Bikaji Foods International Ltd (BIKAJI) Q4 FY23 Earnings Concall Transcript

Bikaji Foods International Ltd ( NSE : BIKAJI) Q4 FY23 Earnings Concall dated May. 24, 2023

Corporate Participants:

Vijay Gyanchandani — Investor Relations

Rishabh Jain — Chief Financial Officer

Manoj Verma — Chief Operating Officer

Analysts:

Harsh Shah — InCred Capital Financial Services — Analyst

Ravi Srivastava — Bay Capital India — Analyst

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Shirish Pardeshi — Centrum Broking — Analyst

Saurabh Jain — HDFC Life Insurance — Analyst

Anurag Lodha — Axis Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Bikaji Foods International Limited Q4 FY ’23 Earnings Conference Call, hosted by S-Ancial Technologies Private Limited. [Operator Instructions] Please note, that this conference is being recorded.

I now hand the conference over to Mr. Vijay Gyanchandani from S-Ancial Technologies Private Limited. Thank you, and over to you, sir.

Vijay Gyanchandani — Investor Relations

Thank you. Welcome to Bikaji Foods International Q4 FY ’23 earnings conference call. From the management, we have today, Mr. Deepak Agarwal, Managing Director; Mr. Rishabh Jain, CFO; and Mr. Manoj Verma, COO. Now, I request the management to take us through the key opening remarks and after that, we can open the floor for the Q&A session.

Now, I hand over the call to Mr. Deepak Agarwal for his opening remarks. Thank you, and over to you, sir.

Rishabh Jain — Chief Financial Officer

Thank you, Vijay. So actually, Deepak is not there, so I’m Rishabh. And thank you to all the analysts and the all shareholders — investors who joined the call. So we are presenting quarter four and full-year review of Bikaji Foods International Limited. I have with me Mr. Manoj Verma; who is the Chief Operating Officer; and along with Bhupender Singh Sohal, who is VP, Sales. The last FY ’23 has been a historical year for Bikaji Foods. We have done multiple things at input metrics, be it right procurement, be it right quality, multiple plant at different location, investment in people, and output has been very satisfactory to us. So last year and if you see a full year, we’ve grown at close to 22% over FY ’22. Our revenues from operation is close to INR1,968 [Phonetic] crore. Our EBITDA is close to INR214 crores. That is 53% [Phonetic] growth over last year. Our PAT is close to 66.5% growth over last year. We closed at INR126 crore PAT over last year.

Our gross margin — so when we started the year FY ’23, in first quarter, we have seen a huge inflationary pressure across all key raw materials, be it edible oils, or multiple process through diesel, all the including inwards sector. But first quarter was tough for us. In first quarter, we have done an EBITDA of close to 7.3%, and gross margin was close to 24%. However, when we completed the year, our full-year gross margin is 29% plus. So we have done multiple things at gross margin level and we’ll explain in detail what we’ve done.

Our EBITDA margin is around 11% — close to 11%, 10.86%, which is close to 220 basis points and higher than last year. [Technical Issues] Quarter four, our revenue from operation has grown by 59 plus [Phonetic], around 16%. Our EBITDA is close to INR61 crore, INR62 crore, and has grown by 52%. [Phonetic] Our gross margin is at its highest, it’s around 34% and our EBITDA is around 13.4%.

FY ’23 has been a milestone year for us. There were multiple events which has happened in last year. We have got listed in BSE and NSE in November 2022. We added three plants; one in Kanpur, one in Muzaffarpur, and one in Bikaner, in the name of Hanuman. We also got PLI subsidy scheme of INR261 crore, which we will get over the next six years and we bought the first tranche of close to INR20 crore in March ’22-’23.

We expanded our regional sales office in South India. That’s the first time, so we have taken our offices outside Bikaner. We also strengthened the management across all key functions, be it supply chain, be it quality, production. Across the position, we have taken the position to strengthen our bench.

Shiv Ratan Agarwal, who is the Founder of the Company. So he started the brand Bikaji in 1993, and he has been the pioneer with the experience of more than three decades working in the Indian snacks industry. He is the Chairman of the Company. We are a very strong Board with Shiv Ratan Agarwal ji, Deepak Agarwal, and Shweta Agarwal. All three are the Promoter and Founder of the Company, and putting a lot of experience in the Company and strengthened the quality, procurement, product quality across every period.

Sachin Kumar Bhartiya, who is a Non-Executive Director and Nominal Director, and he is a partner in Lighthouse Fund. Mr. Siraj Chaudhry, he is an Independent Director, and incurring great experience in FMCG industry, agri industry. Earlier he was the Chairman in Cargill India. Mr. Pulkit Bachhawat, who is Independent Director and CA, CFA, and he is having a great experience in finance background.

Mr. Vipul Prakash. Mr. Vipul Prakash is currently CEO of MakeMyTrip India, and he is having plus 20 years experience in PepsiCo India. Mr. Nikhil Vora. He is running Sixth Sense Ventures fund — Sixth Sense fund. We have supported the very strong professional management, starting with Mr. Manoj Verma, who is the COO of the Company. Recently, Mr. Mahavir Jain has joined the Company, who is the CBO of the Company. Mr. Mukesh Sharma. He is the Head Supply Chain, having a great experience in Britannia and Tata. Mr. Ram Sinha. He is President, Sales, looking after modern trade and our B2B patforms business. He is having great experience in Reliance Retail of more than 16 years.

Ms. Neha Rao. She joined as a VP, Marketing last year. Mr. Bhupender Singh Sohal. He is with us for more than nine years, heading our sales. Mr. Rahul Joshi. He is the Company Secretary and Compliance Officer. Mr. Shambhu Dayal Gupta. He is the President, Finance and Corporate Affairs. He joined the Company more than 30 years.

Now, I will hand over to Mr. Manoj Verma, who will take through the presentation.

Manoj Verma — Chief Operating Officer

Thanks, Rishabh.

So, gentlemen, just taking you through a few snapshots now, the highlights of the Company Y versus peak above [Phonetic]. So vis-a-vis in terms of market leadership, we enjoy the third largest position in ethnic snacks space in the country. We are the largest manufacturer of Bikaneri Bhujia, producing about 36,000 tons annually. We are the second-largest manufacturer of handmade papad in the country.

In terms of our distribution and capacity, we as a company, we have a reah of 9.5 lakh outlets across the country. We have exports covering around 25 countries around the globe. We have now the manufacturing capacity — installed capacity of almost 270,000 metric tons and this is across country’s various locations.

In terms of our organization and its performance, so our five-year revenue CAGR — value CAGR is 21.6%, and volume is 13%. Talking about the Company’s strength, we have a diversified portfolio of over 300 products. We enjoy a market leadership position in the family pack. So our — 59% of our business comes from a family pack, which speaks about the strength of the brand.

Talking about product categories. So we are into broadly six categories. First and foremost is about bhujia. So that’s one followed by namkeen. Third is packaged sweets. Fourth is papad. Fifth is Western snacks. And the sixth is others wherein, you know, it is about frozen. It’s about maida items, and the gift products and all. So these are the six [Technical Issues]. And we have launched a few products very recently to cater or to address the need and opportunity in the premium category and also the health space. So this is about multigrain bhujia, this is about jwar mix, so the roasted products.

We also launched new products in mass category, which is like churmur, sev, murmura, chips — kettle chips, so on, so forth. Also to cater the international opportunities for our export, we have very recently launched part thali — frozen thalis. There are certain products and packs, which we have launched and relaunched. So the one I’m talking about is in the can kind of a stuff. So this is about premiumization and increasing the gross margins on certain products which already exist, but this is about some change in packaging has been besides new product launches.

Talking about product categories as we look at. So revenue say, CAGR for last five years is 22%. If I talk about ethnic snacks, five years CAGR growth is 21%. Packaged sweet has grown at 21% for last five years CAGR. Papad has grown at 15%. Western snacks delivered a growth of 42%. And the other category has delivered 14% growth over last five years.

Product mix, we were to look at, so 35% — as of ’22, 35% of our business usually comes from bhujia, and 35.6% was from namkeen. Packaged sweet was 12.7%, papad was 6.7%, Western snacks was 5.7%, and all others was 4.3%. Whereas if we look at in year ’23, there is a shift and what has happened is that namkeen has gained share of business by virtue of its high growth what it has delivered. So last year’s share of business is namkeen contributes to 36.1%, which is the highest followed by bhujia which is 33.4%, then it’s sweets 12.1%, then it’s papad which is at 6.2%. Western snacks has gained substant [Technical Issues] business of 8.2% and the other is 3.9% share of business.

As we have been talking in the past about that we look our business into three parts which is core focus and others. So if I was to talk on the growth, so core states over the last five year has delivered a CAGR growth of 21%; focus states has delivered a CAGR growth of 22%; other states at 33%; and exports CAGR growth of 16%.

If we look Bikaji business by zone, so each zone has grown at 24% over last five years. North has delivered a CAGR growth of 20% over last five years. South, you know, that’s where is our very recent entry has delivered a growth of 68%, and West has delivered a CAGR growth of 16%.

Talking about our SKU bridge [Phonetic], if we look at, so as of ’22, our family packs were contributing to 60.6%, whereas as of last year, say, FY ’23, the contribution of family pack has come down to 58.9%. And in fact, this is what we had projected, and this is by virtue of gaining by share of business in the Western snack, which is primarily about INR5 and INR10 packs.

Talking about our manufacturing facilities and capacity, I would request Rishabh to speak.

Rishabh Jain — Chief Financial Officer

Yeah. So in current fiscal in ’23, we have added three new plants in Kanpur, Muzaffarpur, and Bikaner, that’s the name of Hanuman. All the three plants have a capacity of Western snacks and namkeen. So we have a total capacity of close to 2.7 lakh metric tons. In FY ’24, we will also add three more capacity. One in the Bikaner, that’s in a category of frozen, that will start in next three months to four months. Other one is our Patna CMU, that will start at the end of this month, and maybe June first — June second week. And last one is Raipur. So Raipur start — I think we are started with CMU, and we are tie up with CMU contractor, and that will start by the end of this financial year. So these three will further add to the capacity of our units of total capacity. We also got PLI and we committed close to INR440 crore, and we’ll complete all the CapEx by end of this financial year to complete all the obligations.

Manoj Verma — Chief Operating Officer

Yeah. So talking on our pan India distribution, so if we look at — the point to note here is that in last one year, Bikaji has gained — increased the reach by 100,000 outlets. So as of end ’21, our reach was 8.53 lakh outlets, which has now come to 9.52 lakh outlets. So that’s the major leap which we as a company has taken. We’ve also expanded our distribute — distributor or channel partner base over the years. Talking about marketing initiatives, so we spent close to 2% last year, which is what was committed are present across communication vehicles, so APL, be it television, be it radio, be it other TV channels, social media. So few of the brand collaborations what we did was tie-ups with PVR certain campaigns we sided with APMs. So international strength or international marketing that we were present on television across US, Canada, UK, other European countries, Australia, New Zealand so that’s what has been our presence. We actively participated in international exhibitions to support our export such as sale in Paris which happened in a way we simply been let’s say, for example, very recently there was a Sonu Nigan Night which happened in UK that was sponsored by Bikaji and product sampling activity, which was done then from certain ground activations that charge down, this is to support our Middle East sale.

Coming onto our new brand campaign. So Amitabh Bachchan continues to be our brand Ambassador who is there till Diwali this year. By end of this quarter, we would be closing down the extension office or whatever next is to be done. We also plan to do few new brands campaigns this year, that’s what we will do, and what we have on cards is the festival campaign because that the next two quarters for us as the organization and opportunity both are very large. That’s what the marketing team is working on. Coming on to the strategic initiatives to further consolidate our leadership position in our core states. What we have done is that new manufacturing facilities, which now has all been commissioned firing well and has been immense support last year to deliver the numbers. And in fact, over-delivers our budgeted number for all three states. Then was about premiumization and upgrading. What we identified for ourselves are the set of SKUs which were higher on gross margin. So our sales team is continuously and consciously working to increase the mix so as to increase the bottom line as well. There have been certain rollout of special programs which our sales team has done. So this is about top-end stores engagement program. Certain wholesale and distributor channel partner program that’s what the roll down in these core state-specific shopper marketing activities were to increase uptake and drive the SP range and portfolio in the store. And last but not the least is about sales automation tools, which is what is being leveraged in these core space. Now, talking about our focussed states and other markets. So what we’re doing in focussed state is expanding our distributor base — distribution. Second is about focusing on categories beyond top-selling products so earlier it used to be a couple of categories where the focus needs to be and Bikaji was known for. Now, we are trying to make this and that’s been our effort.

So all this time to increase that stuff, develop products to cater local sales so this is — be it UP certain products which are more specific to this market. Similarly, for Southern markets, the South Indian products, that’s what we’ve done. We continue to leverage modern trade channels by virtue of our strong relations with all national chains. So all these focused states, we enjoy disproportionate market share in the modern trade channels by the virtue of our the GDP is what we have these accounts for pan India. Last is about the sales teams or the feet on the ground so we have strengthened our teams. Talking about other markets, what we do is that, one, we are expanding our super stockists’ network that’s what helps us to reach increased reach and coverage to the down top [Indecipherable]. We continue to spend behind ATL activities, so that’s what railways brand awareness and therefore it MPs to be…

Operator

Sorry to interrupt. Sir, the audio is getting slightly muffled, request if you can be close to…

Manoj Verma — Chief Operating Officer

Hello, is it better now?

Operator

Yes, sir. Thank you.

Manoj Verma — Chief Operating Officer

Yeah, so continued investment behind the ATL activation. So that’s what has generates brand awareness. Leveraging e-com B2B channel so this channel helps us and the cost-to-serve model becomes much more economical. Then it is talking about our leveraging technology, so technology is there now across platform starting from our depots which is the ASRS. Then is we talked about DMS. Then is SFA and at our production work on the factories. Now coming onto our financials. Rishabh is here.

Rishabh Jain — Chief Financial Officer

Thank you. So our revenue from operations has grown by 22% over last four years to five years. Across all the states [Indecipherable] focus all have grown at least 20%. Our gross margin is around 29% in FY ’23 which was close to 27.4% in FY ’22. So we have done multiple things in executing our gross margins to higher level, be it right sourcing, be it premiumization of few products like I’ll give an example. So our focus product [Indecipherable] which are high on gross margin. So, last year it was close to 11%, 11.2%, we have taken this to 12%. So that has helped us to improve the gross margin by around 0.5%. We also improved our purchase be it long long-term contract or be it right sourcing from right partners and that has helped us in improving the gross margin. Our EBITDA has grown to close to 11%. From ROE-ROC perspective, so our ROC is around 15%, which was close to 13.9% last year and our ROE has improved to 10.5%.

Our working capital which includes [Indecipherable] and inventory is close to 19 bps. Our ROC — our asset turnover ratio is close to 3.3. So we’ve completed our CapEx cycle. So how we will improve our ROE and ROC and ultimately net asset turnover ratio? So by FY ’24, are we complete our CapEx cycles that will give a capacity of close to INR4,500 crores plus. Post FY ’23 and FY ’24, we will not have to do a major CapEx and further FY ’24 CapEx will be sufficient to fund the next two years, three years’ growth. So that’s how we will improve — we will try to improve our asset turnover ratio to 3.32 plus 4 and that will also improve our ROE and ROC in coming years.

In FY ’23, If you look at FY ’23, so our revenue from operation has grown by 22%. We have closed our turnover of around INR1,966 crores. Our Ethnic Snacks business has grown plus 20%. Our Packaged Foods business has grown at plus 17%, and our Western Snacks where we have most of the capacity across many plants, many states has grown at plus around 80%. Papad category, which is highly unorganized, we’ve grown at close to 16%. So in FY ’23 our value growth is close to 22% whereas our volume growth is plus 15%.

When you look at Q4 FY ’23, our revenue from operation has grown at close to 15.5% Our ethnic snacks business has grown at close to 15%. So in quarter four, we started with January, which was a very dull month for, I think across all the food brands, so Jan and Feb was little dull for us, but from March we’ve seen good uptake in demand at rural and urban states. So ethnic snacks business has grown at 15%, packaged sweet close to 14%, western snacks is in good demand of close to 41%. Papad has grown at close to 8.3%. So that’s the overall category-wise growth we’ve done in last quarter. Revenue from operational perspective we’ve grown at close to INR462 crores of turnover versus INR400 crores in FY ’22 last quarter. Our gross margin has improved substantially, whereas last year, last quarter we’ve done close to 29% gross margin versus this year. There was 5% margin improvement and we closed at 34%.

And from compared to the December quarter, third quarter, our gross margin has improved by close to 4%. That has resulted in our PAT margin of close to 8.28% in last quarter versus 6% in corresponding year last quarter. Over the years, we are closed at close to 6.5% PAT margin, and we’re closed at INR127 crores of PAT. Our revenue from operations has grown at 15%, close to 16% over last quarter and 22% year-on-year. EBITDA has grown at close to 52% over last quarter and year also. And our PAT margin has grown 57% over last quarter and we’ve close to INR30 crores in FY ’23 last quarter. We have been witnessing with the softening of raw material prices and packing material prices in FY ’23, resulting in improvement in gross margin by 168 basis points when we see full-year business.

EBITDA margin is also supported by many efficiency and many measures has been taken at all the cost ahead including purchases, including efficiency, including focus on fewer high EBITDA item and we try to improve it all levels, at all costs. Our edible oil when we started in quarter 1 FY 2021 when we see our key raw material prices, edible oil which was around one, so currently also it’s up close to 1.4 compared to last three years, but yeah, when we see it we’re seeing very upswing in the first quarter of this year but yeah, currently it’s around — it’s reduced to close to 30% from its peak. Also Pulses and Flours, in Laminates we completed work, all has reported in last quarter. We got the PLI scheme from government where we are committed close to INR400 [Phonetic] crores rupees of investment. We got the time till FY ’24 to complete all the CapEx and investment plan. We have got to close to INR261 crore in category one and close to INR23 crore in category two, that’s [Indecipherable] mainly any added spends, which will be outside India and international market, we will get the reimbursement of the same. So, we realized close to INR19.82 crores which is the first tranche of 2021-22 in March 2023.

We are not recognized yet in our books of accounts in our P&L and there is some CapEx conditions which is there to fulfill and we will complete the CapEx condition by end of this calendar year mostly. And in FY ’24 most certainly take our PLI benefit in our books of accounts, in other operating income. Some outlook perspective in FY ’24. We’re targeted to improve gross margin of 0.5% on account of improved purchase planning. We are also setting a plant in Bihar, so the plant in Bihar will start next month, and that we will shift some Namkeen and Namkeen category to that plant in Indian foods category. That would also improve our logistic cost because currently we are sending goods from Bikaner to Bihar which is close to 600 kilometers far. So that will help in improving logistic costs.

We are also planning to transformer power consumption to green and sustainable energy and we’re targeting 30% of our total power combination to shift to green and sustainable energy. We’re also focusing on improving the high gross margin products, currently close to 13%, we are targeting to take this to 18% in next three years. So our future [Indecipherable] perspective, we are targeting to increase reach to another 1.5 lakh outlets by end of this financial year. Last year we added close to 1 lakh outlets. This year we are also targeting to add feet-on-ground. So who are our eyes and ears will directly gets to touch with all the retailers of Bikaji Foods.

So, we’re also adding 500 feet on ground. Amitabh Bachchan being our brand ambassador, so we are investing heavily in this campaign. We have also gained share in last four years, we’ve got a good experience with having collaboration with him, and we are planning to further taking these contract to next two years. We are continuously investing in leadership and functional teams including all the senior management and this year also we are targeting the same. Data Science is important for us. We are working on data and all that it should back by the data that’s what our approach is.

So that’s the part from the presentation. We’re open to any questions if you have.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]

Manoj Verma — Chief Operating Officer

Gentlemen, this presentation is uploaded, so what we talk about is all now up on the site.

Operator

Thank you very much. The first question from the line of Harsh Shah from Incred Capital Financial Services. Please go ahead.

Harsh Shah — InCred Capital Financial Services — Analyst

Yeah. Hi, sir. Thanks for taking my question. Sir, when you spoke about improvement of gross margin of 0.5%, is that on the basis of FY ’23 or on the basis of fourth quarter FY ’23?

Rishabh Jain — Chief Financial Officer

FY ’23.

Harsh Shah — InCred Capital Financial Services — Analyst

But sir, why, I mean, why are we so conservative in that outlook because I mean we are planning to increase our share of high gross margin SKUs, plus we will also have other benefits coming in plus I mean if we also assume that the edible oil environment remains stable, then why not plan, I mean, the kind of margins which we have achieved in the fourth quarter?

Rishabh Jain — Chief Financial Officer

Right. So basically, 0.5% what we have told is basis improved purchase planning. Other than this, of course, we have plan to increase our gross margin from above 5.5, but yes I’m speaking only about proper purchase planning and improving on high EBITDA item, high EBITDA product. That’s what 5.5, but our target like last year we closed at close to 29% gross margin and we always took it over the year, not last quarter because last quarter being it’s a fresh crop, the potato prices were low because December to March is a fresh crop. So we always see last 12 months’ overall average gross margins, so last year gross margin was close to 29%, we want take this to around close to 150 basis points higher than last year, that’s what our target is and the overall when we look at over the years.

Harsh Shah — InCred Capital Financial Services — Analyst

Okay. Correct. Thanks for that. And then how should we look at the, basically costs below gross level? Let’s say the other expenses part, I mean you’ve talked about benefits there as to as well from logistics as well. So let’s say if we are targeting at 123 basis point improvement in gross margins, should we target, let’s say, a higher improvement at EBITDA level?

Rishabh Jain — Chief Financial Officer

See basically, we need to — we are working on at all the costs and be it manufacturing costs while we’re going into solar, be it logistic costs when we shift our plant. We are building our plants across all key locations. So we’re looking at all front, and we want to improve our gross — our EBITDA from each front basically, be it logistic costs, so we also included 0.2 basis points, 0.3 basis points compared to last year. These manufacturing costs where we want to improve to around 0.3 basis points. Of course, we want to take — we want to have the 0.5% basis point improvement in EBITDA from other costs. Of course, but yeah, what has been and what’s happening. So we have opened a plant in last one year and this year we’ll open our plant.

So, initial days the cost of opening a plant and cost of running is very high because we will not be running at full capacity, we will be running — these are starting period, so any plant we have any plant so if it not at 35%, 40% utilization for we will not be in breakeven and we will start giving margin. So new plants will start giving benefits in next two, three years.

Harsh Shah — InCred Capital Financial Services — Analyst

Okay. So those benefits will come from FY ’25 onwards?

Rishabh Jain — Chief Financial Officer

Yeah, FY ’25, yeah.

Harsh Shah — InCred Capital Financial Services — Analyst

Okay. And sir, on this PLI front, let’s say, this INR260 crores, which is a benefit, which we will be getting. How, I mean will it be equally dispersed over the six year or I mean how will the dispersion?

Rishabh Jain — Chief Financial Officer

So, basically, it’s a ballooning payment. So the government is taken 2019-20 as the base year. And so this is — and they have taken us close to 7.5% subsidy percentage on incremental sales which we do every year. So basically in 2021-22 we have done sales of close to INR1,300 crores and the base was INR1,100 crores. So they have given in 2019-20 INR20 crores, so next year, so for 2023 we’ll get close to INR50 crores. So it’s a ballooning so this year we’ll get INR31 crores, then INR45 crores, then INR60 crores, so that’s the way ballooning payment is there, so we’ll get in next six years we’ll get INR261 crores.

Harsh Shah — InCred Capital Financial Services — Analyst

Okay. Okay, got it. And sir, just one thing, for FY ’23, what would be our split basically a salience of sales coming from core states, it used to be in the range of 70% to 72%, right, in FY ’22, so what is that percentage now in FY ’23?

Rishabh Jain — Chief Financial Officer

So FY ’23 our core state has close to around 73%.

Harsh Shah — InCred Capital Financial Services — Analyst

So it’s similar as last year. So basically the core state and focus state have grown at the same pace in FY ’23, is that right sir?

Rishabh Jain — Chief Financial Officer

Right.

Harsh Shah — InCred Capital Financial Services — Analyst

Okay. Thank you so much, sir.

Operator

Thank you. The next question is from the line of Ravi Srivastava from Bay Capital India Fund. Please go ahead.

Ravi Srivastava — Bay Capital India — Analyst

Hi, Manoj. Hi, Rishabh. First of all, congratulations on a good set of numbers. And we hope you guys are doing well. Couple of questions from my side. One is on the revenue, right? So you guys grew at 22% for the full year and as I understand, I think 15% volume growth. So just the remaining, if you can talk to us about how much was price increase and how much was mix change that drove the additional over and above volume growth? That will be the first question. And second question is, then I think Manoj Ji spoke about 11% was high margin products and that has gone increased to 13% for this year and you are planning to take that up to 18%. How that impacts the overall margin?

Rishabh Jain — Chief Financial Officer

Yeah. Thank you. Ravi. So basically we have grown at close to 22% overall revenue but ethnic snacks has grown at 21%, same way packaged sweet, Papad at 15%, western snacks at 42%. So this is the value growth so volume growth see, so volume growth was close to 15% and 15.3% compared to last year. But when you see last quarter, so the unit close to 16%, but our volume growth is up for 13%. That’s the volume kind of volume growth we’ve seen in last quarter. Going forward next financial year, so we are looking at more volume-driven growth rather than value-driven growth because in last quarter we had taken MRP cut, we are also increased the grammage to by looking at consumers like in INR5 MRP previously we were giving 16 gram in few items. We’re taken this to 20 grams and 25 grams also. So that’s a call we had taken. Also, we need to look at the competitor at a very tight level, so that’s the volume growth we have done and we have taken price growth of close to 5.5%, 6% in last FY ’23 compared to last year, but this year we are looking at more volume-driven growth. That’s the point number one. And what was the other question?

Manoj Verma — Chief Operating Officer

Yeah. The other question was about the product mix. So Ravi, I think we spoke in the earlier calls as well, so we’ve identified set of brands, which are high on gross margin and what we are doing is that there is a conscious effort to drive their contribution drive these categories and this, it’s not just on sales effort. It is our marketing campaigns, our couple of marketing stuff, our — the tracking of the fill rate of these SKUs. So everyone end to end, our team is aligned on that front and that’s what we’re working on. Currently, we have moved this needle to about 12% is the contribution, 13% this has come to. We intend to take it to 18% over next two, three years.

Rishabh Jain — Chief Financial Officer

Three years from now.

Ravi Srivastava — Bay Capital India — Analyst

Understood. Sir, just Manoj Ji on that. If it moves to 18%, what is the delta on the gross margins? So for example, [Technical Issues]

Manoj Verma — Chief Operating Officer

So basically, so gross margin will improve close to 1.2% if we take this to next level.

Ravi Srivastava — Bay Capital India — Analyst

Okay. So if it goes to 18% then it has 1.2% expansion in gross margin, is that?

Rishabh Jain — Chief Financial Officer

Because we have invest also we will do some pricing corrections and all things because we will push that product. So on net-net we will do close to 1.2% to 1.3% gross margin expansion from that product.

Ravi Srivastava — Bay Capital India — Analyst

Got it. Rishabh, one more thing. Just for the full year I think the EBITDA margins were close to 10.9%, 11%, while for the last year it was 13%. How should we think about operating margins or EBITDA margin two to three years down the line? Is 13% a good indication of where you want to do as you are trying to expand overall margin, is 13%, 14% is a good number to track or how would you sort of think that?

Rishabh Jain — Chief Financial Officer

So if you look at next two, three years agenda, of course, that is our target because we need to move and improving percent type of EBITDA, that’s the target we are taking, but yeah we will see FY ’24, so our last year EBITDA was close to 11%. So we want to improve this to at least 100 basis points, that’s the target we are taking across all function, in all key levels, so that’s the target we are taking. That’s the bear minimum we want to grow because we will see, but we also growing it, we are also last five, six years grown 20% plus CAGR, I mean volume increase there are multiple costs which will become more efficient and costs doesn’t increase from as sales increase. So that’s what we want to improve.

Ravi Srivastava — Bay Capital India — Analyst

Understood. But the focus will be in earlier volume growth, right? Is that is the view you are taking?

Rishabh Jain — Chief Financial Officer

Yes.

Ravi Srivastava — Bay Capital India — Analyst

Understood. Got it. That’s it from my side. Thank you, guys. Thank you.

Rishabh Jain — Chief Financial Officer

Thanks. Thanks, Ravi.

Manoj Verma — Chief Operating Officer

Thank you, Ravi.

Operator

Thank you. The next question is from the line of Binoy from Sunidhi Securities and Finance. Please go ahead.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Hi, thank you for the opportunity. Just want to understand your — the raw material basket, how much of it would be edible oils, how much packaging material, potatoes, and likewise the other raw materials?

Rishabh Jain — Chief Financial Officer

Yeah. So basically edible oil, if you take it compared to [Indecipherable] then edible oil is close to 23%, pulses including pulses and flour, so it’s around 20% to 29% and packaging material is around 9%, 9.5%. That is the overall. Then there are dry fruit, there are millets, there are multiple. We are not dependent on any single raw material. That’s the beauty of us so we can improve gross — in any significant increases in single raw material doesn’t affect much on our gross margin. So in pulses also we are using more than five, six type of dal, two, three types dal. So overall, yeah, like dry fruit we are close to 5.5%, 6%, sugar is close to 20%, millets close to 3.5%. So that’s overall take us to 70%.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

And all these percentages that you mentioned are as a percent of sales, right?

Rishabh Jain — Chief Financial Officer

Yeah.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Okay. Just a clarification, small one. You said pulses is how much?

Rishabh Jain — Chief Financial Officer

So I’ll come back to the exact number, but it’s around 27%, 28%.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Okay. And How about potato you said?

Rishabh Jain — Chief Financial Officer

Potato is close to 3.5%, yes.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Understood. That’s all from my side. Thanks.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.

Shirish Pardeshi — Centrum Broking — Analyst

Hi, Manoj, Rishabh. Good evening. Thanks for the opportunity.

Manoj Verma — Chief Operating Officer

Hi, Shirish.

Shirish Pardeshi — Centrum Broking — Analyst

How are you?

Manoj Verma — Chief Operating Officer

Good, good, Shirish.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah. Just couple of questions. On slide 19 where you have given the regional mix. And I did a quick calculation, where we have seen the strongest growth of 75% in South, I’m doing the YoY comparison for full year. Now obviously your distribution expansion is helping you to grow the market, but I was amazed to see the North and East, which is again a strong snacking markets, you have reported a growth of 20% and 31% in Eastern region. I failed to understand, and maybe you can give some qualitative comments that in the western parts our revenue has moved to INR123 crores against the INR115 crore which you reported in FY ’22 which is about 6.7% growth. So is there any competition angle or is there anything snacking per se activities or something like? So I was looking for some qualitative answer from you.

Manoj Verma — Chief Operating Officer

So, Shirish, I think that’s a very valid observation, and thanks for bringing it up. So let me tell you when we speak about our core and focus states, so, unfortunately, none of these states from the west fallen into any of these brackets. So when we say core and that’s where we invest and to hold our guns, so East if you look at both Assam and Bihar fits in the east geography doing well for us. North when we speak primarily Rajasthan which is the largest state and if Rajasthan does well entire North metrics would do well. South we have already what we’ve called out two states which is Karnataka and Telangana are part of our focus states and hence so the focus on South and therefore and also the number look substantially higher because of loading. Western states to talk about not that now we chose to ignore, but honestly speaking, we do not have as much focus. I think we will have to hold for couple of years more. We are all set to come up with a plant in Chhattisgarh by end of this financial year. And maybe next year, you will see that the western markets will start witnessing the higher growth and I think in line with the investment what we intend to make later this year.

Operator

Thank you. The current participant has left the question queue. Mr. Pardeshi, are you there?

Shirish Pardeshi — Centrum Broking — Analyst

Yes, I’m back. Sorry.

Operator

Please go ahead, sir.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah. So sorry, Manoj, I lost, I was cut some in between. So I could not hear what you said. But maybe I’ll take it.

Manoj Verma — Chief Operating Officer

You want me to repeat, Shirish, I’ll quickly give you.

Shirish Pardeshi — Centrum Broking — Analyst

No, I’ll take it offline. No issues. I have a second question on the gross margin front. Though the observation here is that we have started gaining some benefit here and Rishabh did say that we are targeting at least 100 basis point improvement in the margin. But just one historical data point, if you can share. When the input raw material prices correct, does that mean that the local competition is already started hitting us or maybe if you can give some color more on the local competition, especially in the high consumption states?

Manoj Verma — Chief Operating Officer

So, Shirish, I’ll take this question. So, one is that, if we look at last year, so as we got into this year, so quarter one was the period wherein there were headwinds and in terms of the pricing of the commodities and which really though that gave a big hit bottom line numbers. Over the quarters what we did was that we went back, we try to improve our efficiencies, productivity, some grammage reduction, price increases, whatever. And you know what happened was that by quarter four the prices commodity prices also started softening. So that’s what we were benefited in the double sense. One was that we improved our efficiencies and things, corrected things.

And second is that the softening of prices and numbers speak louder than for what I say that if we — if you compare the EBITDA margin of quarter four versus quarter one, that’s the difference what was there. Now, to your question with the softening of prices here not only the regional players, even the national players or the large players have started passing the pricing benefit to the consumers. And so also we done. Another data point to validate to what I’m saying is that if you look at our quarter 4 numbers, so our volume increase is 13%, volume growth is 13% and value growth is about 16% whereas if you look at our annual number, it is 15% and 22%. So this speaks about the question what you have asked.

Shirish Pardeshi — Centrum Broking — Analyst

Understood, Manoj. That’s helpful. Just one follow-up here. You mentioned that you have started giving back the benefit. Could you quantify, is that the practice which you are going to follow for next four quarters or you are still not completely passed on, and you’re trying to get the competition and the market how consumer behavior?

Manoj Verma — Chief Operating Officer

So it’s both, I think it is, Shirish, it is tactical and strategic both. That’s what we look at it. So — and also we very closely watch what competition is doing in the marketplace and what would help us take this decision is also the commodity pricing. So today pricing — our prices are such that which can help us or which allows us to do this. Therefore, we are doing it. Tomorrow, let’s say if there’s something or some catastrophe or some stuff happens that wherein prices go beyond our expectation maybe we’ll have to stop or cut the spends what we are doing.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. My last question. Manoj, that’s helpful. In terms of competition, do you see the heightened competition or more regional competition in the western or in the ethnic? Because I see that most of the MNCs are also now trying to get aggressive into the ethnic?

Manoj Verma — Chief Operating Officer

So, I think, perhaps what you’re talking is right, so more in the sense that ethnic there were very few players earlier and Western had many so that this was a cluttered market. Today, we also see that lot of companies have started trying to get into the ethnic space, which is true, but I think there is no less competition on the western snacks as well. I mean we see enough and more new variants coming in the companies who are well-established are trying to not to do the brand extension and all that stuff. So, competition is on both ends, Shirish, not just one.

Shirish Pardeshi — Centrum Broking — Analyst

Thank you, Manoj. Thank you, Deepak, and Rishabh. Thanks for the opportunity and all the best.

Operator

Thank you. The next question is from the line of Saurabh Jain from HDFC Life Insurance. Please go ahead.

Saurabh Jain — HDFC Life Insurance — Analyst

Yes, sir. Thanks for the opportunity. So sir, two questions from my side. Firstly, I’m referring to slide 21 where you have mentioned the installed capacity of about 270,000 metric tons. Can you comment that, what is the volume that you’ve produced in FY ’23?

Manoj Verma — Chief Operating Officer

So FY ’23, If you look at overall average, so we have been close to 42%, 43%, near around 42%, 43%, but you will see it depends on certain categories like sweet and sweet is largely in festival driven. So that’s a peak capacity we see in normally from Rakhi-Diwali. But yeah, Bhujia Namkeen we had in regions we will use basically good capacity but yeah in last year FY ’22 we started building capacity. So yeah, our current capacity is between around sub 40%, 42%, 43%. But yeah, our target is to take these to 65%, 70% in next three years, four years.

Saurabh Jain — HDFC Life Insurance — Analyst

Okay, so you are saying that the optimum capacity utilization is about 65% to 70%?

Rishabh Jain — Chief Financial Officer

Optimum, I mean in salty snacks is close to 85% optimum. We can use — we can take this to 85% competitive.

Saurabh Jain — HDFC Life Insurance — Analyst

Okay, sir. And my next…

Rishabh Jain — Chief Financial Officer

[Technical Issues]

Operator

This is the operator. Sir, your audio is now getting muffled. Request if you can be close to the mic?

Rishabh Jain — Chief Financial Officer

Yes, yes.

Operator

Thank you.

Rishabh Jain — Chief Financial Officer

Yeah. But sweet is largely seasonal-driven. So in sweets taking this to 85% is actually tough. So in sweets we can take this to 45%, 50% B2C as blended average, over the years 40%, 45% but in salty snacks we can comfortably take this to 85%.

Saurabh Jain — HDFC Life Insurance — Analyst

Got it. And what is the capacity that will come under operation in the year FY ’24 that is CWIP?

Manoj Verma — Chief Operating Officer

So we have three plants coming up and it’s proven. Another one is Patna [Indecipherable] basically and the other is in Raipur. That’s also CNU [Phonetic], so basically two are CNU and one is frozen plant, which will come in next three, four months. So the overall capacity in Patna will be close to around 10,000 tons. But I would like — overall if we see [Indecipherable] also capacities will be close to 25,000 tons, between 20,000 tons, 25,000 tons addition.

Saurabh Jain — HDFC Life Insurance — Analyst

Okay. Okay. Okay. Sir, my next question is on the other expenses. So the data if you see for quarter four, they have gone up by about 34% and if we look at the percentage of sales also, they have gone up both on YoY basis and Q-on-Q basis. So what is the reason for this?

Rishabh Jain — Chief Financial Officer

So basically, there are two, three things basically. One is basically let us like fuel costs and people costs have increased last year and our logistic costs increased to around 4% [Phonetic] and also there was fair value adjustment in investment. That’s close to 0.6%, 0.7%. So that’s the cost which we have overall, close to 2.5% increase in — as other expense compared to last year.

Saurabh Jain — HDFC Life Insurance — Analyst

So attributing this to, first year you’re saying, manpower cost. Is that right?

Rishabh Jain — Chief Financial Officer

So there was ad spend, which has an increase half for the [Phonetic]…

Saurabh Jain — HDFC Life Insurance — Analyst

Okay.

Rishabh Jain — Chief Financial Officer

— so ad-spend was increased. There were three forward charges has been increase. So there are multiple costs which we invested largely. We invested in ad basically to build a market, to build more conveyor — to build a campaign. We also — there also logistic cost which has been increased because we are building snacks market, so there were chips, Western snacks. So Western snacks involved reasonably good logistic cost, that’s why we are building plant across all key states — nearby states. So logistic cost has increased a little bit and then there were several adjustments on investment.

Saurabh Jain — HDFC Life Insurance — Analyst

Okay, okay. So these three items. Got it. And in terms of the overall — in terms of quantum, what is the ad spend for Q4 and for entire FY ’23?

Rishabh Jain — Chief Financial Officer

So ad spend in Q4 — ad spent Q4 is close to, close to, close to, close to, closer to 2% actually, ad spend, and we see over the — close to 2% ad spend, and over the year also, we have done close to 1.9%. So it’s largely in line. In the first quarter, it was fairly minimal, but in second and third quarter, we got Diwali campaign, we’re reasonably good at cost, and in last quarter also, within close to 2.14%, I hope, I guess.

Saurabh Jain — HDFC Life Insurance — Analyst

Okay, got it. Thank you.

Operator

Thank you. The next question is from the line of Anurag Lodha from Axis Capital. Please go ahead.

Anurag Lodha — Axis Capital — Analyst

Yeah. Thank you for the opportunity. I just had one question. So your exit gross margins came in at about 34%. So I just wanted to understand, if we can sustain these margins in the coming quarters since you’ve been taking so many initiatives towards gross margins. So I just wanted to get a sense on that. Thanks.

Rishabh Jain — Chief Financial Officer

Yeah. See, we always look gross margin at over-the-year level. So, of course, the last year gross margin was 29% [Phonetic]. Last quarter, of course, was reasonably good because there was some fresh crop level spread, so that has helped us in improving gross margin to this level. But yeah, our — the — regular — when regular gross margin, if you look at close to 100 basis points and 150 basis points [Phonetic] higher than this. So close 31% type of gross margin, which we looked at when we look at over the year.

Anurag Lodha — Axis Capital — Analyst

Sorry. You said 31%?

Rishabh Jain — Chief Financial Officer

31%. That’s a gross margin we should look at when you see over the year.

Anurag Lodha — Axis Capital — Analyst

Okay, okay. Okay, understood. Thank you.

Operator

Thank you. The next question is from the line of Binoy from Sunidhi Securities and Finance. Please go ahead.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Yeah. Hi. Thank you for the opportunity. Just a question on your distribution reach, which is about 9.5 lakh outlets. How much of this would be — would the split between core and focus states?

Manoj Verma — Chief Operating Officer

Yeah. What’s the question? Sorry. Can you repeat?

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Of the 9.5 lakh outlets of distribution reach that we have, what would be the split between core and focus states?

Manoj Verma — Chief Operating Officer

Yeah. So core would be the highest, so it’s about 7.35 lakh outlets in the core states, focus has 112,000 outlets, and the rest is others.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Understood. And sir, let’s say, in these…

Manoj Verma — Chief Operating Officer

Let me put some more insight on the question what perhaps you asked, right? So in the focus — in the core states, we enjoy. We have gained numeric distributions. We have a numeric distribution of 55% plus in the core states, while in the focus states, it’s just the entrance. We have about 4.2% numeric distribution. So that’s the room what we have in focus states and we are fairly good on the core state.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Understood, understood. So just as we have a reach of 9.5 lakh outlets, what would be, let’s say, Haldiram’s reach?

Manoj Verma — Chief Operating Officer

I mean, I’ll not be able to comment on Haldiram, but I’m sure, you know, they…

Rishabh Jain — Chief Financial Officer

I think what have in core market, they must be in…

Manoj Verma — Chief Operating Officer

They must be in — at a pan-India level if you take Haldiram as a brand.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Sorry, I didn’t understand. Sorry. Can you just come again?

Manoj Verma — Chief Operating Officer

So I’m saying we enjoy about 55% numeric distribution, right, in our core states, and that’s the kind of market share Haldiram has for the pan-India — for the country kind of thing. So their numeric distribution would be 55% for pan India. This is what we are saying. I mean you can look at easily three years’ kind of from what we have. That’s our guess.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Understood, understood. And sir, the other question is on the portfolio that we have of ethnic packaged sweets, Western, papad and others. If we have to understand this in terms of the GM profile, how would the GM profile be stacked up between these segments?

Manoj Verma — Chief Operating Officer

I mean, real, if you look at the sweets and papad, we’ll be ahead of curve, right, and bhujia-namkeen would broadly on the same stuff, and then the Western snacks would be a notch below.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Understood. And what would be the differential between, let us say, Western snacks and papad?

Manoj Verma — Chief Operating Officer

A couple of percentage points.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

A couple of percentage, not too much.

Manoj Verma — Chief Operating Officer

No, no, not much.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Understood. That’s all from my side. Thank you so much.

Manoj Verma — Chief Operating Officer

Thank you.

Operator

Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Rishabh Jain — Chief Financial Officer

So thank you, ladies and gentlemen, for joining us for this call. I mean, it was a pleasure interacting with you all. Just in case, if you have any questions left out, feel free to reach out to us. We’ll be happy to answer them all. Thanks. Thanks once again.

Manoj Verma — Chief Operating Officer

Thank you very much. Thank you to all the investors and shareholders.

Operator

[Operator Closing Remarks]