Can This Indian Food Stock Get a Nestle-like Premium? Find out...

Back in 2015, Maggi was synonymous to not just instant noodles but instant food.

10-minute deliveries were then unheard of. And no food delivery from a restaurant nearby could be as instant as '2-minute Maggi'.

So, when Nestle's Maggi was banned by the food regulator FSSAI in June 2015 for allegedly containing lead beyond permissible limits, it was not just India's trust in instant food that was shaken. It shook the trust that stock markets placed on MNC food companies like Nestle.

The entity was forced to withdraw the product from the market. And the stock price crashed by over 10% in days.Nestle India, however, changed its strategy and implemented a phased relaunch. The company enhanced food safety standards, accelerate innovation with numerous new products and eventually regained over 50% of its market share

Since the pandemic, there has been a heightened awareness of food safety, chemical residues, and long-term health, especially when it comes to ready to eat food.

Indian consumers now associate organic foods with lower pesticide exposure and better nutrient profiles. Several leading food brands now prioritize preventative healthcare through their offerings.

As India's middle class expands and their disposable incomes rise, buying organic food products is viewed as an investment in health.

Therefore, entities offering 'organic food' in India are at an inflection point.

Organic products carry a significant price premium (often 30-100% higher). This makes the products more value accretive to the food companies.

Urban consumers in India are now more exposed to global food trends. In addition, social media influence and advertisements emphasizing clean eating has brought focus on organic food benefits.

Modern retail chains and e-commerce platforms have also made organic products instantly accessible.

Increased media coverage about the excessive use of fertilizers and pesticides in conventional farming practices has generated fear and distrust regarding the safety of mainstream produce.

So, the megatrend of growth in organic food is here to stay. And companies that have managed to change their product profile to suit this trend have a long runway.

Take the case of premium rice producer, LT Foods (which owns the popular Daawat brand). The company has large network of farmers. It connects with farmers not just in India but also in Uganda for sourcing and exporting its organic products.

Over the years, the company has built a strong network of organic farmers and farmland spanning over 60,000 organic farmers and over 94,000 hectares of organic farmland in India.

The network in India reaches from the foothills of the Himalayas (Haryana, Punjab, and Uttarakhand) to Central India (Uttar Pradesh and Madhya Pradesh) and into southern regions.

The company is also building its network in Africa, spreading over 14,700 organic farming families and over 10,000 acres of certified organic cultivation.

Coupled with this, the company recently announced capacity addition in Rotterdam, Netherlands, which will not only act as a processing and export hub for Europe. The new capacity helps LT Foods service mainstream supermarkets and health stores in Europe with climate friendly supply chains.

More importantly, LT Foods is strategically diversifying its business beyond traditional rice into high-growth, high-margin segments like organic foods and ingredients, as well as ready-to-heat and ready-to-cook products, which are aligned with evolving consumer preferences for health, convenience, and sustainability.

With its integrated 'Farm to Fork' approach and continuous investments in brand building, distribution, and new product development, it's well-positioned to capitalize on the shift from unbranded to branded organic food products globally.

LT Foods' products are sold in over 80 countries through a strong distribution network of 1,800 distributors and more than 150,000 retail outlets.

The company has recently set up a new manufacturing facility in the UK and appointed a distributor for Saudi Arabia (the largest basmati rice market globally). It targets achieving Rs 10 bn revenue each from the UK and Saudi over five years.

It's also investing in facility expansions in the US, UK, and Saudi Arabia, with planned capex for FY26 in the range of Rs 1.5-2.0 bn.

The company is strategically transitioned from a B2B (business to business) exporter to a B2C (business to consumer) player via its 'Daawat Ecolife' range. With this organic offering LT Foods targets higher margins and has projected significant growth in B2C revenue in 5 years.

The transition to a B2C model allows LT Foods to capture the incremental margin that was previously shared with distributors and retailers.

Should Organic Food Stocks be on Your Watchlist?

Compared to basmati rice peer KRBL, the stock of LT Foods has fetched premium valuations over the past few years due to focused growth approach and better track record of corporate governance.

Peer Comparison

Data source: Ace Equity, Company data

Having said that, the premium valuations would be sustainable if LT Foods manages to execute its growth plans with margin expansion targets over the next 4 years.

The company is expected to continue growing at moderate rates while keeping the balance sheet intact.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

Happy investing.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)