Hindustan Foods Ltd (NSE: HNDFDS) Q4 2025 Earnings Call dated May. 21, 2025
Corporate Participants:
Sameer Kothari — Managing Director
Ganesh Argekar — Executive Director of our Company
Mayank Samdani — Group Chief Financial Officer
Unidentified Speaker
Analysts:
Unidentified Participant
Akhil Parekh — Analyst
Vishal Gutka — Analyst
Priyank Chheda — Analyst
Amruta Deherkar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Hindustan Foods Limited Q4 and FY ’25 Earnings conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star 0 on your touchstone fold.Please note that this conference is being recorded. I now hand the conference over to Mr Sameer Kothari, Managing Director, Hindustan Foods Limited. Thank you, and over to you, sir.
Sameer Kothari — Managing Director
Thank you. Thank you,. Good afternoon, and welcome to our Q4 FY ’25 earnings conference call. I’m joined on the call by Ganesh Algear, Executive Director; Mayank, Group CFO; Vicki, Head, Corporate Communications; and SGA, our IR advisors. I hope everyone has had a chance to go through our updated earnings presentation, which was uploaded on the exchange and our company website.
We are pleased to share that Hindustan Foods Limited has crossed a landmark threshold this financial year with our PAT surpassing INR100 crores for the first time in the company’s history. We are pleased that we were able to achieve this in-spite of the softening consumer demand and macroeconomic headwinds.
This was possible only due to our passionate and committed workforce of nearly 7,000 individuals. To recognize their contribution and reinforce our commitment to long-term value-creation, we took two important steps this year. First, we completed a preferential share allotment in our footwear subsidiary — subsidiary, giving them a tangible stake in our collective future.
Second, we rolled-out an ESOP scheme at FFL aimed at rewarding high performers, enhancing retention and attracting the next-generation of leaders who will par our journey ahead. Another factor which has led to this milestone has been our decision to identify and execute and scale growth opportunities across diversified product categories like ice creams, shoes and beverages.
This diversification across new customers and new products has also changed the nature of our business. At a very top-level, this change will reflect in the changing share of shared manufacturing business as opposed to the dedicated manufacturing business that we do and will also be reflected in the changing profile of our customers.
As the pie of the shared manufacturing business increases, we expect to see better margins and a resultant increase in the ROE. As management, we track both the businesses differently, including our expectations on returns and margins. And as a company, we will now start disclosing this to our shareholders and investors for them to be able to track our performance as well. Mayank will explain this in detail shortly. Before that,
I will now hand over the call to Ganesh Agakkar, our Executive Director, to brief you on the operational highlights.
Ganesh Argekar — Executive Director of our Company
Thank you, Sameer, and good afternoon, everyone. I will now walk you through the operational and business highlights for Q4 and FY ’25. From an operational standpoint, FY ’25 was marked with strong execution and resilience as we delivered our highest-ever volumes across beverages, ice creams and footwear segments.
This is despite ongoing deflationary pressures and subdued consumption trends in certain categories. Our supply-chain and manufacturing teams have shown exceptional commitment in ensuring output and efficiency under challenging conditions. The footwear division had particularly an encouraging quarter, delivering its highest-ever turnover in Q4 along with positive operational profit.
For the full-year, the business recorded revenues of INR390 crores and our South India facility continues to ramp-up successfully. The Phase-2 expansion is also underway. We are cautiously optimistic that this division has turned a corner and are confident of a full recovery in FY ’26 with continued customer support.
Similarly, the beverage segment has emerged as a growth engine. Our facility recorded its highest-ever output for Q4 FY ’25 and successfully completed key expansion projects at the site. We see significant headroom in this category and are actively exploring opportunities to expand further.
We also have commenced commercial production at our new ICM factory in Nashik this May and have also identified in North India a new greenfield plant, which is expected to begin operations by Q1 FY ’27. In, we received — we achieved record monthly production and finalized additional investments to onboard a new customer with production slated to begin by Q3 FY ’26. All regulatory approvals for the Baddi facility have now been secured and positioning it for further continued growth.Our OTC Pharma division has shown promising early traction. We are actively working to scale this vertical. Meanwhile, home and personal care continues to perform steadily, demonstrating the defensive strength of our portfolio. With this, I now hand over the call to Mayang Samdani, our Group CFO, to take you through the financial results for the quarter and full-year ended 31st March 2025. Thank you.
Mayank Samdani — Group Chief Financial Officer
Thank you, Ganesh, and good afternoon, everybody. I would now run you through the financial performance for Q4 and FY ’25. This quarter was a record-breaking one across all key metrics, revenues, EBITDA and profit before-tax. Total income increased by 27% to INR936 crores in Q4 FY ’25 from INR734 crores in Q4 FY ’24. PAT increased by 34% to INR31 crores in Q4 FY ’25 from INR23 crores in Q4 FY ’24.
These results were driven by seasonal size in our ice-cream and beverages businesses as well as the long-anticipated breakeven of our footwear segment. The footwear business finally achieved operational profitability in this quarter. And with this, all our businesses are performing as per expectations.
As far as the annual numbers are concerned, total income increased by 30% to INR3,579 crores in FY ’25 from INR2,62 crores in FY ’24. PAT increased by 18% to INR110 crores in FY ’25 from INR93 crores in FY ’24. Despite higher tax provisions compared to the previous year, we posted highest-ever annual profits.
This was added by the ramping of our factory and the new investment in beverage and ice-cream plants. Our PAT for FY ’25 includes the losses suffered by the shoe business in tune of around INR11 crores, which were a result of integration issues that we faced with the acquisition and the accounting impact of scheme.
The year also saw an increase in the working capital requirement of the company, especially in the shoe business, but despite this increase, the company was able to generate cash-flow from operation of INR113 crores. Cash-and-cash equivalents including the fixed deposit with original maturity of more than 12 months stood at INR153 crores and our net-debt to equity ratio stood at 0.79. The strong operating cash Flows along with the proceed from the warrant issue positions us to leverage upcoming growth opportunities. Net-worth for FY ’25 stood at INR891 crores. Our gross block for the year, including the wholly-owned subsidiary LLP and the CAWIP stood at around INR14 crore INR12 crores. We continue to work towards our goal of doubling our gross block to INR1,800 crores by the end of this financial year. As mentioned by Sameer, a lot of question has been addressed to us about the nature of our business and the future part. Just to recap, our business is that of the contract manufacturing. And while we do not report any segment revenues, since we are agnostic as far as the product categories are concerned, we have elaborated on our two commercial models, dedicated manufacturing and shared manufacturing. The main fact of the dedicated manufacturing is stability of our bottom-line, which does not get affected by a slowdown inflation or deflation. On the other hand, shared manufacturing allow us to utilize operating leverage and deliver the better ROEs. However, as has been — it has been our experience in the past, shared manufacturing model also exposes us to the flip side of the operating leverages, leading to the possibility of less-than-optimal result in this model. From the business mix standpoint, dedicated manufacturing continues to anchor our performance. In terms of capital deployment, nearly 80% of our capitalized gross block is attributable — attributable to dedicated manufacturing, while shared manufacturers account for the balance. In the medium-term, we expect these percentage as far as the share of the business is concerned to be similar. A large part of the shared manufacturing business is the shoe business. And as Kanesh mentioned, we are optimistic that the turnaround of the shoe business is structural and will lead to the better margins and returns in the shared manufacturing business. As we expand our business profitably, we are optimistic about the overall increase of the margin profile and the return ratios of the company. With this, I would like to open the floor for the questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star in one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you we have the first question from the line of Faisal Hawa from H.G. Hawa. Please proceed.
Unidentified Participant
Hi, Sameer, best number so-far. Congratulations. Sameer, what is the traction we are now getting in the Dr facility? Is there some chance that we could also subcontract this facility for other players and for exports also? That’s first question. Second, do you see any kind of possibility for exports contracting also?
And how do you see also third-party contracting coming along like — sorry, I meant a private-label contracting? And third is, how do you see the shoes business now panning out? Is there any chance that we could reach like 1,000 tonnes revenue by March ’26 itself? And fourth is that how do you see the ice creams play now with HUL’s a stake going to private players or to a private-equity fund?
Do you see some kind of more aggression because we did see some full-page ads for quality walls in newspapers and maybe that business could get better going-forward.
Sameer Kothari
Hi, Faisal. Thank you so much. So I’ll address all your questions. Let me start with the Dr Shawl facility first. The Dr Shaw facility for the benefit of the other listeners who are not aware is a facility in Sri down South. We, as, you’ll remember, we had converted a part of that facility into a shoe manufacturing facility and we have started ramping-up the production there for a multinational brand already.
So from that perspective, in terms of the operating leverage from that facility, we are already working on it. In terms of Dr specifically, let’s just say that we are watching with a lot of interest what is going to happen as far as Mr Trump and the tariffs on China are concerned. If they go in the way they were supposed to go, we are quite confident that some of that business will get diverted to India.
However, it’s early days, as you would have seen, there’s been too much of flip-flop on that tariff already. So let us reserve our comments and maybe in the next investor call, if we have some more clarity about the tariffs, I’ll be able to come back to you on what’s happening on that front.
Actually, it’s a similar situation for exports and private-label. We are again cautiously optimistic that based on the tariffs, et-cetera, we are seeing some amount of increased interest in-sourcing from India for the entire China plus One thing working out, both in case of footwear, in case of foot care and also surprisingly in case of personal care and OTC Pharma.
However, early days don’t know-how the entire tariff situation will pan-out. So I would like to reserve that comment as well. In terms of the shoe business, overall, let me be upfront that getting to INR1,000 crores in FY ’26 is impossible. While we all are working extremely hard, the shoe business is an extremely manually intensive business, ramping-up to double of where we are right now would involve a doubling up of the manpower, which would involve hiring and training nearly 5,000 additional people.
As you can imagine, not an easy thing to do. We are definitely in the mode of expansion, but the pace of expansion may be a little slower than what you’re saying. Now lastly about the ice-cream business, just a couple of things. I don’t think at least I don’t have that information, it’s not publicly available.
The current decision by HUL is just to list it separately. I don’t think there’s any change of ownership. All the existing shareholders of Unilever — of HUL, including Unilever Global will maintain the same shareholding pattern. So from that perspective, I don’t think there is any private-equity player coming in,, maybe you know something that I don’t.
But in terms of focus, definitely, when a division gets more focused and becomes more transparent in terms of being able to and being and having to give more details in terms of financial information, I certainly believe that there’ll be more focus on it. Incidentally, that was one of the driving force while — while Sameerbai, our SGA Advisor recommended that we start giving information about shared manufacturing and dedicated manufacturing so that we start focusing on the numbers as well.
So transparency definitely helps. And I think in the business, now that it becomes a standalone company, it will definitely have much more focus than earlier when it was a part of a very small part of a very large giant.
Unidentified Participant
Yeah,. Yeah. And can you give some color on what is our investment in Kabadiwala going to fetch us and the kind of terms of engagements that we have with them. So the proposal right now, Fazal is to invest up to INR5 crores in Kabadiwala, which gives us a substantial minority stake.
As you are aware, EPR regulations have been notified and all FMCG players have to comply with this EPR regulations, which basically involves recycling of plastic post-consumer usage. Given that we work with most of the FMCG players. We believe that there should be a strategic advantage of us tying up with the Kabadiwala in terms of this.
We’ll see how this works out in the next few months and we’ll come back to you with some more details on it.
Okay. Thanks a lot for answering my questions. I appreciate it.
Sameer Kothari
Thank you.
Operator
Thank you,. Thank you. Thank you. We take the next question from the line of Akhil Parek from B&K Securities. Please proceed.
Akhil Parekh
Yeah, thanks for the opportunity and many congratulations to the team for the bigger set of numbers. Sameer, my first question again on Sports. If you can throw some light in terms of how the journey has been for the last 12 months some of the challenges that we face after acquiring the five plants where we stand at right now, I think we have mentioned operationally, we are profitable.
So I believe it’s a bit positive and in terms of capacity addition and what kind of scale we are looking for in terms of next two years? Because in last press release, we had highlighted we should be 10% to 15% to 20% of the business should be coming from sport shows. So are we in-line or that guidance and should we be kind of clocking INR1,000 crores of sales, not in ’26, but by ’27? That’s my first question.
Sameer Kothari
Hi, Akhil. Akhil, so like I said, shoe business is definitely a focus area. In Terms of the ramp-up, INR1,000 crore is our target as well, whether it will happen — I mean, it will definitely not happen in this financial year, whether it will happen by the next financial year or the year-after, I think it’s too early for me to be able to comment on that because like I said, a lot of operational issues. The challenges that we faced involved multiple things and I’m going to ask Ganesh to talk about some of the challenges that we face. And then I’m going to request Mayang to talk about when you asked about operational breakeven in terms of accounting terms, what it means, maybe Ganesh can — maybe Mayang can explain that. But Ganesh, in the meantime?
Ganesh Argekar
Yes, sure. Yeah. Hi,. Yeah. Akil, it’s been exactly 15 months since we took over the KNS facilities up north, right? There are five units which we do cover and each unit was handing a different set of activities that itself is a big challenge. I mean, one unit was handling stitching, one unit was handling sole manufacturing, one unit was handling cutting and one unit down up north in was handling the assembly part.
I mean the final packing. All put together, 5,000 people on our employees on our roll-in one-shot, a complete change of integration of new system, new VRP, which took a lot of time. I mean, I would say it took us at least nine months-to our one year to get it done, get it rolling. A lot of new vendors, new customers, new norms, a complete learning for us. It is we had a bit of an experience in leather shoes, but this was — this was too big for us. I mean the was only in and the Chennai region.
But this is — this is there in 5 units of up north. And again, we started manufacturing two units down south, one in and again one in the IGK facility which is there in Chennai. In IGK, we started the first-line in October, which has now been stabilized and the plans are now to invest in a second-line, which would give us the same volumes of in the coming four to six months, right.
So almost doubling of capacity in South and again, addition of one more facility in the region. This is what we are doing so-far. Challenges have been — there have been many challenges, but it’s been 1.5 — almost 15 months that we have been able to, you know, take-up the challenge and move ahead. I mean this is the result is you know sir it really showing which is right now what we have done so-far? I hope that answers your questions again.
Akhil Parekh
Yeah. Yeah. And just on the capacity front, when you say doubling of capacity in South, so what kind of volume or units we are looking at? I believe in North, we are — we should be somewhere around 9 million pieces per year, if that understanding is correct and where we stand-in South, if you can quantify that number will be.
Mayank Samdani
Okay. So Akhil, in terms of the South facilities, we are hoping that the South facilities by the end of this quarter or later by the next quarter will account for nearly 30% of the production, which is happening in the North. And when we are talking of South, we are basically right now talking only about Tamil Nadu. We had announced earlier,
Akhil Parekh
Hello.
Mayank Samdani
Yes. Sorry. We had announced earlier that we will be doing an expansion in Karnataka as well. We don’t see that commercializing at least for the next nine months. So right now, the discussion is when we say South, we are talking about Tamil Nadu and should end-up accounting for nearly 30% of the North production. We ended-up — yeah, that’s where we are. In terms of ramping-up in case of South, we ended-up with just about 40 odd percent of the capacity being effective as of the end of March?
Akhil Parekh
Sure. And margin profile, would you be able to — would you be comfortable guiding for it? How early to say — too early to say about the margin profile, but I’m going to request Mayank to give you an idea of what we — what we are trying to say when we are saying that we are operationally a bigger in the quarter.
Mayank Samdani
Hello. Akhil, can you hear?
Akhil Parekh
Yeah, yeah
Mayank Samdani
So there is some background noise in there actually. So Akhil, as you recollect that in last quarter — last meeting — investor meeting, we also said that the shoe business is EBITDA-positive anyway from the starting, right? This time, if you see — if you remove the ESOP provisioning, which has been one-time expense, we are PBD positive this quarter. So that is where what we meant when we said that this is operationally make — operationally breaking even now.
Akhil Parekh
Got it, sir. Got it. Got it. And just two more questions. One is on the OTC Pharma, if you just can throw more light in terms of the client profile, which we have added now and I believe we have added one more quarter back client profile and product profile.
Mayank Samdani
So Akhil, I obviously can’t name the clients, etc. The product profiles are same, healthcare and OTC Pharma. We are hoping that on the back of these two clients, our Baddi facility will have a full capacity utilization. But okay. So by ’27, we should expect to peak the revenue basically.
Akhil Parekh
Yes, no. Yes. In this financial year, that’s it. So and last from a financial metric perspective, we have seen a meaningful addition in terms of employees, right, and our employee expenses, if I look at it, it has jumped from say INR83 crore to almost INR225 crore in ’25 and so have the other expenses have gone up. Would it be fair to assume now next two years, we’ll start seeing smoothening of these two-line items, employee expenses and other expenses and hence our PBT and PAT growth will grow disproportionately more as compared to, say, sales and EBITDA growth. That’s the last question.
Mayank Samdani
Akhil, what you and mentioned in the first question, do you expect us to ramp-up our shoe business to about INR1,000 crores, you will also have to expect a doubling of the employee cost. Like we had mentioned before, shoe business is extremely labor-intensive and the major cause of that increase in the labor cost in this financial year has been the integration of the shoe business. As we expand that further, the employee cost will increase, but hopefully, the margins will also improve.
And so the effect on the bottom-line should be disproportionate. You’re absolutely right, but that does not mean that the employee cost will be stagnated at this number. It will also increase. Secondly, we’ve got two new factories coming online and hopefully one already which has come online in May of this year and another one towards the end-of-the year.
So that will keep on increasing. I mean, I would be hesitant to say that our employee cost will be stagnant at any point of time.
Akhil Parekh
Okay. Okay. Fair enough. So I know you guys don’t give guidance on the margin front, but if everything turns out as per our expectation in the sports to business, we can inch up towards 9% of EBITDA margins. I hope my understanding is correct.
Mayank Samdani
Yes, your understanding is quite correct, quite fair, Akhil, that we can generate a 9% EBITDA margin in this
Akhil Parekh
Okay, great. Thanks a lot and best wishes, sir.
Mayank Samdani
Thank you again.
Operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Gautam Tiwedi from Capital LLP. Please proceed.
Unidentified Participant
Yeah, hi, Sameer and team. Thanks again for giving us a good overview and really congratulations on the great set of numbers. The question I have is more macro in nature and you said at the outset that there is a slowdown in the consumer space. What are you seeing from your OEMs, your customers?
And are they asking you to slow-down because you do have for the most part a take or pay arrangement. But given the circumstances, I mean, this is not limited to products, but also across FNCG, across urban consumption, QSR companies, Pizza Huts and Kentucky Fried Chicken, all these guys are hurting.
And there’s a real issue. So what — can you explain first of all, are you seeing any light at the end-of-the tunnel based on the feedback you’re getting from your customers? And second and more importantly, are you your take or pay arrangement? Is that flexible?
Sameer Kothari
Yeah. So Gautam, couple of things. I mean the macroeconomic Question obviously is above our take rate. And one of the things SGA insists is that we do our investor calls after all our customers have finished theirs. So already the CEOs of all of our customers have mentioned that they are still seeing a lot of consumption or headwinds. And I think I’m going to just have to repeat what they are saying.We obviously don’t have any more insights than what they do. In terms of our take or pay, the letter and the spirit of that take or pay is quite sacrosanct. And one of the reasons why we’ve been able to service our customers for such a long-time is that because we both, the customers as well as us understand the ground realities and have worked around it. And while this sounds very granuous, what it basically means is that, yes, in difficult times, we end-up supporting each other.
Unidentified Speaker
Okay. Okay. So then that’s really what — what you’re saying. Okay. I appreciate that. And any other macro color that you can — I mean, is it too early to expect a turnaround or what do you say?
Sameer Kothari
Well, I mean, Gautam, I guess what you are asking is, has April-May have been any different than the previous quarter? And my answer is that unfortunately, no. In case of some of the seasonal products, obviously, it helps. But then again, there have been rains which have — which have come in at wrong times at some of the places.
So overall, I would say that it’s still — we are not out-of-the woods. I mean, my team here hates that phrase out-of-the woods, but I’m going to continue using it, saying that I don’t think we are still out-of-the woods. Maybe in case of shoes, we are, but in case of the rest of the stuff, I think we are still not finding the light at the end-of-the tunnel.
Unidentified Participant
Got it. Okay. Thank you. Thank you so much.
Sameer Kothari
Thank you, Gautam.
Operator
Thank you. Thank you. The next question is from the line of Abhishek from Systematix. Please proceed.
Unidentified Participant
Yeah. Hi, and team. Thank you for the opportunity. Just a couple of questions. So firstly, in the sports shoe manufacturing, which is a relatively new segment for us versus our long-standing segments, what has been the feedback that you’ve been getting from clients on the quality and finishing of the shoes that are manufactured? Specifically, have you come across any issues in terms of any adverse feedback on the product quality or the finishing? That’s my first question.
Sameer Kothari
Abhishek, hi. Well, you’re absolutely right that in case of shoes, there would be a large learning curve. And one of the ways that we’ve addressed that learning curve is you’ll recollect that we actually ended-up acquiring one of the oldest and the largest shoe manufacturer in the country.
And thanks to that and thanks to the fact that we were able to integrate all of those people, we frankly have been able to take-off from where they left. In terms of customer quality, et-cetera, I’m — we frankly have been able to live up to their expectations. What we haven’t been able to live up to their expectations is the production numbers and the amount of on-time deliveries.
And Ganesh talked about it right at the beginning of the various issues that we’ve faced. But in terms of quality and the workmanship, I don’t think our customers have any cost to complain. Right, very clear,. Secondly, just — sorry, just let me belabor that point. Sure. You’re absolutely right in identifying that as a major aspect of our business.
In fact, one of the reasons why the South factories have taken so much time to ramp-up is because we need to train the people completely. And especially if you’re dealing with multinationals, if you’re dealing with some of the more premium brands for us to be able to achieve the kind of quality that they require, it requires a lot more time than it normally should.
What it means is that you end-up as a P&L taking the hit of the salaries of all the people during this training period or during this ramp-up period. And you’re absolutely right that quality is absolutely critical as far as that business is concerned. Having said that, I think quality is important in all the businesses that we do. You obviously, obviously even whether it is any of the other FMCG products.
But in this case, the learning curve is definitely more steep.
Unidentified Participant
Very clear, Sameer. Secondly, just wanted to check, we have committed to a significant expansion in ice creams. Since this is a seasonal product, sir, a product, what happens to the capacity during the off-season? Is it fungiable for other products or will we see some amount of operating deleverage during the off-season for ice creams?
Sameer Kothari
Yeah. So Abhishek, the planted is obviously not fungible. We can’t make anything else in those ice-cream factories. The business is seasonal. You’re absolutely right. But the way our commercials are decided, we have dedicated factories. Our entire ice-cream business is part of our dedicated factory section.
And as a result, our commercials are taking into effect the seasonality and the seasonality does not affect us. So our bottom-lines remain the same irrespective of the seasonal variations. There will be such a timing difference, obviously because of quarter-to-quarter, which is what Mayank referred to in his in his opening remarks that in case of this quarter, obviously, our sales, etc., have been higher because of beverages and ice creams are ramping-up.
However, from annual perspective, our bottom-lines are taken care of as far as the seasonal variation is concerned.
Unidentified Participant
Understood, Sameer. Just to sort of clarify here, you said that ice creams is probably dedicated, but we have got multiple clients, more of hybrid model in some of our newer projects in ice creams that we are entering into. So part of those would be — would be underwritten and part will not be.
Does that kind of change our outlook on the seasonal impact part of it?
Sameer Kothari
Actually, again, Abhishek, in case of the newer unit also, we have — while we’ve talked about dedicated and shared, we have a hybrid model, which is called anchor tenant in which customers guarantee a certain part of the capacity. As far as we are concerned, both our factories, 100% of our capacities have been guaranteed.
Unidentified Participant
Right. So we are saying that in the new projects of Nashik and
Operator
I missed Abhishek. I would request you that you return to the question queue for
Unidentified Participant
Sure, sure. Anuka, you will have., if you don’t mind, let me just finish that one point. I think. Is that okay? Just…
Sameer Kothari
Yeah, go-ahead, Abhishek.
Unidentified Participant
Yeah, just — I just wanted to sort of clarify that you’re saying that 100% of the new Nashik and North India projects are sort of guaranteed. Is that the right understanding to take?
Sameer Kothari
That’s exactly why I requested to allow me to elaborate on that. Yes, all the three ice-cream factories, the one in Lucknow, the one in and the one coming up in North India have guaranteed volume offtake agreements.
Unidentified Participant
Great.
Sameer Kothari
Customer or multiple customer, is it material?
Unidentified Participant
Right. Thanks. That’s all. Thanks.
Sameer Kothari
Sure.
Operator
Thank you. The next question is from the line of Ashish Kumar from Amperson Capital Investment Advisors. Please proceed.
Unidentified Participant
Yeah. Thanks for taking my question. My first question is on the ice creams and beverages business. If you can share like what proportion of it of our revenues was in FY ’25 and what would you be in FY ’26? And you have touched upon it like this has been a quite milder summer.
So do we — Q4 has been obviously good for us, which you have commented, but do we see any risk to our Q1 volumes? My second question is on margins. If you see like the employee cost has significantly inched up to around 6.7% of our sales in Q4. Obviously, if you can quantify the one-off in this due to the ESOPs and the ref allotment and like the full-year number is around INR6.2%.
So how should we look at it going-forward like should it be around 6 to 6.2 or should the normalized inch up slightly because of our shoe business? That are my two questions.
Sameer Kothari
Hi, Ashish. Ashish, we generally avoid giving out numbers in terms of product categories. But I’ll just address your question at a slightly higher-level. I said the summer has been erratic. Actually, it wasn’t mild, it was — it was just erratic. The sales have been recently hit because of the untimely rains and the season is not over yet.
So I don’t know-how it’s going to pan-out. Having said that, I want to go back to what we were discussing with Abhishek that in terms of all our capacities irrespective of the three factories of ice-cream are guaranteed. So from that perspective, while the top-line numbers might change, the bottom-line numbers will not get affected irrespective of the seasonal vagaries, right?
The second was in terms of just a broad indication, we have indicated that since the ice creams are dedicated factories and they’re going to become a significant number, we had indicated that by next financial year, which is FY ’27, nearly one-third of our gross block , which is close to about INR650 crore INR700 crores would have been invested in the ice-cream business. So I think that’s the only extent that we are giving out numbers in terms of product categories. And you’ll be able to extrapolate from the slide that Mayank has put in terms of dedicated manufacturing and shared manufacturing. The parameters that we evaluate the ice-cream business are the same as we evaluate any of the other dedicated manufacturing businesses. Second, in terms of the labor cost, I just need to reiterate, the increase in the labor cost is not predominantly due to the ESOPs. It’s predominantly because we integrated the shoe business and got in nearly 5,000 odd people are coming into our system. So yes, there is an effect of the — of the ESOX, but that’s not the one who is — which is going to a provision for the e-source, but that’s not the one which has actually made that delta. Going ahead, will that number be at the same percentage? I’m going to go back to what Akhil was — what I was telling Akhil in his question, which is the shoe business will expand. In case of shoe business, the amount of money that we have to spend on labor as a percentage of sales will remain the same. However, the share of shoe business going ahead, that I’m unable to give you a complete breakup of how that’s going to pan-out. So when you look at it on a consol basis, whether it will be 6%, 6.1% or whether it will — it will jump-up to 7%, at this stage, I’m unable to give you an answer, Ashish.
Unidentified Participant
Okay. Thank you. Thank you. That’s clear.
Sameer Kothari
Yeah, we are hoping that whatever the increases will get compensated by the margins that we make on the product.
Unidentified Participant
Okay, understood. Yeah.
Operator
Thank you. The next question is from the line of Vishal Gutka from ASK Investment Managers. Please proceed.
Vishal Gutka
Yeah. Hi, team, congrats on a good set of numbers. I mean two questions. First question is on the shoe business. You told that this quarter it made EBITDA-positive. Just wanted to check previous quarters we were — EBITDA breakeven was not in the previous quarter because in the first-quarter you made some EBITDA margin.
And second question is on — you see the shop in the shoe business, right? So it is listed company. So there are plans of fundraising exercise or listing of the shoe business.
Sameer Kothari
Okay, Vishal, the first question I’m going to ask Mayank to answer the second one, I will go-ahead.
Mayank Samdani
So Vishal, another question — another question answered I told that the shoe business was EBITDA-positive already in last quarter and before that also. This quarter what — if we remove the stock provisioning, it is PBT positive also. That is what the operational profitability which we are referring to.
So was not EBITDA negative in earlier also. This time if we remove the ESOP provisioning, it is PBT positive also, right? Second question, Sameer will answer. So you look at PBD, right, for you in operational, there is PBD number, not the EBITDA number. That is the you’re trying to highlight because generally the depreciation expense is a reinvestment kind of thing for.
Sameer Kothari
I know Vishal, in fact, our drinker, who is our SG associate and we had a major argument on it, whether we should report adjusted for EBITDA for ESOP or include ESOPS. We believe that ESOP is an expense. So we frankly have treated it as an expense. So while the PBT number should have been positive.
We called it as an operational profit because according to us, ESOP is still an expense. Yeah, you have — so to answer your question, should it be called operational, should it be called adjusted EBITDA, should it be called ESOP cost will be part of it will come before EBITDA.
Unidentified Participant
So I’m just not able to get why it will be positive, why we are trying to emphasize on and EBITDA and EBITDA, because this goes back to a question which we had, I think in the last investor call, where I think people were trying to understand how much money are we actually losing on the shoe business.
Sameer Kothari
And this time, we’ve tried to come up and give those numbers out. I think Mayank in his remarks, I said that we’ve lost about INR11 odd crores of in total, right? And we said that, that INR11 crores includes the ESOP expenses. So if you look at it from that perspective, that’s what we are trying to communicate that the INR11 crores includes the ESOP, it’s not adjusted for ESOP, etc.
And while EBITDA-positive we’ve been right from day-one, you will be collect that we acquired this company, it was making money. While we’ve been a positive from an EBITDA from day-one, because of the various integration issues, et-cetera, the depreciation and the interest was where we were not happy about.
And that in this quarter started breaking even. So yeah, you’re right that strictly in terms of an accounting terminology, saying breaking even at PBT level is not breaking even and it’s definitely not operational profit. But for us, we didn’t want to do jugglery in terms of adjusted EBITDA and all of those numbers.
So for us, the day it becomes PBT positive is the day it becomes positive for us. Got it. And can you quantify the amount of ESOP, the amount is possible to quantify the amount? What was the quantum of ESOP value in the value terms you had given them for that? It is around INR5 crore is sure.
Unidentified Participant
Got it. Got it. Great, great, great. Sir, Pameer, on the second question.
Sameer Kothari
Yeah. On the second question, it’s — we don’t have a clear view on it as yet. So let me just tell you what the facts are. The facts are that we’ve done a preferential allotment in the step-down subsidiary of KNS ShoeTech, which is our Shoe business. At some point of time, we will see how we can create a liquidity event for those shareholders.
Unidentified Participant
Got it. Got it. Thank you. Wishing you all the best for coming quarters.
Sameer Kothari
Thank you, Vishar.
Operator
Thank you. Thank you. The next question is from the line of Priyank Chheda from Valum Capital. Please proceed.
Priyank Chheda
Yeah, hi, Samit. Thanks for the clarity in the presentation around the shared manufacturing. I just want to understand, so outside Shoe, wherever we have in the FMCG business, wherever we have shared manufacturing, how has been the ROEs across the cycles? I recollect Mayan speaking about in his opening commentary that it — we get exposed to the vagaries of the market upcycle, down-cycle.
So how has been the ROE outside shoe business because we have to to judge. Now within the shared manufacturing outs of shoes, how has been the ROE? That’s the first question.
Sameer Kothari
Sure. Our ROE expectation for the shared manufacturing, as we’ve mentioned in a couple of times, ROE expectations are much, much higher as compared to the dedicated manufacturing. How they have been in terms of historical is a large part of the shared manufacturing business that we’ve disclosed now is the shoe business and the second part of it is the beverage business.
And within the beverage business, one particular factory, which is down south is where we are doing shared manufacturing. That business unfortunately was also affected and as I have called it out in a couple of investor calls, was also affected by the fact that we made losses during COVID and post-COVID and then again because of the seasonal variations there.
Our — so I’m unable to give you a historical number, but our expectation is that the ROE numbers should be at least double of our dedicated manufacturing. That’s the target that we would work at.
Priyank Chheda
Perfect. And just to clarify in the shoe business, we have — we would have done the total investment of around INR100 crores and we have reported a revenue of somewhere around INR39400 crores. So it’s a forex turnover that we have done. Now I understand that we are expanding our capacities in South.
But in North, the asset turnover looks to be a suppressed one or is it that North is far more efficient versus South because this whole business, I understand would be asset turnover much higher at around 5, 6 times. So at 4 times asset turnover, could you help me break-down, is there some efficiencies which were yet to unlock during the year?
Sameer Kothari
So the shoe business, Priyank needs to be split into two. One is the labor-intensive part of the stitching and the assembly of the uppers and the second part is the more capital-intensive part of manufacturing the soles. The North unit is a combination of two. We are manufacturing our soles there as well as we are manufacturing open footwear, which is injection molded and compression molded shoes.
So from that perspective, equating the asset turns for North and South may not be right. In case of South, we are basically doing what is in the industry is called as cut-to-box. So we basically do the cutting, the stitching and the assembly. There the capex is much lower. So from an asset turn perspective, South will always be better, north will not be as high because like I said, we are manufacturing soles and we are also manufacturing open footwear there.
Priyank Chheda
So what — so would it be — would it go back to the total investment of whatever we have and the structure that we have within north and South, which is different the current asset turnover is the optimal one or in terms of efficiency that we need to take it out, or the asset turnovers should be higher . How do we read this?
Sameer Kothari
So obviously, it’s not efficient. No, if it was efficient, we would not have made the INR11 crore loss that we did. Last quarter is more indicative of how it should be. And last quarter was a record turnover as far as shoes is concerned. We are hoping that within the same capacity, we still have headroom to ramp this up.
And that’s the only way to look at it. I mean, we obviously have not been very efficient in the shoe business. That’s exactly the reason why we made losses.
Priyank Chheda
Perfect, no problem. Just one bookkeeping question for this year, investment plans would be majorly around ice-cream facilities, which is greenfield, anything other than to call-out among the investment plans for FY ’24?
Sameer Kothari
So this year, the ice-cream plant of will — will be capitalized to around INR150 crores INR200 crores of application there. This year, we will start investing in the North Ice Cream project, which will — which will — we are saying that it will be commercialized in Q1 FY ’26. So that is around INR200 crores more.
And we are also saying that we will invest in some part of shoes in Karnataka, which is around INR50 crores and we will also invest in our home and personal care business around INR100 crores. This is the capex plan.
Priyank Chheda
Thank you.
Operator
Thank you. The next question is from the line of from Wealth Managers India Private Limited. Please proceed.
Amruta Deherkar
Thank you. Thank you. Congratulations on the financial performance. So most of my questions have been answered. So I have one question regarding the private-label business. So for FY ’25, what would be the revenue-share of private-label? And I would like to know from a marginal perspective on this business considering the fact that NIC — the Ice Cream brand, private-label, NIC, which was now turn into BMU for the company.
So what is the management’s perspective going-forward on this private-label business.
Sameer Kothari
Hi,. Amita, maybe there’s a little bit of a misunderstanding in terms of the definition of private-label. For us, private-label basically means businesses where we do product development, packaging development are more involved in the development of the product than just in terms of manufacturing it.
In case of the customers that you named, they are not private labels. We’re doing contract manufacturing for them. And especially in case of the customer that you’ve named, we’ve actually set-up a dedicated manufacturing facility for them. So from that perspective, I’m not sure that customer should be classified as a private-label.
That’s very clear. In terms of our view on private-label, the reason why in that slide, we’ve not mentioned private-label as a separate division is because private-label ends up getting manufactured in a shared manufacturing site. So purely from a financial perspective, the numbers will reflect in the shared manufacturing pie of our business.
Our view continues to be bullish as far as private-label is concerned, our view currently is more bullish about exports of private-label than the domestic. And the reason it’s a little bearish on domestic goes back to Gautam’s question, which is that consumption — because of the consumption slowdown, we are seeing that across not only legacy brands, but also B2C brands as well as private labels in India.
On the other hand, in case of exports, because of the tariffs, etc, we are hoping that we will see some uptick.
Amruta Deherkar
Thank you.
Operator
Thank you. The next question is from the line of Parikshit from Nivetia. Please proceed.
Unidentified Participant
Okay. Hello. Thank you for giving the opportunity, sir. So I just have two questions. The first one is what is the annual capacity of the ice-cream plant? And the second question is what is the average asset turn of the beverage segment of the business?
Sameer Kothari
Parikshit, we don’t end-up giving capacity numbers for dedicated factories because then it ends up divulging information about a particular customer. Like I mentioned, and I’ll just quickly recap that, this is a dedicated factory. So capacity utilization will not affect us as HFL.
What it will end-up becoming if we start disclosing those numbers is that it will become a proxy for how our customer is doing. That’s the reason we don’t give out those numbers as far as dedicated factories are concerned. Your second question was in terms of beverages and the asset turns in case of beverages.
In case of beverages, we follow a couple of business models. In some cases, the customer gives us the raw-material and packing materials and we just build them on conversion costs. And as a result, our turnover is extremely low. On the other hand, in some of our customers, we buy the raw-material packing material and then we end-up manufacturing the entire product and selling it, in which case our turnovers are high.
Let me just go back and tell you that in case of dedicated manufacturing, we urge our investors not to look at our turnover numbers to but to look at ROE numbers. So from that perspective, I would urge you not to look at turnovers as far as dedicated factories are concerned.
Unidentified Participant
Thank you. And sir, sir, I have one more question. So what is the full potential of the footwear segment in terms of revenue?
Sameer Kothari
So when you say potential, you’re talking of how much can we manufacture or how much is the market?
Unidentified Participant
No, no, sir, how much you can manufacture?
Sameer Kothari
Yeah. Let’s say we are investing in capacities. We are debottlenecking a lot of our existing capacities. We are hiring people, we are training people. So it’s a moving number. That’s something which our Board and a lot of our more aggressive investors are pushing us on that number anyway. So I’m hesitant to tell you how much we can manufacture.
But as I mentioned earlier in the call and we’ve done this a couple of times, our target is to be able to scale this up to INR1,000 crores within a short-time.
Unidentified Participant
Okay. Thank you so much.
Operator
Thank you. The next question is from the line of from B&K Securities. Please proceed.
Unidentified Participant
Hi, this is Aragna. Couple of questions. One could be a very basic question, but wanted to understand on the dedicated manufacturing piece, have you come across any arrangement where the contract would have concluded or say it would have gotten terminated. So what sort of arrangement have we gotten into with those sort of clients? Have we been able to renegotiate with those dedicated contracts? And in case of termination, what is the sort of arrangement we take?
I understand that in case of termination also, given that it’s take-off pay, we’ll get our bid. But any thoughts on that?
Sameer Kothari
No. Hi, Radna. Radna, we’ve been in this business now for nearly two decades and more. I’m reasonably proud to say that we’ve not lost a customer. So there have been instances where our dedicated manufacturing contracts have been tested because of macroeconomic headwinds, because of changes in consumer behavior, because of brand failures, et-cetera.
And in-spite of that, like I mentioned to somebody else earlier, both the partners, our customers as well as us have honored the contract in letter and spirit. So from that perspective, I obviously can’t give out specific details of individual negotiations with customers, but we’ve not had an opportunity where we have been worried about any of our customers in terms of the dedicated manufacturing.
Unidentified Participant
And any contracts which have — would have gotten concluded and we’ve been able to regain that. Like Motine, we had acquired in FY ’18, it was for seven years. So where are we on that?
Sameer Kothari
Again, without getting into the specifics, most of our dedicated contract manufacturing and when I say most, I would mean a majority, but just because I’m on a public call, I can’t say 100% would get renewed.
Unidentified Participant
Okay. Second, where are we on the monitoring Ms I would request you to return to the question queue for follow-up questions as there are several participants waiting for their turn. Sure.
Operator
Thank you. Yeah. Thank you. Thank you. The next question is from the line of Mayur Parkedria from Wealth Managers India Private Limited. Please proceed.
Unidentified Participant
Good afternoon and thank you for taking my questions. Am I audible?
Sameer Kothari
Yes, sir. Yes,, we can hear you.
Unidentified Participant
Yeah. So congratulations, Sameer and the team for very good set of numbers. So while there have been lot of questions around how the employee cost will pan-out and you know, how the market — how things will pan-out, especially the business. But let’s say at an integrated level, I know we have been reporting quite a consistent or EBITDA margins
Unidentified Participant
Over the last four quarters plus-minus 8%, 8.2% kind of range. And while there are multiple businesses in terms of now shaping — taking shape in terms of beverages, the shoe, the ice-cream, the other, all of them, right?
Sameer Kothari
But each of them at the respective levels, based on the commentary which you are mentioning, there is an incremental improvement in each of them rather than in while issues have been there, challenges have been there, at the respective unit-level, the commentary suggests that they are going to improve overall.
So in that light, is it fair to assume that in FY ’26, if at all, the margins are going to only improve at a consolidated level, integrated level as we go-ahead. So for your — that’s the reason why Mayank has given out a slide, which basically gives out the EBITDA numbers in terms of the two divisions shared manufacturing and dedicated manufacturing.
In case of dedicated manufacturing, I would urge you to look at the EBITDA number in terms of an absolute number and not as a margin of sales. In case of shared manufacturing, yes, you would look at it as a percentage of sales and we are hoping and confident that we will be able to improve EBITDA to sales in case of shared manufacturing.
In case of the dedicated manufacturing, because the nature of the contracts and because the nature of our take or pay agreements, the EBITDA number is an absolute number which is guaranteed. So from that perspective, any changes in the top-line actually don’t and won’t affect us. Does that answer your question,?
Unidentified Participant
Yeah, qualitatively, so while you mentioned this, so on the dedicated side, we are not seeing any seeing any risk as you said, right?
Sameer Kothari
So again, coming back to the broad understanding, it’s like more or less we should look at a positive uptick rather than any subject to any negative surprises, right?, I mean, yes, yes, Mayur. I mean we all are working towards hoping to deliver better numbers in the coming year.
Unidentified Participant
Yes. No, the reason I’m asking some is, you know, I understand the stock market reactions are not in your hands and as management that’s not, but it’s been a very long while, while we have seen you know things improving from the company side and consistent delivery, which has started to happen.
So just trying to understand is how do we look-forward in another year? Again, congratulations. Look, over the last two, three years, there have been a lot of changes and you all have been able to improve the margin steadily, improve the growth profile steadily. So just wanted to ensure that there are no derails as we go-ahead and we continued on that journey. Thank you so much.
Sameer Kothari
Thank you,. Thank you.
Operator
Thank you very much. Thank you. The next question is from the line of S from Insightful Investments. Please proceed.
Unidentified Participant
Hi, sir. Thank you for the opportunity. Sorry, this is a repeat question of something that has been asked previously, but could you please repeat what you spoke about guide — sorry, capex going-forward in FY ’26?
Sameer Kothari
So we told that in this FY ’26, the Nashik plant will get capitalized, right, that is investment of around between INR150 crores to INR180 crores. We also said that we will start work on the North Ice Cream unit, which will be getting — which will get capitalized in Q1 FY ’26. The most of the will come in CWIP, we believe that come in CWIP.
So we believe that is one which we are investing. We also said that we are investing in shoe business in Karnataka. We will start working on that shortly. And also we told that the HPC business, business we are investing INR100 crores more, which will get capitalized this year.
Unidentified Participant
Okay, sir, understood. Thank you.
Operator
Thank you. The next question is from the line of Kashab from MK Investment Managers. Please proceed mister, I will request you to unmute yourself and then speak it seems like the participants line has got disconnected.
Ladies and gentlemen, due to interest of time, this was the last question for the day and I would now like to hand the conference over to Mr Vimal Solanki for closing comments.
Unidentified Speaker
Thank you,. So as we wrap-up, let me leave you with this. Foods Limited is not just chasing numbers. We are building a future-ready, resilient business with responsibility to the core. Sustainability isn’t just a checkbox on our to-do list, it’s central to how we view the future of manufacturing.
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It’s a win for us, for the planet and yes, even for your portfolio. We are optimistic, we are focused and fully committed to doing well by doing good. Thanks for your continued trust. For more details, feel free-to reach-out or give our Investor Relations team at SGA or Friendly Naj. And before we sign-off, mango season will be ending soon, but it’s still going strong in a cup or a cone next to you.
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Operator
On behalf of Hindustan Foods Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines