01 — At a Glance
The Popcorn Company That Tried to Become Conagra. The Market Isn’t Convinced Yet.
- 52-Week High / Low₹960 / ₹588
- Q3 FY26 Revenue₹407 Cr
- Q3 FY26 PAT₹8.06 Cr
- Q3 EPS₹2.14
- TTM EPS-₹27.5
- Book Value / Share₹384
- Price to Book1.62x
- Debt / Equity0.01x
- OPM (TTM)2.56%
- 3Yr Stock Return-10.7%
Flash Summary: Sundrop reported Q3 FY26 PAT of ₹8.06 crore (¡19.6% YoY!) on revenue of ₹407 crore (+95.6% YoY, thanks Del Monte). Operating margins are still flat at 4.99% because the acquisition came with more baggage than a Bharatiya Rail trunk. TTM EPS is -₹27.5 (the FY25 loss of ₹110 crore is still haunting the calculations). The P/E of 59.8x on negative earnings is not a bargain — it’s a leap of faith. And the stock has returned -13.1% in 3 months. Welcome to the world of “platform consolidation.”
02 — Introduction
ACT II + Sundrop + Del Monte = ?
In most Indian stories, when a company buys another company, shareholders get excited about “synergies,” “scale,” and “market consolidation.” They also always find something under the bed when they move in.
Sundrop Brands (née Agro Tech Foods) is that company right now. In November 2024, the board approved the acquisition of Del Monte Foods Private Limited — 100% stake, all-stock swap, no cash paid. Del Monte brought in ₹500+ crore in annual revenue. It also brought in ₹136 crore worth of impairments in FY25 (reasons: abandoned plants at Jhagadia, Chittoor, Unnao, and shuttered chocolates/wafers/fries lines). Translation: “we bought a business, looked at the cupboards, and decided the cupboards were full of ghosts.”
The company now has three business platforms: ACT II (snacking/popcorn, growing at 12% volume, 18% value), Sundrop (edible oils and spreads, struggling), and Del Monte (culinary sauces, Italian foods, growing at 8–11% value, despite olive oil price deflation working against it). It’s a three-legged stool. One leg is bouncing, one is creaking, and one is Italian.
Management has been very clear in concalls: “We are not in the business of growth-for-growth’s sake.” They want ROI-led investment, capital-efficient portfolio architecture, and a “sharp call” on which segments to invest in. That’s venture-capital speak. It also means they will kill things that don’t work. Q3 FY26 delivered 10% consolidated revenue growth and 80% EBITDA growth on a standalone basis — but the profit story is still healing from surgery.
Credit Rating Update (Sep 2025): CRISIL reaffirmed A/Stable (long-term) and A1 (short-term) on bank facilities after removing the stock from “Rating Watch with Developing Implications.” The message: “We believe the acquisition makes strategic sense.” Translation: “We’re not worried about the debt.” (Spoiler: there is no debt. Debt-to-equity = 0.01x.)
03 — Business Model: Three Legs, Each With Its Own Appetite
What Happens When a Popcorn Company Buys Italian Sauce?
Sundrop is not in the business of making just one thing. It’s in the business of owning brands that live in your pantry and your snacking ritual — and hoping that the brands convince you to spend ₹25 instead of ₹15.
ACT II (Popcorn): The crown jewel. ₹10 per pack, RTE and RTC formats, 12% volume growth, 18% value growth in Q3. Management describes it as “number 1 player in both RTE and RTC formats” — meaning it’s winning in the ready-to-eat (out-of-home snacking) and ready-to-cook (home microwave) segments simultaneously. New competition from Marico and 4700BC is being met with deeper wholesale reach and product innovation (6 new products launched in the year). The moat: a ₹10 price point that is “very difficult for all players to bring” because Sundrop has cranked up manufacturing efficiency to insane levels. Also, they’re now using Del Monte’s B2B network to push ACT II into institutional settings (schools, GCCs, offices). Clever move.
Sundrop Staples (Edible Oils & Spreads): This is where the company is currently protecting, not attacking. Oils volume grew +5% in Q3 but are still -1% YTD. Spreads (peanut butter) is described in the concall as a “level of concern” — share eroding in modern trade, innovation pace slow, competition from MyFitness and Pintola heating up. Management’s strategy: shift from commodity pricing to “grammage + price point flexibility” to protect margins. For spreads, they’ve launched 7 new SKUs, including high-protein options, to counter newer competitors. It’s a “protect and stabilize” game, not a growth game.
Del Monte (Culinary + Italian): The recent bride. Culinary products (ketchup, mayo, spreads) grew 10% value in Q3, 11% YTD. Italian products (olive oil, pasta) grew 16% volume, but value is down because olive oil prices fell and the company passed the benefit to consumers (smart, but creates a short-term headline pain). Management is bullish: “We expect the business to turn value positive in the period ahead” once commodity stabilizes. The B2B revenue is ~40% of Del Monte, giving Sundrop access to food service, hospitality, and institutional channels that ACT II is now trying to enter.
ACT II~35%of group turnover
Sundrop Staples~22%of group turnover
Del Monte~43%of group turnover
E-Com Growth+39%YTD (QC +50%)
The Concall Confession: Management explicitly stated in the Feb 2026 concall that “we are not expecting our marketing as a percentage to go down” — which is admission that building a “platform” requires sustained investment, not cost-cutting. They also flagged that “one-time advisory/project costs” for synergies are tapering: ₹2.7 crore in Q3, expected negligible in Q4. Translation: the acquisition integration cost bump is winding down, which means Q4 margins should be cleaner than Q3’s 4.99% OPM.
04 — Financials Overview
Q3 FY26: The Resurrection Quarter (Sort Of)
Result type: Quarterly Results | Q3 FY26 EPS: ₹2.14 | Annualised EPS: ₹8.56 (Q3 EPS × 4)
| Metric (₹ Cr) |
Q3 FY26
Dec 2025 |
Q3 FY25
Dec 2024 |
Q2 FY26
Sep 2025 |
YoY % |
QoQ % |
| Revenue | 407.47 | 208.30 | 383.30 | +95.62% | +6.30% |
| EBITDA | 23.81 | 14.93 | 11.58 | +59.34% | +105.7% |
| EBITDA Margin % | 5.84% | 7.16% | 3.02% | -132 bps | +282 bps |
| PAT | 8.06 | 3.91 | -2.09 | +106.1% | Positive |
| EPS (₹) | 2.14 | 1.60 | -0.55 | +33.75% | Positive |
The Turnaround Narrative: Q3 was the first full quarter where all three platforms (Sundrop + Del Monte) ran together without major one-time write-downs. Revenue nearly doubled YoY (+95.62%) because of base effect (Del Monte added ₹100+ crore in FY25 from just Feb-Mar). EBITDA grew 60% YoY, but EBITDA margin compressed from 7.16% to 5.84% — the acquisition brought lower-margin revenue, and gross margin improvement is not yet offsetting SG&A dilution. The good news: Q3 saw sequential margin expansion (5.84% vs Q2’s 3.02%), driven by ~230 bps gross margin improvement (material cost + mix) and ~100 bps from manufacturing/logistics efficiencies. Also: “one-time advisory costs” have tapered, which means Q4 should be even cleaner. Management’s medium-term target: 3–4 percentage points of gross margin expansion over ~3 years, plus 3 percentage points of fixed SG&A reduction. That would drive OPM from current 2.56% (TTM) to mid-single-digit territory.
💬 A company buys Del Monte, writes off ₹136 crore, and the market still values it at 59.8x annualized P/E. Is this the market waiting for the margin story to play out, or is it pricing in an exit/sale? What’s your theory?
05 — Valuation: When Negative Earnings Get Expensive
Fair Value Range: The Math When the Patient Is Still in Recovery
