Foods & Inns Navigates Q2 FY26 with Strong Top-Line Growth Amidst Profitability Headwinds

Foods & Inns Limited, a venerable name in the Indian food processing industry with over five decades of experience, recently announced its financial results for the second quarter of Fiscal Year 2026 (Q2 FY26). The company reported a consolidated total income of 195 crore, marking a commendable 14% year-on-year growth. However, profitability metrics saw a decline, with EBITDA falling by 22% to 20 crore and Profit After Tax (PAT) experiencing a significant 94% drop to 1 crore. This divergence between robust revenue expansion and reduced profitability warrants a closer look at the underlying factors.

The primary driver behind the profitability dip was a non-cash, mark-to-market (MTM) forex loss of 5.46 crore, stemming from currency fluctuations on outstanding exposures. Management clarified that this is an accounting impact and not a realized cash loss. Operationally, the company demonstrated strong performance, with Q2 sales tonnage registering a robust 25% growth. This was largely fueled by a sharp 40% increase in export sales and a healthy 17% rise in domestic sales. Despite these positive volume trends, other operating expenses increased, partly due to expanded in-house production capacity and higher export freight charges, contributing to the EBITDA contraction.

Segmental Performance and Strategic Focus

Foods & Inns operates across diverse business verticals, including fruit and vegetable pulping, spray-dried powders, frozen foods, spices, Tetra Recart products, and the nascent Pectin segment. The company's revenue mix for FY25 highlights its core strengths:

The Mango Pulp segment continues to be a strong performer, benefiting from a highly promising export market outlook. India's processed mango pulp has become price-competitive against Mexico due to lower Totapuri prices, leading to strong demand from new customers and early indications of significant call-offs from contracted customers for December 2025 to June 2026. The company has also secured a substantial volume commitment for Tomato Paste, with dispatches scheduled for completion by June 2026.

Frozen Food is another growth engine, with Q2 FY26 volumes increasing by approximately 39% year-on-year and H2 FY26 volumes projected to rise by 44% year-on-year. This growth is supported by encouraging global demand and expansion into new markets.

However, not all segments performed uniformly. The Kusum Spices segment delivered a stable but flat performance this quarter, struggling to gain significant traction against established brands. Management acknowledges this challenge and is recalibrating strategies, planning targeted marketing and digital campaigns to increase its customer base and recall value, especially among newer generations.

Tetra Recart, a sustainable carton packaging alternative, has seen slow offshoots in terms of repeat and new international orders. While exports to Finland and Russia have been reported, and new markets like Germany, Canada, and North America are being explored (with an initial order of around 200MT expected), the segment's FY26 revenue visibility stands at approximately 5 crore, a notable revision from earlier, more ambitious targets.

Strategic Initiatives and Future Outlook

Foods & Inns is actively pursuing several strategic initiatives to drive future growth and enhance operational efficiency. The company plans to expand its spray-drying capacity by installing a mid-size plant within the existing facility over the next 18 months. This expansion is designed to be low-capex, augmenting capacity to meet market demand for powder products.

In a move towards technological advancement, the company has invested in advanced AI technologies to enhance production efficiencies and automate key back-office processes. These investments are expected to yield progressive operational savings over time.

A significant step towards sustainability is the Pectin Project. The company has invested in and set up a Joint Venture to convert fruit waste generated during pulping into Pectin, Oils, and Butter. This initiative not only boosts waste management capabilities and contributes to a circular economy but also creates a new value-added segment. The lab test results for the Pectin produced have already been approved by large MNCs and Indian companies, indicating strong market potential.

Management has set an ambitious internal volume growth target of 20% for both the current and next financial year, emphasizing tonnage growth as a key performance indicator, given their pass-through model for raw material prices. While the sales value may fluctuate with raw material costs, the focus remains on increasing absolute gross profit, EBITDA, and PAT through higher volumes.

Sustainability and Community Engagement

Foods & Inns is deeply committed to sustainable agricultural initiatives. Through programs with the IDH (Sustainable Trade Initiative), the company supports smallholder mango farmers in regions like Ratnagiri and Konkan. These programs address environmental issues such as climate impact, pesticide management, and crop traceability, alongside social aspects. The company also promotes direct procurement of farm inputs through Farmer Producer Companies, aiming for transparency, efficiency, and fair prices for raw materials.

In conclusion, Foods & Inns Limited is demonstrating strategic clarity and disciplined execution. Despite the temporary profitability headwinds in Q2 FY26 due to non-cash forex impacts and increased operational costs, the company's core businesses show strong demand. Its proactive investments in capacity expansion, advanced technology, product diversification, and sustainability initiatives, particularly the Pectin project, position it for sustained long-term growth and enhanced value creation. The management's commitment to recalibrating strategies for underperforming segments and focusing on volume growth underscores its adaptive approach in a competitive market.