Key Highlights

The tax rate for the quarter was higher in Sep'16 quarter as it includes a one time tax element of Rs 1.4 crore of previous year. The tax rate for FY'17 will otherwise be around 31-32% as the company will get some R&D expenditure benefits.

During Sep'16 quarter, Sundrop oil net sales grew 4% which was all due to increase in price, as volume was more or less flat on YoY basis. The margins in this segment is in single digit and increase in competition has restricted the margins and also resulted in an increase in advertisement spend. In general in all the category of FMCG products where Patanjali brand is present, there is an increase in advertisement and promotional expenditure seen by almost every player of FMCG industry.

In Sep'16 quarter, Peanut butter grew 8% in value and 9% in volume. Ready to pop corn grew 13% in value and 12% in volume. The company buys the Peanuts on a six monthly basis and based on last 10 days update, the yield of peanuts are very strong for the current season in Gujarat which is the major market. Management expects the margins in this segment to inch up higher in H2 FY'17 in this product segment.

While rest of the business, which are more of trading business like wending sales, snacks, crystal oil etc grew by 3% on YoY basis. The margins for these segments are in low single digit.

Institution business saw 30% decline in revenue in Sep'16 quarter on YoY basis.

Gross margin (GM) expansion was driven by expansion in food business. Higher utilization and cost cut helped GM

The current utilization is hovering around 50% and the company does not require any major capex in next 15 months. The company can generate revenue of around Rs 450 crore from present capacity that is already installed.

Interest cost higher due to corn borrowing. The company purchases the corn in advance for the entire 12 months requirements and stocks the same. In this way, it is not worried about any increase or decrease in the intermediate stage. For next 12 months season, the company will start stocking in Feb Mar 2017.

There is a huge scope for further leveraging on the brands and making those single digit margin products to double digit and then to carry them to higher double digits going forward.

The management continues to remain focused on profitability.