Hindustan Foods

Hindustan Foods makes products for other people's brands. It owns none of its own. 42 factories, 12 states, five businesses: home and personal care, food and beverages, ice cream, healthcare and footwear. The Vanity Case Group controls it and Sameer Kothari runs it.

The factories work two ways. A dedicated plant is built for one customer on a take-or-pay contract running eight years or more, so the return holds whether the customer uses the plant or not. That is Rs 1,123 crore of gross block and 74% of revenue. A shared plant runs several brands on the same lines, with no volume commitment but almost no capex needed to add a customer. That is Rs 622 crore of gross block, 26% of revenue and 27% of EBITDA.

Nothing gets built until a contract is signed. Every project has to clear an 18% ROCE hurdle and is funded roughly one rupee of debt to one of equity.

Q1 was the highest quarterly profit in the company's history with one division losing money. Revenue up 18% to Rs 1,207 crore, EBITDA up 26% to Rs 106.3 crore, PAT up 33% to Rs 42.8 crore.

The division was footwear. Shoe prices get fixed with the brand six to twelve months before production and there is no pass-through clause, so the shoes sold in the June quarter were priced in late 2025. In between, Middle East disruption took polymer and fabric up 50% to 60% and freight up four times, and Haryana raised minimum wages about 30%. All of it landed at the old selling price. Rs 6 crore in the quarter, Rs 3 crore of it wages. Utilisation was poor on top of that because imported components, half the shoe raw material, did not arrive.

Both have turned. Utilisation is 80% to 90% from August, the order book is full for the rest of the year, and the brands have agreed to take the higher material and wage cost from this quarter.

At the same time over Rs 500 crore of capacity gets commissioned this year against a gross block of Rs 1,745 crore. A third more plant, almost all of it earning from the second half.

Q2 results, early November. The Rs 6 crore that hit footwear in Q1 should not repeat, and utilisation goes from poor to 80% to 90%. Same division, both problems fixed, one quarter.

Beverage lines by January. Rs 210 crore across Coimbatore, Mysuru, Goa, Aurangabad and Hyderabad. The season starts in January, so these have to be running by December. The volume is already committed by anchor customers.

Shared manufacturing ROCE. The company prints shared EBITDA and shared gross block every quarter. It is below the 18% hurdle today and management said shoes are why. As shoes recover, that number moves in public.

Baddi. Approved site, two more multinationals now in commercial production, full utilisation expected within a year. No fresh capex against it.

Watch gross block, not sales. Over five years gross block compounded 28% and sales 20%. More customers now supply their own raw and packing material, so only the conversion charge shows as revenue. Gross block goes to Rs 2,346 crore by March 2027. Screening this on revenue growth gives the wrong answer.

Management guides FY27 PAT of Rs 200 crore to Rs 220 crore, which the CFO put at 34% to 48% growth over FY26, and reaffirmed it after a quarter carrying a Rs 6 crore hit it will not carry again.

FY28 is close to arithmetic. Gross block goes from Rs 1,745 crore to Rs 2,346 crore by March 2027, all of it signed against contracts at an 18% hurdle. Roughly Rs 600 crore of assets running a full year is about Rs 100 crore of extra EBIT, or about Rs 55 crore of extra profit after interest and tax. Off the middle of the guided range that puts FY28 near Rs 265 crore, so 25 times.

Profit went from Rs 34 crore in FY21 to Rs 149 crore in FY26, 34% compounded, funded 1:1 the whole way without coming back to shareholders. The trailing 50 times looks expensive because gross block is up 43% since March 2025 and much of it has only just been commissioned, so trailing earnings are carrying depreciation and interest on plants that are not yet earning. The forward multiple is what those plants look like once they are.

At 25 times FY28, the price needs about 26% compounding over three years from a business doing 34%. What Rs 660 buys is a manufacturing platform no one else in India has at this spread of categories, revenue contracted before the concrete is poured, and a return hurdle on every rupee that goes out.

Footwear pricing is the structural one. Locked six to twelve months ahead with no pass-through, so the next raw material or freight shock lands straight on the P&L.

Net debt to equity is 0.88 times and the company intends to keep funding growth at 1:1. Finance cost was Rs 23.4 crore in a quarter where EBIT was Rs 80.1 crore.

GST duty inversion is holding up cash in the food business and will not fix itself.

Nine projects commission in three quarters. The July flood at Silvassa, ten feet of water in the plant, showed what one site event does.

Utilisation is not disclosed by plant, deliberately, because it would show how each anchor customer is doing. You are trusting the contract structure rather than watching the numbers.

Footwear still loss-making at the end of Q3 despite a full order book and agreed pass-through. That would make it the contract structure, not the shock.

A cut to the Rs 200 crore to Rs 220 crore guidance at Q2 or Q3.

Beverage lines slipping past Q4 and missing the January season, which pushes a full year of revenue out.

Shared manufacturing ROCE still under 18% in FY28 after footwear normalises.

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