AWL Agri Business Ltd Q1 FY2025 Concall Summary

Key Takeaways

• Volume-led quarter, clean numbers: Consolidated volume grew 12% YoY with no one-off items, as the prior year's hedge dis-alignment impact is fully behind the business.
• Edible oil delivered a record profit of ₹398 cr, powered by 12% volume growth and stable, range-bound prices that favor branded players over local competition.
• Food & FMCG is investing for scale, not profit: Segment profit stayed at just ₹31 cr despite strong revenue growth, as the company deliberately channels spend into distribution, advertising and infrastructure to sustain its growth trajectory.
• Rural demand is a bet on H2: Rural coverage expansion was delayed by elections and a heat wave, and rural consumption stayed flat; management expects a recovery from October, driven by a good monsoon and government spending.
• What to watch next quarter: Whether the Gohana food park commissions on time in November, the pace of rural town coverage toward the 50,000 target, and any sign that food segment investments are converting into margin.

Edible Oil: The Profit Engine

• Record segment profit: Edible oil delivered its highest-ever segment profit of ₹398 cr, benefiting from stable international prices in a \$100-\$150 range that strengthens branded players' pricing power, purchase scale and supply chain advantages over local competitors.
• Volume growth at 12%: Strong YoY growth came from both sunflower and mustard oil, with sunflower oil gaining market share in the South to become the #2 brand, up from #3.
• Competitive moat in stable prices: When oil prices were high, local players thrived because brands cost ₹25/liter more. In the current stable-price environment, Fortune's advantages in pricing power, purchase scale and supply chain strength make it harder for local players to compete. Competition remains higher in fragmented mustard oil than in refined oils.
• Sunflower oil as a focus driver: AWL enhanced processing capacity and is now possibly the second-largest importer. The brand was the only one showing growth in Q1 at +1.2%, with market share gains concentrated in the South, a region where it was historically weak.

Kanhere: "We went to the sunflower oil retailer gave them a Atta at an offer which they couldn't reject and they took and slowly the market started accepting the Atta and now Atta sales say in Chennai city is almost equal to sunflower oil sales."

Food & FMCG: Scale Before Margin

• Revenue growth, margin sacrifice: The segment posted only ₹31 cr in profit because the company is deliberately investing in distribution, advertising and infrastructure to sustain a growth trajectory that targets ~₹6,000 cr in revenue this year, up from ~₹5,000 cr last year.
• Wheat flour gaining share: Market share improved from 5% to 5.9% YoY in a fragmented market where only one large player holds 40-45% share. The South distribution strategy clicked, pushing South share to 7.5-8% and Chennai city to 18-19%.
• Basmati rice is a tougher fight: Two dominant players have held 60-65% market share for over 25 years. The Kohinoor brand push increased share, but moving from 10% to 15% requires more distribution work than in wheat flour.
• Rice volume ambition: Management disclosed rice volume at over 200,000 tonnes and is targeting 30-40% YoY growth for the next three years, contingent on the Gohana plant commissioning to bring the supply chain in-house.
• Premiumization via B2B: The company is working on special flours for buns, cream rolls, croissants, pizza and noodles, alongside consumer-facing launches like cold-press mustard oil and functional oils.

Kanhere: "We are looking at both consumer... more than consumer side premium, we are working on the B2B business and trying to make that premiumization."

Distribution & Reach

• Direct outlet reach up 18% YoY to 740,000 outlets, with alternate channels growing fast and HoReCa coverage expanding to 48 towns after adding 7 new ones in Q1.
• Rural expansion delayed: Coverage reached only ~30,000 towns against a March '25 target of 50,000, held back by elections and a heat wave. Management is hopeful of reaching near the target with three quarters remaining.
• South market synergy in action: The strategy bundles oil, rice and flour together. Approaching sunflower oil retailers with an Atta offer they could not refuse has driven Atta sales in Chennai city to nearly equal sunflower oil sales.
• Rural demand flat but outlook positive: Rural consumption stayed at 29-30% of the mix and did not grow, consistent with broader FMCG trends. Management expects a recovery from October onwards, citing a likely good monsoon and government rural investment schemes.

Kanhere: "Going forward, October onwards the rural market should do better."

Industrial & International Segments

• Oleochemicals and castor oil driving growth: Oleochemicals grew 13% YoY and castor oil and derivatives grew ~10% YoY, both benefiting from strong demand and AWL's position as the largest oleochemical capacity holder. The oil mill business de-grew 22% due to unfavorable parity and market conditions, which management views as unsustainable.
• Bangladesh losses narrowing: The operation posted a loss of ~₹10 cr in Q1, far less than the same quarter last year, as conditions improve after elections brought a new government. Currency problems, macro headwinds and government price controls remain, with no specific timeline for a return to profitability.
• Branded export footprint: The company now exports to over 30 countries, with the food business contributing 44% of branded export. Specialty chemical exports are set to expand into application-based products, leveraging Wilmar's client relationships in China, Malaysia, Indonesia and Europe.

Demand Outlook & Risks

• H2 demand expected stronger: Festivities starting this month and a big wedding season from November, combined with a good monsoon, create a positive consumption atmosphere. Management expects all FMCG companies, including AWL, to perform well over the next three to four quarters.
• Rural recovery is a conditional bet: The outlook hinges on monsoon delivery and government rural spending translating into actual consumption. Staples are the first choice when rural incomes improve, but the recovery has not yet shown up in the numbers.
• G2G business is policy-dependent: Government-to-government rice business could disappear if white rice export policy reverts to its earlier open stance, a risk management cannot quantify or time.
• EBITDA run rate sustainability: Management is hopeful of continuing the current run rate in coming quarters, provided there are no geopolitical disruptions and edible oil prices remain range-bound.

Kanhere: "I think all the FMCG companies including ours should do well in the next three, four quarters."

Guidance & Commitments

Key Metrics