Modi Naturals Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Guidance-led recovery story: FY26 revenue guided at ₹850–880 crore with EBITDA of ₹80–85 crore, anchored by a doubling of ethanol capacity and continued consumer division growth.
• Ethanol expansion is the near-term catalyst: Phase 2 adds 180 KL per day by Q3 FY26, tripling total capacity to 310 KL; management expects 50–60% utilization in Q3, ramping to ~90% in Q4.
• Branded division absorbed planned margin compression: EBITDA fell from ~15% to ~8.5% as the company doubled down on advertising, onboarded Karishma Kapoor, and pushed into e-commerce and quick-commerce for the Oleev Kitchen pasta portfolio.
• Bulk division has lapped its inventory-loss cycle: FY24’s commodity-driven inventory write-downs are behind the business; FY25 delivered a turnaround on stabilized prices and improved demand.
• What to watch next quarter: Whether Phase 2 commissioning stays on track for late Q2 or early Q3, the pace of branded EBITDA recovery toward the 8.5–9% target, and any segment-level guidance management promised to provide.

Ethanol: Capacity, Margins & Policy Backdrop

• Phase 2 doubles capacity: Expansion from 130 KL per day to 310 KL per day is on the same premises, with layout and infrastructure always planned for it; commissioning expected by end of Q2 or early Q3 FY26.
• Ramp-up math: Management’s “off the cuff” assumption is 50–60% utilization in Q3, rising to around 90% in Q4, while the existing 130 KL plant continues to run at 100%.
• Asset efficiency: The company expects an asset turn of about 3.4x on the total ethanol division capex post-expansion, with ROCE already at 18.8% in FY25.
• Margin seasonality is structural: Grain ethanol margins follow the harvest cycle: Q4 and Q1 are the best quarters as paddy and maize harvests come through, Q2 weakens, and Q3 recovers over Q2. Maize prices softened roughly 10% when the paddy crop arrived, then another 8–10% after the FCI rice policy change.
• Full-year EBITDA range: Management expects to maintain 12–15% ethanol EBITDA for the full year, with quarterly swings around that band.
• Blending tailwind with a second-half cliff: Blending percentage runs high in the first half when sugar-based ethanol is available, then drops sharply; last year averaged 14.6% annually despite 17–18% in the first five months, and this year hit ~19.8% in the first five months before the expected second-half decline.

Akshay Modi: “Q4 and Q1 will traditionally be the best quarters for grain ethanol.”

Branded Division: Investment Mode, Distribution Push

• EBITDA sacrificed for share of voice: Branded EBITDA started FY25 at about 15% and averaged roughly 8.5% for the year because management chose to spend aggressively on advertising, particularly in Q3 and Q4. The company intends to double above-the-line advertising again in FY26 and maintain or increase it further.
• FY26 margin target: Management plans to hold branded EBITDA at 8.5–9% in FY26, implying the elevated ad spend continues and margin recovery is not the near-term priority.
• Pasta as the new growth vector: The Oleev Kitchen pasta portfolio is scaling through celebrity endorsement (Karishma Kapoor), targeted advertising, and deals struck with all e-commerce partners in FY25 and Q4. Both pasta and popcorn are manufactured on an asset-light model: pasta is outright third-party, popcorn runs from a leased facility.
• Distribution broadening: The company expanded into modern trade, established partnerships with leading e-commerce and quick-commerce platforms, and strengthened traditional general trade; food product distribution will expand further over the next few quarters.
• Confidence anchored in differentiation: Management cites differentiated product offerings, category leadership, and the highest share of voice in marketing as the basis for sustained consumer division growth.

Bulk Division: Cycle Normalized

• Turnaround after two difficult years: FY24 and the prior year were hit by government-imposed oil price reductions and inventory losses from declining commodity prices; FY25 delivered a turnaround on improved demand and stabilized prices, with those headwinds now behind the business.
• Working capital tightened: Net working capital improved to 66 days, driven by strict management practices in the bulk oil business where days were reduced massively, and by the ethanol division operating at near-zero finished goods inventory because orders are placed for the entire year.

Capital Allocation & Structure

• New debt secured: An ₹88 crore long-term loan from HDFC Bank has been disbursed, supporting the ethanol expansion and broader growth plans.
• No demerger or geographic diversification planned: Management is aware of options around demerging the ethanol business but has no plans at present; similarly, there are no current plans to diversify manufacturing to another state.
• Asset-light for now on non-oil foods: Pasta and popcorn will stay on third-party or leased manufacturing until volumes become significant enough to warrant owned capacity.

Akshay Modi: “FY ’25, the year in which our company turned 50, will be remembered as a turning point in the history of Modi Naturals Limited. The year in which we overcame adversity, strengthened our foundations and unlock new avenues of growth.”

Guidance & Commitments

Key Metrics