potato, this October this quarter is on peak because this is the end of the season. So by December end, December mid, we'll see fresh copper coming to a few purchase. So largely, what we're looking at, at quarter four will be we will see some benefit from purchase also... Price also, and this pricing is what we're taking. So I think that we will not require any further price increase till till March end, unless something different happens. So you're trying to say that now, at least for next three, four months, we are covered with the price increases and. Still March, don't see any major price increase. Okay. Okay. Yeah. Last question on. I think you you have given the guidance, the number of stores and everything.

23:27 But if you look at last two quarters and next two quarters, how full year for t h f look like? I mean, obviously, you will have road map for number of stores and how things are happening such as. But if you can give me some help of how full year looks like for. So this year, like, last year, we had close to 100 rupees in. This year, there'll be one sixty, one seventy type of thing. This is 70% growth in. And from a perspective, they they will be at close to 31, thirty thirty two, so 33 stores largely. So that will be at the end what we look here... It looks like. And the growth momentum continues. We... The day we've opened two, three different type of... Experimenting with two, three different types of models, which can be.

24:13 Like, currently, they they are close to... They are opening 2,000 profit... Two twenty five hundred profit outlet. They are they are trying to reach six, seven hundred profit. This can be opened in every malls of India. So we are doing multiple hire... Multiple experiments. Also, we are focusing on sweets and gifting. That's a very big business and very much profitable. So that should we are focusing on because, ultimately, we want to make a brand in in this. We we don't want to only focus on QSR because that's not so much profitable. Our major focus is that when when India think of premium, it should be TSF. And that's where we are majorly focusing on. We're also trying to do few onboarding to start a few brand investors, evaluating few brand investors. So we'll we'll... Next year, we'll be onboarding some brand investor in TSF. So customer thing is... So we we look... TSF is a big brand in next three to four years, and it can grow at 50, 60% at least for year on year for next four, three, four years. That's the potential it is the brand has.

25:11 Yeah. That's exactly I wanted to tell you that recently I saw that they have cut the size of the store also. So Yeah. Since the new modern and expansion strategy, which is worked or I'm sure you guys would have done some pilot. So I think the previous weeks is is one of the fashion. The fashion, it is it is picking up very well. I mean, you look at how players are also benefiting. So I I... I'm I'm just asking this question. If this store growth is is one thing, which is really going to drive and maybe my point is that it would smaller store, the per square feet revenue momentum will come down or will go up because then you are focusing on the premium side of the business. So what we are... So current first six months, we are seeing six to 8% same store growth in in in the stores. In the same store Lucknow, when they have six stores and it's from last four, five years in auto fund, investment Lucknow. And Lucknow also, they are growing at 610% plus store level growth.

26:08 Okay. So... Yeah. So we are looking... This this brand is doing good reasonably. And also, we are we are, like, we are trying three type of model in The US. One is almost 7,500 square feet model. One is 700... Seven eight hundred square feet. And we are also opening one very premium store in Gurgaon in the next month, Mopi. So that that will be the name of by TSF, and that will be most experiential where we will make live Baklava coffee from Soco beans. So, largely, that will be more experimental and more experiential to uplift the brand of. So we're trying to do a vertical thing. But, yeah, overall, this this opportunity, what we look at is is is extremely encouraging. Okay. Thank you, and thank you, and happy to you.

26:55 Thank you. Thank you. The next question is from the line of from Systematics Group. Please go ahead. Yeah. Hi, sir. Good afternoon. Thank you for the opportunity. Just wanted to check that in an earlier call, we had said that because of the disruption in the manufacturing that we had faced in our Bikaner location due to the Bengal elections, we would evaluate alternative locations for for this to avoid this. Just wanted to check what is the progress on that? And also, if this kind of thought, this kind of move is happening then, will it impact the GI tag that we enjoy for the BIKAJI? That's the first question. Okay. So, yes, I think you rightly recorded. So first half of quarter one was impacted on account of this the correlation, the production issues, all that stuff. But if you see the momentum from the second half of quarter one, it is on the high floor.

27:56 Bourgea growth is not in the life of 20%. That's what it is. In terms of future such disruption to proactively work towards it, what we have done is that, you know, our mother deposits have come up. So as to ensure we we can at any point in time increase our inventory at that level. So so as to ensure our plan for any disruption, forcing disruption. Now to the point on geotagging, yes, this is... If unless and until we produce it in Bikaji, we cannot try Bikaji. So that one stuff, the rest of the places, we will be missing out of the the base in Bikaji of the rest of it. But we'll ensure that how do we have, you know, undisrupted people of Bikaji there, and for that, we have done those agreements.

28:46 Got it, sir. So the the alternate locations where this will be manufactured, well, we will not be able to target as Bikaji Foods. Right? You cannot call it Bikaji Foods. Got it, Second second, sir, what seems to have impacted the other expenses for the quarter, which has grown by about 30%, what is setting in there? And related question to that is, you spoke about margins earlier on the call. Possible for you to give a numerical guidance on the full year margins. Yeah. So from excel perspective, largely what we're seeing that on con... On consolidate level, the gross margin impact is close to 0.6%, but on channel level, it's 2%, close to 2% compared to last quarter.

29:31 And also what we're seeing in this quarter this year that all the expense at each line level, like manufacturing fuel costs, logistic costs, because diesel prices increased. So overall, each price has increased this year. But this... In this quarter, what... Overall, at level, what is employee employee cost, we're some efficiency because because overall, we have this and then a good good growth in this quarter over last quarter one. But in a very strong level, point that's... As I explained, which is which is big because with point 7% increase in ad cost compared to last last year. So we are we are investing in advertising because we want to continue the momentum what we what we are building as of now and Yeah. Like long. Our focus paid in snacking is growing at 30% plus in snacking largely this quarter, and the same momentum continue... Continuing in October. So that's what we're majorly focusing on and focusing advertisement and building building momentum. But overall, each cocktail, we're seeing some price increase.

30:33 Right. And, Bikaji, any any guidance for the full year operating margin? So full year operating margin, firstly, currently, we are close to 12.6, close to 13% EBITDA as of now at H1. And and at a year... Full year level, what we see this quarter four will be, of course, higher than this. Quarter four will be thirteen, fourteen, thirteen, thirteen, thirteen Quarter three will be little challenging. It is challenging because we have not taken price increase in in... From September, October, and we've seen some major uplift in cost pricing. And this... You'll get benefit in about two, three, five, forty days in this quarter. So quarter four will be good. So overall, at exit run rate, we'll get 39... Or 30% plus plus EBITDA at Alright.

31:22 So that's it for me. Thanks for the best and season greetings to you and the team. Thank you. A reminder to all the participants, you can press star and one to ask questions. The next question is from the line of from HDFC Securities. Please go ahead. Right. Thank you for taking my question. I'll conclude with the previous answer. Like, for q three, you guided for bit muted margin. But here, we will have a substantial share of fees, which is a margin accretive. So don't you think we'll be able to sort of improve or maintain our EBITDA margin?

32:10 So q three, of course, fleet fleet contribution will be highest in in q three, October largely. And December December very long will be less less of fleet. But overall, what we've seen the increase, we've seen increasing segmental and sugar prices in in in concrete perspective. And now in September of course, we're not taking any big price rise, and we're seeing all pressure. So this this quarter, second, 40% of the quarter, we'll see good margin, but, yeah, first 60%, there was a muted margin. So overall, quarter four will be will be building what we see that it will be 13% plus gross plus EBITDA, in fact, even higher. But, yeah, that's what we are we are looking at. The quarter four will be exit 100 will be normalized normalized EBITDA, normalized gross margin.

32:59 Oh, thank you. My second question pertains to, like, in fees, if we combine q two and q last year grew 9%. So, like, any any sort of expectations here for this year? Like, how we are Sure. In the growth will be? Yeah. So now if you will see why it is December, so quarter two, quarter three, if you look at, so it will be upwards of 10%. Okay. This is good to know. And last question pertains to your A and P spending. If you can highlight, like, what is the current... The A and P spend we have done in this quarter? And additionally, if you can talk about this Paytm cashback, like, what is the period? And also, just wanted to check on, like, how we account for this cashback scheme.

33:50 So on the Paytm offer, so this is a collaboration with Paytm. So what we do all collectors on comcoms for is ours, and the redemption is picked by the the Paytm team in that stuff. So that's how it goes. So it is, like, whatever... I mean, so the POP on ground, ATL, DPL, whatever do we do. So along with our products, we say the the Paytm advertisement also do happen. So that's the benefit what they get. Also, when the Paytm benefit with this collaboration is that they get more customer acquisition. Right? Because no customer is then entitled to, you know, use Paytm, and that's what all is their benefit. But the payout does not go from our pocket, so therefore, it's a much cost effective for what what we do.

34:37 Recap if you can run through on the A and P scheme. Okay. From A and P, you know, target for the full year, what you budgeted in our email was close to 2%, and we'll be maintaining this 2% for the full year. And, Manuji, can you highlight this premium cashback period? So, yeah, so this is still this is still March. Okay. September till March. That's the period. So this is more a longer period compared to the last time. No. Last time was... Last time, we did it for six months. Yeah. The... So this time, because we said the value would be coming in. So that's what we... So till March, this would be existing. What we'll do is that, say, in the beginning of the March, we will start, you know, pumping in the non promo stock as well. So, you know, the endeavor would be that come April 1, there are no Paytm stocks left in the market.

35:34 And within... There will be from our side, from from Paytm perspective, just the change of. There will no major investment that we're not giving any money to for the cash flow. It's a quality approach. And they'll be doing this thing for the... Yeah. No. This was the clarity I was expecting. Like, I was of view that whether we are incurring any cost. But this is because we thank you. It's the Thanks for answering my question. Yeah. Thank you. Sure sir. Thank you. Happy Diwali. Happy Diwali to you all. Thank you. A reminder to all the participants, you can press star and one to ask questions. As there are no further questions from the participants, I now hand the conference over to the management for closing remarks.

36:34 So thank you all for being part of this call. And and they were able to answer all your questions, and also the PPT was pretty much clear. So it should give you a clarity on what's happening. Also, we spoke about how quarter three is looking like in the full year guidance. Even... And if... In case anything is left out, we would be happy... Our team would be happy to answer or clarify any of your questions. With this, on behalf of Bikaji, we would like to wish all our investors, everyone in the call and their families a very, very happy Diwali. Right? Thank you. On behalf of Bikaji Foods International, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.