AWL Agri Business Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Best quarter across all parameters: Volume grew 13%, revenue 19%, standalone EBITDA hit ₹621 crores and PAT ₹326 crores, driven by a complete turnaround in the core Edible Oil segment.
• Edible Oil profitability has normalized: After last year's loss-making aberration, the segment delivered ₹373 crores in Q2 and management says the last four quarters' run-rate is the sustainable range.
• Food & FMCG is a volume-grab story, not a margin story: Underlying volume growth was 21% but the segment is kept near EBITDA-neutral by design as the company prioritizes market share and distribution reach.
• Bangladesh remains a drag but is improving: The subsidiary lost ₹51 crores in H1; management is hopeful of a better next six months but will wait 3-4 months before committing to new initiatives.
• What to watch next quarter: Whether the marriage-season demand lift materializes, any one-time inventory gain from the duty hike, and any signal on when Food business margins might begin to recover.

Edible Oil: The Turnaround & Its Durability

• Segment result swung from a ₹195 crore loss to a ₹373 crore profit YoY, powered by growth across soya bean, sunflower and mustard oil.
• Volume grew 17% on steady commodity prices through most of Q2, structural distribution changes that merged food and oil distributors under a unified sales force, and rural expansion now reaching 7.8 lakh retail outlets directly.
• Institutional sales are a structural moat: AWL is the preferred supplier to large buyers like ITC, Parle and the baking/frying industry because its pan-India production setup can serve them nationally, a capability few competitors match.
• South India is the long runway: 34% of branded edible oil is sold in the South, the largest branded market, but AWL's penetration there is poor, so distribution-led growth can continue for years, not just quarters.
• Market share ticked up from 16.12% to 16.2% on an IMRB household penetration basis, the new tracking metric the company has adopted going forward.
• Duty hike pass-through is done but international prices have also risen, adding pricing pressure; management expects only "small gains" from older lower-cost inventory in Q3, not a windfall.

Mallick: "34% of branded edible oil is sold in South, which is the largest branded oil market, and our penetration is surely poor. So, we know that if we do well there, we will continue to grow for years to come, not one quarter."

Food & FMCG: Volume First, Margins Later

• Underlying volume growth was 21% after normalizing a one-off government-to-government rice sale that added topline volume but not value, while reported revenue growth was a muted 1% because the G2G business exports a cheaper rice variety.
• The segment is kept near EBITDA-neutral by design: management's entire focus is on volume growth and market share, not near-term profitability.
• Wheat flour is gaining traction: market share rose from 4.42% to 5.25% per IMRB MAT data to September 2024.
• Margin stress is real but structural: high inflation in both rural and urban markets makes it very difficult to pass on full price hikes immediately for wheat, rice, besan and sugar, unlike edible oil where 80% is branded and consumers buy branded anyway.
• No timeline for margin recovery: when pressed, management explained why margins are stressed but offered no specific target or date for when they will build back up.

Kanhere: "By design, the EBITDA levels are low in the Food and FMCG segment as the entire focus of the Company remains on the volume and topline growth."

Channel & Brand Execution

• Alternate channels are outpacing general trade: e-commerce grew 27% and quick commerce surged 46%, with internal data showing strong market share on both platforms.
• HoReCa is a quiet growth engine: started two years ago, the institutional channel now clocks 40%+ YoY growth and delivered approximately ₹500 crores in revenue over the last twelve months.
• Regionalization is deepening engagement: targeted ATL activations, region-specific campaigns and festival connects, including a Kachi Ghani Mustard Oil launch tied to West Bengal's Hilsa Festival, are driving Fortune brand stickiness.
• Distribution expansion is on track: the company is "very sure" it will hit its target of reaching 50,000 towns by March 2025, and the job of spreading food distribution through the edible oil network is not yet fully done.

Kanhere: "I think the demand, the stability in the prices and the brand equity, all 3 major parameters actually work for us, not only in the Quarter 2, but also for the Quarter 1."

Industry Essential & Bangladesh: The Drags

• Industry Essential degrew 9% in Q2 and 5% in H1 because management chose not to participate in the de-oiled cake business (soya bean and mustard) due to lack of parity, a deliberate margin-over-volume call.
• Bangladesh lost ₹51 crores in H1 and remains under stress, though conditions have started improving after the new government took over.
• Recovery is a wait-and-watch story: management is hopeful of doing better in the next six months but will observe for another 3-4 months before taking any call on brand initiatives or new product launches in the market.

Margins & Profitability

• Standalone EBITDA run-rate has stepped up: the last four quarters have been in the ₹550+ crores range, with the last two quarters crossing ₹600 crores, and management says this suggests standard run rates are back.
• Edible Oil profitability is now in a sustainable band: management declined to give a specific margin range but stated that the last four quarters' performance represents the sustainable level, with possible minor plus or minus.
• Food margin clawback has no timeline: the company acknowledged the stress from inflation and slow pass-through but offered no quantified path or date for recovery, leaving it as an open risk.

Kanhere: "I think we get a little bit drawn by the last year's Quarter 1 and Quarter 2 numbers, but the numbers we have been able to focus on last 4 quarters for Edible Oil are the sustainable numbers."

Guidance & Commitments

Key Metrics