ADF Foods Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Strong quarter, guidance held: Consolidated revenue rose 29.5% YoY, yet management explicitly maintained its FY27 doubling target rather than upgrading, calling the bar "high now."
• The U.S. shelf is the growth story: Truly Indian landed in ~1,300 new U.S. stores this fiscal year, headlined by a PAN-US Whole Foods listing, and early acceptance is good.
• Brand investment is the margin call: Consolidated H1 EBITDA margin fell 170 bps YoY to 16.7% as the company spent on ADF Soul, Truly Indian, senior hires and freight; management still commits to high-teens margins long-term.
• Capacity build is on schedule: The Surat greenfield is tracking for a September 2025 commission, with a stated revenue potential of ~INR 250 crores, while Nadiad cold storage goes live this quarter.
• What to watch next quarter: Whether the promised freight cost relief materializes, the pace of Soul's modern-trade push, and any acquisition news after management confirmed it is "actively looking."

U.S. Retail Expansion: Truly Indian

• The Whole Foods anchor: Truly Indian secured a PAN-US listing across roughly 530 Whole Foods stores, a national footprint that signals mainstream acceptance beyond ethnic aisles.
• Regional chains add scale: Additional listings at Stop & Shop and Raley's together contribute another 600 to 650 stores, bringing total fresh U.S. doors this financial year to about 1,300.
• Early traction: Management noted good acceptance in the initial stages of the U.S. expansion, with customer engagement expected to gain greater momentum in forthcoming quarters.
• Line extensions coming: The company plans to add a few new items to the Truly Indian range in the second half of the year, broadening the shelf presence it is building.

Sumer Thakkar: "Whole Foods is a PAN US listing. So, we're in about 530-odd stores. And then we've also got some regional names, but that are still very strong brands like Stop & Shop and Raley's. This, if you put them together, will be another 600, 650 odd stores."

India Brand Build: ADF Soul

• Modern trade push in H2: ADF Soul is preparing for a strategic push into modern trade channels in the second half, with new accounts across modern trade, e-commerce and quick commerce expected to start reflecting from December.
• Product pipeline filling: A vast new range of dips and frozen items is coming in the next 2 to 3 months, with visibility in stores and on quick-commerce and e-commerce platforms targeted by January.
• Quick commerce ambition: Management expects quick commerce to contribute a substantial part of Soul's India numbers, though no timeline was specified.
• Investment phase: The brand-building spend on Soul, alongside Truly Indian, was a key driver of the consolidated EBITDA margin decline of 170 bps YoY in H1.

Margins: The Investment Trade-Off

• H1 margin compression: Consolidated EBITDA margin fell 170 bps YoY to 16.7%, driven by increased brand investment, senior management hiring and higher freight costs, partly offset by cost control and process efficiencies.
• Freight as a swing factor: Freight costs rose to almost 2.5% of top line in September; the issues from the prior quarter resolved in the first month of Q2, and rates are softening but remain well above pre-Red Sea crisis levels.
• Relief in sight: Management expects a couple of percent benefit on top line from freight reduction in Q3, offering a near-term margin tailwind.
• Long-term commitment intact: Despite the near-term investment drag, management reiterated its commitment to high-teens margins for the long term.

Capacity Expansion

• Surat greenfield on track: Land leveling is complete, local approvals are in hand, civil work orders are placed and construction staff are mobilized; major equipment orders are in process. Commissioning is expected by September 2025, with revenue contribution starting in Q3 FY26.
• Revenue potential quantified: Management applies a 3x investment rule to the Surat project, estimating roughly INR 250 crores of top-line generation once operational.
• Nadiad cold storage imminent: The cold storage facility at Nadiad will become operational in the current quarter (Q3 FY25), adding immediate infrastructure capacity.

Shardul Doshi: "So generally, we follow 3x of our investment rule, so we should be in a position to generate INR 250-odd crores of top line from that."

Core Portfolio & Distribution

• Ashoka depth, not just width: The flagship brand achieved about 30% CAGR over the last three years primarily by selling more products into the same stores, deepening penetration within its existing retail footprint.
• Distribution business steady: The distribution segment performed well, supported by improved supply chain from principals and healthy market demand.
• Aeroplane Frozen enters Bahrain: The company launched frozen Indian breads and snacks in Bahrain under the Aeroplane brand last quarter, extending its geographic and category reach.
• New categories under evaluation: Management is looking at certain new categories in the second half of the year, though details were not disclosed.

Guidance & Commitments

Shardul Doshi: "So we are maintaining our guidance. Of course, this quarter has been good and we are working on in H2 also to ensure better numbers, but yes we are definitely setting our standards high now."

Key Metrics