New Delhi, Aug. 31 -- Pet food manufacturer Drools Pet Food Pvt Ltd, which recorded strong double-digit growth in revenues and a jump in profitability in FY26, may continue its run, led by robust demand in the pet food category.

The Chhattisgarh-based Drools, founded in 2009 as a division of poultry and broiler farming business Abis Exports India Pvt Ltd, is backed by US-based private equity firm L Catterton. In FY26, Drools reported a 35% increase in net sales to Rs 1,240 crore, led by a 30% increase in cat food sales, VCCircle has learnt. Forty percent of its topline comes from cat food.

The overall pet food market is also growing, according to research firm IMARC, with rising pet humanisation, rapid urban pet ownership expansion, growing awareness of scientifically formulated nutrition and the mushrooming of e commerce pet retail platforms. It pegs India's pet food market size at $2.69 billion in 2026, with a projected increase at a CAGR of 6.91% to $4.60 billion by 2034.

The other players in the market include both domestic and international brands such as Heads Up For Tails, Farmina, Pedigree, Royal Canin and Mars Incorporated.

Improving profitability

Drools became an independent entity, separating from its parent, in 2021. Its products include starter food for puppies, chicken and egg-based meals for dogs, chicken liver gravy for cats, as well as biscuits, bite strips and cat litter.

The pet food company's profit margins inched into the green in FY26 at 5.1%, a turnaround from posting losses in the previous two years (PAT margin of -5.4% in FY25 and -2% in FY24).

Margins had been under pressure in the last two years due to volatile raw material prices and intense competition.

However, the firm reportedly implemented cost rationalisation steps that seem to be showing results.

Its operating margins more than doubled to 13% in FY26, led by lower raw material costs, bulk procurement and better operating leverage. Margins are seen improving further in the medium term as the firm continues its cost rationalisation measures amid plans to scale up its operations, and with the increasing revenue share of its high-margin products.

Analysts believe that the company's notable effort to scale up, through expanding its capacity at Tolagaon, Chhattisgarh, in phases for Rs. 950 crore, is crucial to its retaining its profitability and topline numbers. The facility is expected to be commissioned by March 2027.

In another foray into high-margin products, the company announced the launch of a fresh pet food segment this April with an investment of Rs 180 crore. Drools founder Fahim Sultan had then noted that consumers were actively seeking "fresher, and more transparent nutrition" for their pets.

L Catterton and Drools has not replied to queries sent by VCCircle at the time of publishing.

Fundraising, IPO plans

The firm is now reportedly preparing for an initial public offering, with some media reports suggesting that it has invited pitches from merchant banks.

L Catterton committed to invest up to $60 million (about Rs 490 crore then) in Drools in June 2023 via compulsorily convertible preference shares (CCCPS). CCCPS is an investment route through the preferred stock that accumulates unpaid dividends over time and must be converted into common equity shares by a set deadline.

L Catterton invested Rs 250.5 crore in the first tranche in July 2023 and put in Rs 58.9 crore in the second tranche in June 2024, according to VCCEdge, the data research platform of VCCircle. It invested the remaining amount between FY24 and FY25.

L Catterton is likely to exit the firm by July 2028, VCCircle has learnt.

In an interaction with mediapersons in March earlier this year, partner and co-head of India at L Catterton Vikram Kumaraswamy had picked Haldirams and Drools among probable IPO contenders without giving a timeline for it.

Published by HT Digital Content Services with permission from VC Circle.