Thank you very much. We will now begin the question and answer session. The first question is from the line of Abneesh Roy fro m Nuvama Institutional Equities. Please go ahead.

Thanks. My first question is on the overall performance. So two back-to-back quarters your EBITDA has been quite weak, so wanted to understand what are the learnings here and second is in spite of being a st rong market leader in edible oi ls with 19% market share 1% EBITDA margin or near that in the first half both Q1, Q2 why do you see this performance and when you say that Q3, Q4 the performance s hould be better how much better will it be because commodity has been now stable for many months in that context 1% margin for 19% market share and number one player what does this reflect on the total industry what are the issues, what is the downtrading, downgrading happening, given we are seeing that in many other FMCG if you could discuss that also?

To answer your question see Q1 and Q2 the only issue with not Adan i Wilmar but I think entire industry faced is the disalignment of the hedges and which is something which is very, very unique, very, very exceptional thin g to happen that you go and hedge your risk, and it works against you. So what happened was all our hedges were not in money instead of protecting our base, actually we lost m oney there and this is only a onetime phenomena which happened for Q1 and Q2, so it is something which I do not think should continue as we go forward and therefore from a learning po int of view because your question was what were the learnings I think there is no major learning as such I think it is something which we feel that something whic h has happened once in a while and should not be happening again and therefore we are quite hopeful for Q2 and Q3. Similarly on a EBITDA margin per se our steady state EBITDA margins are anywhere between Rs.3000 to Rs.3500 a ton and if the market continues like this and I do not think now there would be any further disalignment of hedges will be there, so we sh ould be able to deliver that for Q2 and Q3. Having said that it is not about Adani Wilmar I think entire industry suffered on this and I would request Mr. Malik also to add to this.

Abneesh your question is very right that what is our learning, one of the learnings that we have is that possibly inventory management can be relooked at the way the markets, if they do not work in tandem then one thing sure is that you can reduce your inventory, but then the country is consuming more. If you see our full H1 growth in edible oil the branded packed edible oil has grown at 23%. Now honestly we have not seen this kind of growth in last 8-10 quarters or even more before COVID also. So this type of consumption happened because after a long time the edible oil prices came down and consumption was I would say fierce, out of home consumption was very good, otherwise branded packed edible oil growing at 23% is unheard of, so that we were worried to reduce the inventory then we lose it and if we had inventory so we had to buy, so when you buy obviously your hedges were not in tandem so that is one learning we have, but going forward as you said it is now a steady state, yes, last two months little steady August end, September was okay, October was even better I would say. So our pain has now gone, so going forward we should perform the way we were performing possibly better and as you rightly said if the number one brand is not earning then how can the industry earn. Obviously we have been earning in edible oil and we see that coming back in action from Q3 onwards. Bigger issues, good things that is food business that the food FMCG business grew at 19% this quarter, but domestic we have grown at 52% what we lost on is the export of rice that was a big chunk of the business that we lost so that reduced our growth overall, ot herwise if you see the domestic growth because of Kohinoor and Fort une basmati rice we have grown at 50%, branded Atta Fortune Atta is grown at 50%, so that is a very good sign of one consumption, second brand strength and third distribution strength. So going forward we are very optimistic about our performance from Q3 onwards.

Sure thanks for the answer. Two very quick followups, so one is in terms of the hedging impact can you quantify both in Q1, Q2 and second would you be changing your hedging policy I understand the inventory levels can be very dynamic so I am not questioning that but in terms of the overall hedging process do you see some change which is needed and third is whenever deflation happens in edible oil the margins in fact go up because your profit is mostly on in terms of the tonnage so will that be again happening in H2 and FY2025 when things are stable and you get benefit of the current RM would you expect that actually the EBITDA margin should be ahead of what was seen in the stable periods of last two years?

If you look at the profitability for H1 I will talk on H1 rather than only talking on a Q2. So last year we had a net profit of 242 Crores against this this year it is 210, of this 210 you can take out that onetime tax hit. so there is a delta of close to 350 Crores between the profitability which we registered last year and this year and now this majority of this basically is due to the hedging losses. Now these hedging losses as we earlier said it is not because we kept positions open it is because we hedged and therefore it turned counterproductive for us usually it does not never but it is one-time only. Having said that there is no need to change in a risk mana gement policy in fact because of the risk management policy we could restrict the losses to the extent of only 15% to 20% of our full year EBITDA. Having said that there is no change in our hedging policy except for the fact that one corrective action that company may th ink of taking is that we can distribute the hedges between various mechanisms for the example we can reduce the hedges on the CBOT rather than we can take it on the OTC. So that is something company is certainly looking at and we will take that corrective acti on one is that and therefore when we go into the Q3 and Q4 since this disalignment is more or less now been over we should be looking at a steady state run rate whic h we were giving in past so me quarters and therefore the things should look better for the half too.

Your margins will improve?

Yes, of course they should improve on two counts. One is your quarter margin has to improve because we do not foresee now more hedging losses coming in next two quarters, number two though we do not look at margins as a percentage of the revenue but those will also improve given the fact that the prices have already corrected and the prices are at very low level so in terms of percentage to the revenue as well as per ton in both metrics you should see the improvement in the margin.

Sure, my last question is on the basmati rice as per your presentation you have lost around 200 bps market share, wanted to understand is there any one-off, second is in terms of the exports would you need to set up new distribution teams, new distribution tie-ups because the two other listed Basmati rice players are doin g really well, of course a lot of regulation changes are happening, so in terms of expor ts what kind of a scale up in team and distribution you would be needing?

On this market share loss of around 200 points one is that basmati rice 50% of the business comes from modern trade and e-com. Now in modern trade normally we have tie-ups for big days and big scheme s last year April, May we had a big scheme with Reliance and our volumes were very high for two months of Fortune, but this year we shifted that to Kohinoor and this year we did with Kohinoor and our oil and Kohinoor basmati rice obviously the Fortune was not taken. Now you s ee in October, November Fortune and our rice bran oil is the combo pack for Reliance and I can tell you these are big events where more than half a million packs are sold, minimum half a million it can be even 700000 ton to 1 million packs in two months, so that is the kind of volume that comes together. So the market share jumps and then again comes down, that is what it is, but nonetheless we have noted it and we are working on how to increase our presence in general trade and all that. That is part one, part two is that exports, yes, export is a bi gger market for basmati rice, so we have started increasing our presence and di stribution of Fortune brand, we have started Jubilee brand as a second brand and we are now looking at different markets for Jubilee, but other than that we have tied up with few good parties in Saudi and other countries where we have started negotiating for big volumes co ming November onwards because they start buying only from November new crop comes in. So November onwards we have done it. Domestic market also our HoReCa department has started working very well and as you know HoReCa market is going to be very big with the new marriage season coming in there also we have started contracting the caterers and hotels and all that for banquet and all that, so big volumes are expected in H2 in both basmati rice, edible oil and other food products.

Thanks. That is all from me. Thanks a lot.

Thank you. Next question is from the line of Karan Bhuwania from ICICI Securities. Please go ahead.

Hi, good afternoon, Sir. Thank you for taking my question. Firstly on the drop in profitability, so I see there is a drop in profit ability in gross margin and EBITDA level as well, how the drop at EBITDA level is much higher so what can we expect, how can we see this profitability going forward in say second half and if you could also provide some guidance on overall growth numbers for the second half?

On the EBITDA level whatever drop you are lo oking at is basically due to the commodity loss which as I explained we booked for this quarter. Having said that this commodity loss is I think something is now far behind us, I do not think that we will have this situation as we go forward in the next quarter. We should continue to grow on double digit as we have been able to do in H1, H2 also and since the demand forecast is more in H2 so we should be able to grow and our steady state run rate per ton on EBITDA as well as gross margin and other business parameter we shoul d be able to deliver that what we have been able to deliver for last more than 10 quarters, so it should be a normal Q3 and Q4, Q1, Q2 of course remain an exceptional only because of someth ing which we never actually expected on hedging front.

Just to follow up on that. Just asking about the pricing are we taking any further pricing actions on edible oil portfolio or it is just a correction that we have taken earlier?

See on edible oil the prices have actually come down steadily over the last three quarters April and this July, August, September also the prices corrected by almost Rs.5000 to Rs.6000 a ton, but somewhere we see the botto m out is happening and the markets are now getting back into the steadiness or a little positive side. Now we generally do not follow so much on the prices our pricings are based on th e market prices and basis that we are doing it. I cannot comment like that, but looks like the bottom is over, the markets may not fall, so that is how it will remain steady, but even if it falls does not matter, for us the brand takes that much amount of cushion. Price wise these are all very acceptable price to the consumers.

Got it. Also see highlighted that the rural is growing slightly better than the urban markets would you attribute that to a better demand environment and improving demand environment in the rural markets or would you attribute that your distribution expansion that you are currently carrying?

Rural contributes roughly 30% of edible oil business and around 31%-32% of the food business. Now the growth if you see both Q2 as well as the first half the growth of rural has been slightly higher than urban that can be tw o, three reasons, one the edible oil prices have actually now been shift into and consumers feel these are good prices. So they are comfortable with it one, two the food busine ss has done well because wheat we are seeing there is a very good growth in branded wheat flour business that is because government PDS reduction and free open mark et sales reduction has ensured that the availability of cheaper wheat is not there so much so people are buying flour and then people obviously would prefer a branded flour. So that we are seeing branded flour is increasing even local rice is increasing. Sugar we do around 25%-2 6% of the branded sugar sales comes from rural market you would not believe, but 45% of my basin business comes from rural market half kilo basin I can tell you, so branded basi n is doing so well. So all these products shows that rural markets are slowly gearing up but H2 will be better than H1 normally we have seen rural does better in H2.

Got it. Also if you could give some broa d breakup of your foods business in terms of branded consumer business the HoReCa business and the exports business?

On food if you take total food basket our domestic business is bigger out of which the branded business, total food branded business will be roughly around 80%-85%, rest of that is traded product that is one. Two exports of food is less because non-basmati rice got impacted and that is why our rice exports reduced, but overall we do roughly around 200000 tons of exports food business on a good year, now that has reduced a little bit because of the export restriction of rice, third is HoReCa, HoReCa business we started around eight quarters back as HoReCa otherwise distributors were supplying to hotels, but now we have a separate division, separate team, separate distributor, separate mechanism to monitor it, which is now growing at almost 50% quarter-on-quarter and we today do roughly around 100000 tons of food and oil only to HoReCa branded sales to HoReCa.

Thank you so much. I have a few more qu estions I will come back in the queue.

Thanks for the opportunity. I basically wanted to get a sense on like since we are operating in the food part of the business we have been hearing out regional competition getting aggressive, so just wanted to have a sense from you which part of the business you are seeing more competition from the regional players?

In oil and food both we have seen competition from regional players, in edible oil it is mainly non-refined like mustard oil, groundnut oil, cotton seed oil, you will get which are local oil, rice bran oil, you will get local competition that is stronger than national brands and in refined oil it is a national brand. Now fo r us and in food atta we have several small, small players, but they are all in a state or within a state also they are in one location. Basin I have seen 8-10 such local players and sugar al so you have seen such kind of players. So for us our strength is our distribution model th at is the integrated distribution model. So when we start in a factory we have more than one product, so it will be food and oil in each of the factory, so we have common manufactu ring facilities. After that we have common distribution facilities so obviously our distri butors are common, sales people are common and then the retailer is common. So this entire common chain helps in reducing cost per ton and in commodity business you will agree that ability to reduce your cost, and pass on that benefit to the consumers will be most important. So if you have to fight we fight against quality, one consistency of quality, brand power and distribution strength. So we can take all our products to the retailer and give him the option to buy anything or everything that gives us strength at the ground level. So overa ll, overall for us, yes, competition is there from the local players, but we are able to grow faster than that.

I just wanted to get a sense on like this tim e around it is more of raw metal prices coming down and sort of this surge in competition, so do you consider this competition is like say pre-COVID levels when the raw material prices are stable it is that level or you still expect the normalcy to resume in next couple of quarters?

I think we are back at pre-COVID levels in terms of consumption and with this new wedding season coming up we will see very big wedding season. Why very big, number of people restriction is not there, people are going out and spending and they are going out and eating, so out of home consumption is going to be very big and I have seen good brands have advantage, people like us have advant age because I am giving a plate of products which basket of products so that helps the hotel to pick from us any and everything. So we give them a basket and we give them better se rvice, so our distributors are more aligned for it, so there we have advantage.

Thanks a lot, but my question was more from the perspective of regional competition so from the competition what we see from the regional player, so this has gone up at the back of easing in raw material prices they have re emerged in the market and sort of giving us a competition, so from competitive learning, how do you think pre-COVID and post- COVID?

Regional competition was there earlier also pre-COVID it is now there also, but over the time I am seeing regional competition is reducing in basic staples because one ability to buy and store is reducing, second ability to distribute cost effectively is they are losing on it, and second consumers are becoming quality conscious, so end of the day good brands will win even if he is a regional player, but he is gi ving consistently good quali ty we will also win, but slowly the regional players are losing out on th ese fronts, but not that they will not exist regional players always exist.

Sure thank you and my last question is with re spect to this cold pressed oil or sort of a super-premium single commodity oil where like a players like Dabur have emerged and you have Tata Consumer launching products in the traditional companies while there are multiple players operating in that segment so how big is that segment and what is our thought to participate in that segment?

These are very small segments and very niche segment of cold press. Yes, it is visible but they do not sell so much and volume wise surely very, very small. We are also introducing our own cold press oil which we are now ready and possibly in a couple of months we will introduce first with the mustard oil because there we have lot of strengths as number one brand of mustard oil, so we can do that, so we are working on it, but these are niche products still today in India, but we will surely be there.

Thanks a lot. Thanks for giving me the opportunity.

Thank you. Next question is from the line of Jasmine Surana from VD Capital Markets. Please go ahead.

Hi, thank you for taking my question. I wanted to understand the contribution from the new products, which we have launched recently an d another question would be on the mix in terms of our edible oil, our FMCG, and the industrial portfolio, so we can see that the historic trend was around 80% of edible oil, around 5% of FMCG which has now changed a little bit so where do we see these numbers stabilizing?

I will answer your second question first which is about the contribution of various product lines. We do not look at the contribution of the product from a revenue perspective because the edible oil prices keep moving up and down and therefore you do not get real structure of the contribution, so what we lo ok at is volume contribution. So as we speak today close to 58% now comes from edible oil, which earlier used to be 65% two years back, so it is slowly coming down from 65 to 58 and what is going up is basically a food and FMCG segment from 11% to 18% in last two years. So 58% contributed by edible oil, 18% by food and FMCG and rest is coming from the industry essentials. So this is how the construct of our product lines. Having said that as we go forward the food and FMCG will keep going up because food and FMCG today is growing at a CAGR of plus of 30% year-on-year whereas edible oil will keep growing with a sing le digit kind of growth but that is how the industry is and therefore as we go forward th e food will significantly improve, edible oil will slowly come down, and that is good because to that extent you are derisking your entire business model because edible oil suddenly has got its own risk profile due to the commodity hedging, commodity volatility, and coming back to your first question can you just repeat that first question again?

My question was on the NPD and on the mix?

So NPD basically we have toda y, so last year we launched poha which is the flattened rice then we had a khichdi then we had chunkies and then we have lined up couple of like we have a Biryani kit it is at a very nascent st age and does have a very, very small volume to cater in the entire scheme of the things, but having said that it is growing steadily. These are all niche products and therefore we will neve r be able to showcase a very huge kind of volume, but these are good value and margin accretive products and we are hopeful that we would be keep growing on this year-on-year.

Thank you. Just a last question in terms of th e premiumized products that we are selling, would it be able to get a ratio of how much of the products are selling in the premium end and how much are at the mass end?

I can give you one breakup I would not be ab le to give you how much is premium and how much is not premium, but for us the Fortune brand itself is a premium brand in the country, so therefore when we look at edible oil por tfolio and when we look at food and FMCG portfolio close to 65% of our branded sale co mes from the fortune which according to us is a premium brand for us and then rest of the 35% is from all our mass stage brand or a fighter brand which are there in the market to protect the Fortune.

Alright. Thank you so much.

Thank you very much. As there no further ques tions, I now hand the conference over to the management for closing comments.

Thank you everyone for attending this call. We request everyone to keep attending our quarterly earnings call to know business mo re, to know company more. Thank you again and we look forward to see you again in next quarterly call. Thanks. Moderator; Thank you very much. On behalf of ICICI Securities Limited that concludes this conference. Thank you for joining us. You may now disconnect your lines.