Prataap Snacks’ Rs 541 crore quarter ended in cost-led loss

Prataap Snacks Limited, referred to as PSL, reported record income from operations of Rs 540.95 crore in Q2 FY27, the second quarter of financial year 2027, but posted a Rs 2.50 crore loss after tax. Raw-material costs increased 33.7% year on year to Rs 405.23 crore, reducing EBITDA, or earnings before interest, tax, depreciation and amortisation, margin by 290 basis points to 2.4%.

Why did PSL report a loss despite record revenue?

PSL reported a loss because its raw-material cost growth exceeded its revenue growth and reduced operating profit. Income from operations rose 25.9% to Rs 540.95 crore in Q2 FY27 from Rs 429.79 crore in Q2 FY26, while raw-material costs increased 33.7% to Rs 405.23 crore from Rs 303.10 crore. The company identified palm oil, potato, fuel and logistics costs as sources of sustained margin pressure.

EBITDA fell 43.7% to Rs 12.90 crore from Rs 22.90 crore despite the Rs 111.16 crore increase in quarterly income from operations. Depreciation was broadly unchanged at Rs 16.47 crore, compared with Rs 16.54 crore a year earlier, contributing to the Rs 2.50 crore loss after tax versus a Rs 4.64 crore profit in Q2 FY26. The presentation notes that Q2 FY26 profit after tax included exceptional income of Rs 77 lakh.

How far did PSL’s margins decline in Q2 FY27?

PSL’s gross margin declined by 430 basis points to 25.5% in Q2 FY27 from 29.8% in Q2 FY26, while EBITDA margin declined by 290 basis points to 2.4% from 5.3%. Gross margin in rupee terms still rose 7.7% to Rs 138.70 crore from Rs 128.79 crore, but that increase trailed the 25.9% rise in income from operations and the 33.7% increase in raw-material costs.

The first-half comparison indicates that pressure persisted beyond the quarter. In H1 FY27, income from operations increased 23.0% to Rs 1,031.38 crore, while EBITDA fell 21.9% to Rs 31.95 crore from Rs 40.91 crore in H1 FY26. Gross margin fell to 26.3% from 29.2%, EBITDA margin decreased to 3.1% from 4.9%, and PSL reported a Rs 3 lakh loss after tax against a Rs 5.33 crore profit a year earlier.

PSL’s cash profit, which it defines as profit after tax plus depreciation, remained positive at Rs 14.00 crore in Q2 FY27. That was lower than Rs 21.20 crore in Q2 FY26, while cash earnings per share, or cash EPS, declined to Rs 5.80 from Rs 8.90. The measure reflects the Rs 16.47 crore depreciation charge that exceeded the reported quarterly loss.

Which costs put the greatest pressure on PSL’s margins?

PSL identified palm oil, potato, packaging laminates, fuel and logistics as the principal pressures on its Q2 FY27 cost base. Its palm-oil price index reached 1.74 in Q2 FY27, compared with 1.42 in Q2 FY26 and 1.70 in Q1 FY27, with Q4 FY24 set as the base of 1.00. Management said palm oil and potato costs rose further during the quarter.

The input-price movements varied across materials. The potato index was 1.01 in Q2 FY27, below 1.18 a year earlier but above 0.87 in Q1 FY27. The laminate index stood at 1.21, compared with 1.00 in Q2 FY26 and 1.25 in Q1 FY27, while the pellet index was 1.02 versus 1.04 a year earlier.

PSL said calibrated grammage rationalisation, adjustments to channel margins and trade schemes, and operating-cost optimisation partly offset inflation. The company did not quantify savings from those measures by category, but its reported gross-margin change from 29.8% to 25.5% shows that the interventions did not fully absorb the higher input costs in Q2 FY27.

What drove PSL’s record Q2 FY27 revenue?

PSL attributed its record revenue to momentum in Namkeen and Potato Chips, recently launched products, wider product availability at existing distribution touchpoints and volume growth. Income from operations rose 10% sequentially to Rs 541 crore, according to the company’s rounded disclosure, crossing the Rs 500 crore quarterly milestone for the first time. It also cited deeper market penetration and Sales Force Automation as contributors to sales productivity and execution.

Management said quick commerce and modern trade were developing as additional channels, alongside channel-specific stock-keeping units and pack sizes. PSL did not disclose sales for Namkeen, Potato Chips, quick commerce or modern trade separately, so the presentation does not quantify each source’s contribution to Q2 FY27 income from operations of Rs 540.95 crore.

The comparison between sales and gross profit illustrates the reduced profit conversion. Income from operations increased by Rs 111.16 crore year on year, whereas gross margin increased by Rs 9.91 crore and EBITDA fell by Rs 10.00 crore. PSL said recent distribution, product and technology initiatives were supporting its growth trajectory despite the cost environment.

What is PSL doing to improve its margin profile?

PSL is pursuing plant-network realignment, reductions in channel margins and other sales costs, supply-chain efficiencies and procurement actions to improve its margin profile. Its medium-term operating model sets targets of about 15% revenue growth, about 10% EBITDA margin and return on capital employed of more than 15%. Management said it was monitoring input-price trends while balancing margin protection, consumer affordability and market competitiveness.

The proposed greenfield manufacturing facility near Indore forms part of the disclosed structural plan. PSL completed the acquisition of RLOP Foods, which holds the leasehold rights to the project land, and said it would initiate the process to merge RLOP into PSL. Preliminary site development has started, with civil construction and procurement of long-lead-time plant and machinery planned next; management said the facility is intended to improve manufacturing efficiency and operating costs.

H1 FY27 cash flow shows the funding associated with the expansion. Cash from operating activities declined 11% to Rs 23.57 crore from Rs 26.44 crore, while capital expenditure increased 135% to Rs 20.53 crore. PSL also recorded Rs 39.04 crore of investment and loans to a subsidiary for land acquisition, resulting in free cash outflow of Rs 32.20 crore, compared with free cash flow of Rs 19.86 crore in H1 FY26.

Conclusion

PSL’s Q2 FY27 results showed a divergence between sales growth and earnings conversion. Record income from operations of Rs 540.95 crore did not prevent a Rs 2.50 crore loss after tax because raw-material costs increased faster than revenue, reducing gross margin by 430 basis points and EBITDA margin by 290 basis points.

The next disclosures will show whether grammage changes, channel-cost measures, procurement actions and plant-network realignment can narrow the gap between sales and input-cost growth. Management expects strong double-digit revenue growth in FY27, while the Indore project is scheduled to progress from site development to civil construction and machinery procurement amid continuing input-cost monitoring.