Modi Naturals Limited: Blending Growth with Strategic Shifts in H1 FY26

Modi Naturals Limited, a prominent player in India's edible oil and ethanol sectors, has unveiled its financial performance for Q2 and H1 FY26, showcasing a period of strategic adjustments and notable growth in profitability. The company reported a consolidated revenue of Rs 302.0 crore for H1 FY26, marking a 2.7% increase year-on-year. While revenue growth was modest, the company demonstrated strong operational efficiency, with EBITDA surging by 24.0% to Rs 33.0 crore and Profit After Tax (PAT) climbing an impressive 36.7% to Rs 20.6 crore compared to the previous year. This performance underscores Modi Naturals' continued focus on enhancing operational excellence, managing costs, and improving margins across its diverse business segments.

The company's performance was driven by its three core divisions: Ethanol, Consumer, and Bulk. The Ethanol Division emerged as a significant growth engine, contributing Rs 164.1 crore to H1 revenue, representing approximately 54.34% of the total. This division saw substantial margin improvement, with EBITDA margin increasing by 337 basis points in H1 FY26, primarily due to lower grain prices and improved raw material availability. The Consumer Division, accounting for Rs 90.7 crore (30.03% of H1 revenue), experienced some temporary headwinds in Q2 due to GST rate rationalization and increased marketing investments. Despite this, demand remained strong, supported by an expanded distribution network and successful new product launches like the Hing product and a top-ranking pasta range on quick commerce platforms. The Bulk Division, with Rs 47.2 crore (15.63% of H1 revenue), faced seasonal softness in Q2 due to the monsoon but achieved an EBITDA turnaround, moving from a loss of Rs 1.5 crore in H1 FY25 to a positive Rs 1.2 crore in H1 FY26, thanks to a strategic shift to a leaner inventory model.

Strategic Initiatives and Future Outlook

Modi Naturals is actively pursuing several strategic initiatives to sustain its growth trajectory. A major highlight is the ongoing expansion of its Ethanol Division. The second phase, adding 180 KLPD capacity, is on schedule to commence operations by December 2025, bringing the total capacity to 310 KLPD. This expansion is crucial, especially with the company securing orders worth Rs 400 crore from various OMCs for October 2025. Management anticipates that the ethanol division will remain a key growth engine, aligning with India's long-term national agenda for biofuels and renewable energy.

In the Consumer Division, the company is focusing on innovation and market penetration. Recent product launches, such as the Hing spice product, have garnered positive responses, strengthening the portfolio. The pasta range continues to perform exceptionally well, ranking among the top on leading quick-commerce platforms. Furthermore, Modi Naturals is extending its ready-to-cook pasta range with new shapes and a multi-grain variant, targeting the premium category. The company is also piloting Oleev Junior Peanut Butter, a product specifically for children, with plans for wider distribution in subsequent quarters. These initiatives are aimed at enhancing brand visibility, deepening consumer engagement, and expanding reach into Tier 2 and Tier 3 cities.

Management Commentary and Investor Confidence

Mr. Akshay Modi, Joint Managing Director, expressed satisfaction with the H1 FY26 performance, emphasizing the company's commitment to operational excellence and margin enhancement. He acknowledged the temporary impact of GST changes and increased marketing spend on Q2 profitability but highlighted their strategic nature for long-term brand building. The management is confident in achieving its full-year guidance for FY26, projecting total revenue between Rs 850-880 crore, EBITDA of Rs 80-85 crore, and PAT between Rs 42-48 crore. The strategic shift in the Bulk Division to a lower-inventory model has already demonstrated improved profitability, and the Ethanol Division's expansion is expected to be a significant growth driver.

Modi Naturals is also anticipating future demand for ethanol, driven by increasing blending rates, the advent of flex-fuel engines, and potential use in sustainable aviation fuel. The company's plant location in Chhattisgarh, a state with three crop cycles, provides a geographical advantage for raw material procurement, contributing to cost savings and enhanced margins. While an investor raised concerns about potential overcapacity in the ethanol sector, management clarified that regional demand variations and overbidding by some players might exaggerate the issue, and the company's secured orders provide good visibility.

In conclusion, Modi Naturals Limited is navigating a dynamic market with strategic clarity and disciplined execution. Despite facing some short-term headwinds, the company's underlying fundamentals remain strong, supported by a healthy consumer business, improving operational metrics, and a high-visibility order book in its Ethanol Division. The management's proactive approach to market trends, product innovation, and operational efficiency positions Modi Naturals for sustained growth and enhanced investor trust in the coming periods.