Modi Naturals Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Flat consumer quarter, GST to blame: Consumer revenue was flat at ₹46.3 cr, and EBITDA fell to ₹3.3 cr from ₹4.6 cr YoY, as a GST disruption in the last two weeks of Q2 wiped out the top-line growth that was meant to absorb a sharp increase in advertising spend.
• Ethanol is the star performer: EBITDA margin improved 198 bps to 14.3% in Q2, driven by lower grain prices and full capacity utilization; the 180 KLPD expansion is on track to commission next month, with some orders already secured.
• Bulk division has turned the corner: EBITDA swung to a positive ₹40 lakhs in Q2 from a loss last year, after a shift to a lower-inventory business model tightened procurement and aligned production with market demand.
• Full-year confidence intact: Management is confident of achieving the INR850–INR880 cr revenue guidance and delivering ~INR50 cr in H2 EBITDA, with ethanol expansion and seasonal bulk strength driving the second half.
• What to watch next quarter: Commissioning and stabilization of the expanded ethanol plant, the pace of offtake orders in subsequent tender cycles, and whether consumer division growth returns now that the GST disruption has passed.

Ethanol: Margins, Expansion & Demand

• Margin expansion driven by input costs: EBITDA margin reached 14.3% in Q2 and 15.6% in H1, a 337 bps improvement, as lower grain prices and improved raw material availability combined with optimum capacity utilization at the distillery.
• Location advantage in Chhattisgarh: The company earns an EBITDA of INR10/litre, which management says is higher than peers, attributing the edge to its plant location.
• Expansion commissioning next month: The second phase of 180 KLPD is under trial and expected to commence operations by December '25, taking total capacity to 310 KLPD; revenue contribution is expected in the March quarter.
• Orders already secured for expanded capacity: 49,700 KL in orders plus by-product orders worth ₹400 crores were won from OMCs in the October '25 cycle 1 tender; management plans to participate in cycle 2 and cycle 3 to fully absorb the new capacity.
• Raw material supply is abundant: FCI has earmarked ~0.5 crore tons of grain for nine months, damaged grain is readily available, and paddy and maize crops are at their highest ever levels with maize prices now coming down.
• Overcapacity concern is overblown, per management: Management argues the overcapacity problem is "over-highlighted," noting that plants do not operate 365 days a year, creating an effective ~10% buffer, and that capacity augmentation in the country has largely run its course.
• Long-term demand drivers extend beyond blending: The government's push for flex-fuel engines that consume 100% ethanol and the imminent arrival of sustainable aviation fuel create significant inherent growth on top of rising fuel consumption.

Akshay Modi: "blending itself can increase. Number 2, the government is very keen on flex-fuel engines. Once that comes in, those vehicles will consume 100% ethanol. And then there is also sustainable aviation fuel which is kicking in soon."

Consumer Division: Flat Quarter, Spending Ramp

• Revenue flat, not declining: Consumer revenue came in at ₹46.3 cr vs ₹46.6 cr YoY, with management emphasizing that the quarter was flat rather than a degrowth quarter, as a GST disruption in the last couple of weeks hit primary billings across the sector.
• Advertising spend jumped 30% in six months: The division spent ₹6.3 cr on advertising and marketing in Q2 and ₹9.15 cr in H1, a significant increase that was meant to be absorbed by top-line growth that did not arrive because of the GST issue.
• EBITDA margin swing is purely advertising-driven: Fluctuations in FMCG EBITDA margins over the last four to five quarters, from 9% down to 6.16%, are entirely attributable to the timing of advertising expense increases, per management.
• Product pipeline is active: A recent Hing launch under the Spice category has seen a good response, the Pasta range continues to rank among the top on a leading quick commerce platform, and the company is looking at entering the ready-to-eat snacking segment.
• Long-term ambition is INR500 cr: Management sees no reason why the FMCG division should not reach ~INR500 crores, contributed by both oil and foods, though it declined to give a specific timeline for that target.
• GST tailwind on pasta: GST on pasta was reduced from 12% to 5%, a regulatory change that should support the category.

Bulk Division Turnaround

• EBITDA turned positive: The bulk division delivered EBITDA of ₹40 lakhs in Q2, compared to a loss of ₹30 lakhs in the same quarter last year, and ₹1.2 cr in H1 versus a loss of ₹1.5 cr.
• Business model transformation is working: The division shifted to a structurally stronger, lower-inventory model that reduced working capital requirements and improved operational efficiency through disciplined procurement planning and better alignment between production cycles and market demand.
• H2 will be materially stronger: Q2 is seasonally softer due to monsoon-related challenges and limited crop arrivals; with fresh crops arriving in Q3 and price normalization underway, margins are expected to continue benefiting from favorable commodity prices and enhanced operational controls.

Guidance & Financial Commitments

• Full-year revenue guidance: Management is confident of achieving INR850–INR880 crores for FY '26, with no upward revision at this stage but a promise to announce if that changes.
• H2 EBITDA target: Confident of delivering ~INR50 crores in H2 EBITDA, driven by ethanol expansion, seasonal bulk strength, and consumer recovery.
• Debt reduction path: Strong internal accruals over the next 12–18 months are expected to take care of most debt, with the option to pay early or raise capital if needed.
• FY '27 growth outlook: Management expects decent growth in FY '27 from optimum capacity utilization in ethanol and continued growth from the consumer division.
• Volume data disclosure: Management has not been keen to share volume data historically but will take a call on disclosing it in due course.

Pushback & Unanswered Questions

• Volume data remains undisclosed: When asked to share volume growth data for the branded oil business, given that revenue is distorted by fluctuating oil prices, management said it will take a call in due course but acknowledged that it has not been keen to share volume data so far.
• No long-term offtake agreement with OMCs: Management confirmed it does not have a long-term purchase agreement for either phase of ethanol capacity, relying instead on participation in recurring tender cycles.
• ROE/ROC math not done: When asked what ROC and ROE levels to expect post-ethanol expansion, management said it had not done the math and would get back with the number.
• Overcapacity pushback: An analyst flagged that food grain-based ethanol capacity now exceeds what OMCs can offtake, with LTOA holders and cooperative sugar mills getting preference. Management countered that the issue is regional and state-specific, and that its existing facility can go up to roughly ₹320 crores with some orders already secured.
• Several metrics declined: Management declined to provide a specific timeline for the INR500 cr FMCG target, the blended cost of interest on total debt, the current debt-equity ratio, and utilization levels for FY '27.

Akshay Modi: "So far, the management has not been keen to share volume data. So, once the management takes a decision on that, we will share the numbers."

Guidance & Commitments

Key Metrics