💰 Financial Performance

Revenue Growth by Segment

Shared manufacturing now contributes 27% to total sales. The shoe business reached its highest ever turnover in Q2 FY26. Overall revenue grew 18% YoY in Q2 FY26 to INR 1,042.7 Cr and 16% YoY in H1 FY26 to INR 2,040.8 Cr.

Geographic Revenue Split

Not specifically disclosed by percentage, though the company operates manufacturing units in North and South India which have recently stabilized and ramped up production.

Profitability Margins

Gross Profit margin for H1 FY26 stood at 16.5% (INR 336.8 Cr). Profit After Tax (PAT) margin for Q2 FY26 was 3.37%, with PAT surging 54% YoY to INR 35.2 Cr. H1 FY26 PAT grew 33% YoY to INR 67.0 Cr.

EBITDA Margin

EBITDA margin for Q2 FY26 was 8.62% (INR 89.9 Cr), representing a 24% YoY increase. H1 FY26 EBITDA rose 17% YoY to INR 173.3 Cr.

Capital Expenditure

The company has a planned capital expenditure of INR 550 Cr, supported by a strong financial position and internal accruals. The gross block for the shoe business specifically stands at INR 140 Cr.

Credit Rating & Borrowing

Net debt to equity ratio is maintained at a comfortable level of 0.67 as of September 30, 2025. Finance costs for H1 FY26 were INR 40.6 Cr, remaining flat YoY.

⚙️ Operational Drivers

Raw Materials

Not specifically named; however, Cost of Goods Sold (COGS) represents 78.3% of total revenue (INR 1,597.8 Cr in H1 FY26).

Capacity Expansion

The company is ramping up capacity across business verticals, with North and South units now stabilized. The shoe business is undergoing integration to maintain momentum after hitting record turnover.

Raw Material Costs

Raw material costs (COGS) accounted for 78.3% of revenue in H1 FY26, increasing from INR 1,376.6 Cr in H1 FY25 to INR 1,597.8 Cr.

Manufacturing Efficiency

Profit expansion in Q2 FY26 was driven by better capacity utilization and operating leverage. Shared manufacturing now accounts for 27% of EBITDA.

📈 Strategic Growth

Expected Growth Rate

22%

Growth Strategy

Growth is driven by a 'String of Pearls' M&A strategy (10+ acquisitions in 4 years), a shift from dedicated to shared manufacturing models to capture higher margins, and scaling newer categories like footwear. The company also leverages the growth of quick commerce to expand its contract manufacturing footprint.

Products & Services

Diversified FMCG contract manufacturing services, including everyday consumer necessities and footwear (shoes).

Brand Portfolio

The company is a contract manufacturer for marquee FMCG customers; it was founded by the Vanity Case Group.

New Products/Services

Expansion into the shoe business and scaling of newer FMCG categories; the shoe business is expected to be PAT positive in FY26 with return ratios above the company average.

Market Expansion

Focus on unlocking the full potential of each business vertical through strategic roadmaps and pursuing high-growth M&A opportunities.

Strategic Alliances

Maintains relationships with marquee FMCG customers and utilizes SGA as an Investor Relations advisor to improve disclosures.

🌍 External Factors

Industry Trends

The FMCG industry is seeing a shift toward quick commerce; HFL is positioning itself as an expert partner for brands looking to scale rapidly in this segment. The contract manufacturing industry is evolving from dedicated facilities to shared, multi-client hubs.

Competitive Landscape

HFL is a leading diversified FMCG contract manufacturer in India, competing for marquee client contracts through operational excellence and cost discipline.

Competitive Moat

Moat is built on a diversified contract manufacturing portfolio, scale (first quarter exceeding INR 1,000 Cr revenue), and the ability to integrate multiple acquisitions ('String of Pearls' strategy) while maintaining a robust balance sheet.

Macro Economic Sensitivity

Steady demand for everyday consumer necessities provides a natural hedge against market fluctuations and inflation.

Consumer Behavior

Increasing consumer demand for everyday necessities and the emergence of quick commerce are driving higher volumes for HFL's clients.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to client-specific compliance standards and general manufacturing regulations; failure to meet these is identified as a 'Contract Risk'.

Taxation Policy Impact

The effective tax rate for H1 FY26 was approximately 25.1% (INR 22.5 Cr tax on INR 89.4 Cr PBT).

⚠️ Risk Analysis

Key Uncertainties

Operating leverage risk in shared manufacturing could impact profitability by 10-15% if capacity utilization targets are not met. Liquidity risk is rated as 'Low' due to forward-looking cash flow management.

Geographic Concentration Risk

Not disclosed, though manufacturing is spread across North and South India.

Third Party Dependencies

Dependency on marquee FMCG clients for dedicated manufacturing volumes; however, the shift to shared manufacturing is diversifying this risk.

Credit & Counterparty Risk

The company maintains disciplined working capital management, with net cash flow from operations reaching INR 109 Cr.