Orkla India's Q3 FY26: Navigating Deflation with Volume-Led Growth

Orkla India Limited, a prominent multi-category food company deeply rooted in South Indian culinary heritage, has announced its consolidated financial results for the third quarter of fiscal year 2026 (Q3 FY26). The company reported a revenue from operations of INR 636 crore, marking a steady 3.4% year-on-year (YoY) growth. This growth was primarily driven by a robust 5.4% increase in underlying volumes, showcasing strong consumer demand despite prevailing market conditions. The quarter's performance highlights Orkla India's strategic focus on volume expansion and operational efficiency, even as it navigates a complex raw material landscape.

The company's profitability metrics also demonstrated resilience. Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) grew by an impressive 17.7% YoY, reaching INR 102 crore, translating into a healthy EBITDA margin of 16.1%. This strong EBITDA performance was attributed to sustained operational efficiencies and a strategic reduction in advertising expenses, partly influenced by the shift in the festive season. However, Profit After Tax (PAT) before exceptional items saw a more moderate growth of 3.8% YoY, primarily due to lower other income. Notably, PAT after exceptional items turned negative by 14% for the quarter, impacted by a one-time charge of INR 15.8 crore related to gratuity expenses following the implementation of new labor codes.

Segmental Performance: Spices Lead Volume, Convenience Foods Adapt

Orkla India's business is primarily divided into two key categories: Spices and Convenience Foods. Each segment presented distinct dynamics during Q3 FY26.

Spices Segment: The spices portfolio, a cornerstone of Orkla India's business, delivered an exceptional 10.1% YoY volume growth. This strong performance underscores the effectiveness of the company's initiatives to drive penetration, expand its range, increase purchase frequency, and enhance product value. However, the revenue growth for the spices segment was a more modest 3.1%. This disparity is largely due to continued deflationary trends in key raw material prices, particularly chili, which saw a significant reduction of 50%. To remain competitive, the company partly passed on these raw material cost declines to consumers, resulting in a lower price realization of approximately 7%. Management noted that early indicators suggest an inflationary trend in spices in the coming year, which is expected to bring top-line benefits as inventory turns.

Convenience Foods Segment: The convenience foods portfolio recorded a 6.0% YoY revenue increase. Within this segment, the breakfast and meals categories demonstrated strong double-digit growth, reinforcing the strength of Orkla India's value-added offerings. The sweets portfolio, however, experienced a temporary decline. This was primarily attributed to the advancement of the festive season, with many sales typically occurring in Q3 shifting to Q2 this fiscal year. Despite this, new product development (NPD) revenue for convenience foods grew by 41.6% YoY, indicating strong traction for new concepts. The company's fresh Idli-Dosa batter business has also shown positive development, reaching a margin position that supports expansion to other metro towns.

Strategic Thrusts: Digital, International, and Local Focus

Orkla India's strategic framework is built on three key pillars: strengthening its digital play, expanding its international footprint, and deepening its local market penetration. The digital commerce channel emerged as a significant growth driver, expanding by 43.4% YoY. This growth is supported by multiple initiatives across social media and digital commerce platforms. A notable launch in this space is MTR Prakriti, a digital-first brand with its own dedicated D2C site, targeting affluent young consumers seeking premium single-source spices across metros.

In international markets, the Gulf Cooperation Council (GCC) countries continue to be a key growth area, demonstrating sustained strength with a 16.4% YoY revenue increase. The strategy here is anchored on the flagship Eastern brand, transforming its offerings from pure spices to a total food play that includes breakfast, meals, and sweets. Eastern has successfully become the number one Indian spice brand in household reach across all UAE households. While other international markets like the US and North America experienced flat or declining growth due to past distribution network changes and the Red Sea crisis, the company remains focused on building these key markets.

Domestically, Orkla India maintains a strong focus on South India, which represents a significant and attractive market. The company's strategy involves driving penetration, range, frequency, and value of its products. Learnings from the Eastern acquisition have enabled MTR to effectively compete in the pure spices category in Karnataka, increasing its penetration from 20.3% in 2022 to 30.6% in 2025. Similarly, in Andhra Pradesh, MTR's penetration grew from 4.3% to 13% during the same period. The company believes there is a long runway for growth in South India, supported by its multi-category platform that enables locally resonant innovation.

Outlook: Confident in Future Growth and Efficiency

Looking ahead, Orkla India's management expresses confidence in an improved top-line performance, supported by a better consumption environment, strong volume development, and an anticipated turnaround in the deflationary cycle for spices. The company will continue its efforts to build the spices business with a strong local focus and drive consumption in its core geographies. Furthermore, all three platforms within the convenience food portfolio are expected to continue their positive trajectory with successful innovation. Orkla India remains committed to driving operational efficiencies and enhancing capital efficiency to further improve its margins, reinforcing its position as a resilient and value-creating company in the Indian food sector.