Patanjali Foods Ltd
NSE:PATANJALI
Earnings Call Analysis
Q3-2024 Analysis
Patanjali Foods Ltd
Sanjeev Asthana from Patanjali Foods Limited opened the earnings call with a positive note on the company's performance for the quarter ending December 2023. He highlighted that the company achieved its highest quarterly revenue since being managed by Patanjali, indicating a successful implementation of the company's strategies.
Patanjali Food's Q3 FY 2024 results show a revenue of INR 5,482.64 crores from the edible oil segment, a modest 1.13% sequential growth, with the palm plantation sub-segment contributing INR 232.55 crores to this figure. The company saw a volume increase of 5.92% quarter over quarter and a remarkable 16.22% growth over a nine-month period compared to the previous year. Despite achieving higher volumes and 75% of its sales in branded products, the segment EBITDA painted a slightly negative picture at INR -17.22 crores, although there was an improvement from the last quarter's negative INR 27.08 crores .
Strategically, Patanjali Foods is concentrating efforts on establishing a strong foothold in the premium oil market and expanding its oil palm plantation business. The company anticipates a positive impact from the Union Finance Minister's recent strategies aimed at achieving self-reliance in key productions like oilseeds, which aligns with their vision for the oil palm plantation business. In a notable achievement, the EBITDA margin for the oil palm plantation reached 21.2%, and 4,000 hectares were added to it in the quarter, thus emphasizing their aggressive expansion in this segment.
Despite facing challenges such as input price inflation, unusual seasonal variations, and increased advertising spend, Q3 remained stable for Patanjali Foods. The Food & FMCG segment consistently contributed around 31.6% to total revenue, sustaining its performance from the previous quarter and reinforcing the company's targeted focus on this segment's prominence and revenue contribution.
The company's biscuit portfolio witnessed a robust year-on-year growth of 15% for the quarter and even higher for the nine-month period at 24%, indicating a strong trajectory towards reaching INR 1,500 crores in revenue for the fiscal year. Patanjali's strategy aims to not just maintain but expand its customer base with the introduction of new products in the upcoming quarters, signaling potential for further growth in this segment.
Patanjali Foods is actively expanding its spices portfolio and nutraceutical brand, acknowledging the immense potential of these markets. Marketing campaigns and product acceptance suggest a healthy growth trajectory in these segments as well.
The revenue from operations was INR 7,910.70 crores for Q3 FY 2024, with an EBITDA of INR 390.6 crores reflecting a margin of 4.9%. The company's profit after tax was INR 216.5 crores, indicating a margin of 2.7%. Looking at a nine-month perspective, the revenue from operations summed up to INR 23,499.69 crores, with an EBITDA of INR 1,021.82 crores and a PAT of INR 558.83 crores. The revenue from exports saw a significant jump of 49% over the previous quarter. Patanjali Foods expects to end the fiscal year positively, with the Food & FMCG segment predicted to contribute over 30% to the total revenue.
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Ladies and gentlemen, good day, and welcome to Patanjali Foods Limited Q3 FY '24 Earnings Conference Call. . This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjeev Asthana from Patanjali Foods Limited. Thank you, and over to you, sir.
Thank you, and good morning. I trust everyone has had a positive beginning to 2024. On behalf of Patanjali Foods Limited, I warmly welcome each of you to today's earnings call covering the quarter ended 31st December '23. I'm accompanied by my company's colleagues, our CFO, Mr. Kumar Rajesh; Chintan Kotak, who's from the Investor Relations and our adviser in Investor Relations, Strategic Growth Advisors. We have uploaded the financial results and the investor presentation on the stock exchanges as well as company's website for your reference. I'm pleased to announce that our most recent financials underscore a robust performance reflecting our highest quarterly revenue since the company came under the stewardship of Patanjali management. This serves as a testament to the successful execution of our strategies translating into tangible results.
In the quarter, our performance has been propelled by edible oil segment with FMCG maintaining a stable performance. Our robust presence in the rural areas experienced a slight dip primarily due to the weather changes and some impact it had of the seasonality. Additionally, the effective sales volume was subdued in the FMCG space as well. Having said that, our initiatives to broaden our reach through new channels like modern trade, e-commerce, Q-commerce and B2C, especially in urban areas, have yielded positive results.
Concerning the Edible Oil segment, at the outset of the financial year, we encountered distinctive and unprecedented price volatility, characterized by a significant disparity between futures and physical prices of edible oils. However, during this quarter, we observed a contraction and/or discrepancy resulting in increased price stability in the edible oil market. This reduction in pricing pressure coupled with robust demand contributed to a positive upturn in our overall performance.
Turning our attention to the performance of our Edible Oil segment. In Q3, the Edible Oil segment achieved INR 5,482.64 crores in revenue, registering a sequential top line growth of 1.13%. Of this, INR 232.55 crores is the revenue from the palm plantation business. The volumes in Q3 financial year '24 increased by 5.92% to 6.39 lakh metric tons versus 6.03 lakh metric tons in last year -- in Q2 of financial year '24. In 9 months period in financial year '24, the volumes increased to 18.65 lakh metric tons with a growth of 16.22% over 9-month period in FY '23.
Branded sales continue to play significant role, constituting more than 75% of the total sales volume in the Edible Oil segment. The segmental EBITDA increased to INR 107.67 crores against negative INR 27.08 crores in Q2 FY '24, while it was INR 223.19 crores in Q3 of FY '23. For the 9-month period in FY '24, the segment EBITDA was negative INR 17.22 crores vis-a-vis INR 86.27 crores in the previous year.
During the quarter, the company adopted various risk mitigation measures to ensure it is immunized from the price volatility to the best possible extent. There was a conscious reduction in hedge ratio considering the misalignment in the price direction in the futures versus physical. Hedging was based on fundamental and technical research. The company has always adopted neutral hedge through and continuous churning of positions as per the market dynamics.
Our strategic efforts are currently concentrated on expanding sales in the premium oil segment through targeted initiatives and innovative strategies. We aim to foster growth and establish a robust presence in the premium oil market.
In the oil palm plantation business, building upon the initiatives launched in 2022, the Union Finance Minister shared strategies to achieve self-reliance in all key productions in the later budget announcement last week. The plan aims to empower farmers to engage in cultivating oilseeds such as mustard, groundnuts, sesame, soybean and sunflower. Key elements during her budget speech include researching high yielding varieties, adopting modern farming techniques, streamlining procurement processes and more. This comprehensive approach is anticipated to have a positive impact on our oil palm plantation business as well.
Certainly, the oil palm plantation business not only serves as a catalyst for substantial growth of Patanjali Foods, but also plays a crucial role in nation building. It is an integral component of our national effort. We are committed to spearheading and nurturing our thriving business that contributes significantly to the progress and prosperity of the nation. Our endeavor is to increase earnings from oil palm plantation. For this quarter, oil palm plantation has achieved an EBITDA margin of 21.2%. The total area under oil palm cultivation is now 72,500 hectares, with an additional 4,000 hectares added in this quarter. Approximately 1 crore trees have been planted on the cultivated land. Notably, we have achieved rapid plantation expansion as evidenced by the plantation, which are under 3 years old, which now constitute almost 28% of our overall plantation, showcasing substantial growth compared to 18% that we recorded in March of '23.
Two new state-of-the-art nurseries have been established in Northeast region, bringing the total Post Entry Quarantine, PEQ certified nurseries to 37 across India. These nurseries currently in-house about 1 crore sprouts. In the quarter, we imported 13.5 lakh oil palm seed sprouts from Costa Rica, Malaysia, Thailand and Papua New Guinea. Additionally, we signed a lease agreement with Assam Industrial Development Cooperation for establishment of palm oil mill in Assam.
All these initiatives aligned with the pursuit of self-reliance in the edible oil business segment. One of the key objectives is to reorient our marketing activities towards heightened brand premium and expanded market reach. In alignment with our brand building efforts, you will observe a more than 2x increase in advertising spend on Q-on-Q basis. Notably, we have successfully signed renowned cricketer Mr. Mahendra Singh Dhoni to endorse the Mahakosh and Sunrich brands. We anticipate realizing the benefits of these expenditures in the forthcoming quarter, solidifying the company's investments in the impactful marketing initiative.
Now I'll come to the discussion on the food and the FMCG segment. The December quarter remained stable despite several factors which affected the overall operational landscape. The input price inflation exerted pressure on the costs, presenting challenge to the segment's profitability. Unexpected seasonal variations such as delayed winters and the impact of El Nino also influenced the quarter's performance. Additionally, a deliberate and strategic decision to increase advertising spend to enhance brand visibility and market presence contributed to the market dynamics of the segment's financial outcomes. These multifaceted factors collectively underscore the quarterly performance.
Our quarterly performance aligns with the objective of increasing the share of Food & FMCG segment. In the reporting period, the Food & FMCG segment contributed approximately 31.6% to the total revenue from operations, a figure which is consistent from Q2 of FY '24 performance. This strategic trajectory reflects a positive trend and affirms the efficacy of our targeted efforts to enhance the prominence and contribution of the Food & FMCG segment within our overall revenues.
The biscuit portfolio stands out as one of our company's most formidable offerings, showcasing an impressive 15% year-on-year growth in the December quarter and 24% year-on-year growth over the 9-month period. It is on track to achieve a revenue milestone of INR 1,500 crores, reflecting a remarkable 50% growth in just 2 years. The stellar performance is particularly evident in our marquee biscuit brand, Doodh Biscuit and Nariyal Biscuit, both registering robust growth rates exceeding 25% during the quarter. The recently launched premium range has garnered a positive market response with steady repeat orders. The division caters to approximately 1.2 million retail outlets, showcasing the extensive market penetration.
Looking ahead, our vision involves expanding our customer base further by introducing new products in the upcoming quarters. The planned launch of handmade cookies and choco-chip cookies, coupled with facelift for the company's presence in the urban markets is part of this strategic growth plan. Additionally, we are actively considering the strategic expansion of our manufacturing capacity to accommodate the growing demand and capitalize on emerging market opportunities.
Our spices portfolio encompasses a diverse range of essential spices like turmeric, cumin, chili powders [ spice ] et cetera. The spice market holds tremendous potential, and recognizing this, we are actively pursuing the expansion of this category.
Our TV commercials are currently being aired, and we are witnessing a multiple uptake in our spice demand, which is similar to also what we are doing for Chyawanprash and honey advertisements also. Under the 30-year-old brand Nutrela, the premium [ dry food brand ] we recently introduced has received widespread acceptance in the marketplace. The Nutrela MaxxMillet Oats underwent a successful pilot launch in Kolkata in November '23, and was officially introduced in Southern India in December last year.
Our nutraceutical brand has been steadily establishing itself as a top player in the industry, bolstering its position through continuous innovation and product enhancement. Nutrela's nutrition recognition as a Nutraceutical Company of the Year at the India Food Safety & Nutrition Summit and awards '22, '23 validates our commitment. As affluent India experiences a robust wealth effect, the consumers make conscious food choices. Preferences have shifted towards premium products, reshaping the industry landscape. There is a growing appetite for premium food items among consumers. In line with this trend, Patanjali has intensified its focus on premium offerings, aligning with its commitment to innovation and enhancing the premiumization strategy. And premium products are expected to drive higher margins also.
We live in a highly dynamic world, and in recent times, the logistics network has faced disruptions due to the Red Sea crisis. We are closely monitoring the situation on this front. While our edible oil imports come largely from Asia, in case of palm oil, but they do -- especially the soft oil, which comes from Europe and South America, there is a challenge.
On the organization front, we are thrilled to announce that we have once again been honored with the esteemed, Great Place to Work Award for the third consecutive time. This recognition underscores our steadfast dedication to excellence across all facets. We are in the process of finalizing our ESOP policy, which should be rolled out hopefully in the next 2 weeks' time.
Taking a closer look at our financial performance. I'm coming to the last part of my opening remarks. Taking a closer look at our financial performance during the quarter. Our revenue from operations in Q3 of '24 clocked at INR 7,910.70 crores, registering a marginal growth over Q2 of FY '24. The total income recorded is INR 7,957.3 crores. Our EBITDA was INR 390.6 crores with a margin of 4.9% during the quarter as against 5.3% in the previous quarter and 5.1% in the same quarter last year.
Quarterly PAT was INR 216.5 crores versus INR 250 crores -- INR 254.5 crores in Q3 of last year, while the PAT margins were 2.7% versus 3.2% in Q2 of FY '24. The revenue from exports was INR 62.06 crores, making an increase of 49% over the previous quarter.
For a 9-month period, the numbers stack up as follows: Our revenue from operations is INR 23,499.69 crores. The total income booked at INR 23,613.60 crores. Our EBITDA has been recorded at INR 1,021.82 crores. And our PAT, which has been recorded is INR 558.83 crores. We expect to close the fiscal on a high note with the revenue from Food & FMCG segment contributing to more than 30% to total revenue on a full year basis.
With this, let us now open the floor for Q&A.
With this, I conclude the call. Thank you all for your patience. If you have any further queries, you can reach out to SG Advisors and we are open to any questions now.
[Operator Instructions]
We have our first question from the line of Abneesh Roy from Nuvama.
I've got 3 questions. First is on biscuits. So it's a focus segment for you. I wanted to understand 2 things here. One is if I see growth rate this quarter, it is meaningfully slower than in first half, so 9 months growth rate was 24%, while Q3 growth rate was around 15.4%. So that's a significant slowdown and it's your focus category.
Second is biscuit is a very diversified portfolio. So here, you are focusing on the mid- and lower end. Or are you focusing more in terms of premiumization? That is the first question.
So I'll answer that question. So biscuits typically, in terms of the slowdown, it's a part of seasonality effect. Typically, which is slightly strange in the areas -- their distribution is pan-India, but especially in north and eastern part of the country and partially in the western part, there is always slow -- we witnessed a slowdown in the biscuit sales during the winter months. And so it's part of a pretty much similar trend that we observed last year also.
So for example, biscuits last year in Q2 was INR 378 crores of revenue. In Q3, it dropped to INR 337 crores. And this year, likewise, as you've seen, the biscuits from INR 456 crores have dropped to INR 389 crores. So it's part of the seasonality effect, and I would not read too much into it. We'll get back to it. We are pretty much on course to achieving INR 1,500 crores of revenue in this fiscal. In this quarter itself, that will improve. So it's pretty much a seasonality impact.
The second part to your question that our effort -- so largely, our portfolio has 2 components. One is the value biscuits like doodh biscuit, which is our largest selling. It's really almost close to 75% plus of our portfolio right now. We are adding more premium products to it. So last year -- late last year, we had launched in August 3 variants of the premium biscuits, like ragi, 7 grains and digestives, which are gaining a lot of traction on the marketplace. We have a slew of launches, which are planned in this quarter, we will do. So longer term, we'd like certainly the portfolio to be more balanced between premium and the value segment.
And the value segment always has challenges around the input sort of inflation on wheat and palm oil and sugar, typically in the packing material. But broader idea is that -- so the benefit of the increased sales is clearly helping us in expanding the EBITDA substantially. But also, we'd like this to be a premium segment. So we're pretty much at par with the best in class in the industry now. And we will focus more on expanding our value reach, but a lot more focus is now in terms of driving the premium end of the biscuit range that we have.
My second question is on EBITDA margins for Food & FMCG. So one is it's very volatile. So if I see your Q3 margin, that's around 400 bps lower than first half of the same financial year, and your margins have fallen Y-o-Y both for Q3 and both for 9 months. So want to understand why you want to focus more on sale of staples because that will be more competitive. Most companies in food and FMCG try to go for a profitable volume growth. So in that context, why not focus on the higher-margin businesses, focus on premiumization than focus on sale of staple?
So Abneesh, I'll just take a minute extra to explain why this has happened. So to your point, we are pretty much on the overall basis on the -- our run rate is pretty stable in terms of the overall business, and staples have contributed very well. In this particular quarter, we had -- so if you remove the big benefit that we had in the Q2 when we acquired the business from the parent, so we had a big bump on the inventory, et cetera, that came in under the slump sale, which benefit accrued in Q2 of last year.
But post that, we are pretty much in a range. I think this particular quarter, the challenge has been basically threefold why the margins have dropped, is one is that on the staple side, we clearly had an impact of sort of seasonal inflation on the input pricing across the board pretty much. So if you look at the rice, wheat, pulses, some of these spices, et cetera, so there's been a challenge, which the impact, I would imagine, will be close to about 1% of our overall EBITDA margin on the food side. So that was one impact.
Second is that we had the impact of the additional spend on the food side of the -- that we had almost nearly INR 29 crores what we spent on the advertisement in the quarter, which, again, pretty much 1 basis point it knocked off -- I mean 100 basis points it knocked off from the foods EBITDA.
And third is the seasonality impact that we had in 2 businesses, both biscuits and -- so it is not entirely the staples part. It's also we had a similar drop, which is witnessed in the winter months and partially in Nutrela as well in our [ GLB ] portfolio, which is not a consistent. There's a blip always in a particular quarter because the people move on to different food inventors, and that's why this happens. It again stabilizes. So that will be about 1.5%, what we had dropped in both Nutrela and biscuits.
So I would not read too much into it. Our staples, in terms of the drop, would have contributed to about -- just about 1% plus to the dip in the margins, we should do that. But to your larger point that why the focus should be less on staples and more on the premium end. Absolutely, that is pretty much the target. So we are spending heavily on, as I mentioned, Chyawanprash, honey and spices.
We are adding a lot more premium end products to our food range as well, as I mentioned in the biscuits. The idea being that our dependence on the staples will remain volatile and especially as we, in some sort of windows, especially going into an election year in the last quarter, et cetera, there might be some blip. But broadly I'm pretty confident that this will be just about a minor one, and we should be pretty much getting back onto our regular run rate that we had, back to around 15% plus EBITDA margins in the foods portfolio overall.
Sure. Last quick question on edible oil. So MS Dhoni brand ambassador plus higher advertising. What is the thought process here? Is it because regional players have become more competitive, local plays more competitive because of the commodity meltdown? They always come back when that happens. Or is it because you want to become more of a premium player here longer term within your subsegments? Or third reason could be your market share. It's a strong second player market share, but gap with the #1 player is there. Do you want to bridge that gap, which is the main reason for this?
So the main reason is clearly that, a, bring sort of Dhoni stands for sort of health and nutrition and very clean image, which fits in very well with our philosophy. Second is to expand the reach into areas where we were less covered. So while the distribution is pretty extensive, that we have because the size and scale that we have across the country. But I think especially Mahakosh and Sunrich are strong brands, which needed a fresh dose of -- we reach out to the consumers and add a bit of premium to currently that we are. So we already are witnessing some impact of this in our both the brand premium that we earn as well as in the distribution sort of reach that we built up. And recently -- so it's a combination of all 3 that we'll be able to compete more effectively if our brand premium sort of continues to expand. And I'm reasonably confident that I think remaining the course as we currently are, we are pretty confident of building up at a level where we should be expanding our margins, we should be expanding our sales, which we are aggressively pushing constantly. Our volume growth is way more than the industry standards and the country's demand. And we are witnessing a consolidation in the edible oil sales. The risk profiles have gone up. The capacity of smaller and midsized players to continue with that is lesser. So I think we should witness better margin construct increases and we keep consolidating on that base.
[Operator Instructions] The next question is from the line of Dhiraj Mistry from Antique Stockbroking Limited.
Yes. So my first question is on nutraceuticals. So the last quarter, we were having a same run rate of INR 14 crores, INR 15 crores, where there was some inventory correction which happened. What is stopping us from scaling this business in this quarter?
So Dhiraj, the issue is not on what is stopping us. The issue is doing it right. And so we have 3 strategies that we are pushing in nutraceuticals. One is that after the huge scale up that we had in the beginning in last year, we sort of completely reworked on the strategy. So one is that, in terms of the reach we currently have, we have close to 1.7 lakh retail outlets that we reach in nutraceuticals.
Second thing is that we've added a lot more products to our portfolio. There are more launches that have been lined up, especially for kids and women. So for example, gummies and effervescent tablets and new range and with more flavors.
And the third one is that we are increasing focus is a lot more on e-commerce and D2C and the more emerging segments of the distribution channels, which we can drive and build up that change, which is what the effort is. It's taken more time than what we thought. I'm reasonably confident that in the ensuing quarters, we will pick up. So overall, we want to quickly start getting this behind us. And I'm still reasonably hopeful that nutraceutical is very good to get into a INR 200 crore portfolio in next year. And all the preparations are ready. The teams are ready. The business is already going up. It's substantial. There's a wide-scale acceptance of the product. It's just that nutraceutical is a particular way of moving.
So our reach on the retail side is very good, but our e-commerce and D2C is the one which is still to be in traction. We have spent heavily in social media campaigns. We are actively at it through the year. We've got an excellent team, which is in place. So it has taken a little more time, but I'm reasonably confident that, I think, given 1 more quarter, I think we should get back to our winning race in nutraceuticals. And the objective, as I mentioned, that next year, we should be targeting closer to INR 200 crores of revenue in nutraceuticals and with a very healthy margin. Our target margin is close to 25%, we should be able to put in place.
Okay. Okay. That answered my question. Sir, second part on the Food & FMCG business. So in this year, for the 9 months, we are around 15% margin. But our long-term guidance has been somewhere around 17% to 18%. How confident you are of achieving that kind of margin and by when?
So we -- our guidance has always been that our target range of 16% to 18% and in very diverse set of categories. So for example, if I were to compare this year versus the last year, we are at about 14.6% in the current year and versus the 19% what we had. So broadly, my sense is that we should get back to be pretty much a similar range.
This quarter, as I mentioned, we dropped almost pretty substantially to almost by more than INR 100 crores, so which I explained the reasons as well, like our drop in Nutrela, which is seasonality play for INR 16 crores. Biscuits came down by INR 21 crores, again, pretty much a seasonal play, which we should get back. And food was INR 71 crores, largely around both advertising, part of that through food inflation. So my overall, if you're asking as to how this is going to go, we should get back to pretty much on the same basis.
Staples to the previous question also that I discussed that we would be working towards it, hopefully, that uncertainty should go away. So long-term projection that we have between 15% on a conservative basis and 18% on a better basis, I think we should be able to accomplish that objective.
Okay. And palm oil plantation, actually, there was some problem with my line. Can you help me with the revenue from palm oil plantation in this quarter and EBITDA for this quarter as well as for 9 month basis?
So oil palm plantation business, what we have, for example, the 9-month period, our EBITDA is INR 148 crores, which is about 17.9% in terms of EBITDA percentage margin. In this quarter, our margins were INR 49 crores, which is a 21.2% margin in the oil palm plantation business. And we are actually getting, hopefully, by next year because the age of younger plants are getting better and better. I think it should become -- get a bigger uptick I think the year after, when some of these plantations, what we planted last year will start to fruit and start to get there.
Okay. Okay. And sir, last question on oil business. Now the oil price is relatively stable, so in coming quarters, what is our expectation? Like in this quarter, we have moved to 2% EBITDA margin. If the oil prices continues to remain at this level, what kind of margin we can expect in next year?
So margin next year, we are very much confident that we should be better than the midpoint range. I think these 4 quarters of continuous volatility should be behind us. The efforts that we are making on campaign with Dhoni, the distribution needs, et cetera. So for next year, between 2% and 4%, we've always maintained for our edible oil business. We are reasonably comfortable to -- maybe closer to 3% plus next year on the edible oil business.
The next question is from the line of Kuldeep Gangwar from ASK Investment Managers.
Just a couple of clarification. Like you mentioned about INR 29 crores [ A&P ]. So whether it's only for food business or it's for the overall company?
It's for the overall company, Kuldeep, and -- but it is higher by almost about INR 15 crores compared to the previous quarter. So for foods, it's about additional INR 15 crores that we spent.
Okay. And will it be possible to share, sir, segment-wise revenue and EBITDA within the Food & FMCG business?
Yes, sure. So if we look at this quarter in terms of the revenue breakup, we have on the soya products, the Nutrela, the revenue is INR 132 crores. The biscuits business revenue is INR 389 crores. The food revenue is INR 1,963 crores and nutraceutical revenues, INR 14 crores.
And what would be the corresponding EBITDA if possible?
Yes. So for Nutrela, it is INR 19 crores. For biscuits, it's INR 69 crores. For food, it is INR 186 crores. And for nutraceuticals, it's a negative INR 3 crores.
Sure. And you mentioned about, say, 3, 4 reasons about this Q-on-Q volatility of the margin. So it's specific to say food business, right, like while it has come down from 15 [indiscernible]. So [ A&P ] 1%, biscuit and nutraceutical combined 1.5% and [indiscernible] Is it correct to understand?
That's right. So basically, as I was just explaining, and maybe I'll give 30 seconds to quickly repeat it again. We changed from as to why the margin sort of fell. So seasonality impact is almost about 1.5%, where INR 37 crores, we dropped on Nutrela. So Nutrela, for example, our EBITDA was INR 35 crores in Q2, which is INR 19 crores in this quarter. So that is the INR 16 crores drop. Biscuits, it was INR 90 crores in the last quarter. This quarter, it came down to INR 69 crores, which is INR 21 crores drop. So this was largely seasonal and which INR 37 crores, which is about 1.5% what we dropped in the margin.
Advertisement spend is about additional 1% and staples sort of category, which contributed to about 1% due to a very specific quarterly sort of challenge that we had on the business, which is about the inflation across the board, largely a lot of sort of policy interventions, et cetera, which are there and sort of during the quarter, especially considering the sort of environment that we currently are in. I think that's been there, but hopefully, that should be gone also once the elections are done and over. Pretty much that should be well past us.
Sure. And in food business, revenue Q-on-Q [ 0.5 point ] variation. Like if I look Y-o-Y, food business almost 50% in the quarter. So on steady-state basis, what should be the good expectation from this particular segment overall?
So food overall, so I don't know if you are asking for the FMCG segment or only the food part of the portfolio.
Food and FMCG combined.
Combined. So I think pretty much we should be -- as we have said, that I think the revenue run rate, my expectation is that we should be pretty much on course for -- pretty much similar revenues. So just one sort of caveat there. I think many times, the seasonality impact is there. So I think what you may have witnessed is that, a couple of quarters, India has got its own specific preferences for foods in different seasons. So you may have variations in quarters as I mentioned about biscuits and Nutrela in this particular quarter. But in general, I think we are pretty confident that we should be in this broad ballpark range of about between INR 2,000 crores to INR 2,400 crores in the food business.
[Operator Instructions]
The next question is from the line of Vishal Gutka from PhillipCapital.
Just 2 questions. Firstly, you have been stating that Patanjali -- I don't know if it a listed entity [ works ] with the parent arm, we are looking to acquire Rolta. Just wanted some clarification on that. That will be the main focus of the business.
And second is on the -- any thoughts that [indiscernible] because in the recent investor analyst meet, you had highlighted that the company is looking for M&A. Any thoughts of merging the personal care business that you have with the food arm, so that [indiscernible] for listed entity?
Sure. So I'll answer the first question first. So while it is the parent which has shown interest in Rolta. I think which people are less aware that Patanjali, the parent, has also a very large IT business. And certain areas of Rolta are fitting into the strategy of that IT business, which is run under Bharuwa Solutions to sort of explore synergies there and see that it is the right sized -- right kind of asset, right kind of intellectual capital and knowledge what they have to explore acquisition of that. So broadly, that is a plan around Rolta to the best of my understanding. I may not be able to give a lot of details around it. But broadly, that's the plan.
In terms of the sort of consolidation -- further consolidation of the FMCG portfolio within the group itself, so this is sort of often discussed and debated and thought through also. We also sort of explore these areas. I think we'll have to wait for this to happen. So clearly, if you ask logically, it makes a lot of sense and brings in a lot of synergy and value to be doing this. So from a logical thought perspective, it's still to happen and -- but I think we'll wait for this to be -- for this to happen and really get announced for us to take this forward. But I would imagine that there is a competent [ people ] why this should happen.
Got it. And sir, what kind of growth rates are you expecting in medium term for the Food & FMCG business? Well shall be able to grow 20% plus for Food & FMCG business in the ongoing year?
So overall, we have a diverse portfolio. So 20% plus is always a challenge. I think, typically, what we targeted was that we should keep between 12% to 15% growth rate in revenues. So we have done fairly well on this front, barring some blips here or there. I mean largely, we are pretty much on course to achieve between 12% and 15% consistent growth in our portfolio because there are a lot of categories where we are not present. There are categories in which we need to fully flesh out and fully expand the opportunity. So we are pretty much on course for that.
And any update on dry foods piece that I think a few quarters back were highlighted that you have signed up with an international player as well for the dry foods business. Have you commenced that? And what is the update on that front?
No. So we've already commenced. As I had mentioned last time, we launched our first 4 under the Maxx Nuts category, Nutrela. It is receiving very good response on the e-commerce platforms and our own stores. So right now, it's a pilot phase when we are sort of consolidating and getting our overall distribution right. At some point of time, once this is over. So I think already, if I have my numbers right, we've done more than INR 4.5 crores of sales during the quarter. And we are going to expand that further.
So we are pretty comfortable because there is a supply chain benefit that we have sourcing directly from the suppliers. And also the -- both our own stores and e-commerce and D2C, I think we should be able to expand that footprint pretty rapidly. So we are very much on course for that.
Wishing you all the best for the upcoming year because I think that now edible oil business, I think, you settled down and the growth rate picking up in Food & FMCG. It should be much better profitability coming from FMCG segment of the company.
[Operator Instructions] The next question is from the line of Shirish Pardeshi from Centrum Broking Limited.
Just 2 questions. Now edible oil inflation is settled, and there is a good amount of inventory, which would have exhausted of the high price. So going forward, this 1.5% can go to potentially 3.5% in next quarter margin?
So potentially, yes. I mean, as we do know that market has its own sort of short-term volatility would be there. Our target always is that we'd like to keep it stable between 2% and 4%. So if you -- to have a straight answer, whether it can go, definitely, it can go. And that is the effort as well. So, so far, what I've seen in the month of January, there is a confidence that we should pretty much see better performance than this quarter.
And in terms of overall value...
Mr. Shirish, could you please come closer to the device? You're sounding a little low.
Yes, I'm closer to the mic. Is it audible now?
Much better.
So in terms of overall edible oil business, how large would be Mahakosh now?
So between Mahakosh, Sunrich and Ruchi Gold, we do almost INR 20,000 crores of business. And given this, Mahakosh should be about 25%. We should be about INR 6,000 crores plus in Mahakosh.
Yes. The reason I'm asking, this business is growing much faster pace, and obviously, you've put MS Dhoni. So I think is that the strategy we're wanting to get this to half or it will remain in the similar level of 25%?
No. So we have 2 brands, Mahakosh and Sunrich. The effort is on both sides. I think together, currently, it constitutes about 35% of our portfolio and [indiscernible] in some quarters goes up. But I think pretty much, we'd like Mahakosh and Sunrich to be close to -- closer to 50%. And palm oil has its own challenges in the kind of premium that it can fetch. So that's why the big focus is on Mahakosh and Sunrich as brands in our portfolio. Patanjali in cold-pressed oils and premium oils will continue to drive and Nutrela oil, we are pushing as well now, so that -- at a mid-price segment. So the most premium is Patanjali. Next year is Nutrela and then we got Patanjali, Mahakosh and Sunrich, is what we are driving towards. And the commodity brand is Ruchi Gold, which is around the palm oil brand that we have.
So just more curious, between Mahakosh, Sunrich and Ruchi, what will be the margin -- EBITDA margin difference? Would it be substantially about 200, 300 basis points higher?
Yes, definitely. So compared to Ruchi Gold, Mahakosh and Sunrich is always significantly higher. And we -- in fact, we are witnessing both sort of pricing strategy that we follow. As I was mentioning earlier to a question that from a pricing strategy perspective, distribution perspective, there's a lot more focus to get our distribution right and also the pricing uptick we have started taking. So that is we have seen the benefits of both the sort of getting a new brand ambassador, pushing the advertisements, pushing into a lot of these products into self-service stores and those markets. I think we expect certainly that this lead of Mahakosh and Sunrich over the Ruchi Gold should expand. And we're certainly getting there. I think this quarter is one witness that we have seen, and I think that push will continue.
Okay. And my second question is on the biscuits. So we are growing much faster. So I'm just more interested, what is the capacity you are looking for building biscuits or it is enough for next year? And overall, what is -- what kind of CapEx we are envisaging in the FMCG business for next year?
So largely, what we followed is that -- so in terms of the plants, the several plants that we -- so the 2 strategies that we have, one is that we got 3 plants of our own, and we've got 12 locations, which we have on contract manufacturing. So capacity is not a constraint at all in terms of expanding our reach. So that work is going on.
In fact, at Noida, we're putting up our cookies factory and cream biscuits which are premium end facility, which is there. And so I don't expect any problem on capacity to service the demand as we grow. That should not be a limitation.
Okay. And one more just follow-up on biscuits. What I understand, in terms of distribution, we are weaker in South. So is the plant is not there? Or is the focus is not there? Or is the distribution is a challenge in South? And if that is true, what is the efforts which you are taking to build the South business?
Yes. So it is not it's weaker. And a lot of our capacity is in Hyderabad in South. So that's not a problem. The capacities are there. We service the southern markets very well. And -- but what -- your observation is correct that we need to further beef up our presence. We need to further build up marketing efforts in South. There are other areas also, which are certainly we find that we need to pay a lot more attention. But that is part of a continuous process of evolution and development that we keep driving, where we are reaching out to the newer markets, we are expanding our reach both into different segments. So that's pretty much part of our ongoing efforts.
So I would not read too much into it. But yes, that our focus is there. And some of the products which sell very well. So for example, our edible oil, in south we are huge in palm oil. We are very large in several segments. It's a different ways of approaching it. But biscuits, we will expand more in South, and there is a very good traction that the company has in the southern markets.
But sir, is it because that we have a common distribution like in the front end?
We don't have common distribution. So one of the unique features that we have within the company that we've got very separate teams, separate business heads, completely separate distribution channel, including there may not be many common distributors also. So that is why the -- it gives us the kind of focus that we want in the marketplace and which is one of the reasons that our growth expansion which is happening across all the verticals.
Okay. And just last question on new product in the FMCG, what kind of contribution which we have seen this quarter?
Yes. So in the overall, the play because of the large size, the contribution is not very significant. But as I mentioned, for example, the -- we did about INR 4.5 crores of nuts. We did -- we have done additional about INR 5 crores of biscuit sales. We have done [indiscernible] during the quarter. And millets, we have done additional [ INR 2 ] crores of sales [Technical Difficulty] initially [indiscernible] in South. We expanded that to the Eastern markets in Bengal. So we're gaining traction.
I would say the new product launches, which is just about 5 months, we would have done more than INR 10 crores, INR 11 crores of business in there and which is growing. So -- but in the overall as a percentage to the overall business, it's miniscule right now.
The next question is from the line of Rohit from SK Securities.
So I have a couple of questions. Can you shed some light on the price trend you envisage for the quarters to come?
So price trend in which categories?
Mostly in edible oil.
Okay. So in edible oil, the -- if market [ structure ] own ways, because India is nearly a 70% importer of its requirement. So clearly, the global trend that we are seeing right now is the markets in the last 3 trading sessions have moved up on the future exchanges. India is pretty much in an environment of stable price regime to marginally bearish. But our expectation is that this is -- this could change. So there are very good crops, which are going to come up in South America, very good crop of mustard that we have domestically. There's a good development on the palm oil crops. So overall, it looks stable. But right now, if you ask me that in the last 1 week [ what's my sense ] is probably stable to marginally uppish is what I would imagine the edible oil prices are going to be.
Yes, perfect. And second question is, are there any new products in the pipeline?
So there are, of course, new product development is constantly sort of being worked out. So yes, there are several products across all the categories. So as I mentioned that we've got nutraceuticals sea of products. Biscuits, we've got premium end biscuits, which are going to be launched soon. In Nutrela, we are building it into an umbrella brand. We're looking at breakfast cereals. Nuts, we have already launched, millet-based products out there. Then within the foods category, also, we are looking at expanding our reach. So there -- yes, there's a lot of products which are going to be launched.
The next question is from the line of [ Akhilesh ], an individual investor.
So this quarter, we spent INR 28 crores on advertising. So what is the budget looking like for Q4 and FY '25 on advertising spend?
So we will maintain pretty much the trend, and we are going to be in the marketplace and it will be -- it is going to be similar or even more in terms of the plan. So this quarter, certainly, I'm expecting larger than INR 29 crores and next quarter as well. And the plan is twofold, basically continue to aggressively rebuild where the rebuilding of the brand was required, repositioning was planned. And also the new ranges as we are constantly sort of bringing to the market place, we'll continuously to support them with the aggressive A&M.
So do you think then that the EBITDA margin will remain under pressure because advertising will keep getting ramped up? Or do you think that the Food & FMCG segment can get to 15% margin pretty soon, Q4 onwards?
No. As I mentioned, the advertisement spend is not a large dent overall. There was set of 3 factors which impacted. So if, at all, there is a blip, it will have a marginal impact for sure. But the other things, once they come up, I think we should pretty much be positive on the earnings outlook. So we should be pretty much okay. But advertising is something that we need to be in the marketplace and be there, which is what the effort is.
And my second question is on the palm plantation. This quarter, we have added 4,500 hectares. So I'm curious to understand how the pace is decided. Are we choosing to do 4,000 hectares, 5,000 hectares every quarter? What is the max we can do every quarter? Because the sooner we get more and more [indiscernible] the sooner we will get the rewards of 3, 4, 5 years down the line. So how are we deciding how much to take on in a particular quarter? What are the factors impacting that?
So there are 2 sort of pointers, which give us that -- how fast we grow. So in terms of the preparation, as I mentioned, that there's a 15-month lag typically between importing the sprout, putting it on nurseries, it grows and then we distribute to the farmers.
And the second factor is the farmers' willingness to go for it because they are moving in India. We are not cutting the forest to do that. So farmers have to get out of a particular crop to move into it. And for them, it's a leap of faith as well. So that work continues, but I'm expecting this pace to pick up very fast now because we see the cycle of the fresh saplings are getting ready. And I'm expecting that next year should be significantly higher compared to this year.
So if we -- and the plan is closer to 25,000 hectares plus is what we are expecting that we should be planting next year. And thereafter, it is going to pick up. There will be a massive uptick in the year after.
That was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
So we are very thankful to everyone who attended the call and asked a very good question. With this, I conclude the call. Thank you for the patience. And for any further queries, you may contact SGA, our Investor Relation advisers. Thank you so much, and have a good day.
On behalf of Patanjali Foods Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.