Key highlights

• The volume growth for the Q3 was 6% along with same amount of price growth.

• The margin was depressed due to rise in raw material cost. Raw material edible oil prices has grown drastically in the last quarter. Due to lag of time effect the margin has suffered. The company has increased Sundrop brand price significantly in the last quarter but with time lag, for e.g. SKU of Rs 99 has been now raised to Rs 128. The price hike is enough to cover up the input cost as of now. However, the management expects that raw material oil cost may rise in the future. The price hike will be taken then taking into consideration the volume impact. Last time when prices were hiked, volume was impacted. This time there was no such impact seen when price was increased.

• The company also wanted to take the opportunity of volume gain, so reacted slowly on price hike.

• Volume of edible oil are good even with new price tag, which will help to see improvement in margin next quarter if raw material cost don't rise. The company is cautiously looking at the volume.

• Rath brand has been sold to Cargill for Rs 26 crore. The Rath used to do sales of Rs 120 crore annually and gross profit of Rs 3 to 4 crore. As brand was sold in end of December, Q3 number contains Rath sales figure also. The company will continue to make the brand till the Cargill don't achieve efficiency in the brand. So, in Q4 the company will continue to sale Rath but at no margin.

• The Rath brand was sold, so that it could focus on high margin premium brand.

• The part of profit from Rath sales was invested behind ACT II and Sundrop brands.

• ACT II is now available in 3.5 lakh stores and it aims to cross the half million stores very soon.

• ACT II is growing at 50% per annum.

• The management is not worried on localized pop-corn brands which are similar to ACT II and sold at SKU of Rs 10, which has 15 gms more content compared to it, as the management is more confident on its brand value and taste.

• In middle of the December, Inspector from Department of Revenue inspected the company on basis that the company was avoiding import duties on imported corn. As per regulations, corn imported in India through canalization agency, can bring it on free import duty, only if it is end user. As the company sell 20 kg bag to cinema halls, who then sell it to consumers, inspectors found it in violation of regulations. As such, the company has stopped supply of 20 kg bags to cinema halls from mid of December and is waiting for showcause notice from Department of Revenue.

• Only small portion of pop corn sales used to come from cinema halls.

• It has formed a subsidiary company for distribution and sales of its products. As a result , it was able to achieve 40000 stores distribution in last 2 months.

• It has acquired land in Gujarat for manufacturing the peanut butter and will take about 12 months to establish the facility. The full utilization of the facility can happen by end of next fiscal.

• To make peanut butter more appreciated by Indian consumer, it will go for localization of it, which could take place in next 6 months. By the end of the year, it will be available in more than 60-70 top cities of the country.

• On edible oil side, the management's main focus is to atleast maintain margin, rather than top line growth.

• Going forward, the company will try to have 3 brands in focus, rather than presently 2 brands: ACT II and Sundrop. As new brand requires lots of investment behind advertising and promotion, so will take time to bring 3^rd brand in its portfolio.