ADF Foods Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Revenue up 25.9% YoY despite logistics chaos: The strongest order book in company history was partially stranded as 30% of June-ready goods could not ship due to vessel and container shortages.
• Freight costs ate the margin beat: Consolidated EBITDA margin landed at 17.7%, with elevated freight alone imposing a ~3% drag. A tariff refund of ~₹7 crores booked in the P&L provided a partial offset.
• The pass-through pivot is live: Starting Q2 FY27, ADF is passing on 65–70% of freight increases to customers, with the U.S. market absorbing close to 75%. This is the single largest lever for the promised margin recovery.
• Truly Indian is scaling into a mainstream U.S. opportunity: The brand crossed 3,000 stores and is positioned to address hundreds of millions of mainstream consumers, an order of magnitude larger than Ashoka's core South Asian diaspora.
• What to watch next quarter: Whether the freight pass-through actually lifts adjusted EBITDA margins toward the 16–17% target, and whether the container availability crisis eases enough to clear the record order backlog.

Revenue Growth: Strong Demand, Stranded Goods

• Record order book, bottlenecked execution: The June, July, and August order book was the strongest in company history, but roughly 30% of goods ready for June shipment could not move due to non-availability of ships and containers. Q1, historically the weakest quarter, still delivered upwards of 20% YoY growth.
• Ashoka brand delivered 30%+ growth in the quarter and has sustained a revenue CAGR above 20% over the last five years, driven by deeper penetration with the South Asian diaspora and shelf-space expansion across core and emerging international markets.
• Truly Indian has grown 3x–4x from a low base and is now present in more than 3,000 U.S. stores, up from roughly 2,000 in the prior quarter. Growth is split approximately 60% from existing stores and 40% from new listings, with repeat orders from retail partners validating consumer acceptance.
• West Asia shipments resumed: March saw zero shipments due to conflict, but dispatches restarted from late April and have largely caught up, with the region returning to roughly 15% of total business.
• Soul brand has been slow relative to Truly Indian; strategy changes and a refreshed team are now in place, with management hoping for positive results this year.

Bimal Thakkar: "Our order book has been the strongest it has been in the company's history for June, July, even August is a very strong order book. So, we've been producing the goods and the problem has been of shipping out."

Margins: The Freight Drag and the Pass-Through Fix

• Freight costs imposed a ~3% drag on consolidated EBITDA margin, driven by ongoing container shortages, vessel unavailability, and elevated fuel costs. This was the primary reason processed foods EBITDA stayed nearly flat despite strong revenue growth.
• The freight pass-through began in July (Q2 FY27): Management is passing on upwards of 65–70% of freight increases across the business, with the U.S. market absorbing close to 75% of the freight increase. Some markets are strategically not passing on any increase.
• Adjusted margin was under 14% in Q1 after stripping out the ~₹7 crore tariff refund booked in the P&L. Management is targeting 16–17% going forward as the pass-through takes effect and operating leverage kicks in on processed foods.
• Gross margin held up despite tariff challenges, supported by structured manufacturing and supply chain programs, automation and digitalization efficiencies, and a procurement program that buys raw and packing materials when rates are low and hedges prices.
• Distribution segment EBITDA margin fell to 11.5% from 17.4% YoY; management urged investors to look at full-year margins, attributing the drop to seasonal costs within the quarter.
• Staff costs bumped up as the Truly Indian team in the U.S. reached full staffing; no further additions are expected.

Bimal Thakkar: "So it depends market to market, but our major markets like the U.S., we are passing on close to 75% of the freight increase on to the customers. In some markets strategically, we are not passing on any increase. But more or less, I would say upwards of 65% or 70% of our business we are passing on the freight increase."

Surat Facility: Phase 1 Live, Ramp-Up in Early Innings

• Phase 1 commenced commercial deliveries in Q1 FY27, with roughly 15 containers shipped. The facility expands ADF's frozen food manufacturing capabilities.
• FY27 capacity utilization is expected at roughly 30%, with a revenue contribution target of ₹40–50 crores by year-end. Full capacity is expected in 2 to 3 years.
• Phase 2 is expected in Q3 FY27, which will bring additional depreciation in Q3 or Q4, mostly tied to production lines since building and civil depreciation is already booked.
• The ramp-up cycle is inherently gradual: new products must enter the market, consumers must try them, and repeat orders must build before volumes scale meaningfully.

Bimal Thakkar: "And the product needs to get into the market, people need to try it and then we get repeat orders. So, there is a cycle which is there. The new products which we've launched have just got into the market a few weeks ago."

Brand Strategy: Truly Indian's Mainstream Bet

• Truly Indian is positioned as a much larger long-term opportunity than Ashoka: Ashoka services roughly 0.5–0.6 crore South Asians in the U.S., while Truly Indian targets hundreds of millions of mainstream consumers who experiment with international cuisines.
• The brand is scaling through both depth and breadth: focus remains on deeper penetration with existing retail accounts while pursuing additional listings. Repeat orders from retail partners are providing validation of consumer acceptance.
• Ashoka investment as a percentage of sales will decline as the brand matures, freeing up room to fund Truly Indian and Soul without depleting margins. Brand investment as a percentage of sales is expected to reduce over time across the portfolio.
• Soul brand is being built with a long-term perspective as a differentiated portfolio of better-for-you packaged food products, with distribution expanding across e-commerce, quick commerce, and modern trade channels in India.

Bimal Thakkar: "Ashoka is only servicing the 0.5 crore or 0.6 crore South Asians, which are there in the U.S. So if you see the opportunity on the Truly Indian side, I mean there is upwards of hundreds of million people especially who like to try out the different kinds of international cuisines. So that's where the opportunity is."

Tariffs, PLI, and Regulatory Tailwinds

• The 10% U.S. tariff rate expired on July 24 but continues at 10% for now; management has no visibility on future changes and hopes it remains at current levels. Most mainstream customers had tariffs absorbed by ADF, with the rest shared throughout the chain.
• A U.S. subsidiary tariff refund of USD 0.21 crore was received, of which USD 0.08 crore (~₹7 crores) was booked in the Q1 P&L. The balance sits on the balance sheet and will be evaluated based on customer and commercial arrangements, with recognition in coming quarters.
• PLI scheme (Category 3) is in its final year, with ~₹16 crores accrued, matching last year's level. Management is hopeful the government will extend the scheme, citing a recent meeting where an extension was under consideration.
• PLI expiry mitigation is built into the brand investment trajectory: as brands strengthen, brand investment as a percentage of sales will decline, with the absolute investment amount staying roughly flat. Ashoka's investment ratio will keep falling, balancing out the PLI benefit loss so EBITDA margins are not depleted.
• AEO-T3 certification received during the quarter enables faster customs clearances, reduced inspections, and expedited cargo movements. Benefits began flowing from June shipments and will help inventory turns and cash conversion, though quantification is premature.
• Free trade agreements with New Zealand, Australia, the EU, and Britain are expected to benefit the company, with particular positive impact anticipated for the U.K. and, once finalized, Europe.

Bimal Thakkar: "While we will continue to invest in our brands, as the years go by and the amount of investment also reduces as the brands start getting more well known. So we hope to strike a proper balance."

Guidance & Commitments

Key Metrics