Modi Naturals Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Ethanol expansion poised to scale: Phase 2 commissioned, taking capacity to 282 KLPD, but FY26 saw limited contribution; the guided ₹950 cr ethanol revenue is conservative, built on only ~50% utilization of the expansion.
• Consumer division building momentum: Q4 growth accelerated after a slow FY26, driven by quick commerce strength in pasta and the hing launch; management sees a path to ₹500 cr in the medium term.
• Margins and returns improving: Ethanol EBITDA margin rose to 17% on softer grain prices and byproduct value addition, while consolidated ROCE improved to 19.9% and working capital days tightened to 62.
• Capital discipline on display: A non-viable solvent extraction plant was shut down, no large capex is planned for FY27 beyond a ₹20 cr byproduct value-addition project, and an insurance claim of ₹4.9 cr partially offset a prior ethanol plant disruption.
• What to watch next quarter: Private and PSU OMC tender outcomes by end of June, the pace of ethanol capacity utilization ramp-up, and any policy movement on ethanol exports or compressed biogas.

Ethanol: The Capacity Bet

• Phase 2 commissioned, benefits deferred: The expansion from 130 KL to 282 KLPD was successfully commissioned, but commercial operations began late in the year, so the enhanced capacity contributed little to FY26; operational and financial benefits are expected to become visible from FY27 as utilization improves.
• Conservative guidance, significant headroom: The ₹950 cr average ethanol revenue guidance factors in only about 50% utilization of the expanded capacity; if all goes well, management expects to far exceed that number.
• Order book anchored by PSU cycle: A ₹400 cr, 47.9k kiloliter order is in hand for the current ESY cycle, valid till 31st October 2026; the company is already registered with private OMCs and expects fresh tenders from both private and PSU OMCs by end of June.
• Margin uplift from byproduct innovation: Ethanol EBITDA margin improved to 17% in FY26 (from 13% in FY25) because grain prices softened and the company executed one value-addition initiative on the byproduct side; a second innovation is underway and should be completed in a few months.
• Overcapacity risk acknowledged, strategy in place: Management flagged industry overcapacity as a key risk but argued the company is well positioned due to plant operations, geographic location, and value addition on both the product and byproduct side; capacity surge has already played out over the last three years and going forward it will not be as much.
• Exports and biogas on the policy watchlist: A lot of geopolitical action is underway that could affect ethanol policy, including permitting exports, with clarity expected over the next few weeks; compressed biogas remains a chicken-and-egg situation pending more policy measures on piped gas.

Akshay Modi: "I think we are well positioned in terms of our strategy to even handle a scenario of overcapacity due to our, the way we operate our plants, our geography, and the value addition we're doing on the product and byproduct side."

Consumer Division: Building a ₹500 cr FMCG Business

• Q4 inflection after a slow year: The consumer division grew only 2% in FY26 but Q4 grew faster and that momentum is now built; going forward, growth is expected to accelerate.
• Quick commerce and new categories driving growth: Pasta is one of the top-performing categories on quick commerce platforms, and the recently launched hing has received a strong market response; new products are slated for launch later this year.
• Medium-term ambition of ₹500 cr: Management sees no reason why the segment should not reach ₹500 cr in the medium term, with oil growing to about ₹300-350 cr and food adding about ₹150 cr.
• Profitable from the start: Food products are profitable from year one or year two; management stated explicitly that they do not intend to enter loss-making categories.
• Distribution and channel mix evolving: The endeavor is to constantly increase presence in general trade outlets, which remain underpenetrated, while e-commerce is expected to ramp up faster; growth will come from both new products and increasing reach.
• Acquisition lens active: The company has evaluated a few acquisition opportunities in the food sector, though nothing has been firmed up yet.

Akshay Modi: "I don't see any reason why this segment for us should not get to INR500 crores in the medium term."

Margins, Returns & Capital Allocation

• Ethanol margin structurally higher: FY26 ethanol EBITDA margin reached 17%, up from 13% in FY25, driven by softer grain prices and byproduct value addition; the last quarter included an exceptional item that lifted it to 18.8%.
• Long-term ethanol margin guide held at 12-15%: Management reiterated that on a sustainable basis, ethanol division EBITDA should be in the 12% to 15% range, with some quarters beating that.
• Consumer division EBITDA at 8.3%: The division-level margin reflects a business that is still scaling; food products are profitable from year one or year two, and the portfolio is not loss-making.
• ROCE and working capital improving: Return on capital employed improved to 19.9% from 18.3%, while working capital days tightened to 62 from 66 and cash flow from operations rose to ₹61.1 cr from ₹48.8 cr.
• Disciplined capex and portfolio pruning: No large capex is envisaged for FY27 beyond a ₹20 cr investment in a byproduct value-addition project in the ethanol division; a non-viable solvent extraction plant in Pilibhit was shut down, reflecting focus on asset productivity.
• Insurance claim partially offset prior disruption: ₹4.9 cr was received in Q4 FY26 for loss of profit from business interruption due to a machinery breakdown at the ethanol plant in FY24.

Akshay Modi: "My guidance still remains that on a long-term basis, it's going to be 12 to, in the range of 12% to 15%. And of course, in some quarters, we will beat that as well."

Risk & Execution

• Ethanol overcapacity is the acknowledged industry risk: Management flagged overcapacity and underutilization as the risk highlighted in media over the last few months, but argued the company is well poised because it has already expanded significantly and can handle the scenario through plant operations, geography, and value addition.
• Consumer risk is purely execution: With great brands, great products already in market, and a strong new product lineup, the risk in the consumer division is execution, nothing else.
• Raw material pass-through in edible oils: Packaging material costs and rice bran prices have increased, but these have been passed on to some extent; olive oil prices have come down, so the net impact is not hurting as much.
• Auditor transition was planned: The resignation of the previous auditor was always planned as a succession; the new auditors had already been auditing Modi Biotech results for the last two to three years.

Akshay Modi: "And in consumer division, the risk is purely on execution. So we have some great brands and we have some great products already, and we have some great new product lineups as well. So it's purely the risk of execution, nothing else."

Guidance & Commitments

Key Metrics