Sundrop Brands Limited: Navigating Growth and Challenges in Q2 FY26

Sundrop Brands Limited, formerly known as Agro Tech Foods Limited, has released its financial results for the second quarter and first half of Fiscal Year 2026, showcasing a period of strategic recalibration and focused growth. The company, a prominent player in India's packaged food sector, reported a consolidated revenue from operations of INR 383.3 Crore for Q2 FY26, marking an 8% year-over-year growth. For the first half (H1 FY26), revenue stood at INR 755.4 Crore, reflecting a 10% increase.

Despite a 2-3% impact on Q2 growth due to GST transition issues in late September 2025, the company demonstrated resilience. Consolidated EBITDA for Q2 FY26 reached INR 15.5 Crore, growing by 29% (excluding ESOP and one-time costs), while H1 FY26 EBITDA was INR 31.8 Crore, up 30%. The company reported a Profit/(Loss) Before Tax of (3.9) Crore for Q2 FY26 and 1.8 Crore for H1 FY26. These figures underscore Sundrop Brands' commitment to driving profitable growth amidst a dynamic market.

Segmental Performance and Strategic Focus

Sundrop Brands' strategy to concentrate on high-growth, high-margin core categories is yielding positive results. These core categories now contribute a significant 64% to the business, an increase from 53% in FY23. The company's portfolio is broadly divided into Sundrop Brands (58% of business) and Del Monte (42%).

Popcorn, a key segment, continues its strong trajectory, with a 12% value growth in Q2 FY26 and 16% in H1 FY26. This growth is fueled by both ready-to-cook and ready-to-eat formats, with the latter growing at an impressive 43%. The company launched four new popcorn products in H1 FY26, including Butter Blast and Cheese Blast flavors, catering to evolving consumer preferences for convenience and variety.

Culinary products, encompassing ketchups, sauces, and mayonnaise under the Del Monte brand, exhibited robust performance with a 15% value growth in Q2 and 12% in H1. This segment benefited from strong growth in both B2C and B2B channels, supported by strategic partnerships and marketing investments.

Premium Staples, primarily edible oils and oats, saw a 13% value growth in Q2 and 16% in H1. While the edible oil business maintained value, it experienced volume erosion, particularly in bulk packs, due to high sunflower oil commodity prices. The company is exploring strategies to protect volumes and margins in this segment.

Italian products, including olive oils and pasta, showed strong volume growth (13% in Q2, 10% in H1) but a value decline of 3% in Q2 and 5% in H1. This discrepancy is attributed to softening olive oil commodity prices, with the benefits passed on to consumers to maintain market competitiveness.

Spreads & Dips, particularly the Peanut Butter business, faced significant competitive pressure, resulting in an 11% value decline in Q2 and 8% in H1. To counter this, Sundrop Brands launched new high-protein variants (Dark Chocolate, Honey) and mass-segment offerings (Jaggery, Chocolate Peanut Butter) in Q2 FY26.

Driving Efficiency and Market Reach

Sundrop Brands is actively implementing several initiatives to enhance operational efficiency and expand market reach:

1. Sales Force Automation: The company is rolling out a mobile platform through Bizom to bring 490K outlets under coverage. Initiated in Q1 FY26, this project is being ramped up nationally, with 79% of the field force already tracking visits and productivity. The goal is to achieve 100% tech platform coverage by the end of the year, aiming to significantly improve efficiency and productivity.

2. Margin Improvement Programs: External partners have been engaged to guide margin improvements in packaging materials, manufacturing, and logistics. These programs have already yielded substantial results, contributing to a 250 basis points gross margin expansion in Q2 FY26.

3. E-commerce and B2B Growth: Focused investments in performance marketing for e-commerce and strategic partnerships in B2B have driven strong growth. E-commerce grew by 41% in Q2 and 42% in H1, while B2B revenue increased by 23% in Q2 and 12% in H1.

4. GST Reduction Benefit: The government's GST revisions, effective September 22, 2025, have brought 95% of Sundrop Brands' products under the 5% GST slab. The company has passed these benefits to consumers through reduced MRPs or increased grammage, expecting a boost in consumption and volume growth.

Financial Health and Outlook

Sundrop Brands maintains a robust financial position with a strong balance sheet, zero borrowing, and a free cash balance of INR 24 Crore as of September 30, 2025. This disciplined capital allocation strategy provides a solid foundation for future growth.

Management has articulated a clear vision for the future, aiming for strong double-digit EBITDA in the next four years. The company also aspires to double its pro forma top line from approximately INR 1,500 crores to INR 3,000 crores within 2-3 years. This growth will be driven by continued investment in core categories, strategic innovations, and leveraging complementary channel and manufacturing strengths.

Sundrop Brands' Q2 FY26 performance reflects a company actively navigating market complexities with strategic clarity and disciplined execution. The focus on core categories, digital expansion, and operational efficiencies positions it well for sustained profitable growth in the dynamic Indian food market.