ADF Foods Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Top-line momentum intact, supply-side noise: Consolidated revenue grew 13.8% YoY, but a sequential dip from Q2’s Diwali-stocking peak and container-driven carry-forward masked robust underlying demand.
• Margin reset on freight and brand spend: EBITDA margin stayed in the high teens despite a 3% freight headwind, ~1.5% marketing step-up, and ~1.5% raw material pressure; management expects freight relief to lift margins going forward.
• New brands are still a drag, with breakeven now in sight: SOUL and Truly Indian are loss-making at the entity level, but management gave concrete breakeven timelines of 12 months and 6–8 months respectively, and Truly Indian’s 1,300 stores should start generating revenue by Q1/Q2 next year.
• Vibrant bought out to fix an underperformer that matters strategically: The subsidiary’s standalone performance is not up to mark, but sales routed through it have grown from \$1–1.5 million to \$5 million, so ADF took full ownership to turn it around.
• What to watch next quarter: Whether freight costs keep falling as signaled, the pace of SOUL frozen’s quick-commerce ramp, and any clarity on U.S. tariff pass-through mechanics.

Revenue Drivers & Volatility

• Secular demand across brands: The 13.8% YoY consolidated revenue growth was broad-based, with Ashoka continuing good growth and private-label interest emerging from large retailers for Truly Indian.
• Sequential dip is a supply-chain echo, not a demand signal: Q2 jumped because Q1 sales were pushed forward by container availability issues and pre-Diwali distributor stocking; Q3 shows the natural follow-on drop. Demand across all segments remains good.
• Distribution business is volatile but strategically useful: The business strengthens ADF’s own brand and brings down operating costs; once supply-chain issues resolve, it can generate \$12 million to \$14 million annually at steady state. Returns in the current financial year have been very robust.

Thakkar: "the volatility is more on the supply side of things, demand continues to remain robust"

Brand Investments & New Launches

• SOUL entered modern trade and frozen: The brand is now in Nature’s Basket, Reliance, DMart, Haiko and Dorabjee’s in Mumbai and Pune, with a regional start that will expand further west. Frozen breads and snacks launched in January across quick commerce (Zepto, Instamart) and select modern trade outlets, with a range of about 15 SKUs planned over the next three months.
• Truly Indian store count held at 1,300, revenue inflection expected soon: Promotions in the last quarter drove a large bump in secondary sales, but it is still early days (under six months). Management is confident the stores will start generating revenue in Q1 and Q2 next year and plans to increase the count in the short term.
• Amazon presence expanding: ADF is listed on Amazon India, U.S., and EU, and is just starting in the UK. All SOUL SKUs are listed in India apart from the newly launched Frozen range.
• Brand investment thesis: Spending on ADF SOUL and Truly Indian is expected to generate momentum over the medium to long term, with both brands contributing in a better way next financial year.

Thakkar: "it's still early days, but we feel fairly confident, 1,300 stores will start generating revenue in Q1 and Q2 next year, and we also are looking to increase this number in the short-term."

Margins: Pressure & Path Back

• Freight was the single largest drag: Freight alone had a 3% impact on margins, followed by marketing spend at ~1.5% and raw material / COGS at ~1.5%. Some savings on other expenses and fixed-cost absorption over a higher base partially offset the decline.
• Freight trajectory is turning favorable: Month-on-month decreases were seen in December and further in January; management expects freight to keep coming down, and if the Red Sea issue resolves, it will drop drastically.
• Dollar rate adds a tailwind: The improved dollar rate, combined with easing freight, should support a better margin profile going forward even as marketing and manpower investments continue.
• Blended EBITDA target reaffirmed: At the ₹1,000 crores revenue target for FY27, management expects blended EBITDA margins in the high teens.

Doshi: "So freight itself had a 3% impact in terms of our margin. And marketing spend will be around, say, 1.5%. And your cost of goods, the raw material will be around 1.5%."

Subsidiaries & Strategic Moves

• Vibrant became a 100% subsidiary to fix underperformance: Performance was not up to mark, so ADF bought the remaining stake last quarter. The entity has been strategically helpful: sales routed through it grew from \$1–1.5 million to \$5 million. On a standalone basis it must make money, and ADF is working toward that.
• ADF UK investment resolution passed: Money will be onward-invested into U.S. businesses to shore up working capital for increasing Unilever product demand and Truly Indian brand investment.
• Strategic distribution changes made in both UK and U.S. markets.
• Nadiad cold storage facility became operational in the current quarter.

Doshi: "Yes, the performance is not up to mark, and hence we have completely bought over the stake. And this company actually has been really helpful for overall business of ADF."

Capacity & Capex

• Surat greenfield facility on track: Expansion is actively underway and anticipated to begin operations by H2 FY26.
• All CAPEX plans are on schedule.

External Risks & Mitigants

• U.S. tariff impact seen as manageable: If tariffs are imposed on the industry, most players will pass them on to customers; ADF does not see any major impact because its brands carry strong brand equity that supports price increases. Management is waiting for complete clarity.
• Freight remains the swing factor: The Red Sea disruption is the key variable; resolution would bring a drastic freight reduction, while persistence keeps the 3% margin headwind in play.

Thakkar: "our brands have very strong brand equity, so we are able to pass on price increases if need be."

Guidance & Commitments

Key Metrics