AWL Agri Business Ltd Q4 FY2024 Concall Summary

Key Takeaways

• H2 recovery restores run rate: After a rough H1 driven by commodity volatility and hedge disalignment, Q3 and Q4 delivered EBITDA and PAT back at the standard run rate of FY22–FY23.
• Food & FMCG is the growth engine: The segment crossed ₹5,000 crore in revenue, nearly doubling in two years, with domestic volumes growing 40%+ for FY24 and quarterly growth at 30%.
• Bangladesh JV dragged consolidated PAT down 75%: A foreign exchange crunch and government price controls hit profitability hard, though management says both issues are now largely resolved.
• Branded and alternate channels are scaling fast: Branded edible oil grew 15% vs. single-digit industry growth, branded exports grew 72%, and the alternate channel hit ₹2,700 crore, up 29%.
• What to watch next quarter: Whether the promised recovery in oil meal exports materializes in Q1, the ramp-up of new mustard crushing capacity, and any recurrence of hedging losses despite tighter inventory policy.

The H1 Shock and H2 Recovery

• What broke in H1: High-price inventory collided with a market crash and disalignment of hedges, compressing gross profit and EBITDA well below trend. Management says this was confined to Q1 and Q2.
• H2 normalization: Gross profit in H2 reached ₹3,122 crore vs. ₹3,038 crore in the same period last year; EBITDA was close to ₹863 crore vs. ₹962 crore. The company says it has returned to the standard run rate on both EBITDA and PAT.
• Hedging optics clarified: Management argues hedging losses should not be read standalone because the offsetting gain sits in inventory or on the sales side. This quarter had no loss from commodity volatility; some gains are sitting in inventory and mark-to-market contracts carried forward, making the quarter look subdued.
• Risk policy tightened: The company has tweaked its risk management policy to enforce tight inventory and just-in-time management, explicitly aiming to avoid being saddled with large inventory positions again.

Kanhere: "Whatever we saw in Q1 and Q2 in terms of this alignment of hedges and commodity volatility is now behind us, and we are now delivering the EBITDA and gross profit, which is a standard run rate at which we were running."

Food & FMCG: The Margin and Volume Bet

• Volume trajectory: FY24 total volume crossed 0.6 crore metric tons; food & FMCG crossed 0.1 crore metric tons, translating to ~₹5,000 crore revenue. Domestic food & FMCG volumes grew 40%+ for the full year, though overall segment growth was 23% because non-Basmati white rice export restrictions dragged the export component.
• Q4 split: Overall food & FMCG volume grew 9% YoY, but domestic grew 39%; exports were hit by the white rice ban lap effect since Q4 last year had those exports.
• Margin ambition: Food contributed ~₹170 crore EBITDA on ₹5,000 crore turnover (~3.5%), and margins are consistently improving. Management's stated trajectory: edible oil EBITDA margins range 3.5–4%, but food can deliver double that, and the business is being steered toward that outcome.
• Pricing power timeline: Management expects that once food volume crosses 0.15 crore tons (in about two years), the business will have the pricing power to deliver better margins than edible oil.
• Volume mix target: The company is hopeful that food & FMCG will touch 30% of total volume next year, up from 17% currently.

Kanhere: "Edible oil margins can be ranged between 3.5% to 4%, but food can give double than this, and therefore we are moving on this trajectory."

Edible Oil: Branded Push and Mustard Expansion

• Branded outperformance: Branded edible oil sales grew 15% YoY in FY24 vs. single-digit industry growth, driven by a deliberate branded-segment focus.
• Mustard market share gain: The company gained 180 bps in mustard, reaching 15% market share. Mustard is domestic and less volatile than imported oils, and Kachi Ghani Mustard Oil carries very good, stable margins.
• Capacity expansion: One 600-ton-per-day crushing plant was commissioned this year and is ready for operation this season. An additional 1,200-ton crushing capacity at Gohana will be ready in about one month, which should take Kachi Ghani oil to roughly 35% of output.
• Volume outlook: Management hopes for at least double-digit edible oil volume growth in the range of 9–10% next year.
• Standard margin run rate: For edible oil, the standard run rate is gross profit of ₹11,500–12,000 per ton and EBITDA margins close to ₹3,500 per metric ton. Management says things are settled, with no volatility or events like Q1/Q2, and is quite hopeful for a good FY25.

Channel and Distribution Build-Out

• Alternate channel scale: The alternate channel contributed ₹2,700 crore, growing 29% YoY; within that, e-commerce grew 42%. HoReCa, started only a year back, is now a ₹400 crore business with 3x growth.
• Rural and reach metrics: Rural saliency improved from 30% to 31%. Town coverage target is 50,000 by end of next year, up from 30,000+. Atta market share grew from 5% to 5.6%.
• Rice retail expansion: The plan is to enlarge the rice retail base from the current 65,000–70,000 outlets to at least 125,000. Combined rice market share dipped 0.2% to 7.7%, with the impact felt in the Fortune brand because festive-season modern trade business did not repeat this year.
• Basmati ambition: Management plans to cross double-digit market share and become a strong number three player in the country. Branded basmati exports are expected to reach at least 15,000–20,000 tons this year, up from roughly 7,000 tons previously.
• G2G rice buffer: The company has started getting business from cooperatives (NCEL, Kribhco) for white rice; this will be domestic procurement and sale to them, counted as domestic rather than export, partially offsetting the white rice export ban impact.

International and Industry Essentials Drags

• Bangladesh JV: Consolidated PAT fell 75% partly due to Bangladesh. Two problems hit in FY24: an acute foreign exchange crunch (the business depends on dollarized borrowing, and despite spending money, it could not get money out), and government price controls that prevented operators from raising prices in line with international oil prices. Management says both problems are now more or less resolved, with FX availability restored and price control issues settled after the January elections.
• Industry essentials volume decline: Three components: oleochemical (growing over 20% YoY), castor (world's largest exporter, plants at 95% capacity, growing at 5%), and oil meal export. Oil meal export was hit because delayed mustard arrivals and rain made oil meal unavailable on time for exports; prices rose and global consumers would not buy at higher levels. Rapeseed oil meal was particularly impacted. Management hopes to recover substantially on oil meal export in Q1 this year.
• Castor investment: The company is adding capacities and investing in derivatives and specialty castor products, not just base castor oil.
• Export rice recovery: Q3 onwards, export of rice should show much better performance. Basmati rice exports are expected to grow this year because good inventory has been built, and April to September is the good business season.

Mallick: "Bangladesh, of course, was one of the reason why our profitability got dragged in FY'24."

Margins, Depreciation and the FY25 Setup

• Depreciation tailwind: The decline in depreciation is not a one-off. Management revisited the useful life of assets; plants commissioned in the last five years have better life than estimated at commissioning, resulting in a depreciation gain.
• Reclassification of derivatives: Per auditor guidance, derivative gains and losses are now regrouped as other income/expenses instead of material consumed. This changes the line-item presentation but not the underlying economics.
• FY25 margin setup: With no volatility, no events like Q1/Q2, and tight inventory management, management is quite hopeful for a good FY25. The standard run rate on edible oil is well understood; food margins are still climbing toward full potential.
• Rural opportunity: Management is banking on rural markets where many states (Bihar, UP, Orissa, parts of Bengal, Rajasthan, Madhya Pradesh) consume less than the India average, seeing good opportunity to improve sales there.

Mallick: "Oil will grow at around 10%, but food and FMCG quarter-on-quarter, we have been growing at 30%."

Guidance & Commitments

Key Metrics