Ladies and gentlemen, good day and welcome to Dodla Dairy Limited Q2 FY 2027 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the belief, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involves risk 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Dodla Sunil Reddy, Managing Director. 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 warm welcome to everyone joining us today on our call. I would also like to take this opportunity to wish everyone a very happy and prosperous Diwali. On this call, I am joined by our CEO, Mr. BVK Reddy, CFO, Mr. Murali Mohan Raju, and SGA, our investor relation advisors. I hope everyone had an opportunity to go through the financial results and investor presentations, which have been uploaded on the stock exchange and the company website. Coming to our performance during Q2 FY 2027, we reported a revenue of INR 1,196 crore, registering a healthy year-on-year growth of 17.4%. EBITDA and PAT for the quarter stood at INR 64 crore and INR 37 crore respectively.
The performance was a combination of volume growth as well as some improvement in the realization, which is supported by a price increase of INR 2.5 per liter implemented during the fag end of the second quarter. Full impact of price increase is expected to be visible in the next quarter. However, the milk procurement price increase also remained elevated, keeping the profitability under pressure. Additionally, the margins are compressed due to the inflationary environment in terms of logistics costs, packaging costs, and other overheads. Despite a challenging and uncertain operating environment, Dodla achieved healthy revenue growth, demonstrating strong market presence, superior product quality, farmer relation, and execution expertise. The raw material supply stayed healthy during the quarter, as we strategically built adequate inventory to cater to the demand in the upcoming quarters. Coming to our value-added portfolio, the revenue from this category grew 11.7% on a year-on-year basis.
However, the demand for the higher-margin summer-related products such as curd, buttermilk, flavored milk, ice cream, et cetera, remains softer as compared to the previous quarters due to seasonality factor. We are focused on strengthening our existing VAP portfolio and expand into well-established categories like paneer and ghee, where the demand is stable throughout the year and there is potential to build scale over time. Moving on to our Africa business, it delivered a strong quarter with a record of INR 179 crore, representing a year-on-year growth of 56%. We continue to focus on strengthening our presence across Uganda and Kenya. The planned greenfield expansion in Uganda is expected to support growing demand and provide additional capacity for future growth. In Kenya, our focus remains on increased market penetration and strengthening our own procurement network.
I would also like to inform you that the board has approved a proposal to establish a joint venture in India with Meadow India Holdings Limited, with Dodla Dairy and Meadow India Holdings Limited having an equity stake of 40% and 60% respectively. The proposed joint venture will focus on marketing and selling high-quality dairy ingredients to the B2B market. The proposal is subject to execution of the joint venture agreement, completion of the requisite formalities, and the receipt of applicable regulatory and statutory approvals. We will keep you informed about any future material development in this regard. Going forward, the operational environment remains dynamic with elevated raw milk prices and inflationary pressure arising from geopolitical uncertainties continuing to pose challenges. We remain focused on strengthening our procurement and distribution capabilities, driving operational efficiencies, expanding our value-added product portfolio, and executing our planned expansion initiatives, which are progressing as planned.
With a disciplined approach towards product quality, cost management, capital allocation, we remain committed to strengthening our market position and deliver long-term profitable growth. With this brief, I will now hand it over to the CEO of our company, Mr. BVK Reddy. Thank you very much.
Thank you, Mr. Sunil Reddy, and happy Diwali to everyone. I will now walk you through the quarter performance highlights of our business. Starting with our Indian operations, the overall milk supply situation began to improve during the quarter, supporting recovery in our milk procurement volumes. For Q2 FY 2027, the milk procurement stood at 21.3 lakh liters per day, registering year-on-year growth of 9.3%. Average milk procurement cost increased INR 43.2 per liter in Q2 FY 2027 compared with INR 41 per liter in previous quarter and INR 37.3 per liter in Q2 of FY 2026. in response to the rising procurement cost, we implemented the price increase of approximately INR 2.5 per liter. Consequently, our average milk sales realization improved to INR 61.9 per liter in Q2 FY 2027 compared with INR 59.4 per liter in the previous quarter and INR 57.3 per liter in the corresponding quarter of last year.
However, the increase in selling price was not sufficient to offset the impact of the higher milk procurement cost, and profitability therefore remained under pressure during the quarter. To put this into perspective, the spread between the milk sales realization procurement cost narrowed to INR 18.7 per liter in Q2 FY 2027 compared with INR 20 per liter in Q2 of FY 2026. In addition, operating costs remained elevated primarily due to input cost inflation and shift in product mix from bulk sales towards milk value-added products, VAP. Costs related to transportation, fuel, packaging, minimum wages, and other overheads continue to remain higher than the normal level. Going forward, we intend to gradually pass on the portion of these costs to the consumers over the next coming months. Our pricing strategy remains aligned with the broader industry trends, where high single-digit price hikes have been taken by regional cooperatives.
We will continue to maintain a balanced approach to consumer affordability and profitability. Coming to OSAM Dairy, the business delivered healthy revenue growth during the quarter and supported by strong milk sales volume. Although the profitability remained muted due to elevated raw material cost, witnessing similar trends as our domestic dairy business. Speaking about our HR Food business, it is continuing to deliver strong growth with the revenue increasing 40% on a year-on-year basis. In Q2 FY 2027, however, margins were impacted by higher raw material cost, which could not be fully passed on to the farmers. We are also exploring opportunity to expand our food business in Maharashtra once our new integrated facility becomes operational. Our Africa business delivered very strong revenue growth of 56% on a year-on-year basis, largely driven by a 68.5% increase in milk sales.
As Mr. Sunil Reddy mentioned earlier, in Kenya, we continue to focus on gaining market share through strategic pricing while simultaneously strengthening our market presence and procurement network. These targeted efforts are supporting our growth momentum and positioning the business for future expansion. Now coming to the product sales mix, our milk sales volume stood at 14.2 lakh liters per day, registering year-on-year growth of 8.4%. During the quarter, our VAP sales increased to INR 327 crore from INR 292.8 crore in Q2 FY 2026. Curd and curd-based products recorded high volume growth of 23% year-on-year, reaching 444.7 metric tons per day. Demand for our consumer-oriented products across the broader VAP portfolio moderated during the quarter due to seasonal factors, as Q2 coincides with monsoon season.
Looking ahead, with milk availability improving and festive season approaching, we expect demand for certain VAP categories, particularly sweets, ghee, and other festive-oriented products to benefit. We remain focused on capitalizing on these opportunities while maintaining cost discipline and optimal pricing strategy. Further, as our new facilities in Maharashtra and Uganda become operational, we expect them to accelerate our growth and contribute to a stronger, more profitable performance in the years ahead. Now, I would request our CFO, Mr. Murali Mohan Raju, to share the financial highlights for the quarter. Thank you.
Thank you, Mr. BVK Reddy, and a very good morning to all the participants on the call. I wish everyone a happy and prosperous Diwali. Talking about consolidated financial performance in Q2 FY 2027, revenue from operations stood at INR 1,196 crore, reflecting a year-on-year growth of 17.4%. Gross profits for the quarter amounted to INR 275.7 crore, with a gross margin of 23.1%. Employee expenses increased to INR 55 crore in Q2 FY 2027 from INR 49.9 crore in the corresponding quarter last year, registering a year-on-year increase of 10.1%, mainly due to people addition for OSAM as well as labor cost. Subsequently, the employee cost remained in line. Other expenses for the quarter stood at INR 156.6 crore, as against INR 139.3 crore in the corresponding quarter last year.
Although other expenses remained broadly stable as a percentage of revenue, the increase in absolute terms was mainly attributable to higher overhead costs per liter due to inflation and geopolitical situation. In addition, packaging material costs rose 41.6% year-on-year for the quarter, owing to macro factors and change in product mix. EBITDA for the quarter stood at INR 64.1 crore, translating into an EBITDA margin of 5.4%. Depreciation expense for Q2 FY 2027 increased to INR 23.6 crore compared to INR 20.6 crore in the corresponding quarter of the previous year. Other income for the quarter amounted to INR 10.9 crore. Net profit for the quarter stood at INR 36.6 crore, with a net profit margin of 3.1%. Now moving on to our H1 FY 2027 performance. Revenue from operations grew by 18.2% year-on-year to INR 2,394 crore compared to INR 2,025.7 crore in the corresponding period last year.
Gross profit stood at INR 554 crore with a gross profit margin of 23.1%. EBITDA stood at INR 129 crore, while profit after tax stood at INR 77.2 crore, translating into a PAT margin of 3.2%. In H1 FY 2027, we recorded a deferred tax charge of INR 5.77 crore, which includes INR 4.6 crore in CDDL, that is a first-time deferred tax liability recognition, and INR 1.17 crore in HR Food due to a tax rate change. During the period, we incurred capital expenditure of INR 66 crore, primarily towards our Maharashtra expansion project. As of September 2026, we maintained a healthy cash and bank balance of INR 659.4 crore, which is sufficient for our future CapEx requirement. In H1 FY 2027, we were able to build up inventory of INR 76 crore, which includes SMP and butter for our future requirement. As of September 2026, our inventory stood at INR 232 crore.
With this, we conclude the presentation and open the floor for further discussion.
Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to 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 Abhishek Mathur from Systematix. Please go ahead.
Hi, sir. Good morning, and thank you for the opportunity. Sir, I have noticed that our gross margin trend for the past three quarters has been quite firm. Gross margins have stayed in that range of 23% or so, despite the high raw material inflation that we have seen. In that context, the question was that, what is now our outlook on the milk procurement cost? What is the trend that we are seeing in October and for the next one to two months? With our gross margin maintenance background in mind, what would be the pricing approach here? Can we assume that we will take price hikes equivalent to the sequential increase in milk procurement costs in the near term? I just wanted some clarity on that.
Morning, Abhishek. Thank you very much for joining the call. Procurement, we assume, will remain at the same elevated levels, and we do not see the procurement prices dipping down in the coming quarters or even the next quarter. What has happened is we were waiting for other price increases to happen, for example, like the Karnataka state government announcement of an INR 8 price, which did happen on the ground. Therefore, we took our price increase call a little later in the second quarter, which is mostly in the September, which the effect of improvement is showing in the future quarters going forward. Subject to that, if there is even further price increases done by the cooperative after the price increase that we have taken, we will also increase our prices commensurately.
I think the next quarter that we are looking at the current price increase levels that we have done itself, we should come back to our 7.5%-8% kind of EBITDA levels. If the cooperatives take a significantly larger price increase as announced but not yet implemented, we will be able to take a further price increase to improve our profitability further. With this, I think we have put behind the bad quarters, and we are assuming our quarters going forward will be improved.
Got it, sir. Just a quick follow-up here, again on the milk procurement cost. We have seen a 5% sort of sequential inflation in the procurement cost in Q2. If I can just probe a bit here, in October, what is the sequential inflation that you are seeing now building? I just wanted to check that.
There's no We are not building inflation in procurement because we are assuming that this has reached its peak. There might be a slight difference of 20%, 30% depending on the locations of where we are procuring and the mix variation coming into place. But other than that, we don't see an immediate price increase happening further in the coming quarters in procurement.
Understood, sir. That's good to hear. Then, fair to assume that if the procurement cost stays where it is sequentially going forward, let's say for the next few months, we will not require to take any incremental pricing? Is that understanding correct?
If the status quo remains, yes, we won't take the price increase. Whatever we have taken in September, that implications will come through out for the full quarters. But if there is further increases done by the cooperatives as announced by them, we will also react accordingly and increase further prices of sales prices.
Very clear, sir. The 7%-8% guidance that you gave is for what period, sir?
For the next quarter that is coming in as the October, November, December quarter is the guidance that we are giving. I hope, unless there is some other major changes, that should continue for the future quarters also.
Very clear, sir. Secondly, just some bookkeeping questions, if you can disclose the overall realizations for the quarter, consol overall realization, consol VAP realization, and the standalone and Africa realizations.
The realizations we will give you including product, Murali will give you including the product and everything as consol and the breakup between Africa and India. Am I right in asking that that's what you wanted?
Yes, sir. The consol realizations, everything included. Yeah.
Yeah. Okay, the consol realized for the quarter is INR 65.06. Last year it is INR 62.53. That is the consol. For the India, it is INR 63.59, and last year, the same quarter, it is INR 63.07. Overseas, for the current quarter, INR 73.14. Last quarter, the same year, previous year, it is INR 60.11.
The difference in India quarter is because we had bulk ghee sale which was there, which was not there this quarter. That is the reason you will not find much of a difference in the India overall number.
HR Food, we are tracking separately. It is INR 67.05 and INR 63.36.
Right, sir. For the value-added products, the realization, sir, consol realization for value added?
Consult realization for the INR 66.46.
Great, sir. Finally, sir, the OSAM sales have not been disclosed. The VAP sales have been disclosed, but if you can help with the sales for the quarter for OSAM.
Yeah, so the sales growth for the quarter of OSAM has been around, I think, 1.43 lakh liters. We have not seen any significant increase in volume there. That is the reason is because even in Bihar, our procurement prices have gone up significantly. Clearly, we have passed it on. But to keep the margins, otherwise, if I increase my sales a lot more now, my margins will come under pressure. So we are holding back on that till we get our own procurement improvement happening there, and then we will again start pushing for the market. Right now, there, that is the reason we are maintaining our status quo. But I think in this quarter, again, with the festivities coming in where the east of India has a surge in products during the festivities, that will help us improve our margins and also our volumes.
We will take a call more appropriately to start pushing the market further once the procurement prices stabilize.
Sir, I meant the INR sales for OSAM, if you can give.
OSAM, 1.33 lakh is the LPD, and the total revenue for the quarter is INR 82.37 crore.
Great, sir. Thanks and all the best. That is it from me.
Thank you. The next question is from the line of Nikhil Upadhyay from SiMPL. Please go ahead.
Hello. Good morning. Am I audible?
Yes, Nikhil. Go ahead.
Yes, sir.
I have one question on the procurement prices. See, you mentioned in the call just to the previous participant that the procurement prices may not go up from where we are other than that 20%, 30%. But generally in Q4, we see when the season dries up and the supplies get difficult, the procurement prices do again see an inflationary pressure. Would that scenario be very different this year, or is it like a lot of it has already been front-loaded and you don't see that scenario playing out?
BVK, answer that question regarding the Q4.
See, this is front-loaded already in the first, second quarter. This is unusual, you know, earlier years, you know, normally, you know, quarter two, you know, prices used to come down quarter two and quarter three, and quarter four used to go up. This year, you know, see, quarter one and quarter two, already prices have gone up Q2 also substantially. We don't see any price hike. We don't see, as of now, Q3 and Q4, you know, coming quarters, you know, there is any price hike.
But sir, there are two ways to look at it then. One is the reason why Q1, Q2 prices have gone up because the availability has been constrained. Considering the kind of rainfalls and the environment we are seeing, won't it get further constrained in Q4, which generally is the pattern every year?
Yes, sir. It more or less will be. Because already, like you're saying, from a price point of view, it's built up. Also what's happening is, like we had earlier informed, our inventory levels are building up. Everybody now is able to get their little surpluses, and the inventories are also building up. So when I have enough of volume and the inventory buildup takes place, that is a sign that the volumes have come into place. So, the question of, I think, like we said earlier, the production is also changing, where we are not seeing significant drops like we used to see earlier in the Q4s. In fact, the milk volumes are maintaining a steady state. So that is the reason we think prices have already been front-loaded. My opinion, the farming variabilities are coming down.
Therefore, we will not see further increases, because there won't be a steep drop also.
Then the price increase, just last point here, then the price increase which we have seen in Q1 and Q2, is it more driven beyond the supply issues? Because what we understand theoretically is, like, the prices increase when the supplies dry up or the supply is constrained. But as you are saying, there is supply, people are building inventory, but still the pricing has gone up in Q1, Q2. Are there other factors than the pure demand-supply?
Yes, but there is demand-supply plays a role, but also the actual cost of the inputs also plays a role. There has been a significant cost increase even from the farmer level in terms of feed and fodder. If that does not happen and you don't give a remunerative price, which will not help him also, then we'll lose in the long run. It's not us, but the industry as a whole has also increased the prices, keeping into consideration the other input cost increase to the farmer side also.
Okay, fine. Lastly, on the VAP side, can you talk about how the business, other than curd, which were categories like paneer or categories which sell throughout the year, how is our performance improving on those, other than the seasonal categories?
Our categories in terms of paneer has improved significantly, for example, in terms of volume, and also our other products like flavored milk and others have also improved. For example, paneer has improved by 64% if I take it as a volume, although the volume is smaller. It is roughly, it is improved by 2.5 tons per day for us in terms of increase in volume. And if you take products like lassi, they have grown up to be almost double, almost 163%, again with the volume of, differences being around 15,000 liters or so. And ice cream has also grown as a volume for us.
All the other volumes have also considerably grown, but it is not showing as a significant uptake because in the previous year, we had taken our bulk sale of ghee into the VAP, and that was there as a large number. That is the reason why it is not showing a significant increase as overall VAP, but each product other than that has increased significantly.
Sure, I'll come back in the queue. Thanks.
Thank you. The next question is from the line of Hitaindra Pradhan from Maximal Capital. Please go ahead.
Hi, sir. I hope I am audible, and thanks for the opportunity. Just one question. If you can give us some color on the curd realizations. I mean, what kind of gross margin that we earn in curd product, and any price action that we have taken in the last few quarters. You can give us some YoY and QoQ.
Yeah. Murali will give you the specifics. We have taken some price increases in curd also. Go ahead, Murali.
The curd realization per liter, now we are at INR 59.15, and again, last year it was at INR 56.16. That is the realization. The profits are in the range of 12% now. Yeah. EBITDA only 12%.
So, EBITDA you are saying 12%?
EBITDA is at 12%. The gross margin is at 19% for the quarter, the curd.
Curd is, sir, like within our VAP portfolio, adjusting for the seasonality, it will be 60%-70% of our VAP, right?
Yes.
Okay.
Buttermilk and lassi will have a higher margins. Those are above 20%, between 20%-23% we have margins for the buttermilk and the lassi.
Understood, sir. Thank you.
Thank you. Your next question is from the line of Yash from Awriga Capital Advisors LLP. Please go ahead.
Hi, sir. Thank you for taking my question. Can you talk about the JV which you announced for selling high-quality B2B dairy ingredients? Will it be milk or more like cheese VAP, and how will it help your consumer-facing business?
Yash, this JV that we have done, basically Meadow is a U.K.-based entity which is of a similar size that we have, and we are just trying to explore the probability of how do we get into B2B ingredient space, not necessarily the B2C facing. As we will be overall expanding our volumes of milk significantly in the years to come, we assume that we will have a balancing factor with the B2B that we will be able to sell at a higher realization in terms of ingredients. It is just an exploratory JV that we are doing from both the sides.
This is a small venture where we are investing INR 1 crore, and for our 40%, and they will be investing remaining for the venture, where we will look at it in the long term as supply agreements versus them being our content or marketing, and we will see how do we take it forward. They are also the global ingredient suppliers for all the large entities. I think in the long run, we are just looking at it as seeing how these entities will be able to merge, to help each other in terms of expanding our horizons beyond just the milk and B2C milk, but also into the value-added ingredient space.
If I got it right, it will just be milk, or it will be value-added products like cheese and paneer as well for them, which will help your scale?
No, it is not going to be cheese and paneer, sir. It will be other things, like if you take it as, there is these mixes that they make in terms of what goes as inclusions into ice cream making. It goes as some kind of a sweetener, like for example, the caramels that you eat, how do we make those caramels that go into other products? It will not be a consumer-selling product. It will be ingredients that are used by the consumer-selling companies.
Okay. And sir, next question would be, is your Maharashtra plant online? Because I checked the images which you put in the presentation. It does not seem like it will be commissioning by end of FY 2027.
No, it will go ahead. March to April, the liquid milk operations will start, and by September, I think we will start our powdered operations.
Okay. Thank you. I will get back in the queue.
A reminder to all participants, you can press star and one to ask questions. The next question is from the line of Ojas Sawant from Oaklane Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. Sir, just continuing with the previous participant's question on the JV that we have recently signed. If I got correct, we are investing INR 1 crore for 40% is what you mentioned?
Correct. This is basically like we are doing it as an exploratory JV that both of us are going to look at it and see what ingredients should be created and how to take it forward in the years to come.
Understood, sir. When we talk about high-quality ingredients, what type of ingredients are these? Are we currently making these, or is it something like a skim milk powder, or how exactly if you can elaborate, what type of ingredients are there when we talk about high quality?
We will start with basic ingredients like you said, skim milk powder, but it will be only like low heat, high heat, where it will be specifically tailor-made for certain requirements or certain products that certain people need. Later, it does progress into other inclusions that come into the food industry per se. That is the reason it is a very small start that we are doing to do research of which ingredients, what is possible, what is not possible, and therefore we will take it forward there. Keeping that in view, we are just announcing it because we will be entering into the JV to start exploring the process going forward.
Clear, sir. A similar initiative that we have already taken is in the 2% stake that we have taken in Sids Farm. Sir, how has been the development there? How has been our learning there, and do we see like a potential increase in stake in the recent times in earmarking our entry into high-value-added products through Sids Farm?
I think it is very early for us. It has hardly been, I think, the first ink has dried on the agreement that we have signed. It is only a month ago, although we had earlier talked about it and the paperwork done. Like we said, it is a very small investment for us. We will keep looking at it and seeing where exactly what we are not. We will learn from them as to see where it is going. In the future, as things progress, we will have to take a call as it then happens.
Understood, sir. Sir, one last question on, if you can just give up what were our margins for the OSAM business for this quarter?
OSAM business in terms of for the quarter of second quarter has been, one minute, I will get you the exact number.
Sir, margins are for the quarter, EBITDA margins are 1% this year, this quarter. Last quarter, we had 2.67%. It was reduced due to the milk prices increasing. We are not very aggressively going, and we are more focusing on stabilizing the operation rather than focusing on the EBITDA. Once we stabilize, then we can able to increase the margins.
Understood, sir. If I got it correct, is it 7%-8% margins that we are expecting in second half, is what we mentioned, right, sir?
Overall, that is India, that what we are operating and what we are looking at those kinds of margins, not OSAM. Consolidated also, we will look at it to be maintaining at those levels.
Clear, sir. Clear, sir. That is it from my end. Thank you so much for your answers.
Thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, just few questions. One is on procurement volumes. Would it be possible for you to dissect it by state?
One minute, Ritesh. State by state in terms of the India side of procurement volumes, right? It is not OSAM.
Yes.
Yes, I will just give it to you. One minute.
Sir, the procurement volumes, AP we have done 4.76 lakh liters per day, and Karnataka it is 5.1 lakh liters per day, Maharashtra 2.99 lakh liters per day, Tamil Nadu 4.25 lakh liters per day, and Telangana 45,000 liters per day.
Correct. And sir, just a related question, what will be the volume weighted distance?
Volume, come again with the question.
Sir, volume weighted distance. So basically, when we procure the milk, what will be the weighted average distance, basically if we do some product on volume to distance?
From where, sir? From the chilling center to plant or farmer to chilling center?
Sir, both basically. Both included.
I think I do not have a specific number right now, sir. We will get it back to you later offline. Roughly, we look at procurement, which we have multiple operations. If it is a chilling center, we will have around 40-45 km kind of a radius. If it comes down to bulk cooler, the radiuses will come down, and village level chilling will be absolutely at the village level itself. From the chilling center/cooled milk to the plant, if you look at it will be anywhere between 300-400 km radius for the plants to be able to pick up the milk. The specifics, I think we will work out on it, we will get back to you, sir.
Sure. Sir, second is just wanted to understand on the comfort on procurement volumes given drought in a few states and given the El Niño impact, does it have yield on the cows with respect to how much milk do they give? How should we look at these two variables?
El Niño effect is more in Maharashtra compared to Karnataka, there is no much impact. Karnataka, we have a very good growth in procurement. Also AP also not very much impacted with the El Niño. A slight impact is there in Tamil Nadu and Maharashtra.
Okay. And sir, just last question. Are we looking at further cost inflation with respect to the feed that we sell, or I think we call it concentrate, right? On what we sell to the farmers?
Yes. The price increase will get inflation a little more going ahead because I think it is not only going to be for us, but for the industry as a whole, because of ethanol coming into play, compressed biogas coming into play. I think we have to wait and watch how the government policies will come and action because of the amount of the maize being the basic crop being used by poultry and dairy for their concentrate feed is also the one that is being fed into ethanol. We will have to take a call as and when it all happens.
Would it be possible for you to quantify INR per kg for Q1 and Q2?
Sure. So basically, there is an increase of INR 3.35 for the sales realization last year, quarter to this quarter, whereas the procurement price, the blended price was increased by INR 4.84, okay? But when you talk about the last quarter, it is INR 1.99 was increased, whereas the procurement cost was increased by INR 2.93.
Basically, the lag, once the procurement prices go up in raw materials, there is a lag before we pass it on to the farmer. But there also it is the same that we keep passing it on to the farmer.
Right. Just a follow-up just to understand, you indicated a lag from procurement to when we pass it on to the farmer. But again, when we look at it from the economics of the farmer, they also see certain cost escalation, and hence they would also demand a higher price. So when we earlier indicated that we do not see procurement prices to move up much, does it take into account this particular variable as well?
See, it is a minor variable if you look at it because it is a multiple factors of fodder also availability, feed availability, and the volume of milk that the farmer is producing per animal. Concentrate will form, let us say, 30%-40% or 50% of his overall cost that he feeds the concentrate to the cattle. And if it goes up by a rupee or rupee and a half, on a per liter basis, it does not show a significant variation unless it moves up by five or seven rupees per kg kind of an impact that you look at it. Because the rationing comes in that we use this concentrate only to balance the protein requirement of the animal, whereas the fiber and energy comes from the other sources. Part of the energy also comes from concentrates.
In the farmer, when we look at the overall requirement, the concentrate feed element does not play as significant a role as much as it is paid by fodder and productivity based on the climatic conditions.
Perfect. Sir, this is very useful. Thank you so much for the answers. All the very best.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Should you have follow-up questions, please rejoin the queue. The next question is from the line of Shirish Pardeshi from Motilal Oswal. Please go ahead.
Hi, Sunil and team. Thank you for the opportunity. Just quick question on OSAM. Can you share what are the things which we have solved and what are the things which is yet to solve before OSAM really takes off? Maybe some color of competition, how the competition is behaving, specifically in the area of OSAM geography?
I will answer your questions. First of all, OSAM we acquired a year back now, just one year we completed. Initially, we have done a lot of modifications in the plant. See, there was so many things, automatic CIP system, proper equipment, proper layout. All that, it took six to seven, eight months. Once we identified the shortcomings, then we bought out all the equipment and replaced and corrected. A lot of corrections have been done in the plant and in the operation side, number one. Number two, the procurement side also, now slowly we are going with Dodla model. There, see, it is an agent model. Total collection is an agent model. Where we have in Dodla is a direct farmer payment model. That, we have already done 25%-30% that model, and balance we are expecting by March.
At least 70%-80% of that procurement model also we will bring it to Dodla model. That is the major changes what we are bringing, number two. Number three, the market, the major market holder is by Sudha, both in Jharkhand as well as Bihar. Jharkhand, though they made a different name called Sudha, since, from Bihar, when they separated Jharkhand state. Sudha, still Sudha also is there in Jharkhand, and also they have created one more cooperative, the separate cooperative for Jharkhand, it is a Medha. Apart from that, ITC also is there since five to six years onwards. Recently, couple of years back, Amul also entered. There are also some one or two U.P. brands also have entered, Gyan Dairy, Namaste India. But, since, now slightly it is now coming in competition, compared to last five years.
Overall market is there, but still, there is a good scope for the VAP. Maybe it will take little time to catch that market.
That is helpful. I am just trying to compare because ITC has also been there, and Amul is now getting into. It is a little hard and sticky market to my understanding. Obviously the traditional players, and you have been dealing with the cooperatives across other states also, which are larger, for example, than DD and other players. I think, what I understand, you definitely have some understanding of this competition. But then what are the things which we can see actually a scale-up which can happen in this business? I suspect whether Sudha and Medha is giving you a kind of competition. There is a different league and price point. If you really need to develop a value-add portfolio, is the market is ripe or you will do the seeding and maybe over a period of time you can expect the bonus?
First of all, Sudha and Medha. Medha, of course, it is a very recent one, but Sudha and all, as usual, a very lazy cooperative, they are not very active. That is why, the other people are now occupying the market and they are taking the market share. Their payment cycles are not up to the mark. There are a lot of issues as far as Sudha is concerned. Almost 70% of the market share is Sudha, but Sudha is not very active. As usual, their payment running late by one or two months. There are a lot of market complaints. So many things are there. Definitely, we will have advantage. Especially, the Bihar market, the very good market actually compared with Jharkhand. There is a big scope.
Also, sir, it is going to be GDP driven. Bihar GDP was always lower. As the state is improving and the GDP improves, we will see that shift happening. That is why we always say that we see a significant uptake during festival for base products like sweets or paneer or the other value-added products is because of affordability. As the growth of Bihar and improvement of Bihar happens and affordability comes in, you will see a significant growth in the value-added profile because the consumption pattern there has a lot of the value added as a part of the daily diet. It is only affordability that is holding it back.
Sunil, you are bang on. I recently visited, and I saw that Bihar is really doing well. Follow to that is Jharkhand. I think it is a big market. But then, I mean, it is a right strategy, but I am saying, is execution needs to ramp up or really the market dynamics or product profile has to change for us?
Yes, we are looking at it and changing it.
Okay. Last question on the Africa business. This is related to more of CapEx side. I think in the past we said about INR 600 crore. Is there any change in CapEx which will happen for India and even Africa?
See, not much of change actually. In Africa, as we said, we acquired 70 acres of land, and we already started greenfield work. Our civil work already commenced a month back. We are targeting by FY 2028 beginning, running the operations. As far as Africa is, we have very good growth, and Kenya also is done very well. Very good growth market share we have taken from Kenya. As far as I see, even EBITDA level also is very good. As far as other CapEx in Maharashtra, what we are doing, there is not much of increased CapEx what we projected earlier.
Yeah. Basically what happens is INR 600 crore that you are asking as CapEx, we had earlier assumed Africa to be around INR 60 crore-INR 70 crore, I mean, Maharashtra to be INR 280 crore, and the acquisition of OSAM that we did net of cash of what was available in OSAM to be around INR 600 crore. I think that it might marginally go up by 5%-10% as the inflation takes into place and the overall project period, but nothing significant in terms of movement otherwise. Our major CapEx going forward will be completion of Maharashtra and Africa to be implemented.
Africa and feed also.
And feed we are looking at it now, as I mentioned as BVK, that in Maharashtra, once our ethanol plant comes to more of production and facility, we might consider looking at another feed operation to cater to the Maharashtra area rather than moving it all the way from Chittoor to Maharashtra. As is, I think we are slowly, our cattle feed is also come to 6,000-7,000 tons out of the installed capacity or utilization-able capacity of around 8,000-9,000 tons that we can do. We are coming closer to the full capacity utilization of our old feed plant. By the time these are done, we will get another feed plant also. That is not considered at the moment, which we might take a call three to six months later.
Thank you, and all the best, Sunil.
Thank you, Shirish.
Thank you. The next question is from the line of Vandit Dharamshi from Anantra Growth Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. Just one question. Dairy sector, for obvious reasons, has been impacted by weather-related challenges for all these years. The next two, three, five years, do you think, is there anything that industry can do differently to make sure that these weather-related challenges impact is slightly lesser than what they do today? Maybe some kind of sale development or inventory buildup, I don't know what, but do you think we are thinking in that perspective or is it possible?
Yes, sir. Basically, going forward, I do not think only us, but the whole industry per se, we will see that the country will move from the same trajectory like the rest of the world, which was that the dairy farming, which was backyard farming, which had more of the impact on weather or feed, is slowly moving to organized. What I mean by that, it was backyard farming of one, two animals, and if you look at our own history of those days, the average being 2 liters per animal kind, it is now moved to 8-10 liters per animal average lactation period.
I think now we are seeing some states taking the lead forward, like Punjab or Gujarat or Maharashtra, where the farmers are moving away from the backyard farming and bringing it to a per acre mainstream farming, where it will become more in terms of productivity and efficiency. Once that comes into place, you will find that because the farmers have more control in terms of, "Must have a fan to cool down the animal if the temperatures go up," stocking of feed and fodder in the form of silage or other practices, we will be able to move forward. I think already we are seeing the impact of artificial insemination coming into play, where sexed semen plays the role of having only more female animals than having male animals, and also improving of the productivity of the breed.
All the companies are also along the way taking their own respective path in trying to see how best we can associate and help the farmers grow. Some companies are creating their own breeding. We, for example, conduct common health camps, education of farmers, and trying to get more farmers to become more in terms of an organized structure. With this going, I think the signs are showing, as you can already see, that the fluctuations in volume, earlier when it used to be in buffalo milk, it used to be around 50%-60%. Now that has dropped to 25%-30%, and cow has hardly come to a 10% variation in terms of volume. If these continue, that means it is showing signs of the farming industry itself becoming more organized rather than being an organized backyard farming.
Understood. Okay, sir. Thank you so much.
Thank you. The next question is from the line of Nishita from Sapphire Capital. Please go ahead.
Yes, hello. Am I audible?
Yes, Nishita, go ahead.
Yeah. I just wanted to understand again on our EBITDA margins. You mentioned that our OSAM margins have fallen this quarter, and you also mentioned that consolidated, we can still do around 7.5%-8% of EBITDA margins for H2 FY 2027. I just wanted to understand how are we going to achieve that margin because since we are not going to focus on EBITDA margins in OSAM, isn't the margin going to still be under pressure only because of OSAM?
Yeah. See, originally what we projected OSAM is only 4%-5% EBITDA margin only. See, the main margin we were expecting only from the main company, from Dodla only. Already in third quarter we are seeing the change. Definitely we will see even OSAM. First and second quarter also not performed as of expectation level. Even OSAM also we are seeing that third and fourth quarter, they also do around 4%-5% EBITDA. Overall EBITDA of Dodla will be around 7.5%-8% coming quarters.
I will also add here, Nishita, the basic thing is when you look at OSAM can be a revenue of INR 250 crore or INR 300 crore. The 4% on INR 300 crore is around INR 12 crore. Even if we do 2% or 3%, we will make up the absolute difference of OSAM pulling down the overall EBITDA is very small in the absolute number of not INR 3 crore, INR 4 crore difference only. Whereas our, the India side of the operation is substantially larger. Maybe we will add another INR 1,000 crore for the next half year. India will be adding more than INR 1,300 crore-INR 1,400 crore of revenue. That is where we are seeing the improvement coming, and therefore because of the price increase, which will therefore bring it to 7.5%. OSAM alone won't drag it down much.
It is the overall India improvement that will take us to be at a higher level.
Okay. We can expect India revenue to be around INR 1,300 crore, INR 1,400 crore for H2 FY 2027. Is that right?
Basically, current year we have come around INR 900 crore-INR 1,000 crore. Maybe depending on seasonality of summers coming earlier or later, we can be between INR 1,100 crore to INR 1,200 crore, anywhere in that range we can end up.
That we are talking about is our India operation. Overall operations is there around INR 1,200 crore.
We will again assume the doubling of that.
Other than India total operation, we are now including Africa, OSAM, and feed put together, it is roughly about INR 500 crore half yearly. INR 333 crore operation business, Africa business, INR 173 crore from OSAM, and INR 100 crore plus from our feed. It is coming close to INR 600 crore. Out of INR 2,391 crore, close to INR 2,400 crore, minus INR 600 crore is around INR 1,800 crore we have done only India Dodla. In coming quarter also, we are going to do a similar number.
Okay. Understood. That is it for me. Thank you so much.
The next question is from the line of Siddharth from CWC. Please go ahead.
Hi, thanks for the opportunity. Few questions. Did the buttermilk, lassi, and paneer volume increase come with similar gross margins as earlier? I mean, were you able to pass on the price increase, the cost increase to consumers, or is there impact there too?
No, we have passed on the price increase there to the customers also, sir. Same manner. It is only, I would say, the timing question that is there. Maybe we pass on one month later from where the procurement increases, but we have passed on the prices there too.
Okay. The impact really comes in terms of not being able to fully pass on only in milk. Milk products you are able to pass on the cost increase to customers. Is that a fair way of understanding?
Also certain amount of it we do not pass on on curd also. We wait for some time to pass on. It is basically the question of the time lag. When the prices increase, we pass on much later in terms of a month or two because of again waiting to see how the other prices will react. Waiting to see when they stabilize for us to pass on is where the delay happens in terms of profitability getting impacted. For example, when the procurement prices went up in April and May, the impact of that increase is only coming in terms of June is when we pass on. Similarly, when it happened in the second quarter, we were anticipating procurement to come down and it didn't come down. Our effective price increases happened in September.
We got into a little bit of that first quarter, second quarter impact of three, four months, which is showing the overall profitability being lower. But once we have passed it on, like we were saying, the coming quarters, you will see the improvement in profitability going back to normal.
Got it. But outside of that lag, is it fair to understand that structurally, you're able to pass on the cost increase for milk products, but for milk and curd, you may not always be able to pass on the cost increase completely to the customer?
We will not pass on immediately, but over a period of time, it will be passed on to the customer. Instantly, we will not pass it on. We will wait and see because if there is a correction that we were happening, as if the procurement prices come down, then we do not want to bring it down. So we wait for a while and then do. But average, it will be passed on.
Got it. What are the trend that you are seeing in the procurement challenge between cow and buffalo milk supply, especially in Maharashtra and AP, which are decent buffaloes areas? Are you seeing buffalo milk being a bigger challenge or cow, or is it both?
See, overall, buffalo milk is year-on-year, it is going down because there is a big demand for the buffalo meat. Also, see, it is not viable for the farmer to raise the buffalo. So, because there is a huge variation between flush season to summer season. So, because of that variation, so farmer is preferring only a cow. That is why year-on-year, cow milk, entire India, cow milk production is going up. Even if it is in Andhra Pradesh also, earlier, predominantly in a coastal area, it is a buffalo milk. Even in Maharashtra also, some portion of buffalo milk. But buffalo milk slowly, see, year-on-year, diminishing. Cow milk ratio only is going up.
Sure. But this year, did you see buffalo milk fall more sharply than cow milk? Because I will tell you where I am coming from, right? We have seen fat shortages in the market at a different level, and that is where the-
I'm sorry to interrupt you, sir. If you have follow-up questions, please rejoin the queue.
Sure. It's just a clarification on this, but happy to rejoin the queue.
Siddharth, you can also reach out to me or anybody directly, Siddharth. We'll give you the answer. You can get the number from SGA and reach out.
Will do. Thank you.
Thank you. The next question is from the line of Monish Ghodke from HDFC Mutual Fund. Please go ahead.
Hello. Thank you for the opportunity. So this INR 327 crore of VAP sales we had, what is the split between various categories?
One minute, sir.
The revenue of INR 327 crore, sir, basically it's a 580.
Which quarter are you talking about, sir? You are talking about the quarter of the-
INR 327 you have mentioned, no? That is only Dodla Dairy everywhere.
India sales, sir?
Only India sales, sir. That is basically the curd, yogurt, lassi, and buttermilk, all we classify as a curd product. This is around INR 151 crore, and the ice cream is INR 11 crore. Flavored milk is INR 13 crore, paneer is INR 21 crore, sweets is INR 6.6 crore, and ghee and butter is around INR 22.7 crore. That totals to INR 327 crore.
And sir, the share of VAP will, by and large, will remain the same at like around 30% on medium-term basis?
So normally, we keep saying that we will grow by 1%, 2%, sir, because it depends also on which one you look. For example, it's a difficult Revenue will grow up by 2%, 3%, because, for example, if I sell more of paneer, it's 6 liters being sold in the form of 1 kg. So from a revenue percent, it will be a little higher, maybe 2%, 3% in terms of revenue. But from a volume perspective, it cannot be apple to apple because some of them are in liters, some of them are in kgs or so on. If you add ghee to it will go substantially larger, and it can reach up to 40%.
Actually, see, we have grown in VAP last compared to last year, this year by 1.5%. But last year, there was some ghee portion. So this year, the ghee portion is not there. That's why it appears that, so the VAP, there's not much of variation. But actually, VAP, we have grown. VAP, including buttermilk, curd, everything, we have grown.
And sir, last question. This milk procurement price, can we safely say that this INR 62, INR 63 a liter is now a top, and going forward, the increase should not be there? I mean, that is one part, and another part is, how do you see the El Niño impact on milk availability?
Yeah. See, now, because in the first and second quarter itself, they have loaded enough in the procurement. We are seeing the availability of milk also now. Last one month, we have seen some rains in the southern part coastal area, and also availability also has been improved. We are hoping that this third and fourth quarter, there won't be much crisis in the procurement side. It may be, it will stand still.
Okay. Okay, sir. Thank you.
Thank you.
Thank you. That was the last question for today. I now hand the conference over to the management for closing remarks.
One minute, sir. I thank everybody for joining our conference, and we are looking forward to meeting you guys up next quarter. Thank you very much, everyone, for joining our conference call.
Thank you. On behalf of Dodla Dairy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.