Hindustan Foods: Steep Target to Reach

Hindustan Foods Limited is India’s most diversified and trusted Fast Moving Consumer Goods (FMCG) contract manufacturer.

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(A) About The Company

  • Incorporated in the year 1988.
  • The Company offers a gamut of products through flexible Business Models suitable for any Customer size, producing multiple product categories across 11 manufacturing facilities spread across India.
  • Over the years, HFL also transformed into a scalable, profitable, and the most diversified contract manufacturer catering to various marquee customers.

(B) Journey Since Inception

(C) Executive Board Members

(i) Mr. Shrinivas V. Dempo (Chairman)

Shrinivas Dempo is the Chairman of Hindustan Foods Limited. He is the third-generation entrepreneur and chairman of Goa’s leading business house, Dempo, which has diversified interests in industries such as calcined petroleum coke, shipbuilding, food processing, real estate and newspaper publishing. Mr. Dempo earned his Bachelor’s and also Master’s degrees from the University of Mumbai. He later took a Master of Science degree in Industrial Administration & Finance from Carnegie Mellon University, Pittsburgh, Pennsylvania, USA.

Currently he is also on the Board of

  • Dempo Sports Club Private Limited,
  • Dempo Shipbuilding And Engineering Private Limited,
  • V.S.Dempo Holdings Private Limited,
  • Goa Medical Research Private Limited,
  • Automobile Corporation of Goa Limited,
  • V.S. Dempo Mining Corporation Private Limited,
  • Dempo Industries Private Limited,
  • Goa Carbon Limited and various other companies..

Age of Mr. Dempo is 52 years.

(ii) Mr. Sameer R Kothari (Managing Director)

Mr. Sameer R Kothari is the Managing Director of the Company. He is also the Managing Director and Promoter of Vanity Case Group, that acquired the majority stakes of Hindustan foods in the year 2013.

He is a Chartered Accountant and also holds an MBA from Cornell University (USA). Moreover, Mr. Sameer is a professional with 21 years of Manufacturing experience. Mr. Kothari became M.D. of the Company in May,2017 and from then he is in-charge of the overall management of the affairs of the Company, business development and sales and marketing activities in India & overseas.

Age of Mr. Kothari is 48 years. In FY21, he received remuneration of INR 1.56 Crore i.e. 0.11% of Total Revenue and 4.29% of PAT of the Company.

(iii) Mr. Ganesh T. Argekar (Executive Director)

Mr. Ganesh is the Executive Director of the Company. He also heads the Supply Chain Of Vanity Case Group and Hindustan Foods Limited. He is B.Sc. (Chemistry) and also PGDMM IIMM. He has 23 years of overall work experience, during which he has held various managerial positions.

He has been on the Board since 2014. Age of Mr. Ganesh is 49 years. He received INR 52 lacs as remuneration for FY21 i.e. 0.04% of Total Revenue and 1.43% of PAT of the company.

(iv) Nikhil K Vora (Non-Executive Director)

Mr. Vora is the Non-Executive Director in Hindustan Foods Limited. A post-graduate in Management, Nikhil has also completed the Future Leaders Program at the Saïd Business School, University of Oxford. 

He is also the Founder and CEO of Sixth Sense Ventures, India's First Domestic Consumer-Centric Venture Fund, he has vast experience in financial markets and the consumer domain. Nikhil was earlier the Managing Director and Head of Research at IDFC Securities and has been regarded as one of the strongest analytical minds in the country.

(D) Shareholding Pattern

hindustan foods shareholding pattern

*During the year 2020, Hindustan Foods increased its Authorized share Capital from INR 21,50,00,000/- to INR 24,00,00,000/-.

hindustan foods key holding by promoters
hindustan foods key holding by public

(i) Mutual Fund Holdings

hindustan foods key holding by mutual funds

(E) Business Model Of Hindustan Foods

Hindustan Foods Limited has a robust Business Model, which consists of -

(i) Entire Dedicated Manufacturing

Right from finalising the location, design, and capacity, among other parameters, the plans are customized as per the requirements of the Principal Company. All the investments and expenses associated with the manufacturing are HFL’s responsibility, enabling the Customer to focus their spending on factors likely to improve their business.

(ii) Shared Manufacturing

For the company under this model, the manufacturing units are utilized for various client companies in order to manufacture part of their requirements.

The in-house dedicated manufacturing teams help maintain quality standards while controlling the batch sizes and adjusting lead times. Competitive products are also made in the same facility, with strong secrecy codes.

(iii) Private Label Manufacturing

Private label is the process of taking a Manufacturer’s formulation and designing and also adding the brand’s name and logo to it. This model offers several customizable options and requirement levels at competitive prices and is also based on extensive research and testing methods.

(F) Revenue Classification

Hindustan Foods Limited (HFL) is one diversified and trusted players in manufacturing space. In 2013, Vanity Case Group bought a controlling stake in Hindustan Foods Limited and since then the company has diversified across various FMCG categories with manufacturing competencies in Food and Non-food, extending to Personal Care, Home Care, Food & Beverages, Leather Shoes and Accessories.

Hindustan Foods also enjoy meritorious range of both Domestic and International marquee clients, including Hindustan Unilever Ltd, Reckitt Benckiser Ltd, Godrej Consumer Products Ltd, Hector Beverages Private Limited, Danone, Marico, PepsiCo, Bata, Wipro, Emami, Danone GSK etc.

hindustan foods stock research with details of brands manufactured

(i) Segment-wise Revenue

Hindustan Foods Limited reported a turnover of Rs. 1,389.09 cr for FY 21 as compared to Rs. 773.10 cr during the previous year, a growth of nearly 80%. Its PAT of Rs. 36.47 cr for FY21 was also 61% more than the Rs. 22.73 cr in the previous year.

Hindustan Foods Limited's Contract Manufacturing Segment contributes 99.99% Share to to the Total Revenue of the Company.

In the year 2020, Company's Contract Manufacturing Segment Revenue grew to INR 773.03, increase by 57%. This growth is mainly on account of ramping up of the new Plant in Coimbatore and the commissioning of the expansion in Hyderabad.

As of 31 March 2021, HFL's Revenue Distribution By Products is as follows -

hindustan foods stock research with details of segment wise revenue

(G) Industry Analysis

(i) FMCG Contract Manufacturing

FMCG Contract Manufacturing can be traced decades back. However, it gained ground in the FMCG space only in the last few years. The benefits it comes along with plays an instrumental part in its rising popularity. It has not only allowed FMCG companies to focus on their core business activities, but also facilitated outsourcing of manufacturing and distribution.

(ii) FMCG – Need for Outsourcing?

Contract Manufacturing is aiding FMCG players by avoiding the hassles involved in setting up facilities, controlling costs, managing labor, quality control, meeting regulatory requirements and also ensuring faster time to market through a strong supply and distribution network. These platforms are not just boosting the larger FMCG players, but also helping smaller ones emerge stronger. Hence translating into a certain derived demand for Contract Manufacturers. With this backdrop, understanding the opportunity landscape in the FMCG space is important and critical.

(iii) Exports of FMCG

The global FMCG market is currently valued at USD 750 Bn. Out of this, the US market alone has a significant share of around USD 120 Billion, while India has a miniscule share of the manufacturing pie. Foreign FMCG companies are anticipated to increasingly seek Contract Manufacturing from India, considering the favorable conditions, also with easing out of regulatory norms, costs, and quality benefits amongst others.

(iv) FMCG Contract Manufacturing opportunity in India

1. Manufacturers Association with Best Standards

In India, a growing number of organized manufacturers are adopting the best industry practices. One of these include maintaining facilities at par with international standards by complying with best certifications. This, therefore, asserts a sense of high credibility amongst foreign stakeholders to outsource their products from India.

2. Resource Availability

Various commodities are native to the Indian region, thereby making it easy to procure raw materials. This, along with large pool of labor, brings down the overall manufacturing costs.

3. Faster Turnaround Time

Post GST and e-way bill implementation, the turnaround time for transporters has improved drastically. To capitalize on this, companies are looking to expand their manufacturing bases beyond one location. To benefit from the same, Contract Manufacturers are also finding increased prevalence working in their favor.

(H) Cost Structure of Hindustan Foods Ltd

(i) As % Of Total Expenditure

HFL's Cost Structure as % of Total Expenses as on 31 March 21 is as follows -

hindustan foods stock research with details of cost structure

(ii) As % Of Net Sales

As of 31 March '21, Company's Cost Structure as % of Net Sales is as follows :

hindustan foods stock research with details of cost as % of net sales

(iii) Cost Of Raw Material Consumed

Company produces different products for different Companies. For manufacturing these different Products, company has to use different commodities as Raw Material. The prices of these commodities change due to various external factors.

Year-on-Year Cost Of Raw Material Consumed by Hindustan Foods is as follows -

hindustan foods stock research with details of cost of raw material consumed


The Company is continuously spending on Capex. Its Capex increased from INR 10.9 crore in 2016 to INR 375 Crore in the year 2021. The heavy increase in Capex is mainly on the back of Mergers and the setting up of New Units and Facilities by the company in the past few years.

hindustan foods stock research with details of capital expenditure

Hindustan Foods Ltd is also undertaking CAPEX of INR 150 Crores to set up a home and personal care product like bath soaps and detergent bars, facility in Hyderabad, and to set up a Food & Beverages manufacturing facility for a leading FMCG brand in northern India, under its Subsidiary HFL Consumer Products Private Limited. Moreover, the management expects these projects to be completed by Q4FY22.

(J) Group Structure

Hindustan Foods Limited has 1 Subsidiary and 1 Associate Company.

hindustan foods stock research with details of group structure

(i) ATC Beverages Private Limited

In F.Y. 2020, Company acquired 44.43% (i.e. 93,94,084 Equity shares) of the paid-up Equity shares of ATC Beverages Private Limited, which manufactures a variety of juices and also carbonated drinks, with this acquisition ATC Beverages has become an Associate Company of HFL.

(ii) HFL Consumer Products Private Limited

HFL Consumer Products Private Limited, incorporated on 06 August 2020, is the wholly-owned Subsidiary of the Company. Mr. Sameer Ramanlal Kothari and Ganesh Tukaram Argekar are the Directors of the Subsidiary. It is yet to commence its operations in Food & Beverages manufacturing facility for a FMCG brand.

(K) Manufacturing Facilities

The Company has 11 Manufacturing Facilities located at 9 Locations across India.

(i) Pest Control : Coils, Vaporizers & Aerosols - Jammu

This Unit was acquired from Reckitt by the end of 2017 and commenced commercial production from January, 2018. Moreover, Jammu factory is the sole manufacturer of vaporizers, aerosols and coils for Reckitt Benckisor’s, Mortein Mosquito Repellent and Pest Control brand in India. This Plant has Manufacturing Capacity - Coils capacity : 1,200 Mn p.a., Vaporizers capacity : 43.2 Mn p.a. and Aerosols capacity : 7.2 Mn p.a.

(ii) Food & Beverages - Uttar Pradesh

The Company has started building a Greenfield plant for a new F&B project near Lucknow. Commercial production scheduled in Q-4, F.Y. 22.

(iii) Leather Shoes & Sandals - Mumbai

Located on the outskirts of Mumbai, this unit manufactures leather footwear for women, men and juniors specializing in open-toes, high-heels, huaraches, mules, sandals and slippers. The facility caters to International, domestic as well as multiple e-Commerce clients like Esprit, Saks 5th Avenue, Dune, Lollipop, Flipkart and Myntra. Moreover, this Plant has Production Capacity of 0.37 Mn Pairs p.a.

(iv) Baby Food, Extruded Cereals & Snacks - Goa

This is the oldest facility of the Company located in Ponda, Goa, used for manufacturing cereal, porridges and snacks catering to clients like Danone, PepsiCo and Marico. Moreover, this Facility of HFL has Extrusion capacity - 6,000 Tons p.a. and Dry-mix blending capacity - 1,000 Tons p.a.

(v) Cold Beverages - Mysuru

This facility manufactures carbonated soft drinks, juices, active water and energy drinks on its fully automated filling and packing lines for clients like PepsiCo, Paper Boat and Ocean Beverages. Also, this Unit has Manufacturing Capacity of 5.84 Mn Cs p.a.

(vi) Leather Shoes & Accessories - Puducherry

Facility was an acquisition by HFL of Ponds Exports Ltd. which is a subsidiary of Hindustan Unilever Ltd. in 2016-2017. Moreover, this Unit manufactures Leather shoes and accessories and having Full Shoes Production Capacity : 0.5 Mn pairs p.a. and Shoes Uppers Production Capacity : 0.7 Mn pairs p.a.

(vii) Beverages: Tea, Coffee & Soups - Coimbatore

It’s a Greenfield facility exclusively built to process, blend and pack multiple brands and also flavors of tea, coffee and soups for Hindustan Unilever. This Unit has Tea Production Capacity of 700 Tons a week and Coffee Production Capacity of 30 Tons a week.

(viii) Fabric Care & Personal Care - Hyderabad

HFL has the two exclusive plants in Hyderabad.

  • Hyderabad I - This facility is engaged in the manufacturing of detergent powders, having Capacity of manufacturing 70,000 tonnes p.a. of detergent powder for national brands.
  • Hyderabad II - Facility is engaged in the manufacturing of Liquid Detergent, Fabric Conditioner & Softener, Liquid Soaps and Shampoos. Moreover, this Plant has capacity of 60,000 KL p.a.

(ix) Home Care - Silvasa I & II

HFL has Two Facilities in Silvasa.

  • Silvasa I - The Company manufactures the largest international brand of Disinfectant Toilet Cleaning Liquid in a custom-built plant. The facility was built in 7 months of the Covid lockdown period. Moreover, its Commercial production started in October 2020, with a 100KL/day capacity.
  • Silvasa II - The Company will start manufacturing the largest international brand of Surface Cleaning Liquid in another custom-built plant. Its Commercial Production has started in May 2021.

Both the Factories has Combined Manufacturing Capacity of around 20,000 Kl of Liquids.

(L) Financial Parameters of Hindustan Foods

hindustan foods stock research with details of financial performance highlights
  • HFL's Net Sales has shown a robust and regular growth over the years. Moreover, Net Sales grew at a CAGR of 80% over last 10 Fiscal years.
  • Also, Company's PAT has shown a considerable growth and grew at a CAGR of 89% over last 10 years.
  • On the other hand, Company's both PBIDT and PAT margin have shown volatile growth over the years.
  • HFL's ROE was 0 till F.Y. 2016. It reached to 17.80 in the year 2021.
  • On the other hand, ROCE of Hindustan Foods remains at 15-18% range in last 4 Fiscal years.

(i) Robust Revenue Backed by Inorganic and Organic Growth

HFL's Revenue grew at a CAGR of 80% from year 2011 to 2021, driven by business acquisitions and the addition of new capacities and clients.

(ii) Negative Cash Flow From Operations

The company’s cash flow from operations turned negative to INR 18 million during 1HFY21 (FY20: positive INR 68 million), on account of working capital outflow and higher interest expense. Its free cash flow remained negative at INR 356 million during 1HFY21 (FY20: negative INR 1,213 million) and the same shall continue in FY21 and FY22 as well on account of the ongoing capex

HFL's financial flexibility is underscored by its ability to tie-up long tenure loans, ranging from 8 to 11.5 years, with repayments backed by firm contracts. HFL has also scheduled repayments of INR 17.4 crore and INR 29.5 crore in FY21 and FY22, respectively. However, It received an equity infusion of INR 15 crore and INR 100 Crore from promoters and institutional investors during FY19 and FY20, respectively. 

(M) Quarterly Results

hindustan foods stock research with details of recent quarter performance

(N) Management Discussion and Concall Highlights


  • Management stated that its goal is to reach INR 4,000 Crore Revenue in next 3-4 years.
  • It also said that the underlying opportunity in FMCG contract manufacturing is huge and HFL has scratched the surface in terms of categories like pet food, confectionaries, savories, color cosmetics, deodorants, etc.
  • Management also added that the Company wants to add more Products that will add Value to the Company. Additionally, HFL has also started looking at adjunct sectors and are  excited by the Health & Wellness Sector, which is more value added as compared to FMCG.
  • Moreover, on basis of above, the Management is confident on achieving its immediate of INR 2,000 crore Revenues in FY22. Also, HFL's vision 2025 is to double the Turnover in next 3 years by exploring both Organic & Inorganic opportunities.

CAPEX and other Expenses

  • Management further added that the New Plants & Facilities will also help the Company in achieving the said target of Doubling its Revenue, but that will require additional CAPEX too.
  • As per the Management, Company has witnessed some moderation in sales during Q-1, as compared to last Quarter, because of the second wave and change in the product mix. It also stated that HFL has been able to protect bottom-line due to the inherent nature of the Business Model.
  • It also stated that HFL continue to invest in CAPEX, due to which interest cost and depreciation have increased slightly. But, HFL's focus on effective control over working capital and effective deployment of capital will help in improving return ratios in the coming period.
  • Management also mentioned that its recently commissioned facilities at Silvasa and Hyderabad have been ramping up well and started contributing to the Revenues.
  • It mentioned that in Q-1, 2021-22, HFL's Manufacturing Cost decreased because Factories produced less due to second wave of Covid. Management also added that in Q-4 2021, there are also some one time Expenses like Stamp Duty & Provision. This is the another reason of reducing Manufacturing Cost.

(O) Key Developments in Q-1, 2021-22

  • ATC Beverages has signed an Letter of Intent with a large FMCG company to start manufacturing their beverages on a dedicated basis.
  • Moreover, the second facility at Silvassa set up to manufacture Surface Cleaning Liquid on the back of Toilet  cleaning  facility,  which  commenced  commercial  production  in  the  previous  quarter,  has commenced commercial production in May 2021.
  • Project work for Soaps & Bars plant in Hyderabad and also for the F&B Plant in Uttar Pradesh is progressing as per schedule. Moreover, Commercial production for both is expected to commence in Q-4, F.Y. 2022.
  • On the other hand, the Shareholders in their Tribunal Convened Meeting, pursuant to order of the Hon'ble NCLT Mumbai Bench, approved the composite Scheme of Arrangement and Amalgamation Beverage plant in Mysuru and Malt Beverages plant in Coimbatore. However, the Final order from the Hon'ble NCLT Mumbai Bench is awaited.
  • The Company has appointed Sanjay Sehgal as President, Healthcare and Wellness. Sehgal comes with 41 years of extensive understanding and experience in organizations such as Hindustan Unilever, Sandoz & Hindalco. He is a Graduate from IIT Delhi, and will lead HFL’s foray in Health and Wellness Sector.

(P) Opportunities and Strengths

(i) Decentralized Manufacturing

India is a large country in terms of geographical area with a population spread all across. Though the investment in Roads and the doing away of Sale-tax borders has led to improved cost of transportation, FMCG companies are actively revising their manufacturing foot prints to set up their factories closer to the centers of consumption. This will lead to a decentralization of manufacturing and also demand for multiple factories across the country.

(ii) Established Contract Manufacturing Player Having Strong Client Base

Hindustan Foods Limited is one of India’s largest fast-moving consumer goods (FMCG) contract manufacturing players, with over two decades of experience in product development and manufacturing. The company’s portfolio is diversified across various FMCG categories, and it also has manufacturing competencies in food & beverages, home & personal care, fabric care and leather products.

Moreover, the company acts as a contract manufacturer for the top FMCG players, namely Hindustan Unilever Ltd, Reckitt Benckiser Ltd, Godrej Consumer Products Ltd, Hector Beverages Private Limited, Danone Limited, and also for the top National and International Apparel Brands such as Hush Puppies, Gabor, Steve Madden, Arrow, U.S. Polo, and Louis Philippe. 

(iii) Make in India Project

Through the Make in India drive, the Government aims to increase contribution of Manufacturing Sector to the Indian GDP from 16% to 25% by the year 2022. Also, with various efforts dedicated towards improvement of the country’s stature on different counts, like in resolving business issues, lowering corporate taxes, ease in payment of taxes, labor regulation, contact enforcement and land clearance, the business sentiments for Contract Manufacturers in India remains positive.

(iv) Robust Business Model

The Company has a Strong Business Model, mainly Divided into 3 Categories - Dedicated Business Model, Shared Manufacturing and Private Label manufacturing Model.

HFL derives the majority of its revenue from its dedicated-unit type business model wherein the company enters into long-term contracts with guaranteed fixed returns. In such contracts, the company either sets up a greenfield facility or gets a prebuilt facility from the client. The guaranteed returns not only ensure stable profitability but also cover the debt servicing portion of the loan taken by HFL to build the said facility. In FY 20, the dedicated unit model contributed over 85% to the company's total revenue.

The company also has a shared-unit model, where it signs multiple clients for a manufacturing facility. These contracts, though not long-term, are flexible and hence, fetch more margins than the Dedicated Unit Model. HFL also carries out Private Label Manufacturing, where the Client uses HFL's Formulation and Designing, and then adds its own name and logo to the product.

(v) Brand Consciousness

The spending patterns of Indians have witnessed a shift towards branded products owing to a rise in disposable incomes. A vast majority of people no longer wish to compromise quality and hence have shifted their buying habit to purchase Branded Products.

(vi) Shift in Global Sourcing

India is well poised to leverage the on-going trade wars between China and India. Appropriate investment in infrastructure and also the ability to scale up production will be the key to leveraging this windfall opportunity.

(vii) E-Commerce and Digitalization

Changes in the distribution landscape of the country is opening up new fields for existing players and also encouraging new players to launch brands in the FMCG industry. The presence of Modern-trade only or Digital only brands will increase in the coming years and as a result the demand for Outsourced Manufacturing will increase as well.

(viii) Skilled Labour

The availability of Indian skilled labour at relatively lower cost provides a significant advantage. Instead of setting up
an entire plant in India, companies can select Contract Manufacturers who can help ensure right labour sourcing
and efficient management along with other aspects.

(Q) Risk/Concerns

(i) Loss Of Skilled Labor and Workforce

People continue to remain the backbone of the Manufacturing Industry. Obtaining and retaining a skilled Workforce is essential for continued success of business. The loss of efficient labor could make it difficult to continue Production and also could adversely affect other operations and financial results. Moreover, Loss in labor productivity and labor disputes could result in strikes, work stoppages and affect production.

(ii) Competition – Loss of Key Customers and Market Share

With relaxation of certain governmental norms, there’s an increased competition for every sector and Contract Manufacturing is no stranger to it. Any new competition in the market poses threat to the existing players in the industry. Thus, with increasing competition everywhere, a Contract Manufacturer always has a risk of losing the contract to a more competitive party.

(iii) Operational Risk

Timely contract renewals are crucial, as HFL is heavily reliant on the dedicated-unit model with dedicated facilities for a specific client. The company’s inability to complete greenfield facilities under the Dedicated Unit Model within specified timelines and any inconsistency in operational efficiency could attract penalties from its clients and may also affect the Revenues.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry's Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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