Heritage Foods Ltd (HERITGFOOD) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the Heritage Foods Q2 and H1 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this call is being recorded. I would now like to hand the conference over to Ms. Diya Kaswa. Thank you, and over to you, ma'am.
Diya Kaswa (Go India Advisors): Thank you. Good afternoon, everyone. I am Diya Kaswa, and it's my pleasure to welcome you all on behalf of Heritage Foods Limited. Thank you for joining us today for the second quarter and first half of financial year '27 earnings call. This call is being hosted by Go India Advisors. Please note that today's discussion may include certain forward-looking statements, therefore, they must be viewed in conjunction with the risks that the company faces. Today on the call, we are joined by Mrs. Brahmani Nara, Executive Director; Dr. M. Sambasiva Rao, Whole-time Director; Mr. Srideep Kesavan, CEO; Mr. A. Prabhakara Naidu, CFO; Mr. J. Samba Murthy, COO; Dr. Brij Mohan, CEO, Heritage Nutrivet Limited; and Mr. Umakanta Barik, Company Secretary and Compliance Officer. I now invite Dr. Rao to present the company's business outlook and performance, after which we will open the floor for Q&A. Over to you, sir.
M. Sambasiva Rao (Heritage Foods Ltd): Thank you, Diya. Good morning, everyone. Thank you for joining us today. Before we begin the call, I would like to extend my warmest wishes to all of you and your families on the occasion of the festive season. I hope this special time brings happiness, prosperity and good health to everyone. Heritage Foods delivered a strong performance in quarter two of this financial year, sustaining revenue growth despite an inflationary environment marked by rising milk procurement costs and supply-side constraints. Consolidated revenue grew 19% year-on-year to INR 13,196 million in quarter two, taking H1 revenue to INR 26,577 million, up 18%. While elevated procurement costs continue to weigh on profitability, EBITDA stood at INR 740 million with a margin of 5.6% and profit after tax was INR 309 million. Encouragingly, EBITDA margin improved by 98 basis points sequentially over Q1 of this financial year, reflecting a recovery in operating performance amid sustained cost
M. Sambasiva Rao (Heritage Foods Ltd): initiatives. Our integrated farm-to-consumer model underpins our ability to ensure reliable milk availability, strengthen farmer relationships, and respond to evolving consumer preferences. During the quarter, we continue to build on this foundation through a stronger procurement network, expansion of our value added products portfolio, and investments in premium and nutrition-led categories. A strong and resilient procurement network remains fundamental to our business. During Q2, milk procurement volumes increased 7% year-on-year to 17.28 lakh liters per day, while H1 procurement volumes grew 4% to 17,69,000 liters per day. This growth, despite monsoon-related supply constraints, reflects our sustained efforts to deepen our village-level procurement network and strengthen farmer engagement. At the same time, milk procurement inflation remains elevated across the country. Our average landed milk procurement cost increased 11% year-on-year to INR 47.73 per liter in quarter two, driven by sustained demand, limited improvement in milk arrivals, and higher feed and fodder costs. These pressures continue to weigh on near-term profitability across the dairy industry, making procurement efficiency and calibrated pricing critical. On the consumer side, our core milk business continue to demonstrate strength of the Heritage brand and sustain consumer trust. Milk sales volumes increased 2% year-on-year to 12.35 lakh liters per day in Q2, while average selling prices improved 6% to INR 60.34 per liter. For H1, milk sales volume grew at 1% to 11.99 lakh liters per day, while average selling prices increased 5% to INR 59.54 per liter. Our focus remains on balancing volume growth with calibrated pricing, while protecting the strength of our consumer franchise. The evolution of our business mix continues to be an important driver of Heritage's growth. Value-added products remain a key growth engine, with revenue, excluding ghee and butter, increasing 32% year-on-year to INR 4,512 million in Q2 and 36% to INR 10,146 million in H1 of this year. Consequently, VAP contribution increased to 35.4% of revenue in Q2 from 31.3% in the corresponding quarter last year and to 39.6% in H1 from 33.7% in H1 of last year. Growth was broad-based across categories, led by lassi, buttermilk, ice cream, paneer, and curd. Volumes grew 89% in lassi, 56% in buttermilk, 44% in ice cream, 21% in paneer, and 15% in curd during the quarter. We also achieved important scale milestones with daily curd sales crossing 500 tons, quarterly yogurt volumes exceeding 100 tons, and Nourish Plus and high-protein paneer accounting for more than 15% of our paneer portfolio. These trends demonstrate the increasing scale of our brands and growing consumer preference for differentiated and nutrition-led products. Including our consumer-packed ghee and butter portfolio, the broader value added portfolio grew 31% year-on-year to INR 5,408 million in quarter two and 35% to INR 11,730 million in H1. Its contribution to revenue increased to 42.5% in quarter two from 36... 37.9% a year ago and to 45.7% in H1
M. Sambasiva Rao (Heritage Foods Ltd): Alongside portfolio expansion, we continue to invest in innovation. During the quarter, we strengthened our high-protein portfolio with the launch of with the launch of Nourish Plus, high-protein curd containing 25 grams of protein, and Greek yogurt available in single-serve packs containing 8 grams of protein and mid-size packs containing 40 grams of protein. We also expanded the Alpenvie ice cream range and introduced organic curd, further strengthening our presence across premium dairy segments. Our objective is to build differentiated products that address emerging consumer needs while leveraging our brands, manufacturing capabilities, and distribution network. These initiatives are helping us expand our presence in premium dairy and nutrition-led categories with attractive long-term growth potential. We continue to strengthen our adjacent growth platforms during the quarter. The newly commissioned ice cream facility provides additional manufacturing capacity for Alpenvie and Get-A-Way, supporting capacity absorption, operating leverage, and future growth. Get-A-Way, in which we now hold 71% stake, delivered robust revenue growth during the quarter with Heritage manufacturing and supplying 3,272 L of ice cream per day to support its growth, its product availability and expansion. Heritage Novandie Foods, now a wholly-owned subsidiary, continues to strengthen our presence in the yogurt category through the Mamie Yoko brand and has established itself among the top five brands in India. These investments expand our presence across premium food and nutrition-led categories while complementing our core dairy operations. Beyond our core dairy operations, Heritage Nutrivet continue to deliver strong growth. The wholly-owned subsidiary reported revenue of Rs. 853 million in quarter two, an increase of 47% year-on-year with profit of before tax of Rs. 37 million. For H1, revenue grew 42% to Rs. 1581 million with profit before tax of Rs. 56 million. This performance reflects the growing scale of our animal nutrition business and its increasing contribution to our broader portfolio. Our focus remains on translating revenue growth into sustainable profitability through calibrated pricing, tight cost control, continued premiumization, and improved operating leverage. A stronger contribution from higher value products alongside disciplined execution across our operations will be critical to navigating the current cost environment and strengthening margins over time. We also remain committed to responsible and sustainable operations. During the quarter, Heritage Foods Wind Farm, comprising three turbines turbine generators with an aggregate installed capacity of 6.3 MW, received the Indian Windpower Association's Best Performing Wind Farm Award for the year 2025-2026. This recognition reinforces our continued focus on sustainability alongside business growth. Our long-term direction remains unchanged, to build a larger, more premium, and more resilient branded dairy business. The progress achieved during Q2 and H1 reflects the strength of our consumer franchise and the increasing scale of our value-added and adjacent businesses. While near-term cost pressures persist, we remain focused on disciplined execution, profitable growth, and creating sustainable long-term value for all our stakeholders. On behalf of the entire management team at Heritage Foods, I would like to thank our farmers, employees, distribution partners, customers, consumers, shareholders, and all our stakeholders for their continued trust and support. Once again, I wish everyone a very happy and prosperous festive season. With this, I would like to conclude my opening remarks and open the floor for discussion. Thank you.
Moderator: Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking
Moderator: Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Moderator: Our first question comes from the line of Sameer Gupta with IIFL Capital. Please go ahead.
Sameer Gupta (IIFL Capital): Hi, sir, good morning, and thanks for taking my question. Firstly, on going into the buffalo flush, are we seeing any sign of moderation in milk procurement prices? I understand last year also the prices had gone up during the flush season. And normally, it doesn't happen that for two consecutive years, we have a persistent inflation. But, this is also an El Nino year plus a broad-based inflation, you mentioned feed and fodder fodder costs are seeing inflation. So, any sense on the upcoming flush that you can provide will be helpful.
M. Sambasiva Rao (Heritage Foods Ltd): Thank you, Sameer, for the question. And you have answered partly. The repetition of the same is not normally seen in terms of production drop or price hikes, etc. But this being El Nino impacted year, the situation is repeating like last year. The prices have gone up in quarter two, and the performance of the season is not uniform across the country. If you see the last few months, certain states in northern part of the country have received good rains, rather led to even floods of severe nature. And certain states in southern part of India have faced drought. And situation is unclear even today. All the governments are announcing that the situation could be difficult in the coming months in terms of drinking water, water for agriculture, electricity availability, etc. Most of the states have announced contingency plans for agriculture to avoid water-intensive intensity crops to a semi-dry crops kind of thing. So, entire country is preparing for facing El Nino. So, we are also preparing in our own areas of operation where our milk sheds are there, encouraging farmers to adopt more and more healthy practices. You You can see our feed growth itself has seen 47% year-on-year growth in quarter two, sale of cattle feed. So, the the performance of the season is yet to be clear. As of now, in certain areas, milk availability has improved. Certain areas may improve after Diwali festival. So, it's a it's a mixed kind of situation right now. And it might be stable if the good monsoon states perform well to compensate the drop in the drought-hit states. So, it's it's a kind of close observation we are making and improving our performance. You have seen milk also improved 7% over last year in volume terms at the procurement level. So, with our field efforts, continued relations with farmers, extending good veterinary care, timely nutrition support, and even tying up with the funds for overcoming their requirements of working capital for the dairy, are even to procure more animals from the other states. This should help us to further improve our milk availability for us in our catchment areas.
Sameer Gupta (IIFL Capital): Got it, sir. This is very helpful. Second question is on the value-added dairy portfolio. I understand there are broad-based efforts. But this 32% growth Is there any element where weather was more supportive this year in terms of higher temperatures versus last year?
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