Ladies and gentlemen, good day and welcome to the Dodla Dairy Limited Q1 FY26 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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 the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Mr. Sunil Reddy from Dodla Dairy Limited. Thank you, and over to you, sir.
Thank you very much. Good afternoon. On behalf of Dodla Dairy Limited, I extend a warm welcome to everyone joining us on our call today. On this call, I'm joined by our CEO, Mr. B.V.K. Reddy, CFO, Mr. Murali Mohan Raju, and SGA, our investor relations advisors. I hope everyone had an opportunity to go through the financial results and investor presentations, which have been uploaded on the stock exchanges and on the company website. We began FY26 with quarterly revenues crossing the INR 1,000 crore mark for the first time. During the quarter, we registered the highest revenue of INR 1,007 crores on a year-on-year basis, a growth of 10.5%, and an EBITDA margin of 8.2%, and a PAT margin of 6.2%.
This performance comes amidst changing seasonal patterns where we witnessed early rains dampening the summer demand for value-added products like curd, flavored milk, ice cream, etc., during the period. Among the VAP products, bulk sales for S&P and butter were higher than usual, and as we took a decision to liquidate the inventory in view of such declining price environment to maintain balance sheet hygiene. Additionally, rains were accompanied by the higher milk supply, leading to a declining trend in milk prices on a sequential basis. But they remained higher compared to Q1 of financial year 2025. On a year-on-year basis, procurement prices have grown faster than the milk realization prices. As a result of these multiple factors, the margin profile remained under pressure during Q1 FY26.
We expect to intend to improve in Q2 FY26 as the full impact of lower procurement prices will be reflected in the current quarter. In Africa, we saw a healthy growth in terms of revenue of 26.9% on a year-on-year basis, and an EBITDA margin of 13%, which is lower as compared to Q1 of last year. The primary reason for the faster growth of revenue and lower EBITDA margin is the start of a new Kenya plant where we currently focus on capturing the milk market at a strategic pricing of products. In addition to this, we have also witnessed an increase in procurement prices compared to Q1 FY25 in both Kenya and Uganda. Once again, we have enough market share. We will see the gradual improvement in profitability of our Africa business also.
Coming to Orgafeed business, this business continues to witness positive trends and deliver promising numbers. The revenue for the quarter grew by 29.4%, and EBITDA grew by 84.4%. EBITDA margins now stand at 17.6%. Overall capacity utilization level of the dairy business is in the vicinity of 70%-75%, and as we discussed previously, we are looking for a strategic expansion of our capacity as well as our footprint. With this expansion, we expect the seasonality impact to minimize to a certain extent. In line with this framework, our board recently approved the acquisition of a 100% stake in HR Food Processing Private Limited. The company operates under the premium brand Osam and has established a strong presence in Bihar and Jharkhand. This transaction is consistent with a predefined inorganic growth plan.
Further, our greenfield expansion of the INR 280 crore in Maharashtra, aimed at tapping the potential of Solapur market, is on track, with the daily procurement in the region already reaching around 2.6 lakh liters per day. We are developing a fully integrated facility with a capacity of 10 lakhs. With this brief, I will now hand over to our Chief Executive Officer, Mr. B.V.K. Reddy. Thank you very much.
Thank you, Sunil sir. During the quarter, our milk procurement was the highest ever level of around 18.5 liters per day on average. This is in line with our net seller strategy, where we continue to raise our procurement levels whenever there are favorable procurement conditions available in the market. Procurement was around 17.6 lakh liters per day in the same period as the last year. Average procurement cost Q1 of FY26 was 37.38 per liter, which was around 34.15 per liter at the same period of the last year. The average procurement cost in Q4 FY25 was 37.36 per liter. The average milk sales for the quarter were 11.9 lakh liters per day, an increase of 4.9% as compared to Q1 of FY25.
While comparing the financial performance of Q1 FY26 with FY21-25, there were seasonal variations, particularly due to early monsoon. The number of rainy days was more in FY26, which is about 10 days higher than compared to the FY Q1-25, impacting the mix of our VAP product portfolio as well as the reduction in milk prices, as explained by our MD, Mr. Sunil Reddy. Overall, our VAP sales contribution during this quarter stood at 36.2% of sales. Curd sales stood 45.23 million metric tons, with a degrowth of 3.2% on a year-on-year basis. Bulk sales during FY26 stood INR 57.7 crores, which was INR 35.5 crores at the same period of the last year. We need to keep in mind that this performance is coming on top of higher comparable bases as we registered a strong growth in Q1 FY25.
Hence, if you look at the performance of the last two years, the staggered numbers are fairly attractive. Now, coming to our corporate business, it is performing exceptionally well, and we see a lot of potential for scaling of this business. As we are only catering 35%-40% of our farmers, we expect this number to rise further going ahead. Our corporate is not only providing the strategic edge while maintaining relationships with the farmers, but it is also strongly positioned to deliver faster growth in the coming years.
Overall, our focus remains intact on enhancing our procurement strength, widening our product portfolio, and expanding our distribution reach new as well as existing markets. So, with the proposed Osam acquisition and Maharashtra expansion, our long-term aim is to deliver accelerated growth while maintaining a healthy profitability across the business. Now, I would request our CFO, Mr. Murali Mohan Raju, to share financial highlights.
Thank you, Mr. B.V.K. Reddy Garu, and a very good afternoon to all the participants on the call. Talking about quarterly performance in Q1 FY26, revenue from operations stood at INR 1,007 crores in Q1 FY26 compared to INR 912 crores in Q1 FY25, marking the highest-ever revenue in any quarter with a year-on-year growth of 10.5%. We delivered a gross profit of INR 260 crores in Q1 FY26. Margins stood at 25.8%. Employee expenses in Q1 FY26 increased 19.4% to INR 47 crores compared to Q1 in the previous year, primarily due to annual increments and the addition of new employees at various divisions such as procurement teams, sales teams, and expansion at the Kenya plant, etc.
Increase in other expenses includes higher advertisement costs, transportation, and increment of contract employees. EBITDA for the quarter stood at INR 83 crores with a margin of 8.2%. This quarter, our depreciation expense came in net INR 17.8 crores compared to INR 18.2 crores in Q1 FY25. The other income increased 114% from INR 7 crores in Q1 FY25 to INR 17 crores due to interest income on investments and a provision reversal amount of INR 5.6 million on flavored milk GST. There was a decrease in our tax expense as a result of multiple factors such as reversal of deferred tax on long-term capital gains on investments, refunds related to previous year taxes, options of deferred tax impact on cash balance in the subsidiary in the current year, and lower profits.
We delivered a net profit of INR 63 crores for this quarter with a net profit margin of 6.2%. On the balance sheet front in Q2, we expect to utilize our cash balance towards inventory build-up during flush season and the Osam acquisition, which is expected to complete in the next few days. With this, we conclude the presentation and open the floor for further discussion. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have a first question from the line of Mr. Aniruddha Joshi from ICICI Securities. Please go ahead.
Yeah, thanks, sir. Thanks for the opportunity. Sir, in terms of milk prices, at least we had seen from some of the channels that milk prices have corrected with early monsoon settling in. So, do you see that probably the July prices are also in a way lower than what prices we had seen in June quarter, and that should lead to relatively better profitability in the rest of the full year? That is question one.
Secondly, we have seen some of the cooperatives have raised prices, but the private players have not yet fully exercised the pricing power. So, how much price hike can we take to maintain the margins? Or we would like to go for market share gains by taking the advantage of that? And lastly, what will be the inventory of excess S&P and butter left on the June balance sheet now? Yeah, that's it from my side.
I'll broadly give you a first look at the pricing, and as Murali will give the specification, B.V.K. and Murali will give the specifics. We do think that the milk procurement prices have corrected, and it is looking good for this coming quarter, where we are confident that we will be able to improve our margins over the last quarter. The second question regarding our increasing of selling prices, whatever selling price increase we have taken was not enough in terms of the procurement price hike that happened in the first quarter. But I think with the second quarter milk procurement prices coming down, we will not be taking that much of a milk price increase, but I think the product mix will improve, and we can see an overall improvement in the realization front also.
The third question regarding inventory: as of now, there is no significant build-up of inventory. Depending on the way the flush season pans out, we should be equivalent to the same as last period. I think. Specifics: Murali can go ahead and give you the specifics.
Yeah, with regard to the inventory, sir, as of now, we are having butter only INR 99 crores, as against INR 155 crores of last year, June 2024. So, the substantial reduction. Even the skimmed milk powder also, last year we have around INR 144 crores, but now we have only INR 17 crores. So that was it. Even in March also, from INR 43 crores, it came down to INR 17 crores of skimmed milk powder. Even in the butter also, from INR 19 crores, it is a reduction to INR 9 crores.
One more, already you see, Mr. Sunil Reddy has clarified about regarding the procurement. If you see last year and the first quarter, the lowest procurement in Africa, and lowest procurement, whatever lowest procurement, even in India also. So, subsequently, in the second and third quarter, even India also has gone up the procurement prices, and in Africa also has gone up. So now, from April to April, we have corrected only some INR 0.30-INR 0.40 in April, and May we have done some INR 0.90, and then July also we have done another INR 0.58-INR 0.60. Now, overall, that is reflecting in the month of July. The prices slowly, see, it is coming down. Definitely, quarter two and three, it will reflect the profitability, the overall consolidated. Is it clear, Aniruddha?
Yes, yes, sir. This is very helpful. Just one last question. What will be the internal guesstimate as far as the lost sales will be? I guess many products like beverages, ice cream, curd, revenue would have very monsoon.
No, see, because of unseasonal rains, sir, we have not got any growth in curd. Luckily, we have lost a lot of volume. Even there is no curd growth, buttermilk. So all that, you know, where you see VAP, we have maintained almost like last year numbers are 1% or 2% lesser than the last year numbers. See, that growth, you know, normally what we get in a month of April, May. So that we could not get.
Okay, okay.
We thought we got our growth in milk, but we didn't get the growth in curd, which is high profile. Curd, I think we had a degrowth in terms of the first quarter comparatively. It was around 3%, I think, if I'm right.
Yes, correct, sir, correct, but normally, we will have a very good growth in the first quarter. See, that has not happened because of unseasonal rains.
Okay, and last question from my side. You want to call out the impact in any particular state, or is it across all the key states in South India as well as Maharashtra?
Yeah, it's across all the states. That's all the states, sir, but depending on an apple-to-apple comparison of the state averages, some states where some of the others will have a larger volume might have had some benefit, and some states where we have a larger volume, we might have had a little adverse effect in terms of, let's say, Tamil Nadu prices comparatively were slightly better than the prices of Karnataka. Ours is almost an even split of what we are getting as milk. So there will be that little advantage of one state having higher, but for us, it might have gone a little other way around. That will also add to a percentage or two differentials which normally are there.
Okay, sure, sir. This is very helpful. Many thanks.
Okay, thank you.
Thank you. The next question is from the line of Deepak from Unifi Capital. Please go ahead.
Hello, sir. Thank you for the opportunity. So first question, in the liquid milk sales of 11.9 lakh liters per day, if you can break up how much is India and what has been the India growth in this quarter? And similarly for procurement, if you can break up how much is India and the procurement growth in India, please.
I think Murali, can you take that and give a break-up of both India and the sales and procurement?
Yeah, sure, sir. I'll do. Sir, Tamil Nadu liquid milk growth by volume was around 2.9%.
Yeah, I think how much quantity?
Quantity?
Yeah.
India, sir, 10.27 lakh. Okay? That was there, and which was grown by 3% in the volume and revenue by 6%. And with regard to Africa, milk volume is around 1.6 lakh now, as against 1.35 lakh of last year. That is almost 19% growth in the volume. And with regard to the value, this year it is INR 81 crores, last year it is INR 64 crores. That is 26% growth in Africa. Deepak, hope that is fine.
Yes, sir.
So can you give the procurement number? Africa, procurement, Murali?
Okay. Africa procurement number, LPD, sir, it is 1.98.
Yeah, yeah. Procurement and sales are almost the same number. The first quarter average sales, including our yogurt, is 197,000 liters. Our procurement also is close to that 198,000, sir.
India's standalone, it is INR 16.75 for procurement. As against last year, INR 15.95.
A follow-up question to that. So, see, if in India we are growing at, say, 2-3%, and versus our procurement, which is growing at a higher rate, the question here is that there will be no pressure to do B2B sales. These are we selling in the B2C market. So firstly, how do you take up this challenge of B2B versus B2C? And is there an eventual goal to reduce prices? Because we are working in a price-sensitive market. So is there an eventual goal to reduce prices and eventually grow volumes? So any strategy on volume that you can call out from your end, how can the volume growth improve?
Volume growth is not the basis.
Volume increase of milk, which was adversely there with the rains, milk volume should not have come grown, should have actually come down. We were able to manage the growth of milk because of interventions that we have done, like advertising, deeper penetration into markets we had. That is why we did get the 3%-4% growth in terms of liquid milk volume. Curd as a consumption pattern, once the monsoon rains come in, people stop eating curd. So that significant drop of the curd volume is the reason why you will see that overall number not being there. If the curd had not shrunk and it had maintained even the feel of whatever the numbers were, we would have seen that 7%-8% of volume growth coming from the curd and milk alone is the value-added product.
I think coming to the B2B, B2B for us will only be skim milk powder as the days go ahead. Because we are actively pursuing and improving our consumer key sales. We have also improved our milk sales, I think, because of getting to modern trade and having more presence. Regarding pricing, I don't think there will be an undercutting of pricing as much as to take on the market share. It will be that we are not trying to over-premiumize our product versus the cooperatives. We are trying to maintain a sort of a mass premium, not a super premium, and I think pricing, that is the reason we are keeping where it is and not reducing the price for volume there.
Sure, sir.
Sir, so if in a hypothetical scenario, if the procurement prices are going down currently, the assumption that we should be working with is a lower volume growth of, say, 3%-4%, and you will be able to maintain prices. That's the callout that you're making, right?
Yeah, the growth percentage will be a little higher, and the procurement prices will come down. So that is what it will be. It will come back to the same, let's say, volume-wise, 7%-8%, and value-wise, maybe between the 10% to 15% or 12%-13%.
Sure. Understood. And secondly, I wanted to check in the B2B sales that we did in this quarter, were there any write-offs that we took?
No write-offs.
No write-offs.
No write-offs.
There is no write-offs or anything?
There is no write-offs or anything. So whatever is the stock is there, we have sold off. Only in the June, we have sold S&P and little at the market price, lesser than our carrying value. Current stock, everything is at the market price.
Okay.
There is no write-offs.
How much loss did we incur in the June sales, sir, if you can quantify that?
June, it is around INR 1.2 crores.
Today, we are carrying about INR 100 crores of S&P and butter inventory, right?
Yes.
Okay. Understood.
Overall, it is 17 plus nine, but closing inventory is only INR 23 crores. Put together S&P as well as this side. So there is not much stock. And on an average, every day we consume 10 times for internal consumption. So we don't think there's anything left for us to sell as a B2B.
Sir, one last question I had. This is a combination of our subsidiary performance. So you mentioned that Africa had an issue with regards to procurement price and Kenya underutilization. So if you can touch upon that, on how the outlook will look like. And secondly, Orgaf eed has seen a remarkable margin performance. So should we expect this margin trend to continue, or should it normalize to a certain level?
Yeah. See, first, we'll go to Africa. Africa, because last year, April only, we started Kenya operation, and we got very good numbers. And also last year, see, the first quarter, the prices, procurement prices were very low, but second quarter prices have gone up. But since this quarter, prices are very stable there also. And last year, overall, last year to last year, we got a volume of 35-36,000 liters high.
So volumes are now last couple of months, the volume is stable now. It is now around 2 lakhs, 1.6 lakhs is milk, and 40,000 is yogurt. See, the volumes are very stable, and the procurement prices also this year are very stable in Africa. And compared to last year, this year, we will see better profit margin in Africa. And Orgafeed, yes, Orgafeed, still there is a scope. Now, right now, we are catering only 35%-40% of our own farmers. And month on month, year on year, we are keep on increasing. And still, we have a lot of scope because plant capacity utilization is less than 45%, less than 50% only. So this year also, we have taken aggressive number, and Orgafeed, we are hoping that this number will continue this financial year also.
Regarding the margin, maybe a bit clearer there.
Yeah, stable.
This quarter, we have a very good performance of 17.6%, as against average of last year around 15%. So probably there may be 1% here or there, but we are intact with the volume or the margins.
Sure. Okay. Understood. I'll call back on the queue for more questions. Thanks.
Thank you. The next question is from the line of Mr. Abhishek Mathur from Systematix. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Just wanted to check in the VAP segment, are we now seeing some kind of a growth revival in the month of July or even in June? Did we see some kind of a revival versus April and May? And secondly, in Africa, is there a sense we are getting on any intensification of competition which is happening, or is it stability on that front also? Also wanted to check why the procurement cost in Africa has gone up, reasons behind that. Thanks.
I think here also the first week of July last, again, last couple of days onwards, it is raining, Andhra and Telangana heavily. But first 10-12 days, July was somewhat good growth actually as far as Indian numbers is concerned, sales numbers. And Africa, see, now it is very stable. Procurement also is very stable, and we are expecting by year-end further volume growth will get in Africa.
There is also.
There is also enough number of dairies out there, but we have consolidated our position that we will be able to take growth in Africa also.
Right. So there's nothing specific that we want to call out in terms of competition intensifying or anything. It's stable is what you're saying?
We are living with the competition. There's no problem. Especially in Uganda, yogurt, there's not many players. We have taken almost number one position in Uganda as far as yogurt is concerned. There, yogurt we have to keep on consolidating, and year on year, we are getting a good growth there. In Africa, in Kenya, there are a number of players, more compared to Uganda in liquid milk sales. But in spite of that, we have established our brand. So we were able to take numbers. There's a good growth.
So, coming to the basic thing is, yes, we will have the regular growth as what we are maintaining between plant capacity and growth in Kenya. Uganda also will continue to grow. Depending on the profitabilities, again, like how we are seeing the price. For example, last year, same quarter, we had a significantly low price. That is why in the first quarter, you would have seen a huge profitability. And the following quarters, it was sort of maintained and muted down. This year, we didn't see that huge in the first quarter, but we will maintain the same profitability level as we go forward for other quarters, which will be an improvement over the previous year quarter.
Abhishek, sir, there's a sort of disturbance in your line.
Yes, sir. Anything else, guys? Can we go to the next question, Abhishek?
Yeah. Sir, are you able to hear me now?
Yeah, yeah.
Yes. So I was saying, sir, that in the India VAP segment, you're saying that we are seeing somewhat good growth or stable growth in the month of July in the last two weeks. Is that the right takeaway?
Yeah, yeah. Right.
Yeah. The first two weeks was there, but again, now we have the cyclonic weather again. But still, overall, it's good.
Understood. And lastly, sir, just a bookkeeping question. If you can help with the overall cost realizations, the VAP cost realizations and the India-Africa realizations, please.
India realization consolidated is 62.78 overall for the quarter consolidated. Standalone, it is 63.24. Africa, 59.25. And Orgafeed, it is not off the milk. It is a fee. It is 24.70.
Sir, the VAP contribution realization, please.
VAP contribution realization. Okay. VAP contribution realization is basically currently VAP is overall INR 60. And again, yeah.
Thanks, sir. That's all from me.
Excluding VAP. Yeah.
Sure. Thanks.
Yeah.
Thank you. The next question is from the line of Mr. Rajat Sethia from ithought PMS. Please go ahead.
Hi. Thanks for the opportunity. Sir, what is driving the high margins in Orgafeed? We used to be at 12-13%, and now we are doing 17-18%.
See, the raw material. See, the majority there in Orgafeed also, 75% is the raw material. So availability of raw material and the price is very stable. So that is there. And the selling side also, see, not much of fluctuation.
As the selling price included, there's a bit of 12% in the cost of procurement, cost of mix of all raw materials. But the sales realization was reduced only by 6%. So there is a delta of 6%, which has in turn resulted into the overall margin improvement.
Okay. For this year, I think last year margins were higher as well. So is it largely because last year also raw material prices were down more than the realization?
Yeah. So last year also, because it's the same earlier, an average of 18.8 per kg, it was reduced to 17.6 for the last Q4 of FY24. That was further reduced by 17.3. So quarter on quarter, the prices are reducing it. And out of that, some of the amount, we are also passing on to the farmers. If any extra amount is there, that was building up in the margins.
Understood. So if the raw material prices go up a lot, our margins there, that will be a challenge, right?
Generally, we will pass it on. Okay. So we don't expect there will be any more volatility more than 1% or 2%. So with the value increase, I think we are absolute-wise, the amount we will grow only. We don't have forcing any regress in the margins in absolute amount.
Okay. Understood. And what are generally the factors that drive the raw material prices here?
Normally, see, DRP.
Main prices.
Yes, sir. Main is maize and rice husk, DRP. These are the major items.
Okay. Okay. Understood.
And with regards to Africa, I could not understand the explanation around the increase in procurement prices. Is that seasonal increase in procurement prices here? No. See,
Africa also, if you see, last year procurement price first quarter was very low. Then subsequently, because second quarter has gone up. See, if you see first quarter to second quarter, there is an INR 10 variation. And then there is somewhat stable second and third and fourth quarter. So somewhat it is stabilized. Now, fourth quarter to now, this year, first quarter, there is INR 1, INR 1.50 reduction in the overall procurement. So that's why now, even in the month of July, also procurement is very stable. Even in Uganda, Kenya also, now this year also, there's a sufficient range. So we don't foresee any kind of volatility like last year. Last year, there's a huge variation in the procurement prices.
So you're saying it's stable now, but I think in Q1, you have mentioned that procurement costs were higher.
No, Q1. See, last year, see, very abnormally, very low actually. See, that has reflected in high profit in the first quarter of last year. But this year, see, somewhat it is very stable. First quarter to second quarter, you will not see much of variation. But last year, first quarter, we made INR 18 crores, and second quarter, we made only INR 5 crores a bit. But this year, it is not looking like that. You may have variation of only one crore, less than one crore this way, that way. Because the purchase price is.
Sir, what are the flush?
So I didn't get you.
Can you repeat that?
Understood, sir.
Yeah. I was saying, what are the flush and lean seasons in both the countries?
There in Africa? There are two seasons and two seasons there. Now, it is the flush only. Then the other September, October will be a lean. Again, you see, November, December, January, there will be flush. There will be three months flush, and three months will be lean. Again, three months flush, three months will be lean there.
Okay. And the December one you said is a flush, right?
Yes. Yes. October, November, up to December, it will be flush.
Flush means more availability as well.
It is the same.
Right. Right. And it is the same for both the countries, right?
Yeah. More or less one month this way, that way. Sometimes rains delayed 15 days, one month this way, that way.
Understood. All right. Thank you so much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Mr. Praveen Kumar from Equitas Capital. Please go ahead.
Yeah. Hi. Thanks for the opportunity. I had a couple of questions. The first one was looking at your procurement volumes, which are going up over time, especially in India from pickup in Maharashtra and elsewhere. On one side, your procurement volumes are doing well, whereas on the other side, year to year, there continues to be the seasonal kind of volatility, right, which is somewhat unpredictable in nature. So in this kind of a construct where your procurement volumes keep going up and there is seasonal volatility leading to demand unpredictability, how do you manage margins from a strategic perspective? Can you walk us through that?
See, our now, see. Yes, sir. Yes, sir. Yes, sir. Good.
Yes, sir. Please go ahead.
Yeah. So basically, the volume to market growth volatility will only become more and more stable once we have enough volume of our own without depending too much on commodity for the B2C business. We are also growing in terms of the value-added part of the business, which is basically trying to sell ghee as a value-added product into the B2C sale. And other smaller volume growth in terms of our paneer, which has almost doubled in sales volume or increasing in sales volume. As a combination of these, more and more procurement that we get, we will consume because the liter-to-liter consumption will not necessarily be the same because the requirement of what purchase per liter we are doing to what selling per liter we are doing is different.
For example, if you're buying a purchase meter at 4.2% or 4.3% fat, our selling will be around 4.6% or 4.7% based on the product need. So to manage the balancing of the both, we will need more and more procurement, which will be at least, let's say, 8% to 10% more than our sales volume is also comfortably taken care of by our own captive requirement of balancing what we require. Because when the seasonality, when the issue comes in terms of how long are you hold, sometimes the seasons are not favorable for you, is when we come to this one-off commodity price sale that we are doing.
Otherwise, we'll try to match mostly between our own requirement and our own sales. And we cannot match it precisely to start with the same every day it will be there or every quarter it will be there. So now we are going with the view that we will have ample milk with us because a couple of years ago, we ran short of fat and we had to withdraw from ghee sale, for example. So we will not be. We'll be going back to not withdraw products and continue to sell them in the B2C market. So that is the reason why we are going for more volume. And this volatility will only be sort of evened out more if we're able to get that volume and the sale to be organized.
Understood. Thanks for that. The other question was on the Osam acquisition. See, on that, the gross margins, there is a couple of about 2% kind of a differential between Dodla and Osam. So can you walk us through what is there a plan for convergence of these gross margins over time? And if so, what you will be doing about that?
Osam thing, basically for us, BDK will give you the most specifics of the improvement as we go forward. I think the East markets, for example, Bihar and Jharkhand are improving from the GDP point of view. If you take another couple of years as those states also grow for premiumization to have increasing of the gross margins as we go forward, but on the other side, we have the ability of further improvement and rationalization in the operating structure of cost also, which will give us an improvement, so with both of these, I think it might not be dramatically higher than what we are operating in the southern markets, but at least we'll try to bring it up to those levels as time goes by.
Thanks for that. Thank you.
Thank you. The next question is from the line of Mr. Aditya from Securities Investment Management Private Limited. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. My question was on gross margins. So on a QOQ basis, our gross margins have reduced by around 1.5%. But if I look at your procurement prices, we are stable QOQ, and we have a higher share of VAP in this quarter as compared to Q4. So why have the gross margins reduced on a QOQ basis?
The VAP is also inclusive of our bulk sale of butter and powder. Murali, can you give the specifics?
Yeah. Sure, sir. So basically, sir, Q1, Q2, so the margins of minor reduction was there basically because of the sale of fat and butter and SMP. That was only one of the reasons, and generally in the Q1, we have a value-added product, but that was reduced like either buttermilk or the lassi or the curd. These are the key reasons of that. Q2, Q3.
We have lower realization, value-added products of curd and lassi and other consumer products. We have sold more of the fat, which is a lower realization, so number grew, but the margin took a beating because of the slip in the mix of products.
No, but sir, when I look at on QOQ basis, our VAP sales was around. So what are the key reasons?
No. See, even though the procurement price is one of the factors, another factor is also consumption. If you see, from Q3 to Q4, the prices have increased. From Q4 to Q1, from the middle of May onward, it started falling down. So what happens is the inventory, whatever we built up in Q4 also, will have an impact on the Q1. That is the reason what happens is there will be a minor variation of the consumption also will be there. It is not only the procurement because we always say that 10% or more than our procurement is our consumption. Whatever the last May second fortnight to June also will spill over of the previous inventory will be there. So that is the reason there will be a minor variation of 1% of the margins.
Yeah.
But.
Apart from the commodity, what we said.
Yeah. He's asking about 1.5% margin in margin. So there is a variation.
Correct. You're saying the procurement price increases.
So because carrying forward that inventory, because the inventory of the last fourth quarter, you have carried over to the first quarter. So that has reflected in this.
Yeah. Yeah. I got it. I understood, sir. Total bulk sales of Q4 is only INR 38 crores last quarter. And this quarter, it is around INR 57 crores. So here itself, it's around INR 20 crores higher was there. That also need a higher consumption. The margins, whatever we have in the bulk, will not be there in the normal business is normally higher.
Got it.
And now, sir, if I look at your procurement price for this quarter, it was around INR 37.38. So now, what were the procurement prices in July? Is it lower than this?
This is running July, you're asking?
Yes.
Yeah.
Running July.
Running July is 36.90.
Got it.
Now, in Africa, you mentioned that we had an issue of underutilization in Kenya, but what I realized was we were already supplying milk to Kenya from the Uganda plant, so just wanted to understand why has there been such underutilization happening in the Kenya plant?
Yeah. See, earlier, we used to supply milk from Uganda. But halfway, the Kenyan government put a brake where they stopped giving import permits. So almost one year, they have stopped giving permits. That's why now, see, in 2023, we acquired a plant in Kenya. Then subsequently, that took five, six months to revamp that plant and start last year. So now also, they are not giving permits freely. Whenever there is a shortage, only they are giving a permit to import from Uganda. So that's why there is a problem. See, Uganda milk coming to Kenya, it is not stable. As per the requirement, they are giving the permits. If there is a huge shortage, they are permitting. Otherwise, five, six months, they are putting almost zero. Is it right?
What is the utilization at our Kenya plant currently?
Now, Kenya plant, we are packing around 65,000-70,000 liters. That capacity, we can go maximum 1.3-1.5.
Got it. And sir, basically, what was the sales amount in BT terms this quarter?
Can you repeat the question?
Curd sales in B2B terms for this quarter?
Curd sales is INR 229 crores.
Understood. Okay, sir. Thanks for the questions.
Okay.
Thank you. The next question is from the line of Mr. Rehan Siayed from Trinetra Asset Managers. Please go ahead.
Yeah. Good evening and thank you for the opportunity. Sir, I already have my initial question to ask. So these are our last two questions. But on the working capital side, are there any initiatives to optimize the working capital cycle between inventory, tools across different managers for the dairy industry?
Your voice is muffling. Can you repeat the question?
Are you talking about the working capital?
Yeah. I'm talking about the working capital cycle. And is there any plans or management thinking on reducing it going forward to support growth supply chain?
Y eah. Working capital, there will not be any major except the inventory because that is cash and carry. So we have a sufficient cash balance if any inventory has to be built up that will be met from our cash balance.
Okay.
Now, last question, sir, on the forward-looking questions, this is just primary volume. Can you share your internal growth outlook for Dodla Dairy in terms of volume, revenue, and kind of market?
Can you repeat it? Your voice is really muffling. I'm not able to.
Understood. Sir, could you share your internal growth outlook for Alpha Telecom for going forward in terms of volume, revenue, and margin, if you can?
Margin? Gross margin, are you asking about?
Profit margin, sir.
Gross profit margin for the quarter, it is 25.78% at a controlled rate level. EBITDA margin is at around 8.19%. PAT margin is around 6.24%.
I am asking for convergence impact for FY26 or FY27?
FY27. The guidance number, what we are saying is in absolute terms, we will grow between around 15%-20%. That is what we are expecting it.
Y eah. Thank you so much. Thank you, sir.
Similar growth.
Thank you. The next question is from the line of Disha Giria from Ashika Institutional Desk. Please go ahead.
Hi. So my first question would be, what would be the VAP sales growth year on year, excluding the bulk sales and SMP?
Value growth is.
Yeah. Yeah.
INR 289 crores now. Again, last year, it is 278. That was the growth. So if you talk about as a percentage, 4% is the growth, excluding bulk.
Okay. So you mentioned briefly that our lassi sales, our lassi volume had gone down drastically during the first quarter. And what would be your strategy going forward to revive that sales? Or are we seeing rebound in the same in this quarter already?
Mostly, this lassi and buttermilk, it is regional numbers. Normally, in the month of April, May, when temperature is very high, the numbers are normally it will be very high. But in the month of from June onwards, numbers normally always it will be down. So if I'm selling a lakh liter of buttermilk in the month of June, July, August, it will be only 10. It will come down to 10% only.
Yeah.
It is totally a budget-driven lassi and buttermilk.
Yeah. Basically, buttermilk, madam, last time we have done around 45,000 liters. This time, it was only 32,000 liters, and even lassi also, it is around 15,000, and it was around 14,000, so basically, the major impact happened in the buttermilk.
Okay.
On curd, whatever, generally, we get a growth. That growth has not come. We are little reduction. There is not much. It is around 5%. 3% is a degrowth, like what we mentioned earlier in the curd.
Okay. So my last question is in terms of gross profit. While I understand there was high procurement cost both in India and in Kenya, if I compare our standalone gross profit decline with our closest competitor, our decline is almost 2X of their decline in the same period. So I mean, could you help me understand the same?
If you see, it depends on the cost. Some competitors have an area advantage of Tamil Nadu being more, and some competitors where we have apple to apple, it will be almost the same, at least coming from an EBITDA level, because gross sometimes depends on the way people do the costing. At an EBITDA level, the competitors who are in the same region as what we have would be the same in terms of the decline in EBITDA from where they were. Some competitors who have more of the higher volume from a particular state have the advantage of that state, and their margins are a little better than the other competitors who are equal in this state.
So sir, our highest procurement comes from Andhra Pradesh, right?
Yes. For us, it's almost equal. I think it is Karnataka followed by Tamil Nadu.
Andhra Pradesh, sir?
Andhra Pradesh followed by Karnataka.
Andhra Pradesh, Tamil Nadu, Karnataka. Andhra Pradesh, Tamil Nadu.
Tamil Nadu, Karnataka, and then Maharashtra.
All right. Understood, sir. Thank you.
Thank you. The next question is from the line of Mr. Kiran Kumar from Green Investors. Please go ahead.
Good afternoon. Thanks for the opportunity. Am I audible? Just want to clear.
Yes.
So my question is, thinking of standalone business, I would like to know the revenue of a milk and kind of standalone for Q1 versus Q125.
Standalone milk revenue is around INR 538 crores.
You are not hear. Please could you repeat?
INR 538 crores. Revenue number from the milk.
Okay.
Standalone. Last quarter is the same for.
Yeah. What?
Last year, same quarter, it is INR 507. So 6% of growth in the revenue.
Okay. Okay, sir. So coming to curd? Coming to? Curd, curd.
Curd basically INR 204 crores current year. Last quarter, it is INR 210 crores. There is a 3% reduction.
Okay, so VAP, sir, for standalone?
VAP, standalone, other than curd, excluding fat, currently it is INR 76 crores. Last quarter, it is INR 42 crores. And fat product.
Excluding fat.
Current quarter, it is INR 45. Last quarter, it is INR 41 crores.
So INR 76 crores? VAP minus curd?
Yeah.
35 is?
35 is fat and fat products. Basically, butter and ghee.
Okay, so would you please confirm if total bulk sale is only from standalone or?
Bulk is only standalone. We don't do any bulk sale in the. Africa.
Okay. Thank you. That was my question. Thank you.
Thank you. The next question is from the line of Parikshit Gupta from Fair Value Capital. Please go ahead.
Thank you for the opportunity. I just want to confirm, in terms of growth, you mentioned a 15%-20% growth in terms of value, correct?
15%-20% in absolute growth, it is EBITDA or at a PAT level.
Understood. And in terms of top line, what was that number? And if you could also give me.
It is usually 10%-15%.
Okay. Can you also tell me a break-up? How much of it are you expecting from value added, from Liquid Milk, Africa, Orgaf eed? If you can give a sense around that, please.
See, in the proportion it is not.
I think Africa is on the higher teens. Sorry. I think Africa will be on the higher teens. Orgaf eed will also be in the higher teens of growth. And India will be in that 10%-14%, 15% kind of a growth rate. So that is what we'll look at it. We cannot be very precise because of seasonality. But we normally target as a calculation overall to be there.
Understood. In terms of my second question was.
On higher teams, India will be in the lower teams.
Can you please repeat that?
Sorry, go ahead.
Africa will be in the higher teens. India will be smaller teens. That's what I was saying.
Understood. And does this also the India number, does it also include the Osam brand, the contribution from additional revenue from Osam?
We are not considering Osam. Without Osam is where we are looking at the lower tier markets of India. With Osam, it should be a little on the higher tier markets at the same, between the 15% of growth.
And just my last question, can you also tell me about the regional revenue split? I do understand that it is primarily in the south, but can you bifurcate it for me a little, please?
See, can you give the numbers of the states of revenue?
Yeah. Overall revenue, sir, from Karnataka.
Okay.
VAP, we will have around INR 59 crores. Karnataka, it is INR 279 crores. Tamil Nadu, it is INR 149 crores. Telangana, it is INR 119 crores. Excluding bulk. So bulk, we have done around INR 57 crores.
In terms of the growth, which states do you think would be the greatest contributor to it? I just want to understand which states are expected to do well versus which ones might be laggard here.
So excluding bulk, it is almost 9.6% what we have grown it in India. Out of that, 11% is AP growth, followed by, sorry, Telangana 11.7%, Tamil Nadu 10.3%, Karnataka is 7.2%. This is with regard to the value, revenue-wise.
Going forward, we expect to follow the status quo?
Similar to that.
Sorry?
Similar growth we are expecting it.
Understood. Those were all my questions. Thank you again.
Thank you. There are no further questions from the participants. I now hand the conference over to the management for closing comments.
I would like to thank all the investors who came on the call. Thank you very much. If you have any other questions, we can always get in touch with our investor relation team from SGA. Thank you.
On behalf of Dodla Dairy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.