Manorama Industries Ltd (NSE: MANORAMA) Q3 2025 Earnings Call dated Jan. 22, 2025
Corporate Participants:
Ashish Saraf — Chairman & Managing Director
Ashok Jain — Whole Time Director & Chief Financial Officer
Ekta Soni — Associate Vice President, Investor Relations
Analysts:
Hiral Keniya — Analyst
Nitin Gosar — Analyst
Akash Pawar — Analyst
Rohan Mehta — Analyst
Alisha Mahawla — Analyst
Kaushik Mohan — Analyst
Dikshi Jain — Analyst
Arpit Shah — Analyst
Bharat Shah — Analyst
Abhishek Sengupta — Analyst
Presentation:
Hiral Keniya — Analyst
Ladies and gentlemen, good day and welcome to Manorama Industries Limited Q3 and 9 months FY25 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 the star then zero on your touchstone phone. Please note, this conference is being recorded.
I now hand the conference over to Mr. Hiral Kemya from EY LLp. Thank you. And over to you, sir. Mr. Heral, your line has been unmuted. Please go ahead.
Thank you, Steve. Good afternoon everyone. On behalf of Manorama Industries Limited, I welcome you all to the company’s Q3 and 9 months FY25 conference call to discuss the performance of the company and to answer the questions. We have with us the management team comprising of Mr. Ashish Saraf, Chairman and Managing Director. Mr. Ashok Jain, CFO. Ms. Ekta Soni, AVP Investor Relations and Mr. Deepak Sharma, Company Secretary.
Before we proceed with this call, I would like to draw your attention to the fact that today’s discussion may contain forward looking statements that are subject to various risk uncertainties and other factors which will be beyond management’s control. We kindly request that you bear in mind that there might be uncertainties when interpreting such statements. Please note that this conference is being recorded. We would now start the session with opening remarks from the management team. Afterwards we will open the floor for an interactive Q and A session. I would now hand over the conference over to Mr. Ashish Sarap for his opening remarks. Thank you. And over to you sir.
Ashish Saraf — Chairman & Managing Director
Thanks Hiran. I heartily welcome everyone to Manoroma Industry Q3 and 9 month financial year 25 earnings call we are happy to state that the company has reported its highest ever operational performance during quarter three financial year 25. Led by robust market demand for our diverse range of specialty buttons and fat coupled with higher volumes led by commercialization of our new fractionation facility, we are optimistic to achieve our financial year 202425 guidance of INR750 crores plus revenues with increased profitability.
Manorama Industries strengthen its global operations by creating seven new strategic subsidies including six in West Africa to secure she nuts and one in UAE to secure its sourcing and attract new clients from the MENA region. The portfolio expansion is aligned with our commitment to deepen the relationships with our esteemed stakeholders. The company has significantly expanded its vaccination capacity from 15,000 metric tons in 202021 to 40,000 metric tons with a recent addition of 25,000 metric tons commissioned in July 2024.
Manorama continues to innovate through its Milkoa Research and Development center which certified by India’s Department of scientific research till 2019-24. Proceeds usual for manufacturing few value added products where we have clear foresight of scale up and cash flow generation. And now I believe it’s an opportune time to start planning for next round of growth for five years starting from year 2026-31.
Today we stand we are evaluating multiple projects out of this we are conceding and prioritizing these 45 projects for a timeline of next 2 to 3 years to 5 years perspective and to give you broad idea. Two of them will fall in backward integration and three in forward integration. For forward integration, first was forward integration by entering the cocoa butter alternatives market. Second, the forward integration by starting production of industrial and compounds. Third, the forward integration of manufacturing of palm mid fraction which is used to make CBE. Third is backward integration project of thermal extraction for Sal, Mango and other Indian exotic seats in Chhattisgarh, India. Fifth is backward integration by creating a prepaid solvent extraction facility in the West African state of Burkina Faso. We will be updating the necessary project cost payback period commercialization timeline extra once we have finalized our execution plans. Manorama is on a path of sustainable growth creating world class ethically sourced products for customers worldwide and thereby creating value for the esteemed stakeholders. Now I would like to invite our company’s director and CFO Ashok Jain for his comments on Q3 and 9 months performance. Thank you.
Ashok Jain — Whole Time Director & Chief Financial Officer
Thank you sir. Good afternoon and warm welcome to everyone TO Manorama Industries Quarter 3 and 9 months Financial Performance and earning calls highlighting the company’s financial performance of quarter three Manorum Industries revenue during quarter three financial year 2425 grew by 112.5% year on year to owing 209.20 crore rupees owing to higher demand of company’s product portfolio in the both export and domestic market. The company’s export business contributed 73% of total revenue and balanced 20% 27% in the domestic market.
The company’s EBITDA has witnessed a substantial rise of 2.5 times year on year reaching rupees 55.20 crore rupees in quarter three financial year 2425. Additionally, Malorum Industrial has seen an expansion expansion Its EBITDA margin by 1051 basis points year on year growth and the EBITDA margin stood 26.4% in the quarter three financial year 2425 which is attributed to efficient cost management and operating leverage. Profit after tax during quarter three financial year 2425 grew by exponential almost three times to the rupees 29. Crore rupees profit after tax margin expanded by 656 basis point year on year and it showed 14.1% in quarter three financial year 2425. Employee benefit expenses during quarter three financial year 2425 is rupees 17.40 crore and it includes a stock provision of rupees 7.68 crore rupees. Also our other expenses including job process charges, insurance, traveling, store consumed etc. Now highlighting CAGR track record of Manorum industries During financial year 2020-24 revenue EBITDA and PAT has registered CAGR of 25%, 14% and 15% respectively. Thank you for listening to us. Now we open the floor for the question and answer session. Thank you.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 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 handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nitin Gosar from Bank of India Mutual Funds. Please go ahead.
Nitin Gosar
Hi team, good afternoon. Thank you for the opportunity. I had a couple of questions. Can you please help us understand, you know how. How do you select a CAPEX program or what are the guidelines or criteria in terms of you know, financial parameter like roe payback period while zeroing down to the projects for next round of CapEx.
Ekta Soni
Yeah. Thank you Nitinji for the question. So as far as new projects, what we have announced in this quarter are concerned, of course we are going to submit the detailed financial plan to our shareholders once we get the approval from our board members and also update our capital expenditure plan to our esteemed shareholders. But as of now you can consider that company will. So the. The thing is that the. By selecting the projects we see that if you consider the last projects what we have set up the vaccination. So we have always considered a payback period which gives us less than three years. So going forward the project. Project what we have recently finalized or prioritized. So we have considered the project which will give us a payback period of less than three years.
Nitin Gosar
Okay. Okay, got it, got it. So we are almost doing something which is less than three year as a first criteria to consider as a project. Obviously there will be parameters of as sir had mentioned on forward integration and backward integration attached to it. Second is with regard to, you know, since there are couple of projects which we are working upon. So would there be a scenario where bunching up of this capex will happen? Like, you know, in a given year there will be strain on cash flow or, you know, how do you wish to incur this capex? Because most programs then if they are less than three years on payback, then you may wish to consider them, you know, up front at one go. But that will strain our balance sheet. So how do you, how do you envisage to incur this capex once it is approved by the board?
Ekta Soni
So all these projects what we have discussed now, so we are going to do over the period of next three years. So we are going, the company is going to generate healthy cash flows over the period of, you know, two to three years. So we think that this could be done through internal approvals. But then that is something what we will, you know, get back to you once we get the detailed financial grants approved from our boards whether how we can go about it.
This project, what we have announced, it is like five projects what we have announced. So that will be done over the period of three to five years. So our cash flow permits us to, you know, go through all these projects over the periods of time. But that decision will be taken by our board and the management team once we get our detailed financial plan approved by the board. So we can then again come to you that how we are managing our cash flows over this project.
Nitin Gosar
Got it, Got it. And if you can help us, you know, with certain housekeeping data like you know, fractionation, production volumes over last three quarters and also the share of value added piece in over last three quarters. But if we can give for seven quarters, it would be very helpful.
Ekta Soni
The volume growth, if we talk about quarter on quarter, it has been in the range of 5 to 10%. We can assume the volume growth what we have done so far and all the products, what we are manufacturing are all value added products. There are four to five products in the process what we get. But mostly we are considering our serine and CDE portion as the more value added product mix. So we, you can consider 55% of that product mix includes Serine and CBE
Nitin Gosar
C Got it. And how Was this in second quarter? Like this 55% value added today. How was it in the previous quarter and the last year during third quarter
Ekta Soni
Steering and CBE always has L in the range of 55% only. Because if you see the process, that’s what we derive out of our production process, the CV and steering. So that only we have to take and consider going forward as our value added sort of. So within that parameter, of course we can increase the portion of PBE further. But as in, you know, the market participants would be product for us is a value added product.
Nitin Gosar
Okay, okay. Sorry, slightly. If you can enlighten, then you know, the source of this margin expansion is more to do with the change in the value added piece. You know, any. Any products which are helping us to shore up our margins. If you can help us understand that piece.
Ekta Soni
There are a lot of factors which has, you know, attributed to our margins. Of course, there is reduced cost of production also which has helped in improving our gross gross margin. There is operational efficiency also. And there is also a volume growth. What we have done around 5 to 10% in last to last quarter. And also there are some realization benefits what we have received for our products. But there are multiple factors who are contributing to our margins.
Nitin Gosar
Okay. And would it be fair to believe, you know, this multiple factors which we are highlighting those have got exhausted or the Runway of them to, you know, continue to contribute still exist. I mean, they continue to contribute to margin expansion. If I have to put it in. Sorry, plain language.
Ekta Soni
Yeah, right. So what guidance we have given earlier was of course 20 to 22% on our previous conflicts and everything. So now we are more confident of graduating more towards 23 to 25% of EBITDA margin on EBITDA level. But there are key modes where we differentiate ourselves and there are multiple levers which we have still not exhausted. So we see our margin to be on a good trajectory from here on.
Nitin Gosar
Got it. And one last bit. I just noticed there are subsidies which are opened in Brazil. Is it for business or sourcing purpose? If you can help us understand. And were we doing any kind of business with Brazil earlier? So yes, that market has recently opened for us. We have had our customers from Brazil earlier.
Ekta Soni
But as Brazil, Latin America is a very huge market for the products. So now. We are there in that country where we can, you know, connect very well to our esteemed clients. And it’s totally for our business focus to, you know, create more and more clients from that Latin America region. It’s a big market for us.
Nitin Gosar
Okay. And ideally like Europe, us is always considered to be a, you know, a big market or
Ekta Soni
A that is already there with us. So Latin America is the new market. What we have entered and the local presence there was necessary going forward. So we have established one company there that will cater to further demands from the local companies also from there.
Nitin Gosar
Got it. Just one last on this. So doing business or incremental business coming in from Brazil, does it enhances our profitability or does it pulls it down?
Ekta Soni
It enhances our profitability.
Nitin Gosar
Okay, got it. Got it. Perfect. Thank you.
Ekta Soni
Thank you sir. Thank you.
Operator
The next question is from the line of Akash Pawar from Sasar Capital. Please go ahead.
Akash Pawar
Yeah. Hi. Good afternoon team and congratulations on the good set of numbers. So I had a couple of questions. So first one was, you know, since we are through with the majority of the capex that we did and you know we are venturing into the new geographies like MENA and Latin America. So how is the competitive landscape there and how much time do you think will it take for us to you know, onboard new clients?
Ekta Soni
So we see we already had our clients there. Incorporation of company was mostly to, you know, cater to local clients of Latin America and Brazil there. So we see a very good business in the country of Brazil and also the, you know, the countries which are surrounded to Brazil and under Latin America content.
Akash Pawar
So have we, have we developed, you know, specific products with them or is it to start right from now on?
Ekta Soni
Can you be little like the void is little low. Can you speak again?
Akash Pawar
Is it better now?
Ekta Soni
Yeah.
Akash Pawar
Hello. So have we developed you know, specific products over there or is it just beginning right now?
Ekta Soni
No, there are the same product line which we are selling to you know, this customer. There is theory in what we are selling to them. The CDE is there and you know there are different patch requirements. It’s not if we are talking CBE then there are different specification which is involved to steering or say cbe. So every customer will have a different product. Product requirement as per their recipes of the, you know, chocolate, confectionery and food. So but the food, the product is the same. So we are going to sell them CBE only. But that can happen with a different specification of the fat, cooking of the fat and maybe a better pricing also there.
Akash Pawar
Okay, and the next question would be if you could, you know, just give a brief about the new market that we are venturing into that is, you know, alternative. So how is it different from, you know, CB that we manufacture?
Ekta Soni
Right. Manorama is very strong on R D. So the new we back ourselves in technology so adding more technological solution to our exotic product. So it is a forward integration project where we are fortifying our more further. It will be an in-house technology because now that we have stabilized two mega projects of vaccination adding up highly intensive tasks. So through this futuristic technology which will help us convert our low value added product like Olin to more enhanced products like steering. So it’s a proven technology in lab scale and also in pilot scale.
And now we are planning to take this to a commercial scale.
Akash Pawar
Okay, that’s it from us. Thank you.
Ekta Soni
Thank you.
Operator
The next question is from the line of Rohan Mehta from Fecom family office. Please go ahead.
Rohan Mehta
Hi. Am I audible?
Ekta Soni
Yes, yes, you are
Rohan Mehta
Thank you so much for taking my question. So I wanted to know what is the current capacity utilization of your plant and. And where do you estimate it to be around by, let’s say March 2025.
Ekta Soni
The current capacity utilization for our existing plant of 15,000 ton is 100%. And our new capacity utilization for our new plant is around 50%.
Rohan Mehta
Sorry, could you repeat that? For new it is.
Ekta Soni
Sorry,
Rohan Mehta
Could you repeat that?
Ekta Soni
Yeah. So the utilization from our existing plant of 15,000 tons is 100%. And the new plant is giving us 50% capacity utilization as of now. So we expect it to. It should be around 60 to 65% by the end of financial year 2025, which is very well, you know, linked to our guidance what we have given to our shareholders.
Rohan Mehta
Got it. And in terms of the current prices for cocoa butter equivalents, what is it on a per kg basis compared to last quarter?
Ekta Soni
Are you asking the realization part?
Rohan Mehta
Yes.
Ekta Soni
Can you repeat your question please?
Rohan Mehta
What is basically the current price for cocoa butter equivalent on a per kg basis compared to last quarter?
Ashish Saraf
Currently it is ruling around, we expect to be around $6 to $7 per kilogram.
Rohan Mehta
Right. And there is no change from last quarter?
Ashish Saraf
There is no change. But in going forward we expect to increase it further
Ekta Soni
Because the contracts, what we sign is usually for 9 months and 12 months. So where the pricing and the volumes are fixed. So we cannot expect, you know, price realization changes in every quarter. So it happens contract to contract basis. So if we get, if we get, you know, the change in the price, we may update you at a later stage.
Rohan Mehta
Sure, sure, sure. And just to follow up on cd, I believe the contribution for value-added products as of today you mentioned is about 55%. So where do you see this going ahead?
Ekta Soni
55% will be the total product needs. Within that we can say that a portion of CBE can be increased to maybe, you know, 22. What we have guided earlier it was around 30% that we will be doing the CVE portion to this current financial. So we are in line with what we are guided.
Rohan Mehta
So just to clarify, CBE in terms of the contribution to overall revenue, we’re saying by March that will be 30%.
Ekta Soni
Yes, the wallet share of CBE.
Rohan Mehta
Right. And currently only CBE, how much is it?
Ekta Soni
It is around 15, 15, 20% roughly.
Rohan Mehta
Right, got it, got it. And one final question from my side. So I was seeing in the news that European or cocoa grindings, they are down by about 6% in Q4 of 2024. And, and apparently this was the lowest since 2020. So I just wanted to understand that how do you see this potential fall in chocolate demand that can happen and subsequently it can affect cocoa butter equivalent demand in the near term, considering cocoa grindings are near to the COVID lows.
Ashish Saraf
So cocoa butter is, you know, the world is addicted to cocoa. So these grindings and this all depends on various other factors, very human or not, especially in Europe, Platinum. America, America, Russia. They’re addicted to cocoa since childhood. So we don’t anticipate any faulty people will stop eating cocoa chocolates or cocoa products. So these brandings and all these have got nothing to do with the demand they are related to. More to the other factors. As far as TV is concerned, we are not directly linked to cocoa butter prices due to their functional interchangeability. In reality, CB pricing dynamics differ significantly and remain sustainable irrespective of CB price fluctuation. Cocoa butter price fluctuations. While the market perceives cocoa butter equivalent cocoa butter as closely linked, the reality is that CBE enjoys relative pricing stability due to its diversified raw material base, contractual pricing models, consistent demand from chocolate manufacturers. Our CB business remains vigilant, ensuring sustainable margins and revenue visibility independent of cocoa butter price constellations. Because cocoa butter equivalent brings stability and it is a must for big chocolate manufacturers.
Rohan Mehta
Sure, sure. Thank you. Thank you so much. That’s all from my side.
Operator
Thank you. Participants who wish to ask a question may press star and 1. The next question is from the line of Alisha Mahavala from Envision Capital. Please go ahead.
Alisha Mahawla
Hi sir. Good afternoon. Just wanted to understand and Q1Q basis which is Q Q3 of this year versus Q2. Revenue is up 7%.
Operator
It’s not clear. Rather now.
Alisha Mahawla
Am I audible now?
Ekta Soni
Yeah. Hello. Yeah, please go little slow when when asking the question.
Alisha Mahawla
Sure. So on Q On Q basis, Q3 of 25 is Q of 25 and Revenue is A4. But we also said in the opening commentary that we enjoyed slightly better realization and mix because now our citation capacity has come on Q on Q basis has volume grown or volume is flat?
Ekta Soni
Can you please convey the question to us? Because then we are not able to understand what exactly the question has been asked.
Alisha Mahawla
Hello. Hello. Hello. Am I audible now? Is it better now?
Ekta Soni
Yeah, this is. This is much better. Yes.
Alisha Mahawla
Okay. I was asking that on QQ basis, FY Q3, FY25. On Q2, FY25, our revenue has grown at 7%. In our opening commentary, we mentioned that we’ve enjoyed slightly better realization and our mix is also improved because of the commercialization of our practition capacity. My question is, has volume grown on Q on Q basis.
Ashok Jain
So Q1Q basis we will be seeing that will be given by 15 to 20% every quarter in terms of both quantity as well as the.
Alisha Mahawla
Sir, I’m asking, in Q3, has volume grown versus Q Q2?
Ekta Soni
Yeah, yeah, we mentioned that in the call earlier also that there is a volume growth also up around 5% QoQ.
Alisha Mahawla
And the new capacity, has it stabilized? And now will we start seeing better utilization? Because only 5% volume growth when last year the capacity. Last quarter capacity came in the middle of the quarter. So the volume growth should have been slightly stronger. So are we facing any challenges in commercializing or the new capacity?
Ekta Soni
Yeah, we got your question. So there are no actual challenges, you know, in stabilizing the plant. This plant has highly technical plants, so it takes its own time in, you know, getting the utilization done for the capacity. So earlier also we had mentioned that the year FY25 utilization will be around 60 to 70% for our new plants. So we are very well in line. What we have, you know, guided. Because these projects are not something, you know, you have started and you can do the production.
So this plants take its own time to stabilize. So it will take its own time. So that is how we have guided of around 60% utilization for our new plant. And of course gradually it will improve. So we are expecting our utilization to be around 60 for this financial year for the new plant. And the existing one is already running on 100% utilization.
Alisha Mahawla
Understood. So for FY26, can we assume that because we will be starting with 60% utilization, we should be able to hit up peak utilization of 80, 85% by FY26?
Ekta Soni
Yes. We expect our utilization to be around 75, 80% in FY2 dissection.
Alisha Mahawla
Understood. And my last question is the new project that we’re evaluating, the forward and the backward integration, how should one understand the lease time for this? Will it take two to three years for each project? To commercialize or will these be. Or will we be able to? Because we are yet to put it up to the board.
Ekta Soni
Yes, the projects what we have set up last year also it usually takes you know, 12 to 15 months. One project post what we have, you know got the approval from our board and we have started execution. So that of course in the past what we executed, you can consider that as a timeline for each of the projects. But of course we can further update you once we have got the approval from our board. But generally you can take that timeline only for consideration as of now.
Alisha Mahawla
And are we expecting to crystallize a plan in this financial year.
Ekta Soni
Sorry,
Alisha Mahawla
Are we expecting to crystallize our plans for the forward and backward integration projects in this financial year only and get the approval from the board in this financial year of FY25.
Ekta Soni
See this financial is hardly we are in the Jan. So by March we this financial aid will end. So maybe we can you know have further deep dive in. Because yesterday only we have got the approval from our board, you know to further evaluate on the things. So let us you know do some exercise internally with our team and maybe then we can get back to you that by then we can, you know announce the detailed financial front to our shareholders.
Alisha Mahawla
Okay, thank you.
Ekta Soni
Thank you.
Operator
The next question is from the line of Kaushik Mohan from Ashika Institutional Equities. Please go ahead.
Kaushik Mohan
Hi Team. Thanks for giving me an opportunity. I just wanted to understand on the number front I can see our finance cost has increased from 8th year to 11th year. Like can I get the clarity on what was the reason
Ashok Jain
Of procurement of Sri Lank is going on? So therefore we have taken the working capital from bank. So this is our seasonable model of business. So we have to procure the raw materials in the quarter three. Therefore we have increased the working capitalization for the interest cost has increased.
Kaushik Mohan
Okay. What is the inventory currently? Sir, what is our inventory book size on the balance sheet
Ashok Jain
Currently as on the total value is around 580 crore rupees including raw material, what we have procured and as well as the finish.
Kaushik Mohan
So it is 500 crores you’re talking about?
Ashok Jain
Yes, 580 total inventory book as 580 crore.
Kaushik Mohan
518 crore. Okay, so another 5. Okay. I know it. Okay. Another one is on the employee cost. This time I think we have slightly. It’s more than the double. It’s like if I see that more than 8% is contributing to the revenue. So on the revenue part if you look at employee cost has increased. What’s this for team?
Ashok Jain
The employee cost. Remember that we have taken the provision of ESOP employee stock option plan as per the Indian accounting standard. So we have made the provision of around 7.68 crore rupees this quarter financial. So this was the reason to increase this employee cost. Otherwise the employee cost remains same as was in quarter two.
Kaushik Mohan
Got it. Got it, sir. And I just also wanted to understand that is this the cost will be repetitive in our Q4.
Ashok Jain
No, it is depending on the provisions as per the accounting standard. But the cost will be remain same. There is no equity.
Kaushik Mohan
Okay. So and at the current juncture what is our utilizations of our plant?
Ekta Soni
So that the utilization of our plant new vaccination plant is around 50% for this quarter. And existing one is doing hundred percent capacity utilization.
Kaushik Mohan
Okay. The old one is doing 100 capacity and the current one is doing. Got it. Got it. And I also wanted to understand how are we standing with the full year guidance that we gave in the concord the past Concur.
Ekta Soni
So we are comfortably above the guidance of 750 crore as per our current order book. So we are very confident of achieving and surpassing that this financial year.
Kaushik Mohan
Okay. So now currently I see that Sharaf sir also mentioned that we have around six to seven dollars on the cocoa equivalent butter prices. So do we have any opportunity over here to increase the prices going further?
Ashish Saraf
This what I said six to seven dollars is what we expect going forward. And it is markets that the prices will keep increasing based on the market situation worldwide is what we anticipate.
Kaushik Mohan
Okay sir. That means that currently with these numbers we are looking at an ROCE of 13.5 percentage. That means that when we close our entire full year books we have the asset which has been started putting up the P and L numbers and they are putting up the PAT numbers. That means that our ROCE numbers will double from here is my understanding. Right. Because of the balance sheet is staying the same way.
Ashok Jain
We will back to you.
Ashish Saraf
Yes, whatever is the best possible. We are looking at it. It should happen. Good.
Ekta Soni
So of course that will be further improved. Definitely. But let the numbers come on the Q4 and then we can of course calculate and update you on our press release and presentation. What? Exactly. But definitely there will be improvement on ROCs and ROCs going forward. Because if you see the last quarters we have been continuously posting good rocs and rock.
Kaushik Mohan
Yes, that’s making an interesting thing. And also one statement in the yesterday’s announcement that I see that we are doing some capex. Can I understand this? Forward integration or backward integration? Can you explain the interval chain that what we are going to do?
Ashish Saraf
So for backward integration it is basically we are using some outsourced facilities for forward extraction in India which we are losing money because of that. So we will save big amounts of money in that. So that is one of the plants we are doing in Burkina Pars always is the same. We are going to crush the Sheena there and bring the butter instead of the seed. So for cocoa butter alternative is related project to our cocoa butter balance. So it is going to give us huge benefits is what we anticipate and plan. Same is for palm extraction we anticipate that because we have to use palm mid fraction for making PvE. Currently we are using outsourced facilities which we want to do in-house. So these all immensely boost our profitability and our opportunities for the Ramanuama.
Kaushik Mohan
Got it Got it sir. At a conservative level what can be our operating margins like EBITDA margins on by doing this backward integration what can be because currently we are doing around 26 percentage. What can we look at
Ashish Saraf
That we will update you the later going forward.
Kaushik Mohan
Okay. Okay, thanks. Thanks. That’s my question. Thanks.
Operator
Thank you. The next question is from the line of Dikshi Jain from Invest Savvy. Please go ahead.
Dikshi Jain
Hello.
Ekta Soni
Yes. Hi.
Dikshi Jain
Hi. Great numbers. Congratulations. So we have a few questions regarding the capacity utilization and the revenue also. So last week, last quarter in quarter two, how much was the capacity utilization for the new plant? Hello.
Ekta Soni
The last quarter we mentioned that the growth was around 5%. So you can take that only as the utilization level for last quarter. So it must be around 40, 45%.
Dikshi Jain
Okay. Because I think. Around 30% was mentioned last quarter. Okay. The question which we have is if volumes have grown 5% and earlier quarters. You had said that most of the cocoa butter contracts were expiring around September to December quarters. September around September onwards until December. So given that the payments are linked to dollars, are we seeing the new. And some of the contracts would have got done in September, especially for the new capacity. A lot of the contracts were not done earlier. So they were done post-March which were at a higher rate. So if 5% is the quarter-on-quarter volume growth then for the new plant realizations, aren’t they higher?
Ekta Soni
So see, you have to take. Firstly, we have guided earlier that the contracts are usually for nine to 12 months. And it was the. Because if you see, we started our capacity only in July 2024. How can we take orders earlier in the March? So we have to link. So you cannot say that quarter on two, it has been there. So it’s an improvement of growth there. Because that already what we had envisaged earlier when we, you know, started our plant and how that turnover because there are shipment schedules which needs to be done. We started our plant in July 2024 and accordingly we gave you the guidance of 750 plus crores initially.
So as per our guidance only and we know how the utilization will be and how the shipment will be. We have continue and we are what we have seen or what we have reported. We are very well in line with our guidance and capacity utilization. What we have guided you earlier. And the contracts are revising every nine months and 12 months. So we cannot expect that quarter and quarter things it will be applicable for every.
Dikshi Jain
What we gathered was that given that. So for the old plant all the contracts were long term, which we understood. But for the new plant in your previous quarters, what we gathered was that since capacity rollout was not entirely, you know, fixed by March and the fact was that prices of cocoa butter and cocoa butter equivalent went up after March. So our reading was that in the Q2 and Q3, the contracts for the new capacity would have been struck at a higher price. So the yield of the incremental capacity which is coming in which you said is 50% or 40. For 45%, possibly for the last, whatever, 40% for the last quarter and this quarter I think you’re expecting now 60% or 65% utilization in this quarter. Would this be coming in at higher rates? Because you won’t have previous contracts for this capacity before March. Prices in cocoa butter went up when I thought they went up around March, right? In Q1 or Q4 of last year.
Ekta Soni
Yeah, yeah, that’s what we are saying. You see, contracts are there, but there are agreements which are long term and there’s a contract which are first nine months and 12 months. So once we have, you know, for example, I signed a contract now with, for, with a company with my clients. So that shipment period will be throughout 12 months. It’s not that we have signed the contract and we have shipped all our higher CP prices at one good.
Dikshi Jain
No, I agree ma’am, but what I’m saying is those agreements were. So prices went up, let’s say in, let’s say for January to March 24 the prices went up.
Ashish Saraf
Do you want to know, Let us know what, what is the confusion? If you can just let us know.
Dikshi Jain
Sorry. So what we are trying to gather is that, you know, in terms of the agreements and contracts, given the significant jump in cocoa butter prices, equivalent prices, when does that increment start coming in for you guys?
Ekta Soni
It will happen. It will come in a gradual phase. So we cannot say that quarter two will have better margin realization benefits of quarter three or quarter four. So it will have a gradual effect on the revenues and profitability over the course. So we understand what, what you want to, you know, understand from us. But this is the model of the business and you have to perceive things like this only. So it’s a contract.
Dikshi Jain
When do contracts do contracts get renewed every quarter for a year? Like you know, is it an ongoing process or is there a period where you do it for the next 12 months altogether? Like do you do it let’s say for a full financial year, you do them at the beginning of the financial year or it’s like you do it on a running basis.
Ekta Soni
Yeah, it’s an ongoing process for every, every client. So some clients will have month different and the other maybe clients will have a different month of, you know, contract getting expired. So once it gets expired with one particular customer, it gets renewed again. So that’s how it works. So it’s a continuous ongoing process. It’s not that we are only going to do in maybe March or Jan or something like that. It’s not that. So when it expires we get the contracting with our client.
Dikshi Jain
The other thing is if we compare to last year the employee costs are up almost 4 times so from 4 crores to about 16 crores. Now I understand some 7.68 is being taken in as ESOP value but the rest doubling of employee cost. Is it that you know the new capacity is now more or less fully staffed and that part will be stable or are you still ramping up employees and you know that cost will continue to go up because the full employment for the capacity has not yet been done?
Ekta Soni
No, if you see the. If you come if you are comparing yoy then 9 months is of provision with date is around 11.50 crores. So 7.68 sir mentioned was for the quarter. So ESOP provision with date of around 11.50 crore for nine months.
Dikshi Jain
Okay.
Ekta Soni
Yes, look there is that way if you see there is no much variation in our employee cost even if you compare value by your qq if it is required and it is part of the business, we are of course going to, you know, update you and of course we are going to hire new employees. But that variation what you are talking about is mostly of for esop provision of 11.50 crores. It’s not today that we have recruited employees of that amount.
Dikshi Jain
So basically the jump from say 4.5% on to 8% this quarter or earlier is more on account of ESOPs etc and not on account of great. And in terms of employees required to run the additional capacity, will that be having a significant impact on the cost?
Ashish Saraf
Those are technical positions which are routine positions which we already have people maybe we can keep on adding or. But it is nothing more impactful. The major employment which we anticipate are in other sectors of the business.
Dikshi Jain
Another question that we have is first the Africa.
Operator
Could you please come back in the question queue for further.
Dikshi Jain
Yeah, no problem.
Operator
Thank you so much. The next question is from the line of Arpit Shah from Stalin Asset. Please go ahead.
Arpit Shah
Hello. Hello?
Operator
Oh yes sir, please go ahead.
Arpit Shah
Yeah, just wanted to understand what kind of revenue we are targeting for FY26.
Ekta Soni
So your voice is not clear. Can you please repeat the question?
Arpit Shah
Just wanted to understand what kind of revenues we are targeting for FY26. FY25. The guidance is about 70 crores, probably going to exceed that. And we do have capacity available the second in the new plant. So what kind of revenue guidance we are targeting for FY26
Ekta Soni
Revenue guidance in INR we can better give you on fourth quarter once we have have the numbers for March quarter as well. From the utilization point of view, we can guide you that the capacity realization will be somewhere around 75 30% in the financial year FY26.
Arpit Shah
Got it, got it. I just missed the inventory number. Was it 508 or 580?
Ekta Soni
580.
Arpit Shah
Okay. And for the expansion, are you looking out for, for a capital raise or is gonna be through internal accruals debt? How’s it gonna.
Ekta Soni
We mentioned that we will submit a you know, detailed financial plan. Of course company is going to have healthy cash flows. So we might see at that time the need of the capital whether any debt dilution is required or not. So that we can update you at a later stage. Only once we, you know, get these things approved from our group. Of course we are also going to generate healthy cash flows internally.
Arpit Shah
Got. And if I see the current margins, EBITDA margins, they are about 30% in. If I exclude the ESOP costs and everything, the EBITDA margins are about 30%. So given the backward integration of over integration that you’re going to add, you think the margins can still expand from 30% to higher levels or 30% is something which is out of the ordinary.
Ekta Soni
See, we already told you that bare multiversity. So we are trying our best, you know, keep on improving on the same. But we given our earlier guidance of 20, 22% now of course we are graduating more towards 23 to 25% on a, you know, whole financial year basis, not just quarter on quarter. And as the things improve to improve us, we are going to update you further.
Arpit Shah
Got it. But you think this margin sustainable, right? There are no, no risks to these margins?
Ekta Soni
No sir, no. So we expect our margins to be sustainable.
Arpit Shah
Got it. And no other kind of competition is also cropping up in your face?
Ekta Soni
No we don’t. As of now we don’t see any competition from our knowledge.
Arpit Shah
So thank you so much.
Operator
Thank you. The next question is from the line of Bharat Shah from Ask Investment Managers. Please go ahead.
Bharat Shah
Yeah hi. With the expanded capacity given our superior capital asset turn, what is the optimal output you think we can achieve? About 1250, 1300 crore turnover
Ekta Soni
In INR terms, you know we can better give you the guidance on 100% utilization maybe in the coming quarters we give you, we will give you the guidance for utilization of 80 odd question for the financial year 26. So we just want to wait for one more quarter to have the march numbers with us and then we can further guide you on INR level basis also that on 100% utilization what could be our turnover. But of course there will be a significant jump on our revenue front here onwards for FY26 and 27 also.
Bharat Shah
Now I’m seeing assuming this new capacity were to get deployed sooner rather than later and given the current realization trains, what is the optimal likely possible turnover from the expanded capacity? Are we in a position to.
Ekta Soni
Sir, we are actually not in a position as of now to guide you. 100% utilization turnover basis as of now, maybe further sometime later also we can connect and guide you how the overall performance numbers will look like on 100% capacity reliation. So as of now we are, we are not going to give that guidance. Thank you.
Bharat Shah
And current year you said 750 plus therefore the next year clearly will reflect the strength of the current trend and therefore four digit kind of a turnover we should be seeing in the next year.
Ekta Soni
Yes, that probably you know we can consider that but we will update you better on on fourth quarter only. But of course that what you have taken. Consider and it should be better only.
Bharat Shah
Okay, thank you.
Operator
The next question is from the line of Abhishek Sena Gupta from AB Capital. Please go ahead.
Abhishek Sengupta
Hello, Am I audible?
Ekta Soni
Yes sir, you are.
Abhishek Sengupta
Just wanted to ask will we get operating leverage going forward next year just like this year?
Ekta Soni
So we will. We are getting that leverage benefit as of now also. And quarter on quarter we will see the improvements and we are going to get that leverage benefit in the coming financial year also. So as we utilize our capacity much better way, that leverage factor will always come in the picture.
Abhishek Sengupta
Okay. And can you guide as to broadly what will be the ROE trajectory going forward? Will it creep up gradually going forward next year?
Ekta Soni
Of course it will be further improved only because what we expect our performance are going to be on improving mode only from here on. So of course we expect better ROE and rocs going forward.
Abhishek Sengupta
Can you give a number as to what will you target ROE going forward?
Ekta Soni
As of now, we are not going to give any guidance on ROCs or ROEs. Maybe once we have finalized our numbers for March and then we will update you through our presentations and press releases. The ROCs and ROC, what we have reported
Abhishek Sengupta
And at a broad level, do you anticipate significant competition coming to your business like in the near future, do you see any green shoots like too many competitors coming in your field?
Ekta Soni
Of course not. As per our knowledge, we don’t see. We are not seeing or anticipating any such events for us. So we don’t see that landscape anticipating for us.
Abhishek Sengupta
Thank you. Thank you.
Operator
Thank you. Ladies and gentlemen, due to time constraint, this was the last question for today’s conference call. I now hand the conference over to the management for their closing comments.
Ashish Saraf
Dear friends and my respected shareholders, I would like to extend my gratitude to all the participants for dedicating their time to join us for for The Manorama Industries Q3 and 9 months financial year 25 earnings conference call, the company continues to solidify its reputation as a dependable and most trusted and leading provider. Dedicated to fulfilling the increasing need for sustainable cocoa butter equivalents, specialty fats, butters and other value added products for the confectionery and food industries of India and the world. With our deep focus on research and development, we maintain our status as the most preferred supplier of specialty, super specialty, niche facts and betters to both our global and domestic suppliers and all the other parts of the world. I request you if you have any additional questions, kindly feel free to reach out to us via email or contact Ernest and Young, our investor relations advisors. I sincerely thank you for thank you all for participating today and giving your valuable time and I wish you to have a wonderful day. Thank you
Operator
On behalf of Manoruma Industries Limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines.