Prataap Snacks shares fall 3.4% after Q2 FY27 shows margin squeeze and net loss

According to the abridged P&L on page 29 of the presentation, Prataap Snacks’ consolidated sales/income from operations for Q2 FY27 rose to Rs 540.95 cr from Rs 429.79 cr in Q2 FY26, a 25.9% year‑on‑year increase. Including other operating income, total income from operations stood at Rs 543.93 cr versus Rs 431.89 cr, also up 25.9%.

This strong growth carried into the half‑year as well. H1 FY27 sales/income from operations came in at Rs 1,031.38 cr against Rs 838.73 cr in H1 FY26, a 23.0% rise, with total income from operations at Rs 1,036.43 cr versus Rs 842.89 cr, again up 23.0%.

The operational overview on page 27 highlights that Q2 FY27 was the first time quarterly revenues crossed the Rs 500.00 cr mark, with revenue from operations growing 26% YoY and 10% QoQ to Rs 541.00 cr. Growth was led by Namkeen and Potato Chips, supported by new launches and deeper distribution.

However, the same P&L table shows that profitability did not keep pace:

• Gross margin in Q2 FY27 was Rs 138.70 cr versus Rs 128.79 cr a year ago, up only 7.7%.
• The gross margin percentage fell sharply from 29.8% to 25.5%, a contraction of 430 bps.
• Q2 FY27 EBITDA dropped to Rs 12.90 cr from Rs 22.90 cr, down 43.7%, with EBITDA margin sliding from 5.3% to 2.4% (a 290 bps decline).
• Profit after tax turned negative at Rs (2.50) cr versus a profit of Rs 4.64 cr in Q2 FY26.

For H1 FY27, EBITDA was Rs 31.95 cr compared with Rs 40.91 cr in H1 FY26, a 21.9% decline, and EBITDA margin fell from 4.9% to 3.1% (down 180 bps). PAT for H1 FY27 was marginally negative at Rs (0.03) cr versus Rs 5.33 cr in H1 FY26. The company notes on page 33 that the prior‑year Q2 and H1 PAT included exceptional income of Rs 0.77 cr, but even adjusting for that, the direction of travel is clearly weaker.

This combination of record revenue with shrinking margins and a net loss helps explain why the stock moved lower despite the strong growth headline.

The presentation squarely attributes the margin squeeze to raw‑material and operating cost inflation.

On page 29, raw material cost for Q2 FY27 is shown at Rs 405.23 cr, up 33.7% from Rs 303.10 cr in Q2 FY26, outpacing the 25.9% growth in income from operations. For H1 FY27, raw material cost rose to Rs 763.78 cr from Rs 596.66 cr, an increase of 28.0% versus 23.0% growth in income from operations.

The management commentary on pages 27–28 notes that “rising input costs have continued to present challenges,” citing further increases in key inputs such as palm oil and potato, along with higher fuel and logistics costs. The raw material price trend charts on page 35 visually reinforce this, showing palm oil and potato indices well above the base level of 1.00 in recent quarters.

The company says it has responded with “calibrated grammage rationalisation, selective adjustment to channel margins and trade schemes and continued cost optimisation across operations” (page 27). These steps have “enabled the company to offset a significant part of impact on margin,” but not enough to prevent the sharp drop in gross and EBITDA margins that investors are now reacting to.

The EBITDA and PAT charts on page 33 underscore why the market focused on profitability rather than revenue:

• Q2 FY27 EBITDA is shown at Rs 12.90 cr versus Rs 22.90 cr in Q2 FY26, with EBITDA margin at 2.4% compared with 5.3%.
• H1 FY27 EBITDA is Rs 32.00 cr versus Rs 40.90 cr in H1 FY26, with EBITDA margin at 3.1% versus 4.9%.
• Q2 FY27 PAT is Rs -2.50 cr, against Rs 4.60 cr in Q2 FY26.
• H1 FY27 PAT is effectively breakeven at Rs -0.00 cr versus Rs 5.30 cr in H1 FY26.

On the cash side, the cash‑flow statement on page 31 shows reported EBITDA of Rs 31.95 cr in H1 FY27, but free cash flow at Rs -32.20 cr versus Rs 19.86 cr in H1 FY26. This was driven by higher capex of Rs 20.53 cr and Rs 39.04 cr of investment and loan to subsidiary for the greenfield facility near Indore. While these are growth investments, the negative free cash flow in a period of margin pressure can add to investor caution.

The cash‑profit and cash‑EPS charts on page 34 do show positive cash profit of Rs 14.00 cr in Q2 FY27 (versus Rs 21.20 cr in Q2 FY26) and Rs 32.80 cr in H1 FY27 (versus Rs 39.00 cr in H1 FY26), but the decline here too reinforces the narrative of earnings compression.

Management is clearly positioning FY27 as a transition year, with multiple structural initiatives underway:

• The margin‑improvement roadmap on page 21 targets a cumulative 4–5% uplift in EBITDA margin through cost optimisation (seeking 1.5–2.0%), plant‑network realignment (another 1.5–2.0%) and supply‑chain efficiency (aiming for 1.0–1.5%).
• The greenfield manufacturing project near Indore detailed on page 22 aims to consolidate seven smaller units into a single facility, with management expecting “structural accretion in margin of over 1.5%” and incentives covering “over 25% of eligible investment.”
• The medium‑term target operating model on page 25 aspires to around 15% revenue growth, ~10% EBITDA margin and 15%+ ROCE.

In his message on page 28, Managing Director & CEO Amit Kumat reiterates confidence in “delivering strong double‑digit revenue growth in FY27,” backed by momentum in core categories, distribution expansion, product innovation and alternate channels such as quick commerce and modern trade.

However, the current reported numbers are far from the medium‑term margin aspiration. With Q2 FY27 EBITDA margin at 2.4% and H1 FY27 at 3.1%, investors appear to be discounting the execution risk and the time it may take for these structural levers to translate into the targeted ~10% EBITDA margin.

Putting it together, the 3.4% slide in Prataap Snacks’ share price after the investor presentation appears to reflect:

• A clear disconnect between record revenue (Rs 543.93 cr in Q2 FY27) and weak profitability.
• Sharp gross‑margin compression (25.5% vs 29.8%) and a halving of EBITDA margin compared with the medium‑term aspiration.
• A swing to net loss of Rs (2.50) cr in Q2 FY27, even as management talks up double‑digit growth and long‑term margin expansion.
• Ongoing input‑cost and logistics inflation, as highlighted in the raw‑material trend charts and management commentary, which keeps near‑term earnings visibility cloudy.

The presentation reinforces the long‑term growth story and a detailed margin‑recovery plan, but the latest quarter’s numbers underline that the turnaround is still a work in progress. The stock’s move to Rs 1,014 suggests the market is, for now, focusing more on the immediate pressure on margins and PAT than on the promised medium‑term operating model.