ORKLAINDIA - Orkla India

📊 NSE: ORKLAINDIA 🏢 Other Food Products 📅 Last Updated: 11/13/2025 15:25

💰 Financial Performance

Revenue Growth by Segment

In Q2 FY26, the Convenience Foods segment grew by 19.2% YoY, significantly outperforming the Spices segment which saw a marginal revenue growth of 0.1% YoY. The Spices segment's revenue was suppressed by a 12.3% YoY deflation in raw material prices despite a 5.9% increase in volume. Digital commerce grew by 48.7% and Modern Trade by 11.2% during the same period.

Geographic Revenue Split

The revenue split is heavily weighted toward the domestic market, with India accounting for 80.0% (INR 5,195 million) and International/Exports accounting for 20.0% (INR 1,301 million) in Q2 FY26. This distribution has remained stable compared to FY25, where India was 79.4% and Exports were 20.6%.

Profitability Margins

Profitability showed a slight decline in Q2 FY26 with a PAT margin of 11.8% (INR 767 million) compared to 13.3% in Q2 FY25. However, H1 FY26 PAT margin stood at 12.5%, showing an improvement over the full-year FY25 margin of 10.7%. The decline in Q2 PAT was primarily due to lower other income following a large dividend payout of INR 6 billion in FY25.

EBITDA Margin

EBITDA margin for Q2 FY26 was 16.9% (INR 1,097 million), down from 18.3% in Q2 FY25. This was impacted by one-time GST 2.0 migration costs and reduced PLI incentives; excluding these, the adjusted EBITDA margin was 17.8%, a 0.2% increase YoY. H1 FY26 EBITDA margin remained strong at 17.8%.

Capital Expenditure

While specific future INR figures for CapEx are not detailed, the company reported a focus on enhancing capital efficiency and maintaining a high ROCE, which stood at 32.7% for FY25. The company also noted a cash conversion rate of 124.8% in FY25, indicating strong liquidity for potential investments.

⚙️ Operational Drivers

Raw Materials

Spices (including pure and blended varieties) are the primary raw materials, with the company noting a significant deflationary trend of 22% to 25% in spice prices over the last two years. These materials are critical as the Spices segment contributes approximately 61% of total revenue.

Import Sources

Sourcing is primarily focused on key Indian spice-growing regions to maintain proximity to manufacturing facilities, though specific states or countries are not listed beyond the mention of 'key sourcing regions'.

Capacity Expansion

The company operates manufacturing facilities strategically located near sourcing regions. While specific MTPA figures are not provided, the company is driving growth through 'Pure Spices' development in Karnataka and Andhra Pradesh, which saw a 40% volume growth in the current quarter.

Raw Material Costs

Raw material costs have been impacted by unprecedented deflation, with a 12.3% drop in spice prices in Q2 FY26 following a 10.8% drop in the previous year. This deflation has forced a reduction in Maximum Retail Prices (MRPs) to maintain a competitive premium over the 60% unorganized market.

Manufacturing Efficiency

The company leverages Orkla ASA’s Global Centres of Excellence to drive operational frameworks and high-quality standards. Efficiency gains were cited as a partial offset to rising advertising and transition costs in Q2 FY26.

Logistics & Distribution

The company reaches over 686,729 retail touchpoints as of FY25. Distribution is a key driver for the 7.7% volume growth achieved in Q2 FY26, supported by rural activations and digital commerce expansion.

📈 Strategic Growth

Expected Growth Rate

Growth Strategy

Growth will be achieved by increasing household penetration (currently only 12 out of 260 possible consumption occasions), expanding the product portfolio (specifically in the Mithai/Sweets category which grew 26%), and scaling digital commerce (49% growth). The company also plans to leverage its position as the largest branded spice exporter to expand in 45 international markets and pursue strategic acquisitions.

Products & Services

Spices (Pure and Blended), Convenience Foods (Ready-to-eat meals), and Sweets/Mithai products.

Brand Portfolio

MTR, Eastern.

New Products/Services

The company is aggressively developing the 'Sweets or Mithai' category, which achieved 26.4% growth in Q2 FY26, and 'Pure Spices' in new geographies like Karnataka and Andhra Pradesh (40% volume growth).

Market Expansion

Expansion is focused on driving depth in local Indian geographies and serving the Indian diaspora in 45 international markets. International business currently contributes 21% of sales.

Market Share & Ranking

The company is a market leader in its core categories and has been the largest branded spice exporter for 24 consecutive years.

Strategic Alliances

The company is a subsidiary of Orkla ASA (Norway), providing access to global centers of excellence and governance support.

🌍 External Factors

Industry Trends

The industry is seeing a shift toward digital commerce (49% growth for Orkla) and organized branded players capturing share from the 60% unorganized segment. There is a trend toward convenience foods and premiumization in the sweets category.

Competitive Landscape

Competitors include Dabur India, IFFCO Group, Colgate Palmolive, and Voltas (in various food/beverage segments), alongside a massive unorganized sector that controls 60% of the spice market.

Competitive Moat

The moat is built on strong brand heritage (MTR and Eastern), a dominant 24-year leadership in spice exports, and the operational support of a $11bn parent company (Orkla ASA). These advantages are sustainable due to high household penetration potential and a robust distribution network of 6.8 lakh+ outlets.

Macro Economic Sensitivity

Highly sensitive to spice commodity prices. A 22-25% deflation in spices over two years has significantly decoupled volume growth (7.7%) from revenue growth (4.9%).

Consumer Behavior

Increased demand for convenience foods (19.2% growth) and festive-driven consumption in the sweets category (26.4% growth) are key shifts.

Geopolitical Risks

The international business serves 45 markets; however, specific trade barrier impacts were not detailed in the provided text.

⚖️ Regulatory & Governance

Industry Regulations

Operations are affected by the Production Linked Incentive (PLI) scheme and export incentives provided by the Ministry of Industry and Commerce. A reduction in PLI benefits was noted as a factor in the Q2 FY26 EBITDA decline.

Environmental Compliance

The company aligns with Orkla ASA’s commitment to sustainability values, though specific ESG costs in INR are not disclosed.

Taxation Policy Impact

The company is transitioning through GST 2.0, which resulted in one-time migration expenses in Q2 FY26.

⚠️ Risk Analysis

Key Uncertainties

Raw material price volatility is a major uncertainty; the recent 22-25% deflation in spices is described as 'unprecedented' in 18 years. This volatility can lead to unpredictable revenue growth even when consumer demand (volume) is strong.