Prataap Snacks Ltd (DIAMONDYD) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the Prataap Snacks Limited Q2 FY '27 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. Should you need assistance during this conference call, please signal an operator by pressing star followed by zero on your touch-tone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Mayank Vaswani from CDR India. Thank you, and over to you.
Mayank Vaswani (CDR India): Thank you, Yashashree. Good afternoon, everyone. Welcome to the Q2 and H1 FY '27 earnings call of Prataap Snacks. On the call today, we have Mr. Amit Kumat, Managing Director and CEO; Mr. Sumit Sharma, Executive Director and CFO; and Mr. Rishabh Singh, Business Head. Before we begin this call, I would like to point out that some of the statements made in the call may be forward-looking and a disclaimer to this effect has been included in the earnings documents that have been shared earlier. With that, I would now like to turn the call over to Mr. Amit Kumat for his opening remarks. Thank you, and over to you, Amitji.
Amit Kumat (Prataap Snacks Ltd): Thank you, Mayank. Good afternoon. Good afternoon, everyone, and thank you for joining us today for our Q2 and H1 FY '27 earnings conference call. I hope you had a chance to go through the earnings presentation and the financial results that we shared earlier. I'm pleased to share that Prataap Snacks has delivered another quarter of strong revenue growth with our quarterly revenue crossing the milestone of ₹500 crores for the first time in the company's history. Revenue from operations in Q2 '27 stood at ₹541 crores representing growth of 26% year-on-year and 10% compared to the previous quarter. This is an important milestone for us, especially as it follows the record quarterly revenue achieved in Q1. For the first half of '27, our revenue from operations stood at ₹1,031 crores, an increase of 23% over the corresponding period last year. What is particularly encouraging is that we have maintained the strong
Amit Kumat (Prataap Snacks Ltd): momentum of the last few quarters. We believe the various initiatives we have been working on over the past several quarters are now showing clear results. Let me share some of the key developments in our business. Our Namkeen and potato chips categories have continued to perform well and have been important drivers of growth during the quarter. We are also encouraged by the consumer response to the new products and variants introduced over the past few quarters. Product development continues to be one of our key focus areas. We are working on introducing new flavors, expanding our product range and developing offerings suited to different regions and consumer preferences. Namkeen remains a particularly important opportunity for us. It is one of the largest categories in the Indian snack market and we still have considerable scope to increase our presence. Over the years, we have demonstrated our ability to grow categories such as rings and pellets. We are now leveraging this experience to further strengthen and scale our presence in Namkeen. Another important driver of growth has been our continued work on distribution. We have focused not only on reaching new outlets, but also on increasing the range of our products available at existing outlets. This gives us opportunity to grow sales by making our products available to consumers through our established network. Our investments in technology are supporting these efforts. Salesforce automation and other digital initiatives are giving our teams better information about market coverage, product availability, and sales performance. This is helping us identify opportunities, improve productivity, and take faster decisions in the market. We're also making a steady progress in newer channels. Our quick-commerce business continues to develop well. We are expanding our presence across platforms and increasing the range of products and pack sizes offered through this channel. These channels are important for reaching new consumers and developing our presence in large packs and newer product categories. As we have shared earlier, our aim is to increase the contribution of these new channels to around 5% of our revenues over the next 3 years. Overall, we are pleased that growth is now coming from several areas of the business, rather than depending on any single product or initiative. Now turning to profitability, the operating environment remained challenging during the quarter. There has been a further increase in the prices of key inputs, particularly palm oil, potatoes, and packaging material. Fuel and logistics costs have also remained elevated. These cost increases have been significant, and despite the strong growth in revenue, they have put pressure on our margins. Our gross margin for Q2 stood at 25.5%, compared to 29.8% in the corresponding quarter last year. EBITDA for the quarter was 12.9 crores, compared to 22.9 crores last year, with EBITDA margin at 2.54%. For H1 25, EBITDA stood at Rs 32 crores. The pressure on operating margins also impacted our bottom line. We are taking several steps to address these pressures, such as grammage rationalization, adjustment in channel margin, and trade schemes, and continued cost reduction across our operations. These measures have helped us offset part of the increase in input costs. However, the overall inflation has been substantial, and we will need to continue working on these areas. We are closely monitoring commodity prices and will take further steps whenever required while keeping our products competitive in the market. Apart from these immediate measures, we are also working on a structural improvement that will strengthen margins over the longer term. During the initial years of our expansion, we took a decision, conscious decision, to build a pan India business, rather than expand one region at a time. Accordingly, we invested significantly in building our distribution network across India. And our distribution reach today would rank higher than revenue scale in Indian snack industry when compared to peers. This means that we have supported new distributors, invested in sales team, and incurred full expenses towards feet on street in prior years. A large part of the distribution infrastructure and associate investment is already in place. As we increase volumes, add new products and categories through these touch points, these are negligible additional costs involved given in the investment in earlier years. This means that as we undertake steps to improve productivity and throughput, we can generate higher sales through the existing network without a proportionate increase in distribution cost. This will deliver substantially accretive contribution and an enriched margin profile as the business at each touch point scales further. A similar opportunity exists on the manufacturing side. Our Indore operations have grown over many years, with capacity added in stages to serve the immediate requirement of the business at that point in time.
Amit Kumat (Prataap Snacks Ltd): investment served an important purpose at that time. However, this gradual expansion has resulted in multiple stand-alone units operating within the same manufacturing complex, creating certain inefficiencies in production, manpower and overhead costs. We have been evaluating the right time to address these inefficiencies. We believe that the business has now reached a stage where a more integrated manufacturing setup makes both operational and economic sense, enabling significant reduction in conversion costs and overheads. These developments, along with the benefits available under government incentive schemes for new investment, have created a favorable opportunity to undertake this project. Our proposed greenfield facility near Indore will bring together existing operations under a more integrated and automated manufacturing setup. This will help us improve production planning, optimize manpower and other operating costs, and achieve greater inefficiencies. The facility will also provide additional capacity and room for further expansion. We see this project as an important step towards structurally improving our cost base and margin profile over the coming years. That brings me to an important development regarding our proposed new manufacturing facility near Indore. During the quarter, we completed the acquisition of RLOP Foods, which holds the leasehold rights to the land identified for this project. With this acquisition, we have secured access to approximately 50 acres of land required for the new facility. We will soon initiate the process of merging RLOP Foods with Prataap Snacks, which will simplify the corporate structure. At the same time, we are moving ahead with procurement planning for plant and machinery, particularly equipment that has a longer lead life time. This will help us coordinate machinery deliveries with the the progress of civil construction. In closing, I would say that we have made a strong start to '27, and the momentum in our core categories, new products, distribution and alternate channels gives us confidence in delivering strong double-digit revenue growth for the full year. On the margin side, the input cost environment continues to require close attention. We remain focused on cost control, productivity improvements, and taking appropriate measures to reduce the impact of inflation. At the same time, we are investing in the areas that will strengthen our business over the longer term, including product development, distribution, technology, and manufacturing capabilities. We are excited about our growth prospects and quarters ahead. With that, I conclude my opening remarks and we can take we can now take questions. Thank you.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Moderator: We take our first question from the line of Bhavik Shah from InCred Capital. Please go ahead.
Bhavik Shah (InCred Capital): Yeah. Hello, sir, good afternoon. So, my first question is regarding our pricing. So, we are seeing like quarters where we get hit by say, oil prices or like raw material inflation due to oil prices or potato prices or say besan prices or anything. So, how do we sir see this stabilizing in future? Like or will we continue to face this volatility? Our gross margins have reduced significantly to now around 25-26%. So, is like pricing really a power for us anymore or how how do we tackle this now?
Amit Kumat (Prataap Snacks Ltd): Thank you, Abhishek. Here, I would like to mention that inefficiencies in the system in terms of production capability then the channel margin. So, we are trying to remove those inefficiencies. Those inefficiencies can give us 5% to 6% extra margin, which can compensate if there is any price further price increase.
Bhavik Shah (InCred Capital): No. But our gross margins have reduced, sir. Inefficiencies could be removed and maybe EBITDA could be improved. But what about the gross product like production level margin, you're saying?
Sumit Sharma (Prataap Snacks Ltd): So, Bhavik, there are two things. One is the immediate impact on the raw material pricing especially after the Russia after this US-Iran war. So, if we compare numbers from quarter 4 almost 8 percentage point of negative impact we have experienced in quarter 2. So, that much significant impact we have experienced. Now, we have mitigated this largely through increasing the prices. I mean increasing our realization as well as by optimizing some of the grammages in some of the SKUs and that's how we could able to protect our gross margin and operating profit to a large extent. So, that's the immediate impact. What Amitji has mentioned that is more about the structural things what we are doing. As he also mentioned in his opening remarks that over the period we expanded our Indore facility as per the immediate requirement and that's the reason we have multiple smaller units in the same campus and that is leading to relatively higher operating cost and now we are fixing this that inefficiency by shifting to a new location and that will improve the overall operating profit by about 1.5% to 2% in next 1.5 years' time. Though there may not be direct impact on the gross margin, but that will positively impact the bottom line and the operating profit. Now, the second reason for having some stress on the gross margin is the hard investment in building the distribution network. Now, we have one of the strongest reach in terms of national presence if you compare with some of our peers. We are available at more than 2.5 million outlets and building this kind of distribution network requires a lot of front loading in terms of investment and through profit and loss account. So, I think that's a tough part for any of the FMCG company, which we have done over the period. Now, it's time to get the result out of this and now we are leveraging the existing distribution network. As you can see in our presentation and in Amitji's opening remarks as well, now we are driving the reach of all the product categories. Today, as we speak the highest reach we have for the extruded snacks. Now, we are increasing our reach for potato chips as well as namkeen and the incremental revenue will come with a very minimal incremental cost and that will positively impact the gross margin. So, that's how the gross margin will improve over the period and that improvement will be a structural improvement, which will not have any relation with the raw material pricing and all. But in short term there was a negative impact because of this sudden increase in the price specifically the palm oil and the packaging laminate, which we have largely mitigated through taking price hikes, improving our realization as well as rationalizing the grammages for certain SKUs.
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