Event Participants
Executives
7 A Prabhakara Naidu, Brij Mohan, J Samba Murthy, M Sambasiva Rao, N Brahmani, Srideep Kesavan, Umakanta Barik
Analysts
10 Abhishek Mathur, Aditya Khandelwal, Hitaindra Pradhan, Kshitij Sowlani, Nishita Shanklesha, Parth Sodha, Pratik Kothari, Sameer Gupta, Vignesh Iyer, Viraj Mehta
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Consolidated Revenue | ₹1,338.1 crores | Highest quarterly revenue in company history; +18% YoY driven by VAP growth, pricing actions and resilient demand |
| Milk Procurement Volume | 18.10 lakh litres/day | +2% YoY despite industry-wide supply tightness; supported by farmer engagement, vet services and village-level network expansion |
| Milk Procurement Price | ₹46.61/litre | +7% YoY on continued supply tightness; cow milk ₹43.2 (+ |
| Average Milk Sale Price | ₹58.68/litre | +4% YoY, reflecting Heritage brand strength and calibrated pricing actions |
| VAP Revenue | ₹563.6 crores | +40% YoY; ~35% volume-led with 5.12% weighted average price hike; paneer +33%, curd +26%, ice cream +25%, butter milk +60%, lassi +98% |
| VAP Contribution to Revenue | 44% | Record vs 36% YoY; broader VAP incl. consumer pack ghee/butter at 49% contribution, +39% YoY to ₹632.2 crores |
| Ice Cream Revenue | ₹55+ crores | +65% YoY; Alpenvie +44%, Get-A-Way +196% (near breakeven); new facility at ~40% capacity utilisation |
| Nutrivet Revenue | ₹72.8 crores | +37% YoY with PBT of ₹2 crores despite elevated input costs across the animal nutrition industry |
| EBITDA | ₹61.9 crores (4.6% margin) | Milk EBITDA margin 3.03% vs VAP 8.06%; gross margin down |
| PAT | ₹15 crores (1.9% margin) | Operating leverage (other expenses + employee costs) improved bottom line by ~1.1%, partially offsetting gross margin pressure |
Geographic & Segment Commentary
Liquid Milk: Milk sales volumes remained stable with sale price +4% YoY to ₹58.68/litre; management labels liquid milk volume growth the "main problem to solve" for overhead absorption. Distribution expansion added ~1 lakh litres/day during the quarter, with month-on-month volume growth visible from March through July; procurement volumes grew +2% YoY to 18.10 lakh litres/day.
Value-Added Products: VAP revenue +40% YoY to ₹563.6 crores (record 44% of revenue); ~35% volume-led with 5.12% weighted average price hike. Curd now 68.9% of VAP (down from ~75%), paneer contributes ~₹52 crores quarterly revenue; measurable market share gains across curd, paneer and butter milk in organized channels.
Ice Cream: Crossed ₹55 crores (+65% YoY); Alpenvie +44% with comprehensive brand refresh and new SKUs underway; Get-A-Way +196% YoY, near breakeven; newly commissioned facility at ~40% capacity utilization manufacturing both brands from a common platform.
Heritage Nutrivet: Revenue ₹72.8 crores (+37% YoY) and PBT ₹2 crores despite elevated input costs; ingredient prices rising month-on-month since Q3 FY26 (corn diverted to ethanol, slower rice milling); price increases partially passed on to dealers/farmers.
New Growth Platforms: Heritage Novandie Foods (Livo high-protein yogurt) became a wholly owned subsidiary; stake in Peanut Butter and Jelly Limited increased to 71%; Nourish+ high-protein paneer, Sampurna A2 Curd, Chef's Choice curd and organic milk gaining consumer acceptance.
Company-Specific & Strategic Commentary
Farmer Network & Procurement Resilience: Added ~5,000 farmers in Q1 FY27 with another ~5,000 planned in Q2; subsidized cattle feed, artificial insemination programs and animal health initiatives aim to increase farmer-level throughput and secure milk volumes for milk and VAP growth.
Brand Building & Premiumization: Alpenvie undergoing brand refresh with new identity and several SKU launches; Nourish+ high-protein paneer gaining strong traction; Livo performing well across organized retail; strategy focused on premium dairy, nutrition-led and differentiated food categories.
Operating Leverage: Other expenses declined to 9.01% of revenue from 9.64% YoY; employee benefits down to 6.74% from 7.21%; combined ~1.1% bottom-line improvement as VAP scale increases.
Manufacturing Expansion: New ice cream facility ramped to ~40% capacity utilization within its first quarter; paneer and ghee projects under construction; FY27 capex guided at ~₹250 crores.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth (long-term) | Company 16-17%; milk 7-8%; VAP ~25% | Reiterated despite 40% VAP growth in Q1 (cycling a low weather-affected base); growth driven by distribution expansion and market share gains |
| VAP Revenue Contribution | ~50% by FY30 | From 39% in FY26; annual improvement of 2-2.5 percentage points; FY27 contribution may expand faster as milk volumes lag |
| EBITDA Margin | High single digits | Not targeting 6%; primary driver will be raw milk price correction from the current cyclical trough, supported by VAP mix shift and operating leverage |
| Milk Procurement Prices | Q2 FY27 stable to slightly higher; flush expected from October onwards | Mini flush failed in April-May; El Niño/deficient monsoon risk makes outlook unpredictable; price hikes continuing across markets in July |
| Capex | ~₹250 crores for FY27 | Paneer project, ghee project, and minor raw milk procurement-side investments |
Risks & Constraints
| Risk | Context |
|---|---|
| Elevated milk procurement costs | Procurement price +7% YoY to ₹46.61/litre; cow milk + |
| El Niño / deficient monsoon | Southern Peninsula already in rain deficit; weather patterns unpredictable and heterogeneous across geographies; failed mini flush in April-May heightens risk of extended supply tightness |
| SMP & packing material inflation | Higher SMP consumption volumes and price (~0.5% margin impact); packing material costs up ~30 bps on war-related inflation; management passing on costs through phased price hikes |
| Animal nutrition input inflation | Input costs rising month-on-month since Q3 FY26 — corn diverted to ethanol, rice milling slowed; competitive pressure from poultry/egg industries; Q2 FY27 costs expected to remain heavy |
| Government intervention | Historically, government has allowed duty-free SMP imports during scarcity and export incentives during glut; such actions could alter domestic pricing dynamics |
Q&A Highlights
Milk Procurement & Flush Outlook
- Question: With the mini flush not materializing and El Niño expected, what is the procurement price outlook? (Sameer Gupta - IIFL Capital)
- Answer: The mini flush in April-May did not happen due to weather; prices rose March-June and are now stable, with Q2 expected stable to slightly higher; flush is expected only from October onwards, with the company expanding village-level procurement and farmer throughput. (J. Samba Murthy - COO). Procurement growth is in line with material balance planning, and the industry is facing an overall supply shortage. (Srideep Kesavan - CEO)
VAP Growth: Price vs Volume
- Question: How much of the 40% VAP growth is price and how much volume? (Sameer Gupta - IIFL Capital)
- Answer: Weighted average price hike of 5.12%; the balance ~35% is volume-driven; curd is now 68.9% of VAP, down from ~75%, and will continue to decline as faster-growing categories scale. (Srideep Kesavan - CEO)
VAP Volume Growth Drivers & Guidance
- Question: What is driving 35% VAP volume growth — geography, distribution, or share gains — and does the 20-25% VAP guidance change? (Abhishek Mathur - Systematix)
- Answer: Cycling a low base from last year's rain-affected Q1; ~80% from distribution expansion in existing geographies (no new geographies opened) and ~20% from consumer traction with measurable market share gains in organized channels; long-term guidance of 16-17% company growth remains intact. (Srideep Kesavan - CEO)
Gross Margin Decline Drivers
- Question: Why did gross margin fall despite a flat weighted-average procurement price and higher VAP mix? (Pratik Kothari - Unique PMS)
- Answer: The weighted average masks mix change: cow milk rose
₹1 to ₹43.2 and buffalo rose ~₹4.6 to ₹65.99, with buffalo volumes down >20%; SMP consumed in higher quantities at higher prices (0.5% impact) and packing material (~30 bps) added pressure; total gross margin declined ~2.5% YoY. (Srideep Kesavan - CEO)
Ghee & New Geography Break-even Progress
- Question: Where are we in the journey to break even ghee and the seeded Mumbai/North geographies? (Pratik Kothari - Unique PMS)
- Answer: Ghee EBITDA improved from -12% to -8.5% YoY; losses in the loss-making regions reduced — had they declined in line with raw milk inflation, the company would have faced an additional ~₹1 crore bottom-line hit. (Srideep Kesavan - CEO)
Liquid Milk Volume Growth
- Question: Any breakthrough on the flattish liquid milk volumes? (Pratik Kothari - Unique PMS)
- Answer: This is the highest priority given its impact on overhead absorption; distribution expansion added ~1 lakh litres/day, with month-on-month growth visible from March through July. (Srideep Kesavan - CEO; J. Samba Murthy - COO)
Segment Margins & VAP Target
- Question: What are the margins for milk and VAP, and what is the VAP revenue share target? (Kshitij Sowlani - Yes Securities; Vignesh Iyer - Sequent Investments)
- Answer: Milk EBITDA margin was 3.03% and VAP 8.06%, with ice cream the most profitable category; VAP contribution target is ~50% by FY30 from 39% in FY26, improving 2-2.5 percentage points annually. (A. Prabhakara Naidu - CFO; Srideep Kesavan - CEO)
Procurement Price Scenarios & Farmer Addition
- Question: What are the best/worst case procurement price scenarios after the October flush? (Kshitij Sowlani - Yes Securities)
- Answer: Best case is a strong buffalo flush bringing prices down; worst case is continued tightness; the company added ~5,000 farmers in Q1 with another ~5,000 planned in Q2, supported by subsidized cattle feed, artificial insemination and animal health programs. (Srideep Kesavan - CEO; N. Brahmani - Executive Director)
EBITDA Margin Trajectory & Operating Leverage
- Question: When will the richer product mix translate into structurally higher EBITDA margins? (Parth Sodha - Trinetra Asset Managers)
- Answer: VAP absorbed raw milk inflation better than milk (EBITDA -1.7% YoY vs -2.8%); operating leverage is already visible — other expenses at 9.01% of revenue vs 9.64% and employee benefits at 6.74% vs 7.21% YoY, a combined ~1.1% bottom-line benefit. (Srideep Kesavan - CEO)
Long-Term Margin Normalization
- Question: Is the 7-8% normalized margin view still valid 4-6 quarters out? (Viraj Mehta - Enigma Investment)
- Answer: Raw milk long-term inflation is ~3.5-4% YoY; current ₹46.61/litre compares with ₹41.38 in Q1 FY25 and ₹44.78 in Q1 FY24; the company is in the cyclical trough and margins will expand widely when raw milk corrects, with VAP mix shift ensuring EBITDA-accretive growth over the cycle. (Srideep Kesavan - CEO)
Key Takeaway
Heritage Foods posted its highest-ever quarterly revenue of ₹1,338.1 crores (+18% YoY) in Q1 FY27, led by VAP growth of 40% to ₹563.6 crores — a record 44% of revenue — with ~35% volume-led growth and a 5.12% weighted average price hike. Elevated procurement costs (+7% YoY to ₹46.61/litre) compressed EBITDA margin to 4.6% (₹61.9 crores) and PAT to ₹15 crores, with gross margin down ~2.5% on cow/buffalo mix changes, SMP and packing material inflation. Strategic progress continued: ice cream crossed ₹55 crores (+65% YoY) at 40% capacity utilization, ghee losses narrowed from -12% to -8.5% EBITDA, Nutrivet grew 37% to ₹72.8 crores, and ~5,000 farmers were added with another 5,000 planned in Q2. Management reiterated long-term guidance of 16-17% company growth, ~25% VAP growth, ~50% VAP contribution by FY30, and high single-digit EBITDA as raw milk prices cycle down. Key watch points: El Niño/deficient monsoon impact, the October buffalo flush, and continued phased pricing actions across markets.