LTFOODS — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

La dies and gentlemen , good day, and welcome to Q 2 FY

Thank you very much .

We will now begin the question - and - answer session .

We wi ll take the first question from Amanjit Singh from Oculus Capital .

Please go ahead .

Amanjit Singh

So, my first question is , so we have seen on a sequential basis , that is Q1 to Q2 , an improvement in the gross margin on the Basmati an d specialty ri ce, but the EBITDA margins have fallen slightly by 50 bps. So, what is the reason for this ?

Sachin Gupta : So, b asic reason for the decline in the EBITDA margin is the freight cost.

The logistic cost during this quarter has increased .

So, if you compare it with the immediate preceding quarter , there is an increase of 2.5 % , and if I compare it with the year on performance , it has increased by 6.6 % .

So, this has led to decrease in the EBITDA margins this quarter .

Understood.

Secondly, so there were certain news articles on private equity evaluation and you know , your fundraising .

So, could you hel p us understand what kind of proposals is the Board considering ?

And what should we watch out for ?

LT Foods Limited November 1, 2022

Ashwani Kumar Arora

So, there was a strategic proposal and Board is evaluating it and seek ed more information .

So, maybe in the next coming Board meeting , they will decide .

Amanjit Singh

But it was a complete a buyout of majority or is it l ike a minority stake that they a re considering ?

Ashwani Kumar Arora

I can't disclose much .

Moderator · Conference Operator

Thank you .

We have a next question from the line of Siddhant Dand h from Goodwill .

Please go ahead .

Siddhant Dandh

I just wanted to get some guidance on how much Basmati have we procured compared to last year ?

Secondly, I wanted to understand why our margins are lower than the largest p layer in the industry.

Is it because we age our Basmati ri ce less ?

And are we getting any fore x gains from or benefit of Forex because of our export market currency becoming stronger ?

Ashwani Kumar Arora

So, first of all , you know , I will answer your first question on the sourcing.

The procurement season has just started roughly 15 to 20 days back .

It was late because of the heavy and untimely rain .

So, the procurement is in progress as per plan .

So, we will be achieving our procurement target.

Siddhant Dandh

So, how much is it over last year in volume terms ?

Ashwani Kumar Arora

So, you wanted to know the crop size or our data ?

Siddhant Dandh

Yes , just the volume target, last year let's say we procured 100.

So, this year are we procuring 110, 20?

Ashwani Kumar Arora

Ou t of our total requirement, we have sourced around 15 to 17 %.

Siddhant Dandh

Perfect.

Ashwani Kumar Arora

So, answering to your second question Monika

Chawla Jaggia

Margins.

Siddhant Dandh

Margin.

Yes .

Ashwani Kumar Arora

As Mr. Sachin explained our gross margin has improved , but , the logistic cost has gone up .

And strategically , we were not keen to pass on this kind of cost to the LT Foods Limited November 1, 2022 consumer as this is we believe that , this is kind of temporary and the freight trade will settle down soon .

Siddhant

Dandh

And on whether we are benefiting from export Forex ga ins or something ?

Ashwani Kumar Arora

Sorry.

Siddhant Dandh

Because of our currency weakening , are there any benefits in the export market?

Ashwani Kumar Arora

Yes . if Indian currency is deval uing , India is becoming more competitive .

So, that's , of course , is helping us in our business .

Siddhant Dandh

What is our share of export ?

Ashwani Kumar Arora

In terms of you mean to say branded in USA , we have 50 % market share .

So, India we have 28.5 % market share .

So, we export to 60+ countries .

So, if you talk about , the branded rice which is , owned by India , I will check , but we have a remarkable good share .

Siddhant Dandh

And what is the share of expo rts of our sales , like in our top line , how much come from export ?

Sachin Gupta : So in the Basmati and th e specialty segment , 70 % of our sales comes from exports .

Moderator · Conference Operator

Thank you .

We have a next question from the line of Anand Venugopal from BMSPL Capital .

Please go ahead, sir.

Anand Venugopa l: So, thanks for the opportunity.

So, could you help me understand what is the current state of the Basmati rice industry ?

And how are prices for Basmati rice holding up ?

And what is the outlook for Basmati rice prices going into 2023 ?

And lastly , what are the demand factors that are leading to this outlook?

That's all from my side.

Ashwani Kumar Arora

As far as Basmati rice industry , it is doing very well .

It has become consolidated , stable, doing very well .

On the pricing fr ont, as compared to la st year , the opening price is roughly , 25 to 30% higher as compared to last year .

And this is mainly because of the strong demand and on the supply side there was the constraint .

But this year, the crop is better .

We are expecting roughly around 12 to 15% higher , but demand w ill pick up , and the prices we believe that will remain higher than last year .

Moderator · Conference Operator

Mr. Venugopal?

Anand Venugopal

That's it from my side.

LT Foods Limited November 1, 2022

Moderator · Conference Operator

Thank you.

We have a next question from the line of Abhishek Maheshwari from SkyRidge Wealth Management .

Please go ahead.

Abhishek Maheshwari

So, thank you for the opportunity .

So, you were able to deliver a very good sales growth.

And we just want to know that the current harvest season we just begun , an d ho w are you seeing the crop?

Do you think the procurement prices might come down a little thereby letting us improve our gross profit margin a little more in H2?

Ashwani Kumar Arora

So, Abhishek, because your voice was not clear, if I'm able to understand your question correctl y , the crop is as I told for overall Basmati and all Basmati varieties, there is 12 to 15% higher production is there .

But there is a strong demand across all geographies in the world.

So, prices are roughly 25 to 30% higher .

It depends on grain to grain, higher than the last year , and we believe that one , because of this weaker rupee, there will be not much impact on the consumer price on the export market .

In India , we have already started passing on the hike to the consumer and it's well accepted .

So, on the gro ss margin si de, we will be able to maintain the gross margin .

Abhishek Maheshwari

And secondly, regarding packag ing and freight cost, sir, in freight cost the increase was mainly due to road logistics or ocean logistics?

Ashwani Kumar Arora

The ocean freight .

Abhishek Maheshwari

So, ocean freight we are hearing that it has started to moderate considerably in the last few months .

So, do you think H2 should be better EBITDA margin wise?

Ashwani Kumar Arora

Yes.

So, for the last month it has started softening ,and the impact we will see in the coming quarters .

Abhishek Maheshwari

Is it a substantial impact o r just a little will be?

Ashwani Kumar Arora

I think little .

Not very substantial .

It has softened , but not to the pre - COVID lev el s or the earlier level s .

Abhishek Maheshwari

And sir, packaging cost?

Ashwani Kumar Arora

Packaging cost will be stable.

T he inflation has come .

So, packaging cost is not coming down .

It is in the almost same range .

Abhishek Maheshwari

So, regarding your non - current borrowings , they ha d increased by around crore rupees.

Any particular reason for this ?

Ashwani Kumar Arora

Sachin will answer that question .

LT Foods Limited November 1, 2022

Sachin Gupta

During th is half year , we have actually made an in one of our J V in USA with Golden Star .

This has resulted in increase in our borrowings.

Abhishek Maheshwari

And two more questions .

Since your working capital requirements are very high , what do you think the rate hike impact is going to be in coming quarters ?

Will it be su bstantial impact or just marginal?

Sachin Gupta : There will be a n impact, but it won't be a substantial impact .

It will be a marginal impact .

Yes, the cost of the capital will increase .

That is for sure.

Currently, it is a t 6% .

It w ill be increased by another 0.5%.

Sir, one last question .

How is th e demand com ing from North America and Europe at the moment, because there are some fears and supply chain issues there?

Ashwani Kumar Arora

So, demand is good, you know .

As Sachin said, 70% o ur revenue comes from export , and last H 1 we have delivered 3 1 % growth .

So, it's a healthy growth both in the western world, Europe, America and India .

Abhishek Maheshwari

So, any new geographies you are entering right now?

Ashwani

Kumar Arora

So, we are almost present , you know , across the possible area where the co nsumption of Basmati is there .

So, we are available in all the major Basmati consuming geographies .

Moderator · Conference Operator

Thank you .

We have our next question from the line of Amit Doshi from Care PMS.

Please go ahead.

Amit Doshi

Congratulation on achieving the 2% additional market share in the domestic market .

So, just one question about this Golden Star.

Now we hav e 5 1 % controlling stake .

So, how are we accounting for it and say, for example, what growth that we have seen from 1300 to 1700 crore?

So, what portion has contributed from that Jasmine rice business?

Sachin Gupta : So, as far as the accounting is concerned , we are doing equity method of accounting .

In that we are just recognizing the share of profit , and that it accounted for in our financial statements in the six months financial statement that we have disclosed.

So, the top line, so the sales figure are not accounted for in the current number.

That you look at it.

Sachin Gupta : No. LT Foods Limited November 1, 2022

And sir, second about t his domestic growth , significant , I am sure there will be some significant steps th at w e want to take.

We have strong number of outlets as well as distributors have been increase d .

So, what is the plan going forward for the next year also ?

Vivek Chandra

See, what we are seeing now is the result of some very fundamental work which has been done in our route to market and in our brand building over the last two years , and that is now playing out in terms of increased home penetration , in terms of increased distribution .

And these programs that have been put in place , they still have a lot of headroom .

So, going forward , the se sort of grow th in the fundamentals of consumer acquisiti on and retail store expansion , we believe we will continue to see , and it is being supported also with an increase in the category demand in the country.

Amit Doshi

So, we have more marketing spend to do or this has kind of fundamental s teps have already been taken as you said ?

Vivek Chandra

No, the marketing spend i s the continuous process .

In fact , it's the brand that we will keep supporting and building , and our marketing spend s are higher than what we did last year , and in response to business , we will adjust and grow , but I think we will keep growing the marketing in relation to the gro wth in sales.

Amit Doshi

On the freight co st, sir, just couple of points .

So, basically, what we read in the newspaper o r the freight index that we track, you know , th ere is a significant reduction already in place .

This is what we understand .

So, why the same has not flown in the real numbers which you a re indicating that it has just started softening from last month ?

And what we see from the a rticles o r the n umbers indicate s otherwise.

So, if you can just, throw some light on that ?

And second , while freight cost I understand is more on the exports had on that side , our domestic margins are also not very great , I mean, despite increas e in such a sharp domestic business .

So, can you just clarify on the se points?

Ashwani Kumar Arora

Sure.

So, as far as, you know, the freight, a s I said , it has started softening for the last month , and it will have a positive impact in the coming quarters .

Regarding India , the mar gin has improve d further .

Amit Doshi

So, when I look at standalone nu mbers , I understand standalone will have export numbers as well , but when I look at standalone, there is no improvement in the operating margins .

LT Foods Limited November 1, 2022

Ashwani Kumar Arora

Yes , but in stand - alone , you are seeing because it's a mix of t rading al so we have done with China .

So, that 's the mix but as far as branded business is concerned, we have improved margin on that .

Amit Doshi

And sir, this China contribution, what would that be in ter ms of -

Ashwani Kumar Arora

So, China will be how much, Sachin?

Sachin Gupta

In th is half year, China was contributing Rs. crores to my revenue.

Amit Doshi

In the H1 you are saying.

Not in the Q2. Sachin Gupta : H1 I am saying.

But sir, in terms of this whatever freight cost that are being passed on, we have done it partially only .

Our brand whether it's Royal or Dawaat, it's such a strong brand where we are not able or we don't intend to pass on the full freight, because we are at flat the fa g end or the lower end of the margins that we have been in our history .

Ashwani Kumar Arora

So, as I said in the starting that , Dawaat and Royal are very , very strong brand.

Royal is at 50% market share , but being leader , we have a responsibility also.

So, we have to see which cost is sustainable , which is not , and we don't want to be volatile in consumer pricing.

So, we believe that the steam er freight will come down , and this is we have to take the hit of freight cost that has temp orari ly gone up .

So, the proportion that was sustainable , we have passed on to the consumer .

Amit Doshi

And sir, in this convenience , health and convenience segment, when do we plan to break even?

Vivek Chandra : I think, at this point in time , the real question is that this is we propose to make this a significant part of our business .

So, really ,it's more about expanding th at range .

There are for each of the projects the re is a individual P&Ls with break - even s projected that have been made , bu t our current focus is for them to become meaningful and significant part of consumer lives which then translates into a good share of our revenue ,and it will follow the pattern that you see with most consumer company’s new product launches .

So, we have some pipelines with new product s in next two quarters or so.

Vivek Chandra : Yes, we do, but w e have actually just launched a very exciting product with the Biryani Kit, which is gaining a very good consumer acceptance .

Cuppa Rice continues to build .

So, if you we re talking of the next one or two quarters , our focus is going to be on LT Foods Limited November 1, 2022 building the se in India and international and to continue to build the strong position that we are acquiring with RTH , Ready to Heat in the U.S. Amit

Doshi

And can you give this HoReCa segment growth, how things have been because, of course, one year was very bad ?

So, now how HoReCa segment is to doing ?

And what kind of growth have we seen or some contribution that is there as of now?

Ashwani Kumar Aro ra: As compared to last year must be growing more than 50% I think , but we will have exact data.

Sachin Gupta

The HoReCa segment now is contributing 19% of my overall revenues, and it has grown by more than 15% from the last year.

Amit Doshi

15%, 1 - 5?

Sachin Gupta

Yes .

Amit Doshi

Any number ?

I mean, what would be the, sorry, 19% you said already .

Fine.

And sir, lastly , I understand that this PE thing or whatever acquisition or whatever, so I am not getting into that part.

What I want to know from you is, you have been so far guiding of 10 to 15% growth and of course , some margin expansion that you have already indicated in past multiple times.

So, now that we are planning for some fundraising and presuming w e already generate 500, 600 crore annual cash flow, so we are thinking something big or something higher target of growth rate.

So, what has changed that , Management growth target and wh y, if you can just share on that part?

Ashwani Kumar Arora

So, still we are maintaining 15% grow th year - on -year and the margin expansion .

This is I can't disclose at the moment , but this is a very strategic in nature .

So, the unfolding will happen when it will happen.

Moderator · Conference Operator

Thank you.

We have our next question from the line of Resham Jain from DSP Investment Managers.

Please go ahead.

Resham Jain

Good afternoon.

So, few questions.

So, first one is on organic piece.

I think there has been a material dip in the revenue run rate which you are doing just the last few quarters .

So, is there any issue there or this is like a one - off and will come back from next quarter onwards ?

Ashwani Kumar Arora : So, Resham, this is a one - off.

It will come back , and the reason is th ere was a big shipment which was p ending , and we couldn’t load in th is quarter .

So, this will come up.

It will be , again , on a full year basis we will see a double -digit growth.

LT Foods Limited November 1, 2022

And what is that we are looking at the organic business , sir, in terms of let's say over next two, three years ?

Are we going to maintain the r un rate which we have shown over the last of three, four years ?

Or now on a higher base , now it will start moderating ?

Ashwani Kumar Arora

So, it is higher th ese days it will moderate for sure.

It will not be in the range of like 3 0 , 3 5 % wh at we have delivered in the last two years .

So, it will b e in the double - digit , but we are very bullish on this business .

The idea in th is business is now to focus more on the margin expansion in inorganic business .

Resham Jain

Understood.

And also s ir, on the new product business which Vivek sir spoken about , so the re with now I think a few months into this new product launch , specifically Biryani Kit, any color on what is that you a re targeting ?

Because I think you are doing domestic as well as exports and any focus ed kind of market which you feel can be scaled up from the current level s?

And what will be the distribution approach in this business , specifically the new product business , Biryani Kit and Cuppa Rice?

Vivek Chandra : So, of course , for each the re is a different RTM that is planned.

So, it's talking about Biryani Kit, which will be in broader distribution , but the initial approach for these is really , you know, for us has been to test the waters and we ha ve done that through going into e - com and then expanding into the top supermarkets .

So, as of now that's really what the availability is, an d it is from here that we are getting very good traction.

In some of the e - com , we have become new product top sellers in the way they measure and they record on to their own platforms .

With this once we ha ve got a certain amount o f proof of concept , we will start to be expanding this into the t otal supermarkets and the top groceries .

So, we will be following a top -down approach when it comes to this Biry ani Kit.

Sir, just one related question o n the new product business.

If you look at the gross margins of the new product which are considered to be more value -added products , and if you compare it with the other businesses Basmati and organic , the gross margin seems to be much lower than some of the other categories , as well as if you compare it with some of the other food businesses , the gross margin seems to be much lower 30% odd gross margin .

Vivek Chandra : Right.

Because I think what you have seen here is a blended gross margin .

There is a fairly large contribution in here of Daawat Sehat, which is in the health both doing and it serves the social cause of addressing malnutrition and severe acute malnutrition in the country .

But t he point is that , you know , that tends to follow more like the Basmati margin, but has a significant contribution , but the other products are all following the margins .

Mr .

Resham, as you talk about food, consumer , branded , those , the other product margins are in l ine with th at.

LT Foods Limited November 1, 2022

No, actually, this is lower than Basmati as well, like 28% gross margin in this quarter .

It was 33 in the last quarter .

Last year I could see it was 36, 37%.

So, constantly , this, typically , gross margin in this business is we have seen at around 50 , 60% and more , but like even , 37% which was on a higher side last year , the number seems to be too low for a consumer product like this .

Vivek Chandra : I think you need to see the segment al margins .

S o the movements that you are seeing in the t otal are a function of how the contributions of the different products are moving , but individually , they a re robust.

So, some of the newer product s that you spoke of a re going to be in the 40 ranges .

Because it's there in the p resentation .

So, maybe I don't know.

Vivek Chandra : No, it's a fair point , but I think, as I mention ed, it is a blended margin that we have s ee n .

So, that 's sort of clouding the picture , but the fundamentals which you are alluding to are all there , and the segment als will show that .

Sir, the last one from my si de is on number of households , I think you have mentioned 37 lakhs o r something .

So, what is the target kind of addressable market for us over here?

And what is the approach we are taking here to get to that total addressable market ?

Vivek Chandra : See, the total addressable market in a sense is the total households .

Now Basmati consuming households are a bout a third of the total FMCG consuming homes , but this is growing at a double digit.

So, we are so rt of not working on an absolute target .

Our target is to grow at a rate which is faster than the growth rate of the categories , and that really fall s back into the fact that we want to keep growing our market share quarter - on - q uarter.

So, our target basically , when we measure these numbers and report these numbers, these are more evidence of the successful marketing and distribution campaigns that , I mean, not campaigns, but strateg y that are in place , and these are the growth i n share , the growth in homes , the growth in outlets are numerical measures of the success of growth strategies .

Just one addition to the point I made earlier about this whole blended.

As we bring in new product s, th ere is a fair amount also sampling which is done free of cost to gain new users .

And if in a quarter that's quite heavy , that can also bring down , but treated more as a marketing expense than a margin erosion .

Moderator · Conference Operator

Thank you .

We have our next question from the line of Amit A ggarwal from Leeway Investments.

Please go ahead.

LT Foods Limited November 1, 2022

Amit Aggarwal

Sir, we bought a 30% stake in Leev.nu in January 2021.

Right now if you go through th eir website, it's just a one - page website, and all the links lead to Instagram.

Sir, as far as I understand, the se a re dead investment .

Can you comment on t his ?

Ashwani Kumar Arora

Leev, you know, the investment is only 200,000 Euro, which is equivalent to Rs.

1 60 crore.

Just a minute.

If I have understood you correct, let me underst and from Monika .

So, Amit, this is not the dead investment although, you know, we have done a small investment.

The Leev as a brand is doing good in The Netherlands, and they are adding the product s also .

So, the investment is not dead.

Although it's a small investment , the business is working and doing good.

Amit Aggarwal

But sir, just a one - page update.

I heard you say e - commerce site , and it's e - commerce venture.

Ashwani Kumar Arora

Monika just told me .

You know, you have gone into the wrong websit e.

The right website is Leev.nu .

You know , i t' s a very impressive .

It has open ed in front of me , and if you can see the kind of the product range it has, you will be amazed .

Amit Aggarwal

Another question is 75% of our profit comes in consolidated balance sheet, right?

But if you go through the annual report, then it seems none of the subsidiaries are so much profitable , and only one of them is making 70 crores profit roundabout .

So, can yo u elaborate on this?

Ashwani Kumar Arora

No, let me understand your question right, and then we will answer you.

Amit Aggarwal

70% of our profit come from consolidated balance sheet, right?

But if you go through the annual report, then it seems none of the subsidiaries are so much profitable.

And only one of them making 70 crore profit per annum.

So, where is the profit coming from?

Does it come from consolidated balance sheet?

Sachin Gupta : All of my subsidiaries are making profit .

Firstly, you need to check the data , and apart from LT Foods, th at is the ma i n Company .

We have Daawat Foods in India .

That is also making profit.

Yes .

I think Daawat Foods is making 70 crore profit .

That's the most profitable besides our stand alone Company .

Sachin Gupta : So, apart from that , there is a U.S .

Company as well .

That is LT Foods America .

That is also making profit .

Can you elaborate how much ?

LT Foods Limited November 1, 2022

Ashwani Kumar Arora

What we will do is so you send your query and I can tell you , these all the subsidies are making profits .

Amit Aggarwal

No, I understand .

None of them is adding up to the 300 crore s profit.

The profit on consolidated balance sheet is huge .

Monika

Chawla Jaggia

But I would request Amit to refer to page number 319 of the last year annual report and to go through it as details of the profits that the subsidiaries are making is mentioned there.

So, it's very evident that all the subsidiaries are profit making subsidiaries.

Please refer to the page number 319.

Amit Ag garwal: No, but that is why, but none of them is making, adding up to 300 crore profit.

That's my question .

The annual profit is around about 300 crore, but if you add up all the companies, the subsidiaries, that 's almost 80 crores to 90 crores.

Sachin Gupta : We will give you the breakup of that will be added up .

So, if there is a n addition that only that is the amount .

You can give us your email ID to our IR, and they will provide you the Company wise profitability, and it wi ll be adding up to the profit that we have declared .

Amit Aggarwal

And my third question is , you know, Eco Life product .

Sir, I tried to search them online.

It's not available in India, currently out of stock, and same also in Europe.

Europe, almost impossible to find any website selling Eco Life product.

So, w here they are sold basically ?

Ashwani Kumar Arora

We always say that , you know , our organic business majority is B2B business , and it is exported to Europe and America .

We sell organic products .

That's a very limited , you know, in the northern part of the India .

And in USA , we sell organic product under the brand name of Roy al. So, if you go to the Costco and you ask for Royal Organic Basmati , you will find it .

Amit

Aggarwal

And my last question is , you know, BigBasket has their own private label , BigBasket BB Royal .

So, are we in partnership with them ?

Because the brand is quite similar to our brand .

Are we in partnership with them or the ir BB Royal Basmati Rice?

As hwani Kumar Arora

No, the re is no partnership .

But , that's an IP issue and , you know, our legal department has taken it up with them .

Amit Aggarwal

So, we are not benefiting from BB Royal as such .

Ashwani Kumar Arora

No, we are not .

LT Foods Limited November 1, 2022

Moderator · Conference Operator

Thank you.

We have our next question from the line of Aman Madrecha from Augmenta Research Pvt.

Ltd. Please go ahead .

Mr. Aman Madrecha, please go ahead with your question .Since there is no response, we move on to our next question from the line of Vipul Shah from Sumangal Investment.

Please go ahead.

Vipul Shah

My question is, previously, you used to share all the volume details for domestic and export business , and in do mestic also you used to segregate it between rice and non - rice .

So, that practice you have stop ped.

Ashwani Kumar Arora

This we have done strategically , you know, because of competitive reason .

Yes .

So, we share all relevant data basis the investor’s queries .

So, we have , you know, accordingly designed the presentation .

Vipul Shah

So, if I send the mail , will I get those details or you wi ll stop that practice ?

Ashwani Kumar Arora

So, please send the mail .

So , you know, our IR department will get back to you .

Vipul Shah

And sir, what is the status of our court case ?

It is pending since a very long time .

So, any update th ere?

Ashwani Kumar Arora

That's very unfortunate , you know, the Indian legal justice ,but we are expecting by the end of the year , the first court verdict will come .

Vipul Shah

And sir, can you comment on the performance of our European business ?

So, what is the turnover ?

And what is the profitability ?

Ashwani Kumar Arora

Sure, Vipul. the Europe business is doing extremely very well , and we are using full capacity .

And this year we will be doing full year basis more than 100 billion Euro which is equivalent to 800 crores , profitable business doing very well and growing .

Vipul Shah

It will be EBITDA positive , sir ?

Ashwani

Kumar Arora

Yes .

PAT positive .

Vipul Shah

PAT positive , wonderful .

Moderator · Conference Operator

Thank you .

We have a next question from the line of Vincent Andrews from Geojit Financial Services Limited .

Please go ahead .

Vincent Andrews

I have only one question.

Most of my questions have been answered .

S ee , first of all , congratulations for the good set of numbers .

See, you have grown around 32 % in the first half .

So, if I can ask what would be the growth you are expecting in the second LT Foods Limited November 1, 2022 half and next year on that ?

Because if we see for the last two , three years , the revenue growth was 12 % in F Y ' 21 and 16 %, 17 % around in F Y ' .

Suddenly, the growth expanded to 30 , 32 % in the first half of this year .

So, what dr ove the growth on the distribution strength or anythi ng else ?

And what would be the growth if you can g uide for FY ' 24 ?

Only that question .

Ashwani Kumar Arora : So, in FY23 , we are expecting on full year more than 20 % growth .

Vivek Chandra : Yes .

I think FY '24 is still under discussion with the individual businesses because , I mean , there are things which are working strategically right for us which are driving this growth , but to sustain this level of growth , we will have to work with individual businesses and on their plans .

So, our AOP process and the five -year planning process is currently underway , and only once we ha ve completed that will we have a picture for FY '24.

So, if I can ask , see the sudden jump in the growth in this year from the last t w o , three year s if you compare , so is it the distribution expansion only cost this ?

Vivek Chandra : But distribution expansion has certainly played a role , but it is really three things that is driving that growth , whether it is in India or in the U.S . or any of our major markets .

So, the one is distribution , but the second is that there is a very sustained and consistent marketing aimed marketing program which is being delivered in all the markets which is gaining for us new users and is helping in the retention and trial generation .

And the first driver has been the fact that the overall portfolio of Da awat and Royal is getting strengthened as more and relevant convenience and health products come in the market which then feeds also into the main brand .

So, really core adjacencies and distribution are all coming together to give this growth and not just distribution , Mr. Vincent , as you were re ferr ing .

Moderator · Conference Operator

Thank you .

We have a next question from the line of Subhankar Ojha from SKS Capital and Research.

Please go ahead .

Subhankar

Ojha

So, just with respect to the EBITDA margin , just coming back to the freight cost , can you give me the number with respect to freight cost as percentage of sales in current quarter versus last year same quarter ?

Sachin Gupta

So, this current year quarter , my logistic cost is 13.7 % .

If I compare it with the immediate preceding quarter , it was 11.3 % , and if it is compared with the year - on - year quarter , it was 7.2 % .

Subhankar Ojha

That's a big increase .

And with respect to the current rate , which means quarter three tr end, where do you see these numbers settling up ?

LT Foods Limited November 1, 2022

Sachin Gupta

So, Subhankar, this is the peak.

So, this will be lowering in the forthcoming quarters .

So, this we consider it as peak .

Subhankar Ojha

And sir, with respect to this presentation , I a m sorry , presentation , so , obviously , we set up a EBITDA margin target of 140 to 150 basis point that does five year target for us .

Can we , I mean , the request would be , can we put a number , absolute number with respect to this is wha t we aspire to do fo u r , five years down the line?

Because right now we are doing f air 10 % .

So, current quarter taking as a benchmark , I mean , we are basically talking about a 12 % shot up.

Is that our aspiration ?

Or do we intend to do much better than this ?

Ashwani Kumar Arora : So, our a spiration is to do , 13 .5 % EBITDA.

1 3 .5, okay .

Ashwani Kumar Arora : 13.5.

We are working towards , yes .

So, I think that can be added to this slide because , you know, basically it keeps changing obviously .

Ashwani Kumar Arora : We will do that .

We will do that .

And you did say that on the organic part of the business , so there was basically shipment delay sort of , right , which is why the revenue declined .

Ashwani Kumar Arora

Yes.

Moderator · Conference Operator

Thank you .

We have a next question from the line of Aman from Iwealth Management .

Please go ahead .

Aman

Thank you for the opportunity , sir .

Congrats on a great set of numbers .

So, we are seeing , sir, on a month - on - month basis , Basmati prices have came down 12 to 15 % .

So, is it seasonal ?

Or is it the demand which is softening as of now ?

Can you help us clarify on this part ?

Ashwani Kumar Arora : I mean , I don't know what you are referring to, but the Basmati prices are getting stronger .

So , as I said that against last year , the new sourcing has opened 25 to 30 % higher than the last year .

Got your point .

And second question was from the insurance recoverable , the amount which you have classified in the non -current assets this q uarter because you have said that case is also pending in the Civil court .

If you can help the clarify of that amount ?

LT Foods Limited November 1, 2022 Sachin Gupta : So, the amount standing in my bo oks is Rs.

134 crores .

So, that is the insurance claim receiv able in the books of accounts .

Previously, you have written off Rs.

44 crore also , which was -

Sachin Gupta

It was four to five years back we had written off 44 crores .

So, my original insurance claim was 178 crores.

But the claim which we have to receive is Rs. crore only .

So, we have provided for in our books of accounts to Rs.

44 crores.

Moderator · Conference Operator

Thank you.

We have our next question from the line of Viha ng Subramanian from Zaa ba Capit a l.

Please go ahead.

Vihang Subramanian

Just wanted to know how does export realizations get determine d for us in the Basmati Rice segment ,like the local production dynamics com e in to play ?

Ashwani Kumar Arora : Vihang, can you repeat your question please?

Like you mean to say how the Basmati price discovery happen.

Vihang Subra manian: Correct.

Exactly.

Like for our export market , because I just read somewhere that in India lot of the production was curtailed and because of that price increases happened , and your international growth also looks really good .

So, just trying to put things together , like is it because of that or am I missing something?

Ashwani Kumar Arora : If you see the Basmati, Indian Basmati has a kind of in the Basmati monopoly , 80% of the Basmati products are grown in India , and the price discovery happened on t he size of the c rop.

So, if you know the crop is short, then the prices get strong .

And if the crop is more the prices got softened.

So, this is a fundamentally how the price discovery happen s.

Pakistan has a role to play .

It has only 20% of the production .

So, on the demand side , consumer is what we have seen historically , the consumer is insensitive to price to the Basmati.

So, the price increase has not impacted any demand .

So, there ha s been a price increase though this year in FY ' 23 .

Ashwani Kumar Arora : Yes.

And could you quantify how much percentage price increases come through for Basmati Rice?

Ashwani Kumar Arora : So, I can roughly like as compared to last year , the sourcing price for Basmati has gone up .

It depends on variety to variety , 25 to 30% .

LT Foods Limited November 1, 2022

Sir, just so price increase has be en 25 to 30% for this year the n, 25 to 30%.

Ashwani Kumar Arora : On the paddy level , yes .

On the raw material level.

And sorry, I mis sed the starting of the call .

So, apologies if you have answered this question.

Ashwani Kumar Arora : No, no, it's perfectly all right.

Could you just talk a little bit about the growth in the organic segment?

I think the growth ha s seen a bit of tapering off .

So, what has really impacted that ?

And could you just give us some guidance for what should one think of for growth in the organic segment ?

Ashwani Kumar Arora : So, if you see the H1, we are flat , and the reason is that the shipment got de l a y ed, but if you will see year - on - year basis, the growth will be double - digit , whereas , if you see the historically , three - year CAGR is 36% .

Moderator · Conference Operator

Thank you .

We have our next question from the line of Arpit Shah from Stallion Asset.

Please go ahead.

Arpit Shah

I just wanted to understand your revenue guidance.

You are just guiding of 15% revenue growth for FY ' 23 , but if I see your first half, you have already delivered more than 30% revenue growth.

So, what is actually stopping you to guide at least let's say , 25% plus revenue growth for this year?

Ashwani Kumar Arora : So, that's because , we have always given volume and this year volume and value both has grown , and that has led to th e 3 2% growth .

And full year basis, we are expecting this year to close at more than 20% growth .

So, typically H1 is on the lower side for LT Foods.

It's around , 45% of sales , and we have done close to 3300 crore sales.

So, is it good enough to say that we are able to let's say cross 7 , 00 0 crore revenue for this year?

Ashwani Kumar Arora : Under Rs.

7 , 000 crores .

It will be around 7,000 crores?

Ashwani Kumar Arora : Around, less than 7,000.

And can you just bifurcate the revenue growth let's say in volume, price realizations and curren cy tailing which you would have got in the first half?

LT Foods Limited November 1, 2022 Vivek Chandra : Sorry.

Could you repeat that please?

What bifurcation are you asking?

Ashwani Kumar Arora : Volume growth.

Yes .

Volume growth, price realization growth, the Realization growth and the curren cy tailing that you have got due to the dollar appreciation?

Sachin Gupta : So, my volume growth in th is half year was 15 % , and my realization growth during th is half year is around 18%.

I missed you r volume.

Sorry.

Sachin Gupta : Volume is 15 % growth

That is for the first half, right?

Sachin Gupta : Yes, it is in the first half.

Sachin Gupta : Yes, w e d o the hedging, and which is as per the policy which we have adopted .

So, we do forward hed ging .

And just coming to the strategic tie up or the private equity investment that you have announced a couple of days back regarding t he announcement , I just wanted to understand would that b e happening at the Company level or as a subsidiary, because w e ha ve seen in this just two years back we had announced a deal where the shareholder had changed hand in Daawat Foods which w as our wholly - owned subsidiary where we own 70% and 30% i s now owned by Saudi Arabia , one of the Saudi Arabia n funds.

So, just wanted to understand , would the money be com ing to the Company or would that money let's say be going to the promoter family ?

What w ould the deal structure look like broadly ?

Ashwani Kumar Arora : I can't discuss; it is at the Board level .

I can't disclose at the moment w ho i s coming and the ir name.

B ut I can say , whatever will happen will be good for the Company , and a s I said , we w ill unfold you in the next Board meeting.

You expect to conclude th is tie up or this investment, let's say, by th is quarter or you think the Board would require more time ?

Ashwani Kumar Arora : I can't give you the timeline , but whenever you will get the information .

Perfect.

And just wanted to understand, let's say in the Middl e East we are very much limited , and if you see our competitor who was starting as a distribut or had opened up LT Foods Limited November 1, 2022 a lot of space for let 's say other players in the market to capture a bit of market share.

Are we thinking in those lines?

Ashwani Kumar Arora : Sorry.

What you sa id, can you repeat that ?

Can you be little slow ?

Yes .

So, in the Middle East , one of our competitors was struggling due to change - Ashwani Kumar Arora : I can't comment on competition .

No, I am just wanting to understand your perspective , how you are looking to gain any market share over there because they are struggling .

Ashwani Kumar Arora : No, Saudi is a very big market , 3 million tons , and we are d oing good .

So, I can't comment on fu rther that.

And just last part on the freight expenses.

You have reported around 3 0.7% for th is quarter.

So, where do you see this number let's say for H2 FY '23?

Sachin Gupta : This is the peak number .

So, what we are expecting that th is number to come down .

So, it all depends up on the freight which we will be getting in the different territories.

Of course, th is was the peak which we have achieved .

So, whatever saving you have let's say in H2 FY '20, now they are all focus E BITDA line .

Sachin Gupta : Because we have passed on the freight cost and of course, it will have an effect on the EBITDA.

Moderator · Conference Operator

Thank you.

I would now like to hand over the call to Management for closing comments.

Ashwani Kumar Arora

Thank you everyone for your continued support .

Hope w e were able to address all your queries .

Should you have any further questions ,please feel free to contact our investor relations team.

Thank you and look forward to see you soon.

Moderator · Conference Operator

Thank you .

On behalf of Motilal Oswal Financial Services Limited, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.

(This document has been edited for readability purpose) LT Foods Limited November 1, 2022