Ladies and gentlemen, good day and welcome to Dodla Dairy Limited Q4 FY 2026 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 the 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference to Mr. Dodla Sunil Reddy, Managing Director of Dodla Dairy. Thank you, and over to you, sir.
Thank you very much. Good morning to all the participants. On behalf of Dodla Dairy Limited, I extend a very 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. Muralimohan Raju, and SGA, our Investor Relations advisors. I hope everyone has had an opportunity to go through the financial results and investor presentation, which have been uploaded on the stock exchanges and our company's website. Now, coming to the business. Financial year, FY 2026 was a year that tested the dairy industry. Milk supplies remained constrained for most of the year. Procurement cost inflation was sharp, and erratic rainfall affected demand for certain value-added products in some regions. Against that backdrop, Dodla Dairy has delivered resilient performance.
Revenue growth was 11% year-on-year, EBITDA margins stood at 7.5%, and a PAT margin of 6.5%. Notably, the performance is overall on the healthy base of FY 2025, which delivered an exceptional growth of almost 20 years over the previous. To better understand the trends of the dairy industry, one should look at the three to four year cycle. On that basis, our four year CAGR stands at a healthy level of 16%. Based on our growth and expansion plans for the next three to four years, we are confident to maintain or even surpass this CAGR number in the long run. The pressures we faced were industry-wide. In such tough times, the diversifications which we have built via Africa and Orgafeed played a critical role. Coming to the quarter performance.
During the quarter, we recorded our highest-ever revenue growth for the fourth time in a row with a top line of INR 1,074 crores, reflecting a year-on-year growth of 18%, primarily driven by volume expansion. EBITDA for the quarter stood at 5.5%, and PAT margins stood at 6.5%. Margins remained under pressure due to elevated milk procurement costs and a calibrated pricing strategy. An increase in procurement price was not fully passed on to the selling price to maintain the market share. Our pricing strategy is in line with the overall industry. Going forward, the situation is turning positive. Milk supply is improving, which should result in a normalization of procurement costs. For milk sales, some price hikes will also be considered. Some trends are already visible, where a few of the northern players have already increased their milk prices.
Our value-added product segment witnessed steady performance during the quarter. Due to operational variability, the overall VAP portfolio could not grow to its full potential. Once our plant expansion fully stabilizes, our plant expansion directionally, we are confident that the VAP mix will improve further. This growth will be delivered by curd, paneer, and ice cream, and broadly, we are targeting closer to 32%-34% in terms of VAP contribution. Africa business recorded a revenue of INR 151 crores, reflecting a robust growth of 48% year-on-year, driven by more than 60% growth in liquid milk sales. As a result of continuous increase in the scaling of business along with better operational efficiency, we have achieved our highest-ever EBITDA number of INR 18 crores in Africa.
This is for the fourth quarter. The decision that we took 12 years ago to extend our footprint in Africa has now become an important engine for long-term growth of the company. We see Africa scaling towards 15%-18% of consolidated revenue by FY 2028, supported by a phase II expansion in Uganda, which will include pasteurized milk and milk products that will be sold in Uganda. Orgafeed business delivered a strong revenue growth of 23.2% year-on-year with a slight dip in margin as a factor of higher raw material costs and expansion of our footprint of distribution. This business complements our core dairy operations with a strategic angle. It helps in strengthening farmer relationships through assured feed supply and creating an important loyalty loop in our procurement network.
OSAM business reported a steady progress, with our focus remaining intact on enhancing operational efficiency in this business to improve profitability. I also would like to welcome Ms. Dodla Silpa Reddy, who got appointed by the board as a senior management personnel for strategy and transformation. Silpa has spent considerable time understanding the business across verticals, and now she's increasingly taking responsibility in the strategic and operational areas. Now, speaking about the operations of our expansion projects. Our Maharashtra project is progressing as per the scheduled timelines and is expected to start commercial operations by the end of FY 2027. The work is under progress, INR 106 crores worth of CapEx has already been deployed cumulatively across FY 2025 and FY 2026.
We have also made decent progress towards improving our operational efficiencies of the OSAM business, improved its product quality, and upgraded the infrastructure. We should continue in this direction till margins are at par with the overall company level margins. We were also allocated a seven-acre land parcel by the DR Industrial Area Development Authority for a dairy project, which will call for additional investment of around INR 4.4 crores towards the land. The project is presently under consideration, and further details shall be disclosed after board approves. On the Uganda expansion plan, we acquired 70 acres of land parcel for a greenfield expansion. Total CapEx budgeted for this project is currently around INR 60 crores, including land as well as the plant. It will be executed in a phased manner and will be completed by year-end of 2029.
Before I hand over to B.V.K. , let me share our directional views for FY 2027. We expect revenue growth to be in the low to mid-single supported by OSAM's full year contribution. Africa continuing on its current trajectory and an 8%-9% organic growth in our India business. We are expecting a gradual gross margin recovery of 50 to 100 basis points over FY 2026 level as procurement normalizes and our pricing actions take effect. Effective tax rate will return to the normal 25-27 range post completion of the favorable tax orders we received in FY 2026. On capital allocation, let me articulate the firm clearly. Our priority order is first fund growth CapEx, where Maharashtra, Uganda, and our current regular CapEx are both covered from our internal accruals. Second, regular dividends.
Third, selective bolt-on acquisitions where we see procurement or distribution synergies. The combination of strong company fundamentals, a clean balance sheet, healthy cash flows, and all of these growth initiatives underpin our commitment towards a disciplined capital allocation and long-term sustainable growth of the company. With this brief, I will now hand over to our CEO of the company, Mr. B.V.K. Reddy. Thank you very much.
Thank you, Mr. Sunil Reddy. I will now walk you through the consolidated performance highlights of our business. During the quarter, despite a shortage of milk in the overall industry, our milk procurement level remained stable at 18.5 lakh liters per day, which is an increase of 13.4% on year-on-year basis. Underscoring the strength of our procurement network, long-standing farmer relationships. The average procurement cost in Q4 FY 2026 stood INR 31 per liter as against INR 38.7 per liter in the previous quarter and INR 37.4 per liter Q4 FY 2025. We did not entirely pass on this increase in cost to the consumers. Our average milk sales price for the quarter stood INR 58.4 per liter, which was INR 57.7 per liter in the previous quarter.
This was primary reason for our margin being under pressure during the quarter. To give some context, our standalone India EBITDA margin for the quarter reflected sharpest quarter of the procurement cost inflation in this cycle. The consolidated EBITDA margin of 5% was supported meaningfully by Africa and Orgafeed, which together delivered around INR 22 crores EBITDA in Q4. On nine months basis, our standalone India EBITDA margin was approximately 6%-7%. In Q4, reprinted with little throw, we expect this begin to recover in Q1 FY 2027. We also witnessed some cost pressure in packing and logistic costs, among other things, due to the shift of bulk sales in higher liquid milk and milk product sales. Speaking of Africa, we continue with our growth momentum in the Kenya market. The business is now seeing the benefits of scale with profitability improving steadily.
We continue to price our products competitively to strengthen market presence and remain confident of gradual improvement in margins. Coming to our product sales mix. Dodla's recorded its highest ever milk sales of 14 lakh liters per day, driven by the continuous efforts to our team towards expanding the geographic reach across India and Africa. Total value-added products stood INR 2,969 million as against INR 2,841 million in Q4 FY 2025. Excluding bulk sales, VAP delivered growth of 21% on year-on-year basis. Curd sales volume reported a healthy growth of 15.4% on year-on-year and stood at 442 million metric tons in terms of value. Curd sales grew by 19.1% on year-on-year basis.
Products like curd, paneer, buttermilk, flavoured milk, lassi, et cetera, delivered a recent growth, whereas other products remained muted due to seasonal variance. Within the Orgafeed business, the revenue growth is healthy and utilization levels also are scaling up in a good way. However, rising the raw material input costs have not been fully passed on to the farmers. In order to sustain long-term relationship into low milk supply environment, it is competitively intensive. Some moderation in the input cost is expected in the upcoming quarters, which will improve the profitability of this business. Our pricing strategy in line with the overall industry, and we also see an opportunity to increase milk price in the near terms to pass on some part of the elevated procurement cost. We are also witnessing some moderation in procurement cost as the milk supply in the industry is coming back.
Hence, we expect a gradual improvement in the margin going ahead. With the strong underlying fundamentals and expansion plans in place, we remain focused on effective execution and achieving long-term objectives while delivering profitability growth. Now, I would request our CFO, Mr. Murali Mohan Raju, to share the financial highlights for the quarter. Thank you.
Hi. Thank you, Mr. B.V.K. Reddy, and a very good morning to all the participants on the call. Talking about consolidated financial performance in Q4 FY 2026. Revenue from operation for Q4 FY 2026 stood at INR 1,074 crore, making its highest ever quarterly revenue, growing 18.11% on a year-on-year basis from INR 90 crore in Q4 FY 2025. Gross profit stood at INR 247 crore with a margin of 23%. Employee expenses for the quarter stood at INR 52 crore, up approximately 27% from FY 2025, primarily reflecting Hosur inclusion, Maharashtra greenfield expansion, and the Kenya plant ramp-up. Other expenses stood at INR 141 crore compared to INR 123 crore in the corresponding quarter last year.
While other expenses remained broadly in line with the revenue as a percentage of sales, the increase in absolute terms was primarily driven by increase in infrastructure-related expenses, including rent, employee travel, and the conveyance costs due to an increase in the headcount of the employees. Higher transport costs owing to shifting product mix from bulk sales towards liquid milk and VAPs. We reported EBITDA of INR 54 crore for the quarter with an EBITDA margin of 5%. Depreciation expense increased to INR 22 crore during the quarter as against INR 18 crore in the same period last year. Other income for the quarter stood at INR 20 crore, including INR 10 crore of interest income tax refund pertaining to interest on a tax refund following a favorable ITAT order.
In Q4, we recorded an exceptional item that is INR 3 crore worth of reversal on the one-time Labor Code expenses, which was recorded in Q3 FY 2026. An exceptional expense of INR 5.7 crore was recognized in the previous quarter pursuant to the revised Labor Code guidelines. However, the actual impact was lower than initially estimated due to the restructuring of salary components. Additionally, the company recorded a tax reversal of INR 29.2 crore for the quarter relating to earlier years following favorable order received from the ITAT. This tax credit represents the final portion and accordingly, no further impact shall be reflected from the next quarter onwards. Net profit for the quarter stood at INR 70 crore with net profit margin of 6.5%. I want to call out the one-off support to Q4 PAT explicitly.
The INR 70 crore reported Q4 PAT includes INR 29 crore earlier tax credit, which I just mentioned, and INR 10 crore of interest income on the related tax refund. Excluding these two one-off items, our Q4 underlying PAT is approximately INR 40 crore. For the full year, FY 2026 reported PAT of INR 267 crore includes total one-off benefits of approximately INR 70 crore that is INR 58.7 crore of earlier tax credit through the year and INR 10 crore of related interest income. Adjusted FY 2026 PAT therefore approximately INR 215 crore with an adjusted PAT margin of around 5.2%. This is a key baseline against which FY 2027 should be evaluated. Coming to FY 2026 performance.
Revenue from operations grew by 10.9% year-on-year to the highest ever INR 4,125 crore compared to INR 3,720 crore in the previous year. Revenue remained over INR 1,000 crore for all the quarters of FY 2026. Gross profit increased by 3.3% year-on-year to INR 1,055 crore. EBITDA for the year stood at INR 309 crore with EBITDA margin at 7.5%. The company reported a profit after tax of INR 267 crore, translating into a PAT margin of 6.5%. The company generated healthy cash flow from operations of INR 295 crore during the year, while total cash and cash equivalent stood at INR 649 crore as of March 31, 2026.
This includes cash and bank balance over cash in bank, plus our current as well as non-current investments, as all of those are liquid in nature. Our debt to equity remains under control at 0.03 level. The capital investment done in FY 2026 is about INR 430 crore.
Around INR 271 crore of expansion CapEx in Kuppam, INR 86 crore in Maharashtra during FY 2026, taking the cumulative Maharashtra spend across FY 2025 and FY 2026 to INR 106 crore against the total project envelope of INR 280 crore on the balance INR 73 crore of maintenance CapEx. For FY 2026, the board has recommended a final dividend of INR 5 per equity share. With this, we conclude this presentation and open the floor for further discussion.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask the question may press star and one on their touchtone 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. The first question is from the line of Praveen Kumar from Aequitas Capital Advisors. Please go ahead.
Hello. Hi. Thanks for the opportunity. I had a few questions. The first one was, can you give us a sense of what is the steady-state margin that we can expect in this current environment? Earlier in the call, you had specified 50 to 100 basis point improvement, margin improvement from FY 2026 levels, which would still take you to about 8% at an EBITDA level, 8 or 8.5, which is at the lower end of the earlier margin band which you were referring to. Are you recognizing a structural lowering of the steady-state margin that you can, you know, achieve, or are you saying that FY 2027 is a year in transition and, you know, then onwards there are factors which can take it upwards?
Yeah, that's my first question.
Thank you very much for the question. I think it's more in terms of being cautious with this whole uncertain environment that we are in because none of us are able to take sure of what is going to be pricing of fuel, pricing of plastics, the whole, you know, agriculture under impact with urea production. None of this is very clear for us. That is what is leaving. We'd rather be on the cautious side of taking what can be, what we can achieve even by considering all the uncertainties that are there. This is more a 27-year kind of a year where, you know, taking into consideration uncertainties, what's up, what is going on, that we are trying to give this kind of guidance.
Just as a aside to that, do you see, for example, when you're talking about the urea issues, et cetera, on one hand it can indirectly impact your feed business, but on the other hand, you know, if farmers are constrained on the agricultural side of things, they might focus more on the livestock part and, you know, might improve on the dairy, procurement side, right? Could you throw some light on this?
You're exactly right. Right. If there is drought and less of agriculture, then animal husbandry steps in to acts as a buffer for the farmers to grow. Like I said, we are not too sure where that's going to end, right? Is El Niño actually going to play out and more procurement pricing coming in? That is the reason we are being more cautious because, A, you have a weather which is normally there as an uncertainty, but added to that, the uncertainty of the war and the pricing that is coming. Keeping that into consideration, we are being more cautious.
To understand you are saying that post FY 2027, assuming some of these things normalize, you can get back to a more normal kind of.
Yeah. It will come back to the normal, yeah. Also one more thing is like in these uncertain times, right, you know, we have to be very careful of taking care of both the ends of the chain. That is the farmer and the customer. If we go and unreasonably try to kill the customer, then we'll lose not only consumption will start taking a hit. If we are unreasonable with the farmer, long-term impact in terms of productivity also will get hit. Keeping both into consideration is why we are being more cautious than being aggressive.
Understood. On the VAP mix, can you throw some light on what are the steps that you're taking to reduce the seasonality of that? I think you had already indicated some kind of stable mix you want to get to. If you can throw some light on how do you know, plan to reduce the seasonality part of it to the extent, because a lot of your existing products in the VAP are somewhat seasonal in nature, so.
Seasonality impacts three major products for us. One is ice cream, which does not move the needle significantly because it's a smaller portion of the overall. Buttermilk, lassi and curd are the ones which majorly go affect with the seasonality. That I think would be very, you know, southern consumption habit that if there is more summer, people shift more towards the fermented products. We are trying to see that if it becomes a throughout the year product, what was exclusively a two to three months, we are trying to extend that to a six months period to see that people start using it as a, you know, as a refreshment rather than worrying about it as a summer product. On the other hand, products like paneer have improved for us.
Paneer has seen a significant growth that is coming in the local consumption once placement is in place. Also that we are looking at things like our flavoured Milk, which is also expanding and growing at a bit of a steady state growth that we're looking at growing those products. I think in the days to come, depending on customer habits and health grounds, we will think that even buttermilk and such will become a regular product. Other than that, I think we will not be able to change customer habits dramatically.
Understood. The last question was on OSAM. What operational changes incrementally are you driving to, you know, converge OSAM margins with overall company margins? Can you share in detail?
The operational margin that we are looking at OSAM, basically broadly it is on all fronts. It is on production, it is on market, and it is on procurement. I think the operational efficiencies that you are seeing, I will ask B.V.K. to give you more in detail what all are the operational efficiencies in OSAM that we have undertaken which will help us improve our margin.
Yeah, yeah. See, OSAM, you know, we have implemented SAP and a lot of infra correction we have done. A lot of stresses we improved towards quality and a lot of logistics cost. Everything, you know, streamlined. Since, you know, once we acquired, you know, in a couple of months it took, you know. Maybe in the coming year, you know, we will see further refining and a lot of operational efficiencies, you know.
What kind of time will it take for it to converge? How does this, you know, you are talking about now new land allocations and spending on that to, for expansion further in Bihar. How does that affect the margin convergence trajectory?
Presently, what we are looking at it is the land because the government has offered, given that's only for a future project which will not be immediate. More, like you said, we'll have to go through the board approvals and get it. Existing operations improvement is still what we are looking at. We look at between 6 to 12 months that you'll see all the improvements getting into effect fully. Onwards, it will come back to the regular margins as the overall company's margins.
Thank you.
Thanks.
I'll follow back with you.
Thank you. Next question is from the line of Yash Goenka from Africa Capital . Please go ahead.
Hi. Thank you for taking my question. My question is on the cycle. Do you see anything different about this current dairy cycle?
Hi, Yash. Yes. What we have seen is there's a significant, like, you know, as usual, when the summers come in, we have seen a significant uptake in volumes increasing in the first quarter. That is one on the sales side where we see the significant improvement happening in the product mix, giving a better realization over the previous quarter, the same period. On the other end, procurement was still under stress. We are seeing improvement signs, and we hope that, you know, maybe in another month or so that will also start to improve. I think Maharashtra and Karnataka have improved a bit in terms of productivity. We are waiting to see how the productivity in Tamil Nadu, Andhra, and Telangana and other places will come into place. The shift has happened in the proper manner in the sales side.
Procurement is also on track. We hope to see better results coming in the next month also.
Okay. Secondly, are cooperatives raising their prices in all the, all the regions you are operating in the southern states?
See, we have, they have increased the selling prices. Amul and Mother Dairy has increased the INR 2 selling price. We have already taken the price increase in the month of March itself. Mid-March itself we have taken the increase. The cooperatives are just following the increase that we have taken to compensate the losses.
Over the next two to three months, would you be further taking price hikes, and what would that range be in?
We won't be taking price hikes per se, but we will be trying to correct certain things that are there, right? Like if our, for example, if the packaging material, it'll be only minor corrections that we will take, not a major price correction, because already we have a significant headroom over the cooperatives that are there. We will only take more on the procurement side.
Okay. Lastly, just to confirm, you said that margins will be reverting to mean by FY 2028, right?
Yes.
Okay. Thank you.
Thank you. Next question is from the line of Abhishek Mathur from Systematix. Please go ahead.
Yes. Hi, sir. Thank you for the opportunity. I just wanted to check, what is the milk procurement cost that you're seeing currently as of today? What is that level? Also with the pricing that you have taken so far, as of today, what is, what part of the cost inflation is currently covered already as of mid-May? That's what I wanted to check first.
Murali will answer that, Abhishek. Yeah, what you're saying is, what is the price increase in procurement, and what is the price increase in sales to have compensated the price increase, correct?
Yeah. Broadly, yes, sir. Just wanted to check. You gave the number for the procurement cost for the fourth quarter, but what is it today? The pricing that we have taken so far since we've indicated we are not planning any further major hikes, what part of inflation is covered as of now?
Yeah. Regarding the procurement price in line with whatever the March price is, correct. There is no major increase. Whatever we provided as a consolidated INR 37.36 to INR 40.97, that is a 9.7% growth also year-over-year. The same thing is continuing here. At a standalone it is a 9.3%.
We have passed on around, to answer your question, I think we have passed on around INR 1 of the inflation in the sales recovery that we have already done. Currently that we are doing. We are anticipating the procurement improves. We should get down another INR 1 or so will be coming down in the procurement price.
Great. If I'm hearing correctly, as of mid-May, there is no sequential increase from the number that you gave out on the procurement cost front. Is that the right understanding to take?
Yes, that's the right understanding. No price reduction, but we are anticipating certain areas of price reduction become effective in end May.
All right, sir. Second question is, for FY 2027, if you can indicate what is the CapEx that we are planning and what will be its breakup. I think you have given the FY 2026 to FY 2028 CapEx number, for what will be that number for FY 2027? Also just some bookkeeping numbers, if you can share the consol overall realizations and the VAP realizations for the fourth quarter. Yeah, that's it.
Yeah. Basically regarding the CapEx, Murali will give you the numbers specifically about.
CapEx.
the CapEx up to the current year. In the future CapEx that we are looking at, broadly it will be the higher number we can see coming from Maharashtra, OSAM, and Africa business. I think Murali will give you the specifics in terms of, what we're looking at our CapEx and also the, you wanted the fourth quarter numbers, right?
Yeah, yes, sir.
Yeah. Both of them, FY 2026 fourth quarter numbers, Abhishek.
Fourth quarter, whatever CapEx we have spent in.
Fourth quarter you want the CapEx numbers or?
CapEx we have spent.
No, sir, I was asking for the CapEx number for FY 2027 and for the fourth quarter, just needed the consolidated overall realization and the VAP realization.
Yeah. One minute, sir. Sorry, you wanted the realization or the CapEx?
Budget.
Okay.
Okay. Overall budget for the FY 20-term, what we have considered is.
One minute. We're just bringing up the numbers.
So what is-
Yeah, sure. Sure.
INR 65 crores from the regular CapEx what we consider. Around INR 33 crores we have considered for EPC. Hardware around INR 7 crores. Overall standalone we are expecting around INR 120 crores of CapEx. Q4, yeah. That's what we're projecting, Abhishek.
Without considering the Maharashtra project.
Maharashtra, out of INR 280 crore, INR 20 crores we have spent in FY 2025. INR 185.86 crores we spent in FY 2023. Balance INR 100 crores, INR 180 crores we're planning to spend in FY 2027.
Those will be the broad areas of expense, CapEx, that will be spent in.
Right, sir. The realization, sir?
For the fourth quarter realization for consolidated, Abhishek will give.
Consolidated realization will be INR 61.19. Okay? That is the overall sales realization of the including the, product link.
You want also the procurement price for fourth quarter, Abhishek?
No, sir. Just needed the consolidated realization and the VAP realization for the fourth quarter.
Okay. For the milk procurement, we will talk about when you liquidate consolidated sales price. Sales only. It is INR 65.16 of last year, Q4 to Q3 it is INR 66.16. When you talk about specifically of India, INR 56.15 to INR 58.25. That is INR 2.10 increase in the milk sales realization, especially without the considering the called VAP. VAP is a blended. I could tell you the blended price. Especially at a standalone it is INR 60.72. Sorry, INR 60.892. It is reduced to INR 60.54 because the product mix was changed. Because of bulk sale we have exited. That's why there is a reduction it shows in the when you say the consolidated number.
Sorry, the VAP realization was what, sir?
INR 60.54.
Great. That's it for me. Thanks and all the best, sir.
Yes. Thank you.
Thank you. Next question is from the line of Aditya from Securities and Investment Management. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Sir, just wanted to understand what kind of price inflation we are seeing in our packaging and sales force. Is it manageable now or it's going through the roof? How are you looking to mitigate the same?
I think packaging material as a number has gone up by 30%. Most of the plastics that are there, and we use a lot of the plastic, it's gone up by 30%. That's a small correction is what we have passed on to the consumers in terms of the price corrections that we have taken. We are anticipating that the plastic prices will remain at the current elevated levels only because there has been some government support that came in the middle in terms of excise duty reduction and such. Unless something dramatic happens, we are thinking that it'll hold fort at the current 30% increase over the previous year.
Sir, now with increasing petrol cost, how are you looking at sales force going forward?
The current INR 3, I think, temporarily for a month or so we will have to look at it and we will absorb because a portion of it will be passed on to the transporters itself because we take price corrections only periodically and we normally try to keep it for that period. If it remains at three, so that's the whole reason which I was saying there's certain uncertainty of times. We don't know whether it's going to remain at three, is it going to go up to six or seven. That is the reason we'll wait and watch, I think, for another at least fortnight or a month before we decide how to take it forward in terms of pricing.
Understood, sir. Also, sir, in such an inflationary scenario, is price increase the only solution for us or there is an option for grammage reduction also in our kind of industry?
Grammage reduction which we normally used to do, we will not do much this time because this is not helping in terms of the consumers are also able to realize what is happening as grammage reduction towards price. I think it is going to be a blend today that we are going to do in terms of moving up, what do you say, procurement, operational efficiency and marginal increase in pricing. It will be a blend of all the three. For us, the way I look at it is we need to cover costs and to improve margins maybe we need to increase by INR 1 or so more in terms of pricing.
If we're able to manage INR 0.30, INR 0.40 overall in procurement, INR 0.20, INR 0.30 operationally and INR 0.20, INR 0.30 in terms of the front end, we should be able to improve our margin. Also because overall our volume growth is there. Percentage might be a little on the lower side, but the absolute number will be higher because the volumes in the first quarter are seeming to be pretty reasonable in terms of the size of the sales that we are getting.
Understood, sir. Also, you know, there is expectation of in terms of the season and El Niño. Now, in such a scenario, while we will be positively benefited because of higher VAP sales, but on the flip side, you know, the milk usage might also take a hit, which would impact the procurement costs also. With the milk inventory in the system pretty low, how do you see both of these things intermingling with each other and impact on margins going forward? What would be the factors, you know, things you would look at going forward, which would give you the confidence of improving margin outlook for the company?
Broadly, like we said, the fluctuations will not be dramatic. If there is a severe drought, it is a two way sword for us. Certain areas where there is a drought, animal husbandry improves because there is no other income for the farmers. They concentrate more on animal husbandry, and therefore production normally improves. Also the sales mix, if it continues to be high on the value-added product side because of higher summers, there's more curd, more buttermilk, and luckily that those are our average realization increases because of the product mix change. It sort of helps us in a manner of speaking to keep our costs going. That is what we said. We are more worried about the other costs that are going to shoot up dramatically more than the price of milk itself, right?
None of us are certain about where this price of fuel, you know, will be stopped. If you look at it, this is my view, and please correct me if I'm wrong, INR 60 to INR 120 in my simple mathematics per barrel means it's a 100% price increase. It should translate even to a 25% or 30% increase for us on fuel, which has not yet shown. Right? We're not sure whether it is going to go up by 20% of fuel or only going to remain at the current levels. I think once we get more of a sort clarity on this, we can think of where all we are going to pass on.
How much to the customer, how much from the farmer, and how much in terms of operation efficiency?
Understood, sir. Okay. Now, sir, if I could understand, when I look at your liquid milk sales volume excluding OSAM, we have been growing at near the 9%. Just wanted to understand, what would be the growth in India specifically, because Africa would be the major part driving growth. I just wanted to understand what is your liquid milk sales volume growth in India for the last two, three quarters.
We will continue to grow with that volume terms of 5%-6% in terms of liquid milk. Although in the current year, excluding bulk, including value-added, we did 9.4% of growth. We think that we will continue to maintain an average growth in terms of including value-added to the 10% of volume growth.
Yeah. What I wanted to understand was, you did not increase the milk prices because in the presentation you mentioned that you wanted to gain market share. In the last two, three quarters, has our liquid milk sales volume growth seen an uptick?
Liquid milk volume has seen an uptick, yes or no. Value-added, we are pushing more. That has seen a significant uptick. Liquid milk has seen an uptick of around 5%- 6%, whereas value-added has grown up by 16%.
Understood. Also, what is the OSAM revenue and EBITDA for this quarter?
for the fourth quarter of this year?
Yeah.
Q4 EBITDA is basically INR 2.7 crore.
No, no. They are talking about EBITDA. Okay, I'll talk about even revenue also. For the Q4, the revenue is INR 81.9 crore, EBITDA of INR 2.7 crore. Full year it is at INR 214.7 crore and EBITDA is INR 4.8 crore.
Okay. What kind of gross margins does OSAM make?
Gross margins of OSAM would be around 21%.
21 point. Okay.
Okay. Okay. Just the last one question.
It should move up to the 25% soon.
It should, sorry. Can you repeat, sir?
It should move up to the 25% soon.
This will be majorly due to price hikes and improvement in VAP mix?
Yeah. you know, price hikes, improvement in VAP mix, and also the efficiencies that we were talking about increasing our own procurement, bringing down freight costs, you know, cutting down on losses and all that will add to that.
Understood. Understood. Sir, just last one question. Now in Orgafeed, we have seen a drop in margins, but what I understand that there has been a reduction in maize prices and margins should actually have improved. What is the reason for the drop in margins in Orgafeed?
Although maize prices, we ought to say that have reduced now, it will only be what we buy now will be used later. I think the maize prices overall did go up and not come down. That is number one. Number two, earlier days, like, you know, we are, we were operating in a closer proximity of our area. We had the advantage of other operating costs like freight. Now, since we are expanding our volume and expanding into other areas, we have impact on freight, and we have to be also competitive with the local producers. For example, if I'm selling my cattle feed to sell in Maharashtra, the transport cost from selling from Kuppam to Maharashtra will add on the margin pressure. The pricing in Maharashtra in terms of the local competition will be there.
We are still maintaining that 11% margins that we had, and we think we'll continue to maintain, yeah, that kind of margins.
Yeah. Thank you, sir, for answering the questions. I'll hand back to Nikita.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. We will take our next question from the line of Pradyumna Choudhury from Warhead India. Please go ahead.
Yeah, hi. Am I audible?
Yes, sir. Yes, sir.
My first question was on the butter prices. Last few quarters due to elevated butter prices is one of the reasons why we saw milk procurement price being higher. What is the latest on the global butter prices and global SMP prices? Why was it really elevated Q to Q?
Butter prices and powder prices are elevated because, like you said, last year was a low productivity in terms of milk availability coming down, and therefore the stocks have been depleted. Now, only now in terms of this volume, stocks will be built up. That is the reason why we have removed our bulk sales and not done bulk sales because we don't have the extra butter that we produce. We have sort of compensated it by increasing our milk procurement that we have. I think essentially we did turn out to be a small amount of a net buyer. That is the reason why the whole market prices are elevated.
You know, sir, my question was more on the global butter and SMP prices. Not really India-specific because we saw a lot of price growth there.
Yeah. Global prices also in similar manner were as to us, you know, they are actually, I think, coming now. They are looking at it as an oversupply. India's import of butter is not much. It's mostly ghee that we export in terms of fat for the Indian diaspora which is there. That is what consumes more of the fat exports that India has.
Right now we are seeing these prices coming down, so export prices for butter and SMP.
No, not coming down. They're maintaining the same state as what they were earlier. We are not much into exports. I don't have the specific numbers, but I don't think they're coming down.
That's not a risk to us because that, the milk procurement prices, would start coming down. We do not expect that elevated global butter and SMP prices would be a risk to us.
Not much because I think the number of exports that we see out of the country is not that significant to change pricing patterns as much as also imports are very restricted because we have duty structures so that we don't get the flood of imports coming in. It will broadly be dependent on domestic consumption and production, not much of variation due to exports.
The last question is on the costs mix. If I were to look at cost of goods sold for India business especially, what would be the mix of that? How much would be milk as a percentage of the cost? How much would be packaging materials? What about logistics? If you can give that. The second question would be on the Maharashtra side. I think we are supplying close to 2.5 MLPD already from Maharashtra, but we don't have any bulk sales as of this quarter. Where is this really going in terms of sales?
I'm sorry, sir, we are not able to hear you if you are speaking.
Can you hear me now? Hello?
Yes, you're audible. I'm asking this to management. Management team, are you able to hear us? Ladies and gentlemen, the line for the management has been disconnected. Please hold while we get them back. Ladies and gentlemen, thank you for holding. We have management connected now. Over to you, sir.
Sorry everyone for the disconnection. I'll just now Murali will give the breakup of the cost that you had asked for earlier in the.
Yeah.
presentation. Go ahead, Murali.
Overall, the consolidated if you see the breakup for the full year, it is 74.4% is include the packing materials. Employee benefit expenses is around 4.9%, and transport cost is 1.3%. Foreign fee only is around 1.3%. Commercial expense is 1%, and balance all other miscellaneous expenses, other towards legal, travel, interest, security, all those put together. Overall, the average expenses is coming to 13.2%, excluding the employment benefit expenses. That is at 18.1%. For that, no.
So-
Okay. Out of the 17.4%, 3.5% is the packing material.
Sorry, how much?
3.5%.
Is the packing expense? What about logistics expense in this?
Logistics expense is 7.3%.
Remaining else is all milk.
In 24% in order, only packing material is 3.5 out of the 74, + 7.3% transport.
Around 64 would be milk.
Yes. No, no.
74, transport is not excluded. 74.4 plus transport 7.3, you have to add. For the transport plus.
Input and output.
Yeah. transport includes.
Sorry.
Transport includes the four legs. That is, village to the chilling center, chilling center to the plant to the sales office, sales office to the customer. All the transports are included. Apart from that, the loading, unloading carrier, the freight carry forward, this thing, and the contract labor who all works under the transport of that.
All that comes to 7.3%.
That's right.
It doesn't come in the 74% of raw material. 74% of raw material includes 3.5% of packing.
Remaining is all milk, right? 74 - 3.5.
Yeah, all milk. Yeah.
Power and fuel would all-
Sorry to interrupt, Mr. Choudhury. You may please rejoin the queue for more questions. Thank you. We will take the next question from the line of Ashish from GT Portfolio Managers. Please go ahead.
Hello. Hi, Sandip. Hi, Murali. Hi, Sunny. Hi, Murali. I just wanted to know, how are you thinking of the risk of El Niño on your gross margins? I think earlier in the call you referred to, like, a 50 to 100 basis points improvement in your gross margins. How are you thinking of that?
Basically, we are very confident that milk procurement should come back to normal. It cannot be there. The prices will drop in milk procurement. That itself should give us that difference in our margins. Because if you look at it as what we are saying as 1%, or 100 basis points of price margin, as you see our average realizations are around INR 60. We are looking at an INR 0.60 correction, that means.
Yeah, that's fair. Thank you. My second question is a little more broad. Your Africa business seems to be growing strong and, like, growing a lot. What is going right there, and how do you see that continuing into the future?
I think what is growing right is basically Uganda, we have become a significantly large player. In Kenya, we're just beginning to see that. Kenya is a much larger market than Uganda. Earlier, we used to cater from Uganda to Kenya. Due to the border disputes, we were not able to cater to it properly because there would be restrictions on how much we could send. Once we have now entered in Kenya with our own operations and our own plant and having the stability of the product, we are able to do better. I think in terms of comparison, like we said, it's more keeping your quality in this improved quality, making sure that operational efficiencies are maintained. We are still a smaller market share in Kenya, and that gives us growth options.
Like we said, in Uganda, we are expanding. Earlier, we were into long life products only. We are entering into the pasteurized and other milk products.
Okay, perfect. Thank you.
Thank you. Next question is from the line of Darshan from Axis Capital Institutional Equities. Please go ahead.
Yeah, hello. Good morning.
Sir, you are audible. You may please proceed.
Yeah. Yeah. All right, thanks for the opportunity. I actually, also just wanted current sales in rupee terms for this quarter, Q4.
The current sales Q4 in rupee terms, right, Darshan?
Yes.
consolidated current sales for the Q4-
Rupee terms.
In rupee terms, INR 230 crore. For the full year, it is INR 845.7 crore.
All right. Secondly, just wanted to understand, is there any considerable difference between procurement and realization, you know, costs and realizations between domestic overall business and OSAM? If you were to, like, you know, just see a broader trend, do they move in tandem or are there certain gaps between the trends?
Okay. I was not able to get the question clearly, but what you're saying is the difference between OSAM price realization and the rest of India price realization. Am I correct, Darshan?
Yes.
To request this? actually OSAM.
No, how the price.
Has a better realization than, that is the VAP portion than in, here. Murali will give you the specific numbers.
With regard to Dodla India, so basically the milk realization is around 58.1%. Whereas, HR Food, that is OSAM, it is 55.7%. VAP, excluding the bulk orders, it is 64.2% for the Dodla Dairy. Whereas for HR Food it is 98.8%.
Okay. Got it. All right. Yeah. I'll get back to you.
Thank you.
Thank you. Next question is from the line of Deepak from Unifi Capital. Please go ahead.
Hello, sir. Thank you for the opportunity. Congrats on good top line growth. My questions were on the margin profile of the company. If you can explain as to how you will get to the 150 base margin expansion that you're talking about in EBITDA for FY 2027, given that procurement costs are still elevated, at the margin levels. Freight costs are up, employee and other expenses are also, the costs are up by anywhere around 15%-20%. If you can explain, firstly, the gross margin trajectory that we should start looking at from Q1, and then the below gross margin line items that is under your control, employee and other expenses, as well. Yeah, I would like to hear your strategy on that.
Yeah. You're right, Deepak. Basically, the employment expenses this year, we actually brought it down in terms of the existing operational by, you know, by only a 5%, 6% increase. The overall impact is still at 11% because of the New Wage Code impact that is there. All these costs, including packaging that you're looking at and all that would may have taken up our cost by maybe INR 1, INR 1.5 . We are expecting that the procurement prices should come down to that, INR 1.5 - INR 2. Because of the product mix improvement, our realization is on the higher side.
As a combination of these two, like I explained earlier, our 100% in terms of 1% increase represents roughly a INR 1, INR 1.5 of price, overall efficiency that we need to build up, which we think will come, you know, once the you know, in the following quarters. Normally price will come down. It will not come down for 1.5 year. It will come down as productivity increase.
Okay. If I hear you right, are there any structural circumstances which occur in the March, sorry, the May month or the June month, which would lead to this price reduction? Well, I don't understand as to why.
Yeah.
the procurement cost was
Maharashtra and Karnataka have got a significant upward growth in the milk procurement. You will start seeing, you know, Maharashtra prices sort of correcting a little bit to, you know, because of the growth that is coming in. Similarly, when the seasons of the rest of the operations come in, you will see a drop.
Sure, sure. Sir, next thing I wanted to understand on the price hikes. You know, your strategy on not taking more price hikes when you have the opportunity as the cooperative is also taking. I just wanted to understand your mindset on taking more price hikes. Maybe you're not taking it right now. Will you take it later in the future? I just wanted to understand on the pricing action from the company.
We have basically taken a price hike in March, which the cooperatives have only followed later now in the May. We will again take, you know, the next round will be, as I said, the uncertainty of the fuel prices, packing material and all that has to settle down. Once we see what the impact of that is going to be in terms of sort of a stable state, then the price hikes will again come in from all of us.
Sure, sir.
the difference in terms of us and the cooperatives are significantly higher. We don't want to keep expanding that more and more.
Okay. Lastly, on the volume growth for both the liquid milk and VAP, you mentioned that VAP had some operational challenge. If you can allude to what operational challenge? Secondly, what kind of growth have you seen to the seasonal to the season which has started in April, if you can call out that.
Sure.
Any improvement that you've seen in the growth rates for milk, sir?
Yes, sir. In milk growth rates have maintained around the 4.5%, 5% even in the current scenario. We have seen significant increase in the VAP growth. Like we normally say that our summers of VAP will be higher. Our VAP growth rates have been significantly higher. We are around 16%, 17% VAP growth.
Oh, okay.
I'm sorry to interrupt, Deepak. I'm really sorry. You may please return the queue for more questions. Thank you. Next question is from the line of Rehan Barkat from Omayo Advisors. Please go ahead.
Yeah. Hi, Am I audible ?
Yes, sir.
Yeah. My first question is regarding the impact of an increase in fuel price by INR 1 on the logistic cost.
Basically, when you look at fuel prices, the 3 rupee increase currently will have a impact of about some maybe, you know, not by as that much in terms of 0.5% is what the impact would be. That as I said, if we delay giving it to our transporters, normally they take a hit for a 15-day process and then we go in. Currently it will only be a small hit of 0.25% that we look at. If once we are sure of what the fuel prices are going to be stable at, then we can make a call of how to pass it on.
Okay. My second question is regarding the Africa business and what can be the sustainable growth number to look for there?
The sustainable growth numbers in terms of volume, we are confident of maintaining the 20% kind of growth numbers in the current year.
Okay.
Rehan, does that answer your question?
Yeah. Actually, I wanted to know the value as well in terms of the sustainable growth.
In terms of value you mean, sir?
Basically, sir, last year we done around INR 500 crores. On that, what sir is talking about-
20%.
20%.
INR 600 crores.
INR 600 crores. That is the guiding number.
Got it. Yeah. Okay. That answers my question. Thank you.
Thank you. Next question is from the line of Ankit Shah from White Equity Investment. Please go ahead.
Thank you for taking my question. Sir, regarding the Africa sales, can you split it between Uganda and Kenya for FY 2025 and FY 2026, please?
Uganda and Kenya break up for 25 and 26. 1 minute.
Uganda is almost stable, INR 1.45 lakh-INR 1.5 lakh.
See now, if you see last year we have done, you know, FY 2025 180,000. Out of that, you know, 145,000 from Uganda and balance, you know, 35,000 from Kenya. FY 2026, you know, the similar number, you know, from Uganda we have done 145, 150. The total number what we have done average is 227,000. 120,000 minus balance 87,000-90,000 liters average we have done in Kenya.
FY 2026.
So the volume-
Yes. FY 2026 volume growth has largely come from the Kenya piece.
Yes.
Okay.
Yes, yes.
Sir, if you can give the Africa EBITDA numbers. We have the revenue numbers. FY 2025, 2026 and before FY 2025, Africa EBITDA.
Yeah. EBITDA number.
Yes. EBITDA number, you know, in FY 2025 it was 11% EBITDA. The FY 2026 is 11.3% EBITDA.
Okay. The last question I have is on the Maharashtra plant. Where are you on the procurement in Maharashtra in terms of lakh liters per day? Do we see it going to 5 lakhs till end of 2027?
Right now, you know, the average procurement Maharashtra, what we are procuring is INR 3 lakh average right now.
INR 3 lakh.
Last couple of months onwards. Once season comes, you know, by end of this year we are targeting, you know, minimum INR 5 lakhs.
Yes. Okay. Thank you for taking my question.
Thank you.
Thank you. That was the last question for today. I would now like to hand the conference back to the management for closing comments.
Thank you everyone for joining us today on this earnings call. We appreciate your interest in Dodla Dairy. If you have any further queries, please contact SGA, our investor relations officer. Thank you very much.
Thank you. On behalf of Dodla Dairy Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.