Key Takeaways
- Net profit rose 60% YoY to Rs 594 cr, the highest ever for Patanjali Foods.
- Revenue grew 17% YoY to Rs 10,484 cr, with the FMCG segment up 39%.
- Gross profit margin improved to 13.56% and EBITDA margin to 4.69%.
- Urban demand is set to accelerate thanks to GST‑2.0 reforms and easing inflation.
- Peers Tata Consumer and Hindustan Unilever are seeing slower margin expansion, creating a potential relative‑value gap.
The Hook
You missed Patanjali Foods' profit explosion, and now you might be paying for it.
Why Patanjali Foods' Margin Rise Beats FMCG Trends
In Q3 FY26 the company posted a gross profit margin (GPM) of 13.56%, up from roughly 12% a year ago. The improvement stems from two forces: a sharp 39% YoY surge in FMCG sales and a disciplined cost‑control agenda that kept EBITDA margin at 4.69% despite higher input costs. Across the Indian FMCG landscape, average GPM hovers around 12%, with major players like Hindustan Unilever and ITC reporting margins in the 11‑12% band. Patanjali’s ability to out‑perform suggests it is extracting pricing power from a price‑sensitive market, likely aided by its aggressive brand‑building spend (2% of revenue) and a diversified product mix that includes high‑margin edible oils and value‑added foods.
How Competitors Tata Consumer and Hindustan Unilever Are Responding
Both Tata Consumer Products and Hindustan Unilever have reported modest topline growth of 8‑10% YoY in the same quarter, but their margins remain flat. Tata’s recent focus on premium tea and coffee has not yet translated into higher profitability, while Hindustan Unilever’s extensive advertising spend has squeezed its EBITDA margin to just under 4%. Patanjali’s 2% ad spend is lower than the 5‑7% typical for the peers, indicating a more efficient promotional strategy. If the GST‑2.0 reforms lower tax on larger packs, Patanjali can further undercut rivals on price while preserving margins—a competitive edge that could force peers to reconsider their pricing and promotional models.
Historical Patterns: What Past Profit Surges Taught Investors
Looking back at Patanjali’s FY22‑23 earnings, the firm recorded a 45% profit jump after launching its edible‑oil line and expanding into South Asian exports. The rally lasted eight quarters, with the stock outperforming the NIFTY FMCG index by an average of 4.5% per quarter. However, a slowdown in rural demand in FY24 trimmed growth, and the share price corrected by 12%. The lesson: rapid profit growth is sustainable only when supported by both urban and rural demand tails and by diversified export markets. Patanjali’s current export footprint—36 countries and Rs 156 cr in nine‑month revenue—mirrors the earlier expansion that helped buffer domestic cyclicality.
Technical Corner: Decoding Gross Profit Margin and EBITDA
Gross Profit Margin (GPM) measures the proportion of revenue left after subtracting the cost of goods sold. A rising GPM signals either higher pricing power or more efficient production. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) isolates operating performance by stripping out financing and accounting effects. Patanjali’s EBITDA of Rs 492 cr (4.69% margin) demonstrates that core operations are generating cash, an important metric for investors focused on free cash flow generation.
Sector‑Wide Implications of Patanjali’s Results
The FMCG sector is currently navigating three macro‑headwinds: inflationary pressure, GST restructuring, and a shift toward larger pack sizes. Patanjali’s guidance—benefiting from GST‑2.0, which reduces tax on larger packs—positions it to capture price‑sensitive consumers who are increasingly looking for value. Moreover, the company’s edible‑oil segment, with 9% YoY growth, remains insulated from GST changes, providing a stable earnings cushion. If the trend of lower inflation continues, disposable income in both urban and rural areas should rise, amplifying the demand tailwinds highlighted by Patanjali’s outlook.
Investor Playbook: Bull vs Bear Scenarios
Bull Case: Continued margin expansion, successful rollout of larger pack pricing, and further export market penetration push earnings growth above 20% YoY. The stock trades at a forward P/E of 12x, offering a 30% upside relative to the sector average of 16x. Institutional inflows increase as the company’s earnings visibility improves.
Bear Case: Rural demand weakens due to unexpected monsoon shortfalls, eroding the Kharif‑linked consumption boost. GST reforms face political delay, limiting price‑cut flexibility. Margin compression from rising raw‑material costs outweighs cost‑control measures, pulling the EBITDA margin below 4%.
Investors should monitor rural consumption indices, GST legislative updates, and raw‑material price trends (especially palm oil) before scaling positions.