AWL Agri Business Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Record quarter with commodity tailwind: Revenue grew 31% YoY to INR16,859 crores and PAT more than doubled, but INR3,500–3,600 crores is the normalized EBITDA run-rate and anything above reflects a commodity cycle gain this quarter.
• Food & FMCG is still investment-stage: The segment posted a loss of INR46 crores this quarter, driven by a ~INR50 crore rice inventory write-down; management says margins only start growing after FY28.
• Rural demand is back, urban is stretched: After a stagnant December-to-July period, rural consumption picked up post-monsoon; urban stress persists and is visible in consumption patterns.
• Alternate channels are scaling fast: E-com, quick-com and HoReCa now contribute a combined trailing-12-month revenue exceeding INR3,600 crores, with quick-com alone up 81% during the quarter.
• What to watch next quarter: Whether the Gohana facility ramp drives volume, whether basmati rice market share recovers from 6.1%, and whether palm oil’s price premium over soya and sun persists and further pressures demand.

Quarterly Performance: The Headline vs The Normalized

• Best quarter since inception: Consolidated revenue of INR16,859 crores, EBITDA of INR792 crores, and PAT of INR411 crores, with 9-month PAT swinging from a loss of INR9 crores to a profit of INR1,035 crores YoY.
• Commodity cycle gain inflated the print: Favourable positions and inventory gains lifted EBITDA per ton to INR4,956; management pegs the normalized blended EBITDA at INR3,500–3,600 crores, and the excess as a one-off commodity cycle gain that may span 6–9 months.
• Employee cost spike was a one-time catch-up: A substantial sequential rise in employee cost reflects a proportionate 9-month incentive provision, given the company is heading for one of its best years; an ESOP declared in December will impact from next year onward.
• Other expenses elevated on derivatives, not Gohana: The sequential increase in other expenses is due to derivative and ERD impacts, not the operationalization of the Gohana plant, which only dispatched its first commercial cargo in January.
• Margin trend has been improving for five quarters: Normalized gross margins and EBITDA per ton have risen consistently, barring Q1 and Q2 of last year when hedge disalignment in edible oil created an aberration.

Mallick: "Our normalized EBITDA, as we are saying earlier also, is anywhere in the range of INR3,500 crores to INR3,600 crores. Anything above that is suggestive of the fact that we have witnessed a commodity cycle gain in that particular quarter or period, which may be 6 months or 9 months."

Edible Oil: Volume Holding, But Palm Pricing Is a Drag

• Single-digit volume growth despite high prices: Volume grew in the single digits, led by soya, sun and mustard oil; growth would have been high single-digit had palm prices remained below soya and sun, but consumers cut consumption as palm stayed costlier, a complete departure from historical trends.
• Palm’s premium is a demand and inflation concern: Palm remaining more expensive than sun and soya is concerning for both inflation and demand, and the pricing level seen in January is expected to persist at least through the current quarter.
• Industry grew 5%, rural grew faster: Edible oil industry volume grew 5% in Q3, with rural growing 8%; the company expects industry growth of 6–7% and its own growth at 8–9%.
• Market share dynamics mixed: Overall market share dipped 20 bps to 18.1%, but the Fortune brand gained share, and share rose in soya bean and sunflower; basmati rice share fell from 7.4% to 6.1% and is a work-in-progress with interventions in place.
• Capacity utilization comfortable: Edible oil capacity utilization is reasonably well placed, meaning any future volume growth can be accommodated without significant new capex.
• Procurement fully imported: All palm is procured from Malaysia, Indonesia and other Southeast Asian countries, mainly from a sister concern and other ABCD players.

Food & FMCG: Investment Phase With a Rice Write-Down

• Segment loss driven entirely by rice inventory: The INR46 crore quarterly loss (INR23 crore for 9 months) stems from a ~INR50 crore inventory valuation loss in rice due to a downward market correction; all other food businesses, including wheat flour, besan, pulses, soya nuggets and soap, remained marginally positive, making the overall segment more or less EBITDA neutral.
• Any market recovery reverses the loss: A positive correction in rice prices from here would directly improve the inventory loss number.
• Food stays in investment mode till FY28: Management was explicit that food will remain in the investment and growth stage until FY28, and EBITDA margins should only start growing after that; post-FY28, the company wants to reach benchmark margins of ~25% gross and ~10% EBITDA for rice, and 6–7% EBITDA for wheat flour.
• INR10,000 crore revenue target by FY27 looks achievable: Management expressed confidence in hitting the food & FMCG topline target, with a desired average growth rate of 20% plus.
• Capacity utilization at 53%: Food capacity utilization sits at 53%, leaving ample headroom for the targeted growth.
• Soya nuggets leadership built on owned manufacturing: The company is now the largest soya nugget producer in India at 6,000 tons per month, operating its own Wenger-technology plants in Vidisha, Haldia and Nagpur; competitors like Saffola lack their own manufacturing base, giving AWL a cost and logistics advantage.

Mallick: "I think food will remain in the investment or a growth stage, rather, I would say, till FY '28. And therefore, the EBITDA margins for the food ideally should only start growing after FY '28."

Basmati Rice: A Plant Problem Being Fixed

• Market share fell because of toll-manufacturing constraints: Basmati rice market share dropped from 7.4% to 6.1%; unlike large peers, the company did not have its own plant in Haryana, the main basmati area, and relied on toll arrangements that imposed limitations on processing capabilities and capacities.
• Gohana is the fix: The newly operational Gohana integrated facility includes rice-to-rice and mustard oil capacity, with 600 tons of paddy per day and 500 tons of rice per day, plus large storage; the first commercial dispatch was achieved in January 2025 and full commissioning is expected in Q1 of the next financial year.
• Improvement expected in a couple of quarters: With interventions in place and Gohana ramping up, management expects basmati market share to improve within two quarters.
• Gohana’s volume potential: At 80–85% capacity utilization, the facility should deliver approximately 625,000 tons per annum of combined food and oil volume, with oil contributing roughly 200,000 tons.

Mallick: "In Basmati rice, unlike the big players, we did not have our own plant... Now these toll arrangements have a limitation to the processing capabilities as well as capacities."

Channels & Demand: Rural Recovery, Urban Stress, Alternate Channels Scaling

• Rural is back in action after monsoons: Rural consumption was stagnant from December through June/July; after good monsoons, it picked up only after September and is now recovering, while urban consumption remains stretched and under stress, with inflation hitting both but rural less affected.
• Alternate channels now a INR3,000+ crore business: Trailing-12-month revenue from alternate channels (modern format stores, e-commerce, quick-commerce) exceeds INR3,000 crores, growing 16% during the quarter; e-commerce was up 41% and quick-commerce up 81%.
• HoReCa contributing INR600 crores annually: The HoReCa channel, started a couple of years ago, now contributes close to INR600 crores on a 12-month basis.
• Direct reach target of 10 lakh outlets by FY27: The company aims to exit FY27 with direct coverage of 0.1 crore (10 lakh) outlets, a key distribution lever for growth.
• Industry demand subdued for five quarters: Both edible oil and wheat flour industries have shown subdued low single-digit growth for the last five quarters; wheat flour is an exception in rural areas, where strong double-digit growth is driven by a consumer shift to packaged products.

Mallick: "Rural was almost stagnant between last year, say, December to this year, June, July. Only after good monsoons this here, we saw the route consumption pick up... Rural is -- to a lot extend, it is back in action. Urban stress continues, and we can see that urban consumption is stretched."

Guidance & Commitments

Key Metrics