Ladies and gentlemen, good day, and welcome to the Patanjali Foods Limited Q2 FY 2025 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Miss-- Mr. Sanjiv Asthana from Patanjali Foods Limited. Thank you, and over to you, sir.
Thank you so much. Good morning. Season's greetings to all. Welcome, and thank you for joining us today for Patanjali Foods Limited's call to discuss the results for Q2 of FY 2025. I'm joined by the company's CFO, Mr. Kumar Rajesh, along with Mr. Priyendu Jha from the IR team, and our investor relations advisor, Strategic Growth Advisors. We have uploaded the results collateral on the stock exchanges as well as the company's website for your reference. During the course of this call, we will be referring to standalone financials. I'm pleased to update you that we reported a healthy quarterly performance with double-digit margin growth at EBITDA and PAT levels.
The company reported revenue from operations of INR 8,154.19 crores, with EBITDA of INR 493.86 crores and PAT of INR 308.97 crores. The company declared an interim dividend of INR 8 per equity share. This quarter's EBITDA is our best operating EBITDA since the company came under the management of Patanjali Group. It stood at INR 493.86 crores. The healthy performance came in the backdrop of a fairly challenging market environment that we witnessed in the past quarter. Excuse me. We faced erratic and uneven rainfall throughout the country, which has impacted the FMCG volumes, out-of-home consumption, and consumer off-take across the industry. However, the green shoots are visible in rural demand in the previous few quarters get raised to a certain extent.
The overall performance of the FMCG industry for the second quarter of the fiscal was mixed, with some categories performing better than the others. We also saw some pressure in terms of the raw material prices. Due to reduced supply in the physical markets and delay from the government to relieve the NFSA, the wheat prices shot up anywhere between 9%-10%. Pulses also saw an upward price movement in Q2 versus Q1, and likewise, even the palm oil prices have moved up substantially. The edible oil market remained in the normal range, both in domestic as well as the international markets. The domestic prices of crude and refined oil observed an approximate 20% increase in the month of September 2024. This is largely due to the two-way price increase. One, due to an increase in the custom duty of nearly 20%.
Two, because of 8% increase in the price of the major imported edible oils, and which continues on the upwards spiral. Coming to our segmental performance during the quarter, the food and FMCG segment achieved a revenue of INR 2,303 crores, with an EBITDA of INR 234.71 crores, with a margin of 10.2%. The staples, which includes rice, atta, pulses, wheat products, and dry fruits, recorded a revenue of INR 1,032.43 crores, with a sequential growth of 9%. Cow Ghee, Chyawanprash, honey, etc., the Indian ethnic foods category recorded a revenue of INR 621.48 crores, as opposed to INR 405 crores in Q1 of 2025. As shared earlier, we are reevaluating our strategy for the Cow Ghee business.
In Q2 of FY 2025, the ghee segment achieved a revenue of INR 355 crores, which is pretty much in line with our strategy. Also, we ran a pan-India print media campaign for Cow Ghee. Our biscuits sales segment recorded a five-figure quarterly sales of INR 438.73 crores, driven by a volume increase of 5.9% year on year. Adjustment in grammage and pack sizes have contributed positively to the growth of the biscuit segment. Doodh biscuits maintains the leading position in the category and contributed about two-thirds of our biscuit sales. I would like to highlight that our previously launched Ragi, seven-grain, and digestive biscuits and Patanjali Tea are being well accepted by the consumers. In the soya chunk category, Nutrela demonstrated steady growth, with quarterly sales touching a new high.
To strengthen Nutrela's brand presence in the category, we have onboarded celebrity and fitness icon Shilpa Shetty as a brand ambassador. We've also collaborated with star chefs Ruchi Bharani and Varun Inamdar to create enticing recipes using Nutrela products for the YouTube and Meta platforms. Our efforts to drive and stabilize the nutraceuticals division continue, and in Q2 of FY 2025, we have booked INR 23 crores in revenue. Newly launched gummies, vitamin powder, and other nutraceutical products are showing promising results. We've also added Nutrela Plant Protein and Creatine Monohydrate, along with new variants of weight gain and superfoods to our nutraceutical range. We continue to reiterate our guidance of revenue range of INR 100-INR 125 crores in revenue in FY 2025, with a 25% margin.
We have just onboarded Shahid Kapoor for the nutraceutical product range, which will help us to maintain brand awareness for nutraceuticals. In the first half, we added approximately 125+ SKUs in the food and FMCG segment. Notably, more than 80 of these SKUs were introduced during the second quarter. With the rise of new age channels, such as e-commerce and quick commerce, a new trend has been emerging in the distribution model of the FMCG industry. The number of consumers opting for these alternate channels of distribution over general trade is increasing. Patanjali is also present on these platforms in key markets. In the edible oil business, we registered a revenue of INR 5,939.21 crores, with an EBITDA margin of 4.45%.
The global dynamics of edible oil have been observing a gradual increase of edible oil usage in biofuels, and this is acting as a catalyst for maintaining high prices of edible oils. Harvesting of soybean in India is delayed due to extended rainfalls. Due to lower prices of soybean in the physical markets, the government has announced for its MSP procurement increase. The government also increased the MSP of raw materials for the seed by INR 300 per quintal, making it INR 5,950 per quintal for marketing season 2024-2025, which last season was INR 5,650 per quintal. With these dynamics, all India average prices of packaged oils have increased between 15% and 24% over the last two months. Further, over a longer term period, our endeavor is to increase our dependence on the oil palm plantation business.
In Q2, we expanded our cultivated land by over 5,200 hectares, taking the total to 80,952 hectares. Of this, 64% is in wheat, which generates an EBITDA to the tune of 16%-18%. Our plan is to take area under plantation to 500,000 hectares over the next five years. This should cover about 60% of our requirements. We are rapidly going through partnerships with farmers, providing training and workshops. We are not only dedicated to supporting the local farmers and communities, but also play our role in creating atmanirbharta for our country by reducing imports of edible palm oil. Now, I would like to summarize our overall financial performance in the quarter. The total income stood at INR 8,198.53 crores.
Our total EBITDA stood at INR 493.86 crores, with 17.82% growth on year-on-year basis. The PAT of INR 308.97 crores registered a 21.38% growth on year-on-year basis. In the first half of FY 2025, the numbers stack up as follows: The total income is INR 15,400.88 crores. Total EBITDA of INR 928.93 crores, an improvement of nearly 47% against the same period last year. The PAT registered an improvement of 67.07% to reach INR 571.87 crores. Looking forward, the latter half of fiscal 2025 is anticipated to bring improved performance, driven by the festive season, higher income, supportive government measures, and an above average monsoon.
With respect to the acquisition of HPC business, we have already got the CCI approval and the shareholder's approval, and are hopeful to integrate the HPC business by Q3 and perhaps in very early November, once we receive all the approvals, et cetera, from the lenders. This will give a further shot in the arm to our performance. With this, I conclude our presentation and open the floor for Q&A. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Dheeraj Mistry from Antique Stock Broking Limited. Please go ahead.
Yeah. Hi, good morning, sir. Good morning, Kumarji. So my first question is on oil business. We have seen 30% plus inflation in the month of September. So in light of that, is there any inventory gain which we have realized in this quarter or expected to realize in next quarter? And related to that, what kind of price increase we have taken post this price increase, and what would be the implication on margin going ahead because of this?
So two parts to your question, Dheeraj. The two things which occurred, which is in really second half of September. So the edible oil has continued performing quite strongly in the first quarter also, and likewise in the second quarter as well. The announcement of the increase in the customs duty by nearly 20%, plus, was beneficial, but only the benefit is only accounted for once we do the sale and it is invoiced. So we really got the gain, maybe just for about 10 days to 12 days in the second quarter. There is some inventory gain which is accrued on account of the, you know, the sudden duty increase. But we're also benefited by the positions that we had, as well as the movement up in the international markets. Both have been beneficial to the company.
So we will carry forward the momentum in the next quarter as well. And, hopefully, the prices look very tight. We believe that the markets should be supported. The international markets are looking quite sort of, you know, less supply and more demand. So I expect this to continue. And, hopefully, our edible oil should continue on the path of, you know, better performance that we've always said, of margin constructive between 2% and 4%. And over the previous two quarters, we've consistently maintained a 4% plus margin, and we hope to continue with this momentum.
Okay, okay. And, sir, what kind of price increase, we are expected to take or already taken in edible oil price?
So price increase, you know, there are two ways it moves. One is that, you know, there's no one-to-one equation. So for example, if the prices have moved up, so normally there is a pass-through mechanism that works, but there's local dynamics in the market as well. And that doesn't allow you to pass on, you know, the full, sort of, you know, duty and the price increase to the consumer. So typically, the prices have moved up in the range of 8%-10% internationally, and our price increase also has been pretty much in line with that. Part of the duty has also got accounted for this, so anywhere between 10%-12% margin price increase has occurred in the marketplace.
Will it have margin as a percentage of sales? Margin will be impacted because of this, because our price increase is lower compared to what primary commodity price inflation is?
No, it won't. It's overall beneficial, as I mentioned, that we typically run the business on a long-only basis, where the prices are, you know, typically they start to look up. You know, so you hold the inventory at the next price, and the international markets are moved up, with them either immediately or with a lag, typically, the prices tend to adjust in India. So even if there's a lag, eventually the prices will start reflecting the global prices, and it can cut both ways also. It can go down as well as the inventory pressure. But broadly, the price increase is going to benefit and reflect in our margins in this coming quarter as well.
Oh, okay, okay, and second, related to the oil businesses, what kind of revenue realization we have got from the palm oil crisis?
So.
Palm plantation, I mean.
Yeah. So the revenue, like, in the palm business, oil palm plantation, we sort of, you know, we were quarter one, we were INR 292 crores in revenue. This quarter, we did INR 354 crores in the revenue. And, so of course, there is a seasonal impact also because of the peak harvesting season also, so that benefited us.
Got it, and coming to the food division, can you tell us the revenue and margin for the foods, divide the food business revenue and margin for staple and non-staple foods, and also for the margins for biscuits, Nutrela, and nutraceutical also?
Okay. So I will go one by one. So for example, in the overall FMCG, our total, you know, the business in the foods FMCG, we did about INR 1,654 crores within the... No, so first I'll tell you the overall FMCG portfolio. The total revenue we did was INR 2,304 crores at this quarter. EBITDA margin was INR 235 crores, and it was at 10% that we got. Now, I'll give you the breakup of the FMCG business. So in that, within that, the foods was INR 1,654 crores. EBITDA margin was INR 140, and it was 9% margin that we got. The. Within that, the breakup of this is the Indian ethnic food was INR 621 crores.
The EBITDA margin was INR 133 crores at 21% margin. In the consumer staples, we had INR 1,032 crores of revenue, EBITDA margin of INR 6.7 crores, which was 1% margin. It came down largely on account of the higher price inventory of the staples that we carried, and market did not reflect that. Then on the Nutrela side, which is our TVP business, we did a revenue of INR 188 crores and with a INR 43 crore margin. Margin percentage was 43%. We well benefited quite well on account of much lower the soybean prices. So our raw material prices really sort of went down, and the consumers continued paying at the same level. We didn't have to adjust our prices.
Nutraceuticals, we did INR 23 crore of revenue, made INR 10 crore margin. It was nearly 44%, but there was some one-off tax benefit that we got on account of the accounting. But otherwise, typically, that 25% is what we supposed to maintain. Biscuits, we did INR 439 crore and INR 41, and INR 41 crore EBITDA, and a margin of 9%.... Here, the margin declined on account of much higher food prices and much higher edible oil prices, palm oil prices, essentially, that impacted overall sort of the EBITDA margin that we took.
That's very clear. Thank you, sir. And just last question on bookkeeping, that we are seeing significant increase in our overheads, in employee cost as well as other expenditure. So, what can you divide your employee expenditure between ESOP and what is the normal course of employee cost? And also, in other expenditure, what would be the ad spend contribution in this quarter versus last year? That's my final question.
This question will be answered by Kumar Rajesh, our CFO, who's on the call. Rajesh, I leave you to answer this question from Dheeraj.
Yeah, yeah. So, Dheeraj, just, I would like to say, we got an increment for, we give an increment for the employees in this quarter, and basically, the employee cost is increased by that only. So near about between INR 12-INR 13 crore it has been increased from the previous quarter, if you can compare. So this is on account of increment of the employees, along with arrears since April 2024. As far as other expenses is concerned, major expenses is on advertisement. That is near about INR 40-INR 50 crores, and sales promotions and the schemes which marketing initiatives taken by the management.
Got it. So what kind of run rate we can expect in employee cost going ahead?
So after, just we have not integrated now non-food business, but as far as existing business is concerned, this is a run rate which we have shown in the quarterly results.
Thank you very much, sir. I will come back in the queue in case of any follow-up questions. Thank you.
Sure.
Thank you. The next question is from the line of Prateek Bhandari from AART VENTURES. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Just wanted to get a sense as to what kind of volume growth are we witnessing in terms of, our milk biscuits category versus the non-milk, biscuits category?
So, in the milk biscuits category, the milk biscuits, it's, you know, we have grown about 3.5%. And, so that's a very, you know, that's slightly tapered off. And, but, overall, the biscuit continues to grow. We've grown nearly 6%, you know, this quarter. And, but, milk biscuits actually is a little slightly lower.
So out of the 3.5% of revenue growth that you are seeing for milk biscuits, how much of it would be on account of volume?
It's largely volume-led. I,
Okay.
You know, so the volume growth we have received is about. So there's no price increase, if that is the question.
Uh, huh.
So, it's largely entirely on the volume basis. We haven't taken any price increase in the quarter, and yeah.
All right. Thank you.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Rajesh ji, good morning. Thanks for the opportunity. So three questions in the beginning. We have been seeing of late, starting from the bandwidth, a company like Lever has been talking slowdown in urban. Also, the rural is seeing a gradual recovery. So can you give some little more color for our type of business? Because, edible oil business is always will have a uptrending, downtrending, looking at the price parity between the branded and premium. But then, if you can give some on-ground activities, and what is the contribution we derive from rural, if you have some numbers handy.
So we, you know, for example, the sort of urban in the markets, really there is some stress that is visible. 60% of our business typically, you know, comes from the urban areas that we saw. The rural markets have had a fairly good sort of robust growth. That momentum has sustained in the last quarter also. We are clearly seeing that there's some slowdown in the urban area, and that is causing stress. But we have a reasonably good growth overall. Like, for example, if we really in our foods vertical, we, we're nearly 20% plus. Biscuits, of course, slightly tapered off, as I mentioned, 5.3%. Nutrela that CVD, we got a growth of 8.7%.
And nutraceuticals, of course, the base is very small, so it's not relevant as to what the growth percentage was. But overall, we have seen that urban areas are feeling some stress. Rural demand continues quite okay. So in our categories that we have, we haven't seen any distinct slowdown in the rural areas. In fact, if it has supported, the growth is there. But now with the festivals coming, we are hoping that the urban areas should respond better. And sales trend that we're seeing right now from the beginning of October, there is some push, which had to be done. But broadly, I would say that this quarter, because of some of the festivals, et cetera, should stabilize through.
Okay. The reason I'm asking, because, see, edible oil business price fluctuation, and we are now just on top of the season, so that will get digested. But then non-edible oil business, what are the top two, three things we are trying to do? And, because you, some, in the beginning, you also said that the alternate channels, like, so e-commerce and modern trade is the focus area. But is it really meaningfully scaling up for our type of business?
The e-commerce and quick commerce, it's without a question, because.
E-commerce, e-commerce and modern trade, ultimate channels.
And, so it's without a question, I think that, we can clearly see very visible signs in all the major urban areas that has taken a firm root, and, so we are sort of very seized of that. We are continuously working on that space. The e-commerce sales, you know, we are continuously sort of working in terms of expanding that business. Modern trade also had a marginal impact, but that continues to grow. The strength is largely on the general trade level. But this phenomenon still, I would say in the top 22, top 20 cities, is much more, sort of pronounced, than...
But if the pace continues at the same level, then, you know, we clearly see a very distinct growth, you know, at the cost of general trade in the larger cities.
Okay. Any number you would like to throw for alternate channel, modern trade, quick commerce and e-commerce put together? What is the contribution to sales for.
Yeah, yeah, yeah. So that number is, you know, very clear. We do close to about of the FMCG volumes and not including the the edible oil business. We do in total about 12% through modern trade, e-commerce and quick commerce. And our e-commerce and quick commerce sales are about 4% currently, 6% goes through modern trade, and balance, we are now expanding. So this, and this is growing at nearly 20% plus for us. And so that is a broad basis. Edible oil, of course, is a very substantial part. I'm not including that in it. This only for the FMCG businesses that we co-have.
Okay. The other question I wanted to check, if I look at the industry trend and while speaking to few distributors across the country, I think with the disappointing quarter one, I think the system inventory has gone up. So could you throw some light, how we are managing, or are we really taking some inventory cuts? Because edible oil inventory would always have the benefit to the retailers, so they will not cry. But non-edible oil inventory will always be in a problem. So any color you can throw on the inventory part?
Yeah. So there is some build-up of the inventory, as we've very clearly seen, that both at the secondary sales level as well as at the tertiary sales level, we are seeing some inventory build-up with the general trade. Modern trade is much more nimble in terms of adjusting to the requirements. And so to that extent, that trend can be seen and very clearly. And so now we, in terms of our own actions, we're working a lot more in terms of, you know, the in-store promotion. You know, the work on that area is continuing. But that is something that basically demand shift which has occurred, which has caused this trend. So, you know, the e-commerce and quick commerce side, and I think that the company will have to continue to adjust.
We are working on it quite actively, but we are seeing a clear build-up in the inventory.
So generally, the non-edible oil, what kind of inventory we would have in the system, say, in the trade and in the distributor base?
Total inventory typically that you would have is, you know, around. We keep around thirty days, but that's an entire systems inventory. And you know, that would be between the company level and the distributor level. But otherwise, overall, we do about six times turn, six to seven times of turn on the business. So typically, I would say that forty-five to fifty days of inventory would be maintained substantially across the company.
Okay. Okay, and the last question on the other part of the business, which is getting integrated. You mentioned that from November it will get consolidated.
Yes.
Any ballpark number, how much we would have done in first half?
In that, in the HPC business? So HPC business would be about. I am not sort of in a position to give you the precise number of the first half, but we should be close to about INR 1,500 crores we would have done.
Okay. So if I understand correctly, you would integrate that business after November?
Not after November, and very soon, and it could happen any day when we just simply... Everything is done and ready. We're simply working on the final stages of documentation, and you will hear from us very soon. It could be next several days, 10 days or so.
Okay. The reason why I'm asking, Sanjiv, there are two questions actually here. That will it go with the existing distributors? And then, if that is going to the existing distributor, how this funding or the issues which will get sorted? Because whenever there is a transition, it is looking, on the face of it, looking good, but then, the structurally, the distributor will have an issue. So I just need a clarification from you that, are we going to look at and dump the existing distributors which are selling the HPC product, or we will merge both the distribution together?
No. So we, as we've done in the past, and this is the, you know, time as well, that the existing, nothing changes at all. So, you know, the simple part of the SAP integration at the back end has been done. The team, the distribution, the entire manufacturing and the entire structure of the function, everything moves, you know, entirely, and that integration happens. So really, in terms of the disconnect or adjustment process at the ground level, nothing will happen. But what we gave a guidance, you know, even in the last quarter also, the plan is that over the next 18 months, we will work towards two hundred basis points efficiency led improvement.
Not talking of the organic, sort of growth in the business, as well as, you know, some bit of rationalization at the ground level that we'll start to sort of work on. We should be able to, sort of take that benefit on account of this integration, but right now, I don't see any disruption at all in either the distribution at the ground level or the teams coming on board, because they're simply just, it's almost merely like a plug and play. Because they're moving from the parent to the listed entity, and they will just get started, you know, very quickly once they get going.
Okay. Thank you, and all the best, and happy New Year to you.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Bharat Shah from ASK Investment Managers. Please go ahead.
Yes. Good morning, Asthana Ji.
Good morning.
Yeah. Sorry, the ethnic food specialty, Indian specialty, that part of the business has registered 21% margin in this quarter. Did I get that right?
That's right.
Okay. So that clearly is probably superior to what we might have intended or we might have constructed. Or is this the kind of likely margin profile which will prevail over time?
So, Bharat Shah, what we have as a margin construct in the ethnic food side, we've always maintained that typically the business is good to go with 18% plus margin. In some quarters, for example, in the previous quarter, our margin in that space was 15%. This quarter we registered 21% on account of, you know, some pre, sort of festival push of Cow ghee. Some benefits that we got on the house on account of the honey sales. There are a couple of other categories, but I would say that it cannot be taken as a guidance of 21% plus. It will typically range in the, always be in the range of 18%-19%, is what is, something that we target and intend for.
So clearly, in this quarter it has been better, and therefore, overall, longer term picture, probably should be in that 18%-19% range.
That's, that's right.
Yeah.
Because that business also benefits. Sorry, just one more sentence. Because that business also has certain degree of subjectivity on account of the, you know, the butter prices and the, you know, the fat prices as it prevails. That market itself is quite, you know, sort of, there are movements in the prices, availability, et cetera, and you need to carry inventory at a certain price point. So that's why. But I would say normal expectation range of 18%-19% is what you should have from the ethnic category.
So quite remarkable, I would say, in the backdrop of the kind of scenario that has prevailed in last few months, that definitely is a very healthy kind of a margin and performance in that area. My second point on which I wanted to gain understanding. You see, the digital channels are kind of definitely affecting the traditional distribution strength that many consumer firms, more older generation consumer firms, have typically got, but digital channels are clearly impacting. Other factor which is affecting, maybe chipping away at margin, but certainly the newfangled phenomena of direct-to-consumer brands.
Each of them in itself may be small brand, but at a local level, local entrepreneurs, some of the direct-to-consumer brands are nibbling away the traditional advantage of the distribution strength that earlier generation consumer firms they've been enjoying. But when you are looking at the performance of the businesses like Lever or Tata Consumer and others, including even now Nestlé, it is very clear that unless the business models are distinguished in the consumer side both growth and margins over a period of time will be challenged, and there will be impact on the distribution side. Therefore, two ideas I wanted to understand. Our effort at premiumizing our Indian ethnic food clearly is a very distinguished portfolio. So to that extent it holds a very competitive advantage.
Your Nutrela platform also is a distinguished portfolio, so it enjoys that competitive advantage. But in terms of premiumization, and secondly, gathering the strength in each of the digital and whether quick commerce or e-commerce and specialty offerings through these channels, what are your thoughts on that?
So, you know, to the two things that we are seeing right now that the path forward for us, because of the sheer volatility, some quarters tend to be good, is that we need to work on premiumization very actively. Consumers are willing to pay. There is a class of consumers which is very keen on sort of, you know, buying products which are distinctly different, which carry proposition and there are attributes which they believe that they should be paying a premium for. Health and nutrition is, you know, becoming center stage, but that comes added along with range of other complications as well. Like, for example, the packaging, the branding, the positioning, the distribution, etc.
I'll give one live example that what we have gone through in terms of the after a huge push that we had in our premium biscuit, we saw that it tapered off, then we started rebuilding the entire thing, and we are now seeing a stability in that growth. But the growth is not skyrocketing at 20% and 30%. It's really a very moderated growth of 8%- 10% is what we see in our premium range. Similarly, nutraceuticals, for example, that you know, after a very heady start, we came down, but after that we took the price cuts and the readjusted portfolio. Then we started rebuilding the entire portfolio, but at a premium level now, and very differently packaged, very contemporary.
We have gone through, Bharat, I don't, if you've heard that, we've got four. All the businesses have got different brand ambassadors, you know, now in last year and a half. So, for example, from Dhoni to Tiger Shroff and Tamannaah Bhatia, then we went in with Shilpa Shetty for Nutrela. Now we've got Shahid Kapoor for nutraceuticals. So all these elements have to go in, but the premium category growth is, that segment is very small. The effort to launch it and, you know, the sort of demise at the retail level is also fairly high, because not all these products tend to succeed, and your ability to stay and continue building that up is very high. So I would say the trend is good. We are working on it.
Our premium portfolio, in any case, when we count our Cow Ghee, for example, there are quite a few other products in that category. That premium portfolio is reasonably decent, is between 15%-18%. But adding new products to build up a premium and continuous growing that, it's a challenge. That growth rate will not exceed 7%-8%, you know, at any level where the base is very small. And so that we work on. We're now looking at, you know, adding a range of other products. For example, there's a consideration which is going on in the biscuit category. After the success that we had, we want to now come out with new sort of premium products, new premium offering that we'd like to do, and all our competitors are doing it as well.
Likewise, in the ethnic foods category, we are coming out with our, in our HPC, which is going to soon come. We have launched a new range of Saundarya and other. So hopefully that effort is going to be more organic, it's going to be more long term, and it will come through its own, sort of, you know, fits and starts in terms of the success rate there. But broadly, the trend is very clear. The urban consumer, there's a distinct class which is willing to pay, and, directionally, for a country like ours, we need to head in that direction.
Let me try to kind of put the point in a little different way. I would say in consumer kind of businesses, in regular consumption kind of businesses, I would say four critical parameters to my mind for long-term success. One I would put is product innovation. Secondly, whether our business model is distinguished. In other words, our portfolio has a freshness and difference compared to the typical competition. Third is the channel innovation, and fourth, I would put it is premiumization. Now, when I put these four factors into the play, I would say our product innovation rate at Patanjali is phenomenal.
I've not seen really any other consumer firm innovating so regularly, so many new products. So this scores very, very great. Secondly, one is with Indian ethnic foods, also Nutrela platform, and nutraceutical, when it becomes mature. Our product portfolio is a distinguished one. Our business model is more distinguished one, and we score well there. On premiumization, I think, is an important, long-term journey because the country is getting more and more aspirational. And secondly, on the distribution channels, commerce, digital, e-commerce, these channels, are expressing alternate, I mean, have ultimate ways of expressing the distribution strength. On those two, I wanted to understand, how much, what kind of long-term strengthening the thoughts, we having, of it?
As I mentioned, Bharat, on the distribution side, we have a long way to go. Our current e-commerce and quick commerce sales are just about, you know, 2% plus if you look at overall business, and about 4% if you look at only pure FMCG business, removing the edible oils. So that will need, clearly, a lot of work. So we have got a D2C channel, for example, our nutraceutical business. Mainly, the base is very small, but mainly we are seeing 35%-40% is going through, now e-commerce and D2C. Similarly, in businesses like the biscuits, we are seeing a pickup now on the e-commerce, commerce side that's picking up.
But to answer your question, on a targeted basis, we'd like e-commerce and quick commerce to get closer to 6% of our FMCG portfolio. I'm not talking edible oil in that. And likewise, our modern trade share should be closer to 12%. So this means on a combined basis, we'd like about between 16% to 20% coming through the new age distribution channels, which we currently are at just about 10%. We need to travel some distance. We need to refine our strategy. We are working on strategy.
We have got, for example, across the board, on the social media front, we will find that. I'll go one by one. Nutraceuticals, Nutrela, biscuits, we are less there. We are now ramping that up. And in the food side, our presence on the social media is increasingly high. And, you know, from the social, the social media platform, the site, we are seeing a lot of sales now moving into converting. So but we have some distance to travel, and that work is clearly, you know, cut out for us, and we are working on that. Our intent is very clear, of, you know, moving closer to 20% from emerging new age channels and remaining the balance 80% to our traditional channels of, you know, the GT.
Sure. No, thank you, Ji. Just one last point. The fact that our share of the modern trade relatively is lower as relating to the digital channels is relatively lower, in a way to look at it is an opportunity. And I think, in a way, can be a significant competitive advantage compared to the large and legacy large consumer firms, that have been around for decades, but is probably been more on the legacy side and need to add up. So in a way, both of them is represent an opportunity, along with, of course, premiumization in an aspirational society and aspirational country.
No, absolutely, and we are seeing that growth, and we are seeing that momentum, and we are very positive about it, that this is going to be a big channel of our business, so it's not a weakness, it's an opportunity that we are looking at in terms of building that side of our distribution channel.
Sure, ji. Very happy Diwali to you. For Margi, very happy Diwali to you. Many best wishes.
Thank you, sir. Thank you.
Thank you very much.
Thank you. The next question is from the line of Rajiv from Aryan Investments. Please go ahead.
Hi, good morning. First of all, congratulations for a great report. So I have two questions. One is around the other income. The other income has increased by 80% quarter to. And another one is the other expenses, which has been shot up by 45%. So is there any one-off income or expense during the second quarter?
Rajiv Ji, would you,
I am, yeah, yeah, yeah.
I am taking this question. That basically, other income basically increased on account of, mark-to-market, gain of the mutual fund investment. So if you see the balance sheet, we have realized so much of debtors and invested into the mutual fund. So as on thirtieth September, mark-to-market gain is there.
Okay. And what about the other expenses?
Other expenses is mainly on account of advertisement and sales promotion schemes. So many marketing initiatives has been taken by the management in this quarter, so that this has been increased.
Okay. Okay, thank you.
Yeah. Yeah.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Sanjay Gupta from R.S.S. Investment Private Limited. Please go ahead.
Hello? Hello.
Yes.
Hello. Good morning, sir.
Good morning, good morning.
Sir, my question is regarding the arbitration award going against the company. So how will it affect our company in the future, if in case we have to give one crore eighty-six lakh share to our shareholder investor? And my second question is regarding the...
Yeah.
My second question is regarding the Green tech given to our Patanjali Dant Kanti. There is some controversy going around that. Can you clarify regarding that?
Sure. Rajesh, on the Ashav Advisory, you can go ahead and answer.
Yeah. I'm taking this. Basically, the case of Ashav Advisory is related to the application of preferential allotment applied by the third party in early 2020. As you all are aware that the application was not completed, we have not allotted shares due to regulatory requirement, due to regulatory NOCs from the banks and from the SEBI. After that, they had appealed to the SEBI, and the appeal got rejected. After that, they appealed to SAT also. SAT also rejected the appeal, and they went to High Court, and after that, in arbitration. So we had a strong ground to file an appeal. That's why our name has been included in that arbitration award.
We have a strong ground to appeal in the High Court, and after the Supreme Court, we have been advised by our lawyers also to file an appeal, and we are in the process of preparing the appeal. We do not expect any significant impact right now on our balance sheet and shareholding patterns. So obviously, after the decision of the court.
No, but the arbitration award has already been selected. It has gone in favor of Ashav advisory. You may appeal further, but let us say, let us presume that it is going against the company, then how will it, as a shareholder, I'm asking, how will it affect our company?
No, no, no. Basically, just one second. Yes. That is a arbitration that has happened between the promoter group and Ashav Advisory. So if at all, the promoter group will transfer the shares, you might get a issue if at all that goes against us. There'll be the issuance of that INR 1.86 crores billion shares or whatever, will just simply be given to them by the promoters. And the company, Patanjali Foods, there's a zero impact.
Okay, the second question is regarding doing it to Patanjali Dant, Dant Manjan. Hello?
So that was, you know, one of there are. Like this, this is one thing. Likewise, we'll have similar many such instances where we are contesting any of this. I don't have a specific answer to the question that you raised right now, but there are, you know, similar kind of cases that keep coming up. We are dealing with that. It is still being done at the parent right now, because the business is pretty much with them. But in case you are interested, we can give you further details on that, on the specifics of that case, as to where and how it attributed to being there as well.
Okay, then, my last question is regarding the penalty that is being levied on the company every now and then. So is there anything that company is doing to protest to the authority? INR 50,000, INR 67, all kinds of penalties every now and then.
Is there any specific penalty you're referring to, or not?
Just yesterday, I read that some INR 50,000 penalty is being levied on the company.
I don't have a sort of, to the specific question that you raised. We can come back to you, on what account, this is imposed.
Metrological, I think.
Okay. So that's a department which is, you know, at the state level, Indian Metrology, and which is consolidated, and so we regularly, whenever, you know, such an instance will come, we regularly protest and contest those claims, and it is there, but it's not a very significant nature that it can either impact the company's results or whatever. There is an interpretation of laws at the state levels could be many times different, and we deal at the state level and actually address these issues.
Okay. Thank you very much, sir.
Thank you.
Thank you. Ladies and gentlemen, we'll take this as a last question. I would now like to hand the conference over to the management for closing comments.
So, many thanks for a very you know good set of questions, and we're quite thankful to that. Now, I will conclude the call, and a very happy Diwali to you and your families. Thank you all for the patience. If you have any further queries, please contact your GM or our Investor Relations advisor on any matter at all, and happy Diwali to everyone.
Sure. Thank you. Thank you very much to all.
Thank you. On behalf of Patanjali Foods Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.