Modi Naturals Limited (BSE: 519003) Q2 2025 Earnings Call dated Oct. 30, 2024
Corporate Participants:
Akshay Modi — Joint Managing Director
Analysts:
Gunit Singh — Analyst
Sandeep Dixit — Analyst
Amit Agicha — Analyst
Rohith Potti — Analyst
Tushar Vasuja — Analyst
Ashay Jain — Analyst
Ankit Minocha — Analyst
Faisal Hawa — Analyst
Rohit Thakkar — Analyst
Shaurya Punjani — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Modi Naturals Limited Q2 and H1 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. [Operator Instructions] Please note that this conference call is being recorded.
I now hand the conference over to Joint MD, Mr. Akshay Modi from Modi Naturals Limited. Thank you and over to you, sir.
Akshay Modi — Joint Managing Director
Thanks. Good afternoon, ladies and gentlemen. Thank you for joining us for the Modi Naturals Q2 and H1 FY ’25 Earnings Conference Call. I trust you have had an opportunity to review our financial results and investor presentation, both available on the company’s website and Stock Exchanges. SGA, our Investor Relations advisor, is joining me on this call. Given that this is our first earnings call and for the benefit of the participants at large, I will give an overview of the company followed by financial performance for the quarter and half year ended September ’24. At Modi Naturals, our journey began in 1974 under the visionary leadership of D.D. Modi. From modest beginnings, we have grown into a household name and a trusted provider of healthy high quality edible oils and innovative FMCG products.
With a vision centered on producing premium edible oil and food products, we have maintained an unwavering commitment to quality and innovation. In 1985, we expanded our operations by establishing a new solvent extraction plant in Pilibhit, Uttar Pradesh, as part of a greenfield expansion. This facility has evolved into a fully integrated oil extraction, refining, and packaging plant. Our primary objective was to supply top quality edible oils to Indian households, which at the time had limited options for quality, purity, and health benefits. In the early years, our primary focus was on rice bran oil and a high quality byproduct, de-oiled rice bran, which is an animal feed ingredient. Through rigorous quality control and a commitment to traditional values, we quickly earned the trust of our customers.
As demand grew, so did our product portfolio expanded to include a variety of oils such as olive oil, multi-source edible oil, and canola oil; each known for its nutritional benefits. We invested in advanced extraction and refining technology to ensure that every drop of oil met stringent quality standards, providing an added layer of health benefits that consumers could rely on. At Modi Naturals, we have three divisions: the Bulk Oil division, Branded Consumer division, and the Ethanol division. Let me begin with the Bulk division. Our Bulk division is vital to our overall strategy focusing on the procurement, processing, and distribution of various edible oils in a dynamic market. This segment allows us to capitalize on price fluctuations and shifts in consumer demand, optimizing our inventory and maximizing profitability.
By leveraging our extensive network of suppliers and customers, we navigate the complexities of the oil trading landscape effectively along with backward integration. However, the last few quarters have been particularly challenging for our Bulk division, which despite having a manufacturing back-end, has a trading element. It faced significant obstacles due to government imposed price restrictions on edible oils leading to considerable inventory losses. Market volatility and shifting demand further exacerbated these challenges impacting our trading margins and operational efficiency. Fortunately, we are beginning to see signs of recovery, prices have stabilized and we believe the worst is behind us. Favorable rainfall across the country and the arrival of fresh crops are creating a more conducive environment for trading.
As supply chains normalize and demand picks up, we expect to see positive momentum in our bulk trading segment moving forward. Coming to our Consumer Branded division. A major milestone in our journey was the introduction of Oleev, a brand of high quality, heart healthy cooking oils in 2012. Our flagship brand Oleev and particularly Oleev Active quickly became a popular choice for health-conscious consumers in India combining olive oil’s benefits with everyday cooking oils’ versatility. By focusing on scientifically backed products that addressed health concerns like cholesterol, cardiovascular health, and overall a fitness lifestyle; we successfully reached a rapidly growing market of health-conscious individuals seeking more from their everyday ingredients. Oleev oils became synonymous with quality, lifestyle, and wellness, and the brand continued to innovate by introducing more varieties to cater to diverse cooking needs.
We are currently the only major player in India producing multi-source edible oil with olive oil and we are the country’s third largest super-premium edible oil brand. Our journey was not without its challenges. As the company grew, we faced intense competition from both domestic and international players. The edible oils market is highly competitive with numerous established brands and the constant pressure of fluctuating raw material prices. However, we approached these challenges with resilience and strategic foresight by implementing cost effective manufacturing practices without compromising quality and building strong relationships with suppliers. We were able to maintain stable prices. Furthermore, we adopted a multi-pronged approach expanding our distribution network, strengthening our R&D efforts, and implementing modern marketing strategies by partnering with retailers and distributors across the country.
We achieved nationwide reach, making our products accessible to both urban and semi-urban consumers. Our strong logistics network became a competitive advantage allowing us to maintain a robust presence throughout India as well as some neighboring countries. We strategically selected our market presence. In our consumer business, we do not focus on commodity-based edible oils such as soybean, mustard, and sunflower oil. Instead, we cater to the premium multi-source oil segment, which includes blends like rice bran plus olive oil and rice bran plus sunflower oil. We market these products under brands Oleev Active, Oleev Gold, and Oleev Smart. Additionally, we have extended our offerings into the super premium edible oil category, which includes olive oil and canola oil. These products are marketed under the brands Oleeve Kitchen, Olivana Wellness, and Miller Canola Oil.
Additionally, we reinforced our commitment to quality and transparency by investing in R&D facilities and enhancing our product packaging to clearly communicate health benefits. This dedication to innovation and consumer focus paid off as more people recognized and trusted Modi Naturals as a provider of healthier high quality oils. While we had already established a name in edible oils, our ambition did not stop there. Recognizing opportunities in the FMCG sector, we strategically diversified our product line to cater to a broad range of consumer needs. This expansion enabled us to enter new product categories, including premium oils and other food items thereby creating a strong, diversified brand presence. Recently we also ventured into the ready-to-cook snack category, introducing products that align with our philosophy of health, convenience, and taste.
We have developed strong brand identification to better align our products with consumer expectations. For example the Oleev brand is associated with health and wellness, which is why we extended it under a sub-brand Oleev Kitchen with which we guarantee healthier-for-you food products with significant innovation and product differentiation ensuring our consumers receive high quality with great taste and nutrition. This range includes items like Oleev Kitchen pasta and peanut butter and super soup, India’s first ready-to-cook soup with pre- and probiotics. Additionally, we elevate the snacking experience. We introduced Pipo, a popcorn brand which comes in flavors such as Cheese Burst, Peri-Peri, Tomato Salsa, and Tandoori. Our roasted peanuts also offer both international and local flavors including Smokehouse, Barbecue, Himalayan Rock Salted, etc.
To enhance the beverage experience, we launched Jynx, a line of powdered ready-to-mix drinks available in various flavors enriched with vitamin C. Our products cater to a generation seeking quality, taste, and nutrition in quick-to-make food options. The decision to expand into FMCG was driven by our desire to provide consumers with choices that are not only healthy, but also flavorful and convenient, aligning with modern lifestyles. Additionally, we will leverage the ecosystem that supports our oil business, including quick commerce and e-commerce platforms, a robust network of distributors, direct access to retail stores, modern outlets, and CSD Army canteens. This approach will allow us to efficiently distribute our products while ensuring they are readily available to consumers in various shopping environments.
By utilizing these established channels, we aim to enhance visibility and accessibility, ultimately driving sales and strengthening our market presence. This integrated strategy maximizes our reach and fosters greater customer engagement and satisfaction. This will reduce our effort to a large extent. Introducing these new products is a testament to our adaptability and vision. By closely monitoring consumer trends, we swiftly identify and address market gaps. We have been in the Branded Consumer business since FY ’12 and from day one, we have approached our decisions with extreme caution and careful analysis. Our business has been profitable from the very beginning, which underscores our commitment to sound strategies and prudent management. We will continue to uphold this philosophy as we move forward ensuring sustainable growth and long-term success in a competitive market.
Let me now move on to our new segment, the Ethanol division. We strategically entered the Ethanol division, a move that promises both economic growth and a positive environmental impact. Let me explain the reasoning behind this expansion. India is aggressively pursuing energy self-reliance with an ambitious goal to achieve a 20% ethanol blend in petrol by 2025. This shift toward ethanol, a biofuel derived from biomass resources, holds great potential for reducing fossil fuel dependency, enhancing energy security, curbing environmental pollution, and increasing farmer and rural income. The government’s strong push for ethanol production via the EBP program presents a valuable opportunity for companies like ours to diversify into a sector with rapidly growing demand. We have a rich legacy in processing agri products.
With decades of expertise in oil extraction and refining and safe handling of resources, we have developed the necessary infrastructure and technical know-how to transition seamlessly into ethanol production. Our agri processing sector experience equips us with the critical skills required for efficient processing and product quality management, two key aspects of ethanol production. Furthermore, with decades of experience in handling various types of oils, we have a deep understanding of grains and protein byproducts as commodities, which allows us to effectively navigate the complexities of this market. This expertise is the reason we have decided to enter the grain-based ethanol sector positioning ourselves to leverage our knowledge and drive sustainable growth in this emerging industry.
We have established a 100% wholly-owned subsidiary Modi Biotech and have strategically entered Raipur in Chhattisgarh. This state along with Orissa just 100 kilometers away is rich in grains and produces up to three crops per year. This location gives us a significant advantage in easily procuring raw materials. Additionally, our plants are strategically located near all major oil manufacturing companies’ depots, which helps us reduce logistic costs and strengthen our relationships with them. We began establishing our plant in April ’22 and commenced commercial production in November ’23. Currently, our manufacturing facility is set up for 130 KLPD, for which we have incurred a capital expenditure of approximately INR150 crores. Furthermore, we are working toward expanding our capacity with an additional 180 KLPD ethanol distillery, which will bring our total capacity to 310 KLPD.
We estimate a capital expenditure of approximately INR100 crore for this additional capacity and we have recently completed the engineering work. Construction is set to begin in Q3 of this financial year. We are excited to announce that we have recently secured an order worth INR300 crores for our upcoming ethanol year, which spans from November 2024 to October 2025. This achievement is a testament to the hard work and dedication of our team and showcases our commitment to excellence and innovation in the ethanol sector. Receiving this order not only reinforces our reputation as a reliable supplier, but also inspires us to push beyond our limits in pursuit of sustainable growth. We look forward to the opportunities this order presents and are dedicated to delivering high quality products that meet the evolving needs of our customers.
As we expand our operations, we are confident that we will reach new heights and make a significant impact in the industry. Now coming to our consolidated financial performance. Please note that last year in the same period, the Ethanol division was not there hence it is not a like comparable. Q2 FY ’25 performance highlights: revenue from operations is up by 59.5% to INR146.6 crores, EBITDA for the quarter grew by 5.8x year-on-year to INR14 crores, EBITDA margin stood at 9.6%, and PAT grew by 10x to INR7.6 crores. H1 FY ’25 performance highlights:
Revenue from operations is up by 67.6% to INR294.2 crores, EBITDA for the quarter grew by 5.6x year-on-year to INR27.88 crores, EBITDA margins stood at 9.4%, and PAT grew by 9.7x to INR15 crores.
Coming to our divisional performance. Consumer division: revenue for Q2 FY ’25 stood at 46.6 crores compared to INR47 crores in Q2 FY ’24 and H1 FY ’25 stood at INR86.6 crores compared to INR85.8 crores in H1 FY ’24. Largely, the revenues for Q2 FY ’25 and H1 FY ’25 have remained flattish on a year-on-year basis owing to a reduction in oil prices and seasonality factors at play. EBITDA for Q2 FY ’25 stood at INR4.6 crores as compared to INR5.2 crores in Q2 FY ’24 and for H1 FY ’25 stood at INR10.6 crores as compared to INR9.5 crores in H1 FY ’24. Increase in ad spend in Q2 FY ’25 had an impact on EBITDA and this is in line with our strategy. Further, we are scaling up the pasta portfolio under the Oleev Kitchen brand with celebrity endorsement and targeted advertising. Overall demand is improving driven by expanded distribution, innovation, and new product launches in our food basket.
Bulk division: in Q2 FY ’25 our revenue stood at INR19.6 crores as compared to INR44.9 crores in Q2 FY ’24 and H1 FY ’25 stood at INR49.5 crores as compared to INR89.7 crores in H1 FY ’24. The first half traditionally sees softer performance as fresh crops start entering the market from the second half onwards. EBITDA loss of INR30 lakh in Q2 FY ’25 as compared to loss of INR2.2 crores in Q2 FY ’24 and H1 FY ’25 loss stood at INR1.5 crores as compared to loss of INR2.9 crores in H1 FY ’24. Ethanol division: in Q2 FY ’25, our revenue stood at INR80.4 crores and for H1 FY ’25 stood at INR158.2 crores. EBITDA for Q2 FY ’25 stood at INR9.9 crores and for H1 FY ’25 stood at INR19.4 crores. The ethanol distillery has stabilized and is currently operating at its optimum capacity. Engineering work for Phase 2 expansion has been completed and construction will begin shortly.
Given our place today, we believe our consolidated revenues for FY ’25 will increase by 75% to INR700 crores from INR400 crores. Division-wise split will be as follows: Branded division revenue will contribute INR210 crores, Bulk Oil division revenue will contribute to INR215 crores, and Ethanol division revenue will contribute to INR275 crores. The revenue growth will be attributed to as follows. Consumer division, we will be launching new products in niche categories. Furthermore, our focus will be on expanding our assortment in quick commerce, modern trade, and general trade. We will hire a new brand ambassador and increase our advertising spend moving forward.
Bulk division, with good rains then fresh crop starts entering the market and macroeconomic conditions continue to improve.
Ethanol division: we have recently received an order for ethanol of INR300 crores from multiple OMCs for 41,600 kl, which is in line with our capacity for the following ethanol sugar year starting November 2024. Along with the sale of byproducts, this firms up our revenue for the coming year. We are in the process of expanding our manufacturing capacity to 310 KLPD i.e. expansion of an additional 180 KLPD with an estimated capex of INR100 crores. We expect EBITDA in FY ’25 will be at INR50 crores as compared to INR9.1 crores in FY ’24. Further, PAT is expected to be at INR30 crores in FY ’25 from a loss of INR1.4 crores in FY ’24. Margins and profitability. Our focus will be on enhancing profitability as increased cash flows will drive greater investment in our Branded Consumer business. Furthermore, EBITDA margins will improve supported by a stronger product mix in the branded segment and robust performance in the ethanol business.
With this, now I can open the floor for the questions and answers.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Gunit Singh from Counter Cyclical PMS. Please go ahead.
Gunit Singh
Hi sir. You mentioned guidance of INR700 crores in FY ’25. So, I would like to understand whether this is conservative guidance or an optimistic guidance and what is the downside risk to this and what gives us the confidence of achieving this? And secondly, I would like to understand the operating margins that we can expect in FY ’25 on the steady state operating margins. Because in FY ’23 and before that, we were operating in the range of 1% to 3% operating margin while in this quarter we are observing about 8% to 9% operating margins. So, I mean what should be the steady state operating margins going forward and for FY ’25?
Akshay Modi
So as far as revenue guidance is concerned, we are confident of achieving it and it is in line with what we’ve already achieved so far this year. And for margin guidance, we’ve already provided EBITDA guidance and PAT guidance so I think you can extrapolate from that.
Gunit Singh
Sir, can you please repeat the EBITDA and PAT guidance? I am sorry. I might have missed that.
Akshay Modi
So the consolidated revenue guidance is INR700 crores, EBITDA guidance is INR50 crores, and the PAT is INR30 crores.
Gunit Singh
Alright, sir. Got it. Thank you very much.
Operator
Thank you. Our next question is from the line of Sandeep Dixit from Arjav Partners. Please go ahead.
Sandeep Dixit
Hi. Can you hear me clearly?
Akshay Modi
Yes, please go ahead.
Sandeep Dixit
So, I just wanted to understand the correlation between EBITDA margin across Branded and Bulk. There doesn’t seem to be any correlation inverse or either way because — I mean how does it work? Your EBITDA margin on Bulk for example has been all over the place. It’s gone from minus — let’s say, minus 4.81% last year September quarter to minus 1.3% whereas your Branded has gone from 11% to 9.92%. What exactly — is there any correlation between the way the Branded business works and the Bulk business works?
Akshay Modi
There is no correlation between the two. The two operate entirely independently. The Bulk business has two margins at play. One is a processing margin and the other is a trading margin as it’s a low margin business. And as I mentioned earlier on the call, over the last 2 years we faced some headwinds in the bulk oil business as the government had imposed some price restrictions as well as reduced import duties. So, there was a drastic inventory loss over a few quarters. But that has bottomed out and the Bulk division performance will improve going forward. Whereas the Consumer division operates on relatively straightforward margins, there’s not that much volatility, more stable margins. And in Q2 particularly we have mentioned that we have increased our ad spends in order to pursue faster growth. So, that’s why Q2 margin is a little lower than Q1 margin. Does that answer your question?
Sandeep Dixit
Yes, it does. Just to follow up on that. What would be a sort of a steady-state margin that you can expect in the Bulk business? Because last six quarters, you have made negative margins on this. So, does it make sense to carry on that business at all?
Akshay Modi
Yes. Like I said, that’s a one-time thing. We have probably never witnessed this in our lifetimes. So that is stabilized and moving forward, it should be able to contribute, we haven’t given that number yet, but anywhere between 5% to 6% EBITDA margin.
Sandeep Dixit
Thank you.
Operator
Thank you. Our next question is from the line of Amit Agicha from HG Hawa & Co. Please go ahead.
Amit Agicha
Good afternoon. Am I audible?
Operator
Yes, Amit. Please go ahead.
Amit Agicha
Thank you for the opportunity and congratulations, Mr. Modi. It was an excellent presentation. It doesn’t look like your first con call. Extremely fantastic presentation and most of the things have been cleared. The question was with respect to the FMCG competition. Like given the expansion of the new product launches, like the initial response — how was the initial response on grain pasta, multi-grain pasta, olive, peanut butter, ready-to-mix beverage named by Jynx? Are there any other plans for additional products in the coming quarters?
Akshay Modi
Thank you very much. Much appreciated for your comments. As far as the new product launches are concerned, in multi-grain pasta we’ve had a very favorable response and as I mentioned, we are in the middle of scaling up that portfolio pan India, including targeted advertising. And for the other two as well, as far as peanut butter is concerned, yes, that’s a very crowded market, but we have some product differentiation there and we aim to carve out a niche for ourselves within that. And Jynx is fairly new, we piloted this in the summer as a
Seasonal product and we have got a very good response and we will be scaling it up in the upcoming season.
Amit Agicha
And the last question was connected to the Ethanol division. Can you elaborate the timeline and expected final impact on the Phase 2 ethanol plant expansion and will there be any specific challenges in scaling from 130 KLPD to 300 KLPD?
Akshay Modi
So with the experience of the first plant now, we are able to execute faster. The 180 KLPD engineering work is already completed, as I mentioned, and we will be starting construction as early as maybe two weeks from now. And we hope to complete it by the second half of next year — next financial year.
Amit Agicha
Any specific challenges?
Akshay Modi
Not at present. I don’t see many challenges.
Amit Agicha
Thank you. It was very helpful. Thank you and all the best for the future and Happy Diwali to the whole team.
Operator
Thank you. Our next question is from the line of Rohith from Marshmallow Capital. Please go ahead.
Rohith Potti
Thank you for the opportunity. And I would like to echo the comments of the previous participant. It was excellent opening remarks statement. It was quite comprehensive and helped us get a context for the company. So, my questions are the first one on the Oleev business, the Consumer business. So while the year-on-year business revenue is stagnant, even if I see on a yearly basis last 3 years has been roughly around INR150 crore to INR180 crore. So, I understand there might be a fluctuation because of the edible oil price change, but could you give us a sense of how the volumes have moved over the last three years in this business?
Akshay Modi
So, we have not shared volume data yet. But commenting on the revenue, yes, last two years oil prices were down consecutively and down to the extent of almost 40% to 50%. So despite that, we have had stable revenue. And the other reason was also that while we were investing in our Ethanol division, we had reduced our ad spends over the last year or so significantly. But now since all the divisions are performing well, we have increased our ad spends to target a faster growth rate.
Rohith Potti
Okay. Fair enough. So, am I right in thinking that in the oil part of our Consumer business, we follow the MRP route and hence the reduction in oil prices doesn’t impact us so much or beyond a certain level, we do pass on the price benefit? Is that how it works?
Akshay Modi
I mean that’s similar to most FMCG. So with little bit of price movement, we manage that with consumer offers and beyond a point, then we have to take price reductions.
Rohith Potti
Got it. So, is it fair to assume that you have taken considerable price reductions over the last two years and hence the volumes have improved? So in some sense, I want to understand that the market share in the country has improved because revenue doesn’t seem to indicate that.
Akshay Modi
Yes. I wouldn’t be able to comment on the volumes as I said. But as far as revenue is concerned, you’re absolutely right.
Rohith Potti
So, I just — I don’t want the exact number, volumes qualitatively, it has improved over the last two, three years.
Akshay Modi
Yes, of course otherwise we won’t be able to maintain revenue when oil prices have fallen by 40%.
Rohith Potti
Okay. Thank you so much. And similarly on this, it would be great to hear your thoughts on the consumer strategy in general because over the last two, three years, my assumption was that we will be focusing on becoming a health-focused FMCG brand, extending olive to pasta, peanut butter, etc. So, how does Jynx and PIPO fall in — I mean how does it all dovetail into a coherent strategy is something that will be great to hear from you?
Akshay Modi
Sure. When we look at new product launches, we work on three vectors. One is consumer and brand salience, the other is distribution skills, and the third is competition and margin in the category. So we believe that ready-to-cook snack products like popcorn for instance, the distribution and consumer are the same. The only different thing is the brand there. And same for ready-to-mix drinks. So for example in Jynx, we have not launched a ready-to-drink beverage, we have launched a ready-to-mix beverage brand, which also goes through the same channel, which is premium grocery outlets.
Rohith Potti
Understood. In your comments, you also mentioned that we are the third largest premium oil brand in the country. Would it be possible to share who you see as the Top 2 brands and what is the difference between us and the second as of today?
Akshay Modi
The Top 2 would be I think Marico Saffola and Agro Tech Sundrop and I think we are inching very close to the second spot.
Rohith Potti
So, Sundrop, I would not think it is a premium brand, is it? It’s a mass brand is what I assume. Am I mistaken?
Akshay Modi
Within edible oil’s price ladder, it is a premium brand
Rohith Potti
Okay. Thank you. And my last question on ethanol. You expect to commission this plant by the second half of FY ’26. Is that right?
Akshay Modi
That’s correct.
Rohith Potti
And like for the first phase we would have a contract hopefully ready with the second phase as well as we launch it.
Akshay Modi
The contracts are normally — they come out every quarter so once we are ready with the plant, we will be bidding for that quantity.
Rohith Potti
What is the distance between the plant that we have in ethanol and the potential customers so what is the radius I just to understand the logistics?
Akshay Modi
The nearest OMC depots are about 9 kilometers from us.
Rohith Potti
And that can take the entire expanded capacity as well?
Akshay Modi
Yes and no. not necessarily because there are other plants from other states as well. I mean OMCs have their own sort of algorithm to allocate depots. For example in the upcoming year, we have got Jharsuguda in Orissa, etc., So they have their own way of allocating quantities, but they compensate on freight based on what you get.
Rohith Potti
Okay. Thank you so much. This is very helpful. I’ll get back in the queue.
Operator
Thank you. Our next question is from the line of Tushar Vasuja from Yogya Capital. Please go ahead.
Tushar Vasuja
Hey there. Am I audible?
Operator
Yes, Tushar. Please go ahead.
Tushar Vasuja
Thank you for the opportunity, sir. I have a couple of questions. First one is that you received the 41,600 kiloliters order so is it a fixed confirm order or is it just an allocation?
Akshay Modi
It’s a confirmed order. The allocation comes as a confirmed order and for the first quarter they give you POs, etc., and then they release purchase orders quarterly. But yes, it’s a confirmed allocation.
Tushar Vasuja
So, there’s no expectation of any shortfall from the amount you’re allocated?
Akshay Modi
No, it can only be based on our own operational inefficiencies.
Tushar Vasuja
Okay, sir. And sir, it also mentioned that the entire order is worth around INR300 crore. That comes to around INR72 per liter. So, are the prices for ’24-’25 season out or is it a rough estimation based on your part?
Akshay Modi
This is based on the current prices in the tender.
Tushar Vasuja
So, these prices will be followed for the next year also.
Akshay Modi
See, the current tender gives these prices, but if there’s any price changes then they communicate that separately through corrigendum and that hasn’t come yet.
Tushar Vasuja
Okay. So there is a chance of the order size being changed later on.
Akshay Modi
Yes, that’s correct. Hopefully only upward.
Tushar Vasuja
Yes. And sir, what was the A&P spend as a percentage of revenue for this quarter and how will it shape up going forward?
Akshay Modi
So, we will get back to you with that data piece.
Tushar Vasuja
Okay, sir. And sir, last time we talked, you mentioned that are thinking of — you have thoughts of winding up or spinning off the Bulk division so any update on that?
Akshay Modi
No, it’s too soon. Like I said we will take that decision as and when.
Tushar Vasuja
Okay. Sir, and just last one last question. Is the con call going to be a regular quarterly thing from now on or it’s no?
Akshay Modi
Yes, that is our thought process, yes.
Tushar Vasuja
Okay, sir. Thank you.
Operator
Thank you. [Operator Instructions] Next is a follow-up question from line of Rohit from Marshmallow Capital. Please go ahead.
Rohith Potti
So, I just wanted to confirm the EBITDA margin possibility for. Is this the standard — the normalized EBITDA margin that we can generate around 12% to 12.5% that we see this quarter?
Akshay Modi
For which division?
Rohith Potti
Ethanol division.
Akshay Modi
Yeah. Ethanol division, as I said, given where we are and how we are operating our plants and the value addition we are doing on our byproducts, I think 10% to 12% margin is achievable — maintainable in the near to medium term.
Rohith Potti
But this band would expand once we commence the new capacity is that right?
Akshay Modi
I think it’s kind of modular. So only some amount of operational leverage is there in terms of manpower cost, etc., but the product cost remains the same.
Rohith Potti
Sure. Understood. And sir, what is the working capital — I mean let’s say the working capital investment as a percentage of sales for the ethanol business on an annual basis?
Akshay Modi
On an annual basis, I will have to check that number. I will get back to you on that.
Rohith Potti
Yeah. So, effectively what is the payback period or the return on capital on an annual basis we can get from ethanol is what I am trying to understand, that’s it.
Akshay Modi
My team informs me that for FY ’25 Ethanol division, we are looking at ROCE of approximately 18.5%.
Rohith Potti
Okay. Thank you. That’s it from me. Thank you so much.
Operator
Thank you. [Operator Instructions] Our next question is from the line of Ashay Jain from Jain Capital. Please go ahead. Ashay sir, your line’s unmuted. Please go ahead with your question.
Ashay Jain
Sir, couple of questions from my side. So firstly, can you help us better understand the bulk oil business? What are the key drivers of the business? How are the pricing contracts decided in that segment? And how should we look at going forward? And is there any entry barriers for the players to enter in this particular vertical?
Akshay Modi
The bulk oil business is an oil processing business and it’s a legacy business. We have had it for the last 40 years and these plants are very efficient. They have been around for a long time. And since it’s in our geography, we are based on a local raw material base so it’s basically primarily dependent on a processing margin. And in terms of barriers to entry, it’s kind of limited by the local raw material availability. So, I think the capacities in our region are kind of optimized and there’s very little room for any more plants to come up?
Ashay Jain
Understood. And sir, the pricing contracts?
Akshay Modi
It is commodity pricing; it’s fluctuating on a daily basis.
Ashay Jain
Okay. Understood. Yeah. I think that’s all from my side. Thank you.
Akshay Modi
So, I just go back to the previous question. I think there was a mistake. The 18.5% ROCE number is on a consolidated basis not just ethanol. That number would be higher. We will get back to you with that.
Operator
Thank you. Our next question is from the line of Ankit Minocha from Adezi Ventures Family Office. Please go ahead.
Ankit Minocha
Good afternoon, Akshay. Apologies, I’ve joined the call little late so if this is slightly repetitive. I firstly wanted to understand with regard to the Bulk business. I mean with rice prices expected to be relatively docile moving ahead, what is the kind of margin profile that you would probably be looking at for the Bulk business for H2 of this year?
Akshay Modi
In the Bulk Oil business, we process rice bran not rice particularly so rice prices don’t have any bearing on this. So as far as margins are concerned, as I mentioned typical steady state margins are about 5% EBIDTA margin. Since the first two quarters have been a little muted, we hope that in the second half of the year once the new season comes in, we will be able to cover up.
Ankit Minocha
Understood. Thanks a lot for clarity. And secondly, I mean the growth trajectory given in the guidance and also the results which were excellent, that looks clear I mean in terms till the Q4 of this year. Just wanted to understand beyond that, say for the year after that, what are the thoughts to maintain the strong growth that we are kind of going to be seeing from ethanol this time? Are there plans for capacity expansion or anything else that you have in mind?
Akshay Modi
Yes. As I mentioned in my opening remarks, we have growth plans for the Consumer division as well as the Ethanol division. And the Ethanol division, we are expanding our capacity from 130 KLPD to 310 KLPD, adding 180 KL. So, that new plant should come online by second half of FY ’26. And given the cash flows that we are generating now in the company, we aim to increase our ad spends and investment in the Consumer division and grow that faster as well.
Ankit Minocha
So when we say H2 of 2026 so that means same time probably next year, right?
Akshay Modi
Correct.
Ankit Minocha
Thanks a lot.
Operator
Thank you. Next is a follow up question from the line of Sandeep Dikshit from Arza Partners. Please go ahead.
Sandeep Dixit
Thank you. Just a bookkeeping question. The difference between the standalone and the consol numbers I presume is the ethanol business, am I right?
Akshay Modi
That’s correct.
Sandeep Dixit
Okay. Is that for your wholly-owned subsidiary? I am sorry for asking this question.
Akshay Modi
Yes, it’s a wholly owned subsidiary.
Sandeep Dixit
Right, sir.
Operator
Thank you. Our next question is from the line of Faisal Hawa from Hawa Capitals. Please go ahead.
Faisal Hawa
Sir, the EBITDA margins in the Ethanol divisions are rather low than projected before. So is it because the rice procurement prices have been little higher this year?
Akshay Modi
Are you talking about Q1 and Q2, the 12% EBITDA?
Faisal Hawa
Yes. And plus we are also projecting going forward 10% to 12% only.
Akshay Modi
Yeah. I mean 12% is the number that I have talked about for a long time. Obviously in the first two quarters the crop is not there. So, now in Q3, Q4, the crop comes in. So, the margins on an average basis could be a little higher for the year.
Faisal Hawa
So, fair to assume that on a steady state basis it will be 12%.
Akshay Modi
Yes, in that region. Yes.
Faisal Hawa
And second is that what is our strategy regarding so many brands? Are we like trying various things and then maybe one or two brands will emerge as blockbusters and how are we doing with respect to quick commerce and modern trade? How much is our sales to both of these channels and which channels do we propose to now increase? And what do we want to do with our legacy oil business because that business is always a drag on our margins and overall workings also?
Akshay Modi
Sorry, this was multiple questions so I will try and answer them one by one. As far as the number of brands is concerned, I mentioned earlier that we identify white spaces within our distribution and brand salience and we launch products. Of course some of them will be able to be blockbusters and some will sort of get us a decent enough market share with a profitable growth. So, that is our objective and we aim to leverage all the channels — all distribution channels that we have and we are present across the spectrum from Q-commerce, to ecommerce, modern retail, general trade, as well as the CSD Army Canteens. And the channel mix will change as the channels evolve. It’s not like we are paying special attention to just one and not the other. But yes, like you said, quick commerce is growing much faster. I think they are contributing to almost 15% of our topline now and the number is growing very fast. So, let’s see how it plays out. And I think the last question was…
Faisal Hawa
About the legacy oil business, which is…
Akshay Modi
So, that the management will take a call as and when. It’s probably still a bit early, we hope to scale up the other two divisions in the near term and then take a decision on that.
Faisal Hawa
And when will we take a call to actually manufacture our own products like noodles, pasta, etc. and not contract manufacture them? At what point or do you have a value at in your mind where you will actually then do the manufacturing ourselves and how many basis — percentage points will it add to our EBITDA?
Akshay Modi
So right now we are operating on an asset-light model and once specific products like pasta you mentioned are scaled up enough where it warrants backward integration, we will do it if we see that our margins in it. So, right now it’s too early to say.
Faisal Hawa
And what will be our branding strategy and advertising, will there be like different brand ambassadors for each like for pasta and noodles and for again oil or will we kind of go in for more of a social media branding strategy where we have a very targeted approach to our audience?
Akshay Modi
See, social media is one of the media vehicles that we use, but it’s part of a larger digital marketing strategy and these days even television, which is for example CTV, connected television forms part of digital itself, but it’s actually television. So, we use all the different media vehicles and as far as the brand ambassador is concerned, we could sort of make a deal for oil as well as pasta, which we will be announcing shortly.
Faisal Hawa
And are we particularly weak in South India or is it not a right statement to make?
Akshay Modi
South India is also quite vast. So for example in Andhra, Telangana and Karnataka, we have decent volumes and market shares. Maybe Tamil Nadu and Kerala, we are relatively weaker as we entered those markets much later and we hope to catch up.
Faisal Hawa
Okay. And beyond this 3.10 lakh ethanol capacity, it’s difficult to expand at the current location.
Akshay Modi
We have not thought beyond that at the moment.
Faisal Hawa
Thanks a lot. I appreciate the answers to all my questions.
Operator
Thank you. Our next question is from the line of Rohit Thakkar from 4P Capital Partners. Please go ahead.
Rohit Thakkar
Hi. Thanks for taking our question and thank you so much for this fantastic presentation, Mr. Modi. Just a couple of questions that we had from our perspective. One is could you help me understand what is your utilization level at the ethanol plant for the last quarter?
Akshay Modi
So in Q2, it’s fairly optimum. I think we are almost at about, let’s say, 90% to 95% and it will only increase going forward.
Rohit Thakkar
Okay. And in terms of your Consumer business, what’s the split in revenue between your edible oil versus non-edible oil business?
Akshay Modi
What is the revenue split?
Rohit Thakkar
Yes.
Akshay Modi
The segmental revenue in Q2, we have done INR46.6 crore from the Consumer division and INR19.6 crore from the Bulk division.
Rohit Thakkar
No. So, my question was within the Consumer division, what is the split between edible oil and non-edible oil?
Akshay Modi
So, we don’t give that split. But you can say foods would be about — non-oil sales would be about 15%.
Rohit Thakkar
Understand. Okay. And for your capacity expansion on ethanol, what — how do you intend to fund that? That itself will require about INR100 crores. So, is it internal accruals plus borrowing or are you looking to do capital raise?
Akshay Modi
So out of INR100 crores, see, the plant will also take about a year to establish and the fund flow will be such that I think we will have about INR50 crores through internal accruals and the rest through either debt or equity and the management is yet to take a decision on that.
Rohit Thakkar
But INR50 crores could be done through internal accruals and that’s what the expectation from…
Akshay Modi
Yes, that’s correct. So, there’s not a major gap between what we need and what we have.
Rohit Thakkar
Sure. Okay. Thank you.
Operator
Thank you. Our next question is from the line of Shaurya Punjani from Azav Partners. Please go ahead.
Shaurya Punjani
Hi. Am I audible?
Operator
Yes, Shaurya, you’re audible.
Shaurya Punjani
So, I have two quick questions. So, we are guided for 75% growth in FY ’25. So, what is the growth momentum we are seeing in FY ’26-’27?
Akshay Modi
We haven’t given a number for that yet, but like I said, we expect high growth from two divisions, which is the Ethanol division and the Consumer division. In the Ethanol division, we will be increasing our capacity from 130 KL to 310 KL and that expanded capacity should come on line by the second-half of FY ’26. So, that gives you growth for FY ’26 as well as FY ’27 when we will get the full year for that plant as well and Consumer division will continue to grow.
Shaurya Punjani
What is the current ad spend to sales ratio?
Akshay Modi
So, we will get back to you on that number please.
Shaurya Punjani
Okay. Sure. Thank you.
Operator
Thank you. Next is a follow up question from the line of Ankit Minocha from Adezi Ventures Family Office. Please go ahead.
Ankit Minocha
Hi. Just wanted to also understand that the recent import duty on oils, I mean how does that affect us whether it’s positive or negative and what that also means the price increases due to some compulsion or due to strength.
Akshay Modi
So, your first question is about the import duty. So, let me answer that first. As far as the Consumer business is concerned, we’ve taken price increases so it’s a positive impact on revenue side whereas margins should remain stable. On the Bulk business side, it’s a very positive impact because as prices increase, trading margins will reverse from negative will come back into positive. And at higher price points of oil, we feel that more raw material comes into processing for oil rather than going for other uses. So, it’s a positive impact for our Bulk business as well. What was your second question, please?
Ankit Minocha
I think you have already answered that in terms of the price increase – so any price increases planned on the Consumer business as well.
Akshay Modi
Yes. So, that’s already happened.
Ankit Minocha
Yeah, So I mean just what is the import regulation? How does it affect you in terms of olive oil, the change in import regulation in terms of raw materials?
Akshay Modi
I didn’t understand your question, sorry.
Ankit Minocha
Just the new import regulation, does that mean that the raw materials also become…
Akshay Modi
You mean the import duty?
Ankit Minocha
Yes, import duty.
Akshay Modi
The import duty has gone up on other soft oils not on olive oil. The olive oil import duty is already at the peak.
Ankit Minocha
Right. So, could there be also play coming from substitution into olive oil?
Akshay Modi
So, our product portfolio is very diversified and strategically positioned to take care of this. So, we have pure olive oils and then we have multi-source edible oils which are blend of olive oil with other oils and that helps us maintain price points and margins.
Ankit Minocha
And in the blend, does the import duty impact you?
Akshay Modi
It impacts on other soft oils. So for example if import duty goes up on palm oil, soybean oil, and sunflower oil; it affects the entire basket at the bottom end so even rice bran oil prices go up. So, it affects us to that extent. And we’ve taken price increases for the multi-source oil and so has the rest of the industry.
Ankit Minocha
Understood, sir. Thanks for the color there. Secondly, I mean this might be slightly hypothetical. But is there any link to Godfrey Phillips as a business for you guys, I believe your office is close by, but is there…
Akshay Modi
No, they are two different.
Ankit Minocha
They’re completely different. So, no synergies of distribution or anything.
Akshay Modi
No.
Ankit Minocha
Okay. And any chance you guys are looking for a preferential or an equity fund raise anytime soon?
Akshay Modi
So, I answered this question on the previous one as well. Maybe in future we could look at something. We haven’t taken a decision on how to fund our expansion of ethanol through debt or equity. But in the future that is a possibility, but I wouldn’t be able to comment on that right now.
Ankit Minocha
Right. Thank you so much.
Operator
Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Akshay Modi for closing comments.
Akshay Modi
Thank you, everyone. I hope we have been able to answer all your questions satisfactorily. However, if you need any further clarifications or want to know more about the company, please contact SGA, our Investor Relations advisors. Wish you all a very Happy Diwali and a prosperous year ahead. And thank you once again for taking the time to join us during this call today.
Operator
[Operator Closing Remarks]