Ganesh Consumer Products (NSE:GANESHCP) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Ganesh Consumer Products Q1 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 Sanjay Manial from DAM Capital. Thank you, and over to you, sir. Good afternoon, everyone. We are pleased to host Q1 FY 'twenty seven earnings call of Ganesh Consumer Products Limited.

0:47 From the company, we have with us Mr. Manish Mumani, Managing Director Mr. Amit Tapadia, CFO Mr. Narendra Mishra, Company Secretary and Compliance Officer and Mr. Sanjeev Sanjeev, Investor Relations Adviser. I hand over the call to Mr. Sanjeev Sanjeev. Thanks, and over to you, sir. Thank you, Sanjay. Good afternoon to all the participants. Before I hand over the call to Mr. Manish Mimani for the opening remark, I would like to draw your attention to the safe harbor statement in the investor presentation. I request each one of you to go through the presentation and the safe harbor statement before the q and a starts so that you are well aware of the same. Thank you, and over to you, Mr. Mumani.

1:37 Thank you, Mr. Sanjeev, and a very good afternoon, everyone. On behalf of Ganesh Consumer Products, I warmly welcome you to our Q1 financial year 'twenty seven earnings call, and thank you for taking the time to join us today. The first quarter of financial year 'twenty seven presented a challenging operating environment for the category. Revenue from operations stood at $85,000,000 a decline of 7.1% year on year, driven primarily by an extended heat wave, constrained LPG availability, benign wheat prices and disruptions surrounding the assembly elections, all of which weighed on category demand across Eastern India.

2:33 Within this, our consumer facing b to c business held up relatively well, declining 4.1% year on year, while B2B declined 17.9% year on year. Given the close linkage between the two businesses, softer B2C volumes during the quarter flowed through to B2B with the residual decline attributable to lower realizations and a conscious decision on our part to reduce exposure to lower margin B2B volumes. Despite these headwinds, we continued to strengthen our competitive position during the quarter.

3:22 Our overall market share increased by percent also, reflecting the growing reach and availability of our products in a challenging environment underscores the resilience of our business model and the continued trust consumers place in the Ganesh brand. The strength of our execution was also reflected in our profitability. EBITDA margin expanded to 11.2%, the highest in the company's history, an improvement of 66 basis points year on year and three thirteen basis points sequentially.

4:10 This margin expansion was driven by disciplined procurement during a favorable commodity cycle and enhanced product mix and focused cost optimization initiatives. Importantly, these margins were delivered even as we stepped up our advertisement investment to 3.1% of revenue in Q1 FY twenty seven from 1.9% only in FY twenty six, supporting the long term strength to our brand. Our evolving product mix remains an important contributor to this performance with value added and emerging products now accounting for 68% of our B2C revenue.

4:58 This reflects the continued shift towards differentiated higher margin categories, a strategy reinforced by the healthy improvement in gross margins within our spices segment this quarter on account of better realizations and favorable product mix. Alongside the expansion of our distribution network, this transition is also helping us build a more diversified and resilient consumer business. Beyond our core business, we continue to build the foundation of our next phase of growth Following an encouraging response to the soft launch of our ethnic snacks range, we are preparing for a wider rollout later this fiscal year.

5:45 The entire ethnic snacks portfolio, along with our new packaged sweets category, will be manufactured at our AMTA unit with both categories expected to be launched during the third quarter, extending our presence in the adjacent food segments while leveraging existing manufacturing capabilities. Separately, we commenced distribution of soya chants also, extending our value added portfolio into everyday protein led kitchen staples. Our priorities remain clear to strengthen our core categories, scale our value added portfolio and deepen our presence across both existing and emerging markets. I remain deeply grateful to our shareholders, partners, employees and the entire Ganesh family for their continued trust and support.

6:39 With that, I will hand over to Amit to take you through the financials in greater detail. Amit, over to you. Thank you, Manish, sir, and thank you, Sangeet, sir, and good afternoon, everyone. As our MD has already taken you through our revenue and EBITDA performance, I'll focus on the remaining elements of our financial performance. Profit after tax for the quarter stood at $125,000,000, up 31.4 percent year on year and 31.3% sequentially. Our PAT margin for the quarter expanded to 6.6%, an improvement of 191 basis points year on year reflecting the EBITDA margin expansion and a materially lower finance cost. Our balance sheet remains strong with a net cash position of 172,000,000.

7:26 Return ratios remain healthy with an annualized ROCE of 18% and ROE of 13.3% for the quarter. Our cash conversion cycle stood at forty three days for the quarter compared to twenty three days in FY twenty six and sixty one days in q one FY twenty six, reflecting an inventory buildup from stepped up procurement during a favorable commodity cycle. Inventory days as of June thirtieth two zero two six two lakh fifty three compared to seventy seven days as of June thirtieth two zero two five. We continue to operate under a cash and carry model in general trade, structurally limiting our receivable exposure with receivable days at just six for the quarter. Updating on the deployment of our IPO proceeds, the commissioning of our and basin manufacturing facility continues to progress, albeit behind the timeline originally envisaged at the time of our IPO for the reasons like global supply chain disruptions and geopolitical headwinds, as outlined in our our... On our previous earnings call, the plant design is currently in process, and we now expect to commission the facility towards the end of the ninth year twenty seven, twenty eight.

8:45 The strategic rationale for this investment, which is to expand our high margin GANESH portfolio remains fully intact, and we will continue to keep investors investors apprised of progress on this front. We remain focused focused on translating this operating performance into consistent cash back profitability while maintaining the discipline that has characterized our balance sheet since listing. With that, we are happy to open the call for questions. Moderator, over to you. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch tone telephone.

9:30 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 assembles. The first question is from the line of Rajesh Jain from RK Capital. Please proceed. Hi. Thanks for the opportunity. I wanted to know how much revenue do you expect from outside East India in the next two to three years? Yeah. Hi. Hi, Rajesh. So we we are... Our prime focus is to expand in in the Eastern India market.

10:17 Right? So we want to expand the geographies of Bihar, Hardhad, Purisa, and Northeast. So in the next two years, the prime focus is to expand our distribution in the Eastern Region only. Okay. So so within the Eastern Region, what is the target you have set for yourself for revenue apart from West Bengal? Yeah. Yeah. Over the next So currently, if you... Sir. So currently, if you see the overall mix for for mix of revenue from state other than West Bengal, it is close to 8%, seven to 8%. And in the next two to three years, we expect it to go up till around 18 to 20%. Okay. So in line with that target, like how many new distributors you plan to appoint in the new geographies?

11:14 And how many new distributors have you appointed in the in the quarter which has gone... Just gone by? In the quarter, again, if you see the you see the overall number of the addition of the distributor, it is more than 50. Right? And over the next two to three years, right, so the distribution... The distributors' addition will be on multiple category. One will be in new geographies like Bihar, Pakistan, and the second will be for new product portfolios as as as we highlighted that we we plan to enter the categories like ethnic snacks and packaged sweets. For that, we may evaluate and onboard distributors who specifically will be dealing in those new age categories only.

12:07 So over the over the next two to three years, we plan to onboard at least three to 400... 300 to 400. Okay. And, sir, like, in the last call, you had mentioned that you want to focus on the... On masala powder. Right? And you mentioned that they are margin accretive. They are getting higher margin. So over the next two to three years, what what will be the... What is the revenue percentage we can expect from this masala category? So currently, if you see for the quarter, the masala category can reduce six to 7% of the revenue. And going forward in the next three years, the target is to is to achieve a revenue of close to...

12:53 The revenue mix of close to 11 to 12%. Okay. And the margin profile for the newer item that you are venturing into, that is the packaged sweet and the snack. Right? So what is the margin profile? So I would like to answer this. I would like to answer this. So thank you, mister Rajesh. So I think the... We will we will... As of now, we will not like to comment on the EBITDA margins or the gross margins on the packaged sweets and snacks category. It will be early. But then with the advantage of back end and front end. When I say back end, because all the raw materials will be... Are with us. That is the flour and gram flour, which is used as a raw material in snacks.

13:52 And the spices are also with us, which are used in ethnic snacks and sweets both. And, again, the front end, which is a good brand name, and the leverage leverage of the distribution network also, we think we will be ahead of the industry margins. Okay. Last two questions. So I think in the last call, I recall that you had mentioned that you will be using one of the plans mainly for B2B contracting, right? Yes. So can we give some updates on that? What is the progress on that, and have you secured any long term contract on that?

14:43 So this b to b contract, we will have to check. Currently, one of our clients, are doing a job work for an FMCG player, but I don't... Means... I don't remember the thing that we are hunting for any b to b player or b to b job work for any of the contract. We... Yeah. I mean, I... Even I don't recall. We never said we are hunting for any b two b new player. We are already in continuance of our Hyderabad plan, which we are doing it for b to b player for for a third party packaging. And we we have never committed. We are in a search for a new b to b player.

15:29 No. That's okay. Because I'm just recording from memory, so I could be wrong. So that's fine. So my last question is, like, some of your products quality is quite good. I have personally used them and and tested them. But I wanted to know whether they are contributing very negligible percentage to your overall revenue. For example, the ready to mix, quality is quite good. But is it contributing a very negligible percentage, or is it a substantial percentage, a meaningful percentage of your revenue? So is of the zero SKU, you can say, considering being an instant mix. Right? If you see the overall market of such category of instant mix, it is it is very niche. Right?

16:18 And that will be the Eastern part and particularly West Bengal. You see it will be very niche. And considering that, the the commando block SKU, particularly the commando block SKU does pretty well for us. And going forward, we we plan to... We are working on product development front, right, wherein we are exploring products, right, which can which can add value or add convenience to the consumers and and are in line with such instant. Okay, sir. Understood. So those were my questions. I'll join back. Thank you. Thank you. The next question is from the line of Nikhil from Ranga Investments.

17:08 Please proceed. Good evening, everyone. Thanks for giving this opportunity. I just want to highlight on one thing. In the b two c product mix, the f y twenty six data is around 35%. And in q one, it dropped down to 32%. I just want to know, is it because any whole data has been gone or the value added has been gone? No. So... Hi. Hi, Nikhil. Because the the drop in the the overall mix of the other category. So it is because the value added segment has done well for us. So particularly, the two other category has done well in this quarter, which resulted in the increase in the value added and emerging share in the overall b two c revenue.

18:03 So that is the reason. Okay. Can you tell us, like, out of the 59%, what will be the portion of Subtu in that, and what is the goalie which we had? So, again, we we don't plan to disclose the product level revenue share. Yeah. But, overall, if you see the value added segment, right, it is close to 59%. That is 56% in the previous financial year. Okay. Just one last question. Like, did we take any pricing action in the current quarter considering the you know, Gulf Coast, US crisis impact and all? Yeah. So so there there was a significant increase in the LPG prices, and LPG is primarily consumed for the for the manufacturing.

18:55 But considering considering the considering the brand pool we have and the and the... And we have gotten some operational efficiency at the plant end, and hence, we have not passed on the increase... The the overall increase to the consumer. We have tried to absorb that increase in the LPG prices. Okay. And just one last question. Like, okay. Currently, our atomic is around 30%... 32%. Like, what are we looking at in the upcoming quarters? Like, is is it going to drop or it will improve further? So in the coming quarters, it will be... Obviously, the prime focus is to is to is to promote the value added segment and the emerging segment. Right?

19:44 But we feel that it it will be in the range of thirty thirty two to 34% only. It will not shoot up significantly from here. As our value added segment, we feel that the value added segment and the emerging segment will deliver. Okay. Got it. That's it. Thank you. Yeah. Thank you. Thank you. The next question is from the line of Devi Gosar from Shivcom Ventures. Please proceed. Hi, sir. Thank you for the opportunity. Sir, firstly, I wanted to ask that our gross margin has improved Mister Gosar, can you please speak little loudly? We can't hear you properly. Just a second.

20:30 Am I audible now? Yes. Maskele. Yeah. So first question is around gross margin. So our gross margin has improved drastically. So can you give us a split between what is the improvement because of the product mix and because of the softness in RM prices? Again, because of the softness in the RM prices is... Contributes a very small portion of the overall increase in the gross margin. Primarily, it is because we we we try to maintain better realization across our product category.

21:17 And, specifically, as the value added segment have delivered better as compared to whole wheat segment, the gross margin is is is is... We have delivered a better gross margin. Now if you ask me about the exact number as the exact percentage of the of the contribution because of the value added segment, it will be close to close to 0.7 to 0.8. Got it. So what should be... What should we consider gross margin going ahead for this year and for the next year? So, again, so it will be as in line with the previous year. Right? There'll be goodness as we we we are working towards better realization across the category, and we are also trying to maintain or plan the raw material accordingly. So from the levels of the previous financial year, we can we can expect a a better betterness in the gross margin.

22:21 But as of now, we we are not we'll not comment on the gross margin percentage, exact percentage for the coming quarters. Okay. In the in the new segments, sweets and your ethnic snacks, can you tell us about how much is the market size in the Eastern Part of India where you operate? And would it be through the same distributors? Can you explain a bit about the business model? Yeah. So, again, so as I as I highlighted, it will be... First, I'll take up the distribution fee. Right? It will be... Obviously, since we enjoy muscle power in terms of the overall distribution.

23:08 We will use... We will have a mixed model wherein we will use the existing set of distribution network, and we will onboard new distributors, right, who can who can work with us, right, to expand those portfolio products and to drastically. Right? So this is on the distribution front. Obviously, we will send those categories sales well on the modern trade channel. We we we will be very bullish on the modern trade channel as well. Coming to the overall market share, yeah, Ganesh, I mean, it is it is a it is a big market. Again, we don't have that exact number handy with us. Yeah. But we can we can present to you over for our...

23:54 We can discuss it one on one and then give you the overall number of the overall TAM. Okay. Thank you so much. Thank you. A reminder to all participants, anyone who wishes to ask a question may press star and one on their touch tone telephone. The next question is from the line of Rajesh Jayan from RK Capital. Please proceed. Yeah. Sir, just a clarification. You mentioned that you do job work for a specific client. Right? So is it only one client or more than one client? And can you disclose the name of the client?

24:41 It is for one client only and we will not like to disclose the name because that is a big player in itself and we have that clause that we cannot disclose it. Okay. But but can you tell me... Can you tell something about the profile of the client? Like, they are the FMCG FMCG player. And are they present only in certain regions or they are the Pan India player? So, again, that data, we have to take it from them, but, yeah, they they are present in the region where we are doing the job work from them for them. Okay. And for this full financial year, FY '27, can you provide some guidance on the revenue growth and the consolidated margin for the full year?

25:39 Yeah. So as we had highlighted in our previous call that we are chasing a volume growth of seven to 8%. Right? In this new year, the entire team is working towards the same goal. But, again, we will be able to comment on the exact percentage of the... Not exact percentage, but a better view will be able to tell you after q two, which is by end of first half of this month. And on the margin front, yeah, there'll be improvement. So EBITDA was close to 9.8% last year. We we plan to deliver in the range of 9.8 to 10%, the... In the current plan.

26:25 Okay. In the previous call, you had mentioned that you expected the Horikas segment to get impacted because of the unavailability of LPG. Right? So how is the situation now? And now going forward, do you see any further impact in the Horeca segment? So, yeah, the the Horika segment was impacted. Right? And it is a it is a common because of the MGD brand. Right? Things have improved over the over the last two months. Things are better now. And going forward, we presume that towards the end of this quarter, it will be back to normal. Okay.

27:13 Okay, sir. Thank you. Thank you. Thank you. The next question is from the line of Arab from the Money Mart. Please proceed. Hello. Yes. Hi. You mentioned something about SOIA chunks at the start of the call. How much percent of revenue can we expect SOIA chunks to contribute as well as if you could comment on the margins we have in that segment, if possible? So on the margin profile, it is in line with the gross margins. So the industry, if I I talk about the industry first, right, it will mean line with the gross margins, what we are delivering for our core products. Right? But currently, since we have launched, we are targeting the market. We are pricing it a bit aggressively now. Right? Over the period of, let's say, one and a half to two years, we feel that we'll be able to reach the industrial benchmark in terms of the gross margin. Now talking about the revenue, we feel that... And is...

28:22 Firstly, is widely consumed, the... This geography, and we feel that for a future of next two to three years, we should be... We continue at least two to 33% of the overall revenue of of the the company. Company. Could you repeat on the margin? So over the over the over the next two to three years, we see we see that SOIA terms can contribute two to 3% of the overall revenue of the company. Okay. Okay. Yeah. That would be it from me. Oh. Yeah. That would be it from my side.

29:08 Thank you. Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, sir. Thank you. Thank you, everyone, for for joining this call. Thank you for your continued trust. We look forward to attend you again in the in the in the investors call for the q two of financial year two zero two seven. Thank you. Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line. Thank you. Thank you.