Q2 25/26

Oct 16, 2025

Summary

Q2 revenue rose 9% and PAT 5%, while EBITDA margin fell on higher milk costs and severe weather. Management expects a normal flush season, easing costs and stronger VAP growth to support recovery; ice cream capacity expansion is on track.

Ladies and gentlemen, good day and welcome to Heritage Foods Limited Q2 FY 2026 Earnings Conference Call. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance in 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 over to Ms. Garima Singla. Thank you, and over to you, Ms. Singla. Thank you. Good morning, everyone. I am Garima Singla, and it is my pleasure to welcome you on behalf of Heritage Foods Limited. Thank you for joining us today for quarter two financial year 2026 earnings call. This call is being hosted by GoIndia Advisors. Please note that today's discussion may include certain forward-looking statements, therefore, they must be viewed in conjunction with the risks that the company faces. Today on the call, we are joined by Ms. Brahmani Nara, Executive Director, Dr. Sambasiva Rao, Whole-time Director, Mr. Srideep Kesavan, CEO, Mr. A. Prabhakara Naidu, CFO, Mr. J. Samba Murthy, COO, and Mr. Umakanta Barik, CS and Compliance Officer. I now invite Dr. Rao to present the company's business outlook and performance, after which we will open the floor for Q&A. Thank you, and over to you, sir. Good morning, and a warm welcome to all of you. I would like to begin this call by extending our heartfelt greetings to all of you on the occasion of Diwali, a festival that celebrates light, renewal, and hope. May the season bring prosperity and positivity to all our shareholders, our farmer families, employees, partners, and all shareholders alike. Quarter two of this financial year was among the toughest quarters in the recent times, marked by an extended and intensive monsoon, a lean milk season, and an intra-year butter shortage. Yet, I am proud to say that Heritage Foods once again demonstrated its ability to navigate multiple headwinds with composure and strategic agility. Despite these challenges, our business model remained resilient and delivered a stable and credible performance. Through agile planning, prudent cost management, and a sharp focus on value creation, we continue to deliver growth. Heritage Foods reported consolidated revenue of INR 11,125 million, up 9% year-on-year, and this is our second consecutive quarter above INR 11 billion revenue. This top-line growth was underpinned by strong consumer traction across key categories, an expanding retail footprint, and a strategic shift toward higher value products. Our value-added products portfolio remained the cornerstone of this growth, with revenues at INR 4,132 million, up 18% year-on-year, contributing nearly 38% of total sales. Categories such as curd, paneer, drinkables, and ice cream registered double-digit growth, supported by improved distribution and new product launches. Strategic moderation of low-margin B2B fat sales and strong B2C expansion further enhanced the quality of our sales mix. On profitability, EBITDA stood at INR 772 million, with a 6.9% margin, while PAT was INR 510 million, up 5% year-on-year. We acknowledge that EBITDA margins were lower by 122 basis points year-on-year, primarily due to a 6.3% increase in milk procurement costs versus a 4.5% rise in realizations. Pricing actions helped absorb much of the inflation, but the mismatch was temporary due to delayed pass-through during the lean season. Importantly, margins improved 44 basis points sequentially, indicating that normalization has already begun. Excluding the INR 93.6 million GST refund, normalized EBITDA margins stood at around 6.1%, which we view as a sustainable base that will strengthen further as milk costs soften and volumes rise in the second half. The structural levers are product mix improvement, procurement optimization, and operational efficiencies are already visible. Operationally, milk procurement averaged 16.1 lakh liters per day, down marginally 2% year-on-year with higher procurement costs. To ensure uninterrupted supply, we continue to support our farmer network through timely payments and feed support. This approach preserves long-term loyalty and strengthens milk security ahead of the flush season. At the same time, milk sales grew 1.1% year-on-year to 12.1 lakh liters per day, and realizations improved to INR 57 per liter, reflecting pricing discipline and sustained consumer trust. Our procurement efficiency programs, including route optimization, chilling infrastructure upgrades, and digital tracking, are helping contain logistics and handling costs despite volume fluctuations. Within the value-added product segment, the margin profile remains healthy. Some new and scaling categories such as yogurt, drinkables, ghee, are currently in the investment phase. While mature categories like curd, paneer, and ice cream continue to deliver profitability. As emerging segments scale up, blended VAP margins will expand further. The greenfield ice cream facility, which remains on track for commissioning by end of this financial year, will materially enhance manufacturing efficiency, logistics cost per liter, and our play in high growth, high margin frozen desserts. Simultaneously, the Heritage Novandie Foods operational level integration continues to gain traction, with yogurt now reaching tier 2 cities and new SKUs expanding our health-oriented range. Our wholly owned subsidiary, Heritage Nutrivet Limited, delivered another strong quarter with revenue of INR 581 million, a 34% increase year on year, and PBT of INR 54 million, an 80% increase year on year. This growth is sustainable, backed by higher feed adoption and efficiency improvements. Nutrivet's performance not only strengthens standalone profitability but also enhances cost efficiency at the dairy level through improved yields and milk quality. The recent GST rate rationalization created an opportunity to sharpen competitiveness and helps conversion from unorganized sector faster. While it led to temporary pricing adjustments, we expect stronger volumes and market share gains to more than offset the short-term impact. Encouraging traction from retail and digital channels supports our confidence in the growth trajectory for the coming quarters. Looking ahead, we expect margins to normalize as milk costs ease, supply stabilizes, and premium categories gain traction. Our focus remains on balanced margin management through calibrated pricing, mix optimization, and tight cost discipline. As we enter the festive and flush season, the environment is improving. Milk availability is easing, consumer sentiment is positive, and GST-led competitiveness will drive broader market expansion. The first half of FY 2026 will be remembered as a period of resilience, recovery and renewal, one where we faced inflation and weather disruptions head on, yet remained firmly anchored to our purpose of building a sustainable, value-driven enterprise. Our focus continues to be guided by our Vision 2030 pillars, premiumization, digitalization, sustainability, and farmer-first governance. I am happy to share, Heritage has been recognized as the best workplace in FMCG 2025 by the Great Place to Work Institute. A heartfelt thanks to you, to our farmers, employees, partners, for your continued trust and confidence. Every challenging year makes Heritage stronger, more agile, and better positioned to capture emerging opportunities. With this, I now open the floor for interaction. Thank you. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. 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 comes from the line of Sameer Gupta with India Infoline. Please go ahead. Hi, good morning, and thanks for taking my question, sir. Firstly, on value-added dairy, I understand that there were weather vagaries this quarter, but even if I look at a few more quarter history, value-added dairy as a segment, excluding fat, is averaging around 16%-17% kind of a growth. Our expectations generally from this segment is that given the opportunity and given its size today, 20% plus kind of a growth is something that we all expect. So in your assessment, is this largely a weather-related issue, or do you feel that now the base has caught up and growing at 20% plus on that kind of a base has its own challenges? But still the effort will be towards that side, but it is still a challenging proposition. Your thoughts, sir. This is Srideep here. Good morning, and thank you, Sameer. This quarter, our performance was about 15%, and this performance is at least 5 percentage below our own internal expectations. That is all I can say. Our internal expectation and our internal targets are at least 5 or 6 percentage higher than what we are delivering now. The prime reason, there is only one reason that I can attribute this to, which is the weather. Because we look at the numbers on an everyday basis, and during these 92 days of quarter 2, there were days when the weather was good, and we would see significant uptick in volumes. Please understand, in value-added products, apart from paneer, all the other products have some dependence on weather, whether it is curd or our entire range of drinkables, which is buttermilk and milkshakes and flavored milk, et cetera, ice creams. These all have dependency on weather. Except for sweets and paneer, every other category in value-added has some dependency. So at this point in time, we cannot attribute this gap versus expectation to delivery to anything else. Got it, sir. This is very clear, and thanks for taking this question. Second question, sir, can you just elaborate the reasons for the exceptionally lean milk season and the entire butter shortage. Following on to that, as we enter the flush season, buffalo flush is about to begin. So are there indications of a normal flush as on the information available today, or any deviations from normalcy that you're observing till now? Yeah. Sameer Gupta, Srideep here again. Yes, at this point in time, usually Q3 is usually good in terms of milk availability because of with the onset of flush post-Diwali. This time around, Diwali is earlier, so we expect flush season also to be advanced from that point of view. We do not see any reason to have any worry at this point in time. We don't see any structural problem. We are hoping that the flush season will be normal as it always is, and the prices should ease. And the reasons for the lean milk season and the entire butter shortage, sir? There are so many factors, actually. During quarter 1, the global GDT prices were strong, and we saw a lot of butter exports that happened out of the country. That must be one reason which actually created a little bit of a commodity shortage. The fat prices across the country had gone up during that quarter. That's an indication of that, right? Butter prices actually went up quite significantly in quarter 1. Whenever such a thing happens, usually the demand of free flow of milk increases, and it puts stress on prices. It's very simply put, it is more a supply-demand, demand being higher than supply kind of scenario on the commodity side. Secondly, the monsoon was quite erratic this year in the regions where we operate. We saw up to 29% excess rainfall. A good amount of rain is good because you have excellent fodder availability, and water availability improves and the animal production stays good. But excess rainfall is not good because excess rainfall affects production, excess rainfall affects transport, excess rainfall affects collection of milk as well. This was the second factor which impacted the milk situation. A combination of multiple factors is what resulted in shortages of milk and prices going up. Even then, what we should look at, Sameer, is that if we had not been agile in the way we managed the situation, it would have been even worse. I think credit is due to our procurement team, which in a very agile fashion because of the advantage that we have of operating in multiple regions, we were able to balance from multiple regions. We were able to grow in regions which had decent availability of milk to manage the pricing, et cetera. Got it, sir. Just the last question, if I may squeeze in. More of a bookkeeping question. If I can have the bulk fat absolute sales and ice cream sales this quarter. Good morning, Sameer. This is Prabhakara Naidu, CFO. Current quarter bulk fat sale is negligible, INR 3.67 crores only. Corresponding quarter, INR 26.34 crores. Last year. Last year. Got it. And the ice cream sales, sir, this quarter? While we get to the ice cream sale, it's a point to note that if I just look at, let's say, B2B business, which is excluding bulk fats. Excluding bulk fats, the turnover growth is actually much better at 10.5%. In fact, actually 11%. 11% is the growth if I exclude bulk fats. So ice cream sales, INR 19.46 crores. Got it, sir. Thank you. I will come back in the queue for any follow-ups. Thanks. Thank you. So Thank you. About 20% growth in ice cream. Thank you. Next question comes from the line of Abhishek Mathur with Systematix. Please go ahead. Yeah. Hi, Srideep Sir and team. Thank you for the opportunity. Just wanted to check, I think the mid to high teens growth in VAP that we have delivered despite adverse seasonality, erratic rains, I think is quite a commendable performance. The base was also not weak for us, so quite a good performance. The question here is that, in your understanding, since you are the first dairy company to report, is this sort of VAP growth the trend that we should expect for the broader industry to deliver as well also? Or are there factors specific to Heritage that are at play here behind these numbers? Yeah. Abhishek, this is Srideep here. First of all, thank you for your wishes. See, we should look at how the performance has been compared to the previous quarter, right? If you look at the weather, the weather is actually worse in Q2 compared to Q1. In terms of number of days of rain, Q2 had more number of days of excess rainfall compared to Q1. In terms of average temperature drop below last 10 years, Q2 was worse off compared to Q1. So in all aspects, actually, the impact of weather we agree, and which is why in the opening remarks, our director said that this probably was the toughest quarter that we had seen in recent times. The point to note actually, is that we have been able to pull up our performance despite these things. Right? If you compare each and every category that we operate in value-added products, we have improved the growth rate compared to the previous quarter. So for example, while curd, for example, in the first quarter, we grew at 4% in terms of volumes. Here I'm talking only volumes, right? With a worse weather in Q2, we grew at 10.1%. Similarly, in the first quarter, I don't know, Abhishek, if you were in the call or not, one of the things that we reported was the drinkables portfolio actually de-grew for us in quarter one. With worse weather in Q2, we actually grew drinkables portfolio at 12%. Ice creams, we grew at about 5% in the first quarter, whereas ice creams with a worse weather grew at 17% in the second quarter. With a worse weather, we were able to perform better, and this is attributable to the inputs and the work that we have done in building consumer traction and customer traction. On the customer traction side, we had expanded 60 odd distribution points in quarter 2 over quarter 1, which gave us roughly, you can say, what? 6,000 retail outlets reached in addition over and above what we had in Q1. This is just a Q over Q comparison, right? Similarly, on the marketing side, I am sure that you must have seen our investor presentation, that we doubled down on marketing and consumer outreach. We did several interventions. For example, our milk campaign was a very big success story. After spending close to what? 5,000 GRP on television, we went on digital, which garnered 47 million views. These kind of numbers are really incredible. In the investor presentation we had shared with you that the awareness levels across our markets had gone up tremendously. For example, in Bangalore, our awareness level went up by 12%. Trials went up by 22%. Chennai, 25% trial rate improved. Hyderabad, 30% trial rates improved. So trials is directly proportionate to consumers buying our product, right? So significant numbers we were able to clock across the market as far as consumer traction is concerned. In terms of new products, we launched several new products. In the milk itself, we launched a successful variant called as Sampurna Cow Milk. In yogurts is something that we launched towards the end of last quarter. But in this quarter, we were able to successfully scale it up across the country. So now our yogurts, Livo High Protein Yogurt is available across all metro cities in India. This was achieved in such a short time, right? So we have done so many things in this quarter to turn around the performance and deliver the results that you have seen. I will not be able to comment about the industry, but we are pretty confident that we are getting more control on internal matters and less and less dependent on external vagaries. Right. Sir, thank you for the detailed reply. Just two quick small questions I have. Firstly, fair to assume that our milk procurement which is slightly down year-over-year, maybe because of the lean season, should again pick up with us approaching the flush season and we would again look to build up inventory as we approach this quarter. Secondly, on the ice cream business, do you think, Sridhar Sir, that the traditional seasonality that we have come to expect from the ice cream segment in terms of the summer or winter, that seasonality is now starting to dilute a little bit and ice cream is becoming more of an all year round consumption story in your view? That is it from me. Yeah. Thanks, Abhishek. I will answer the second question first. Let us hope that we all see ice creams in India has got tremendous headroom. Tremendous. I cannot even tell you how much. In India, the per capita consumption is one tenth of what is in the Western world. Even if I compare with China, we will be at 25% in terms of per capita consumption. The recent GST relief, which changed the GST rate from 18% to 5%, that is a 13 percentage drop in GST. Significant for a category like ice cream. We are expecting that more and more households will have ice cream in their fridge instead of, let us say, a soft drink, right? If people want to indulge, let them indulge in a healthy product rather than an unhealthy product. We are hoping all these tailwinds will help reduce the seasonality and will make ice creams a winter product. So may your wish come true. As far as the milk availability is concerned, Abhishek, I already spoke about that and I think Directors have read out in his opening remarks that usually quarter 3 is when we see flush. Usually we see milk volumes coming back. You should expect about at least 1 or 2 lakh liters procurement will increase. This is also the time when we store up commodities for the next lean season. Everything looks okay at this point in time. Great, sir. Thank you for the responses and all the best going forward. Thanks. Thank you. Next question comes from the line of Pradyumna Choudhury with JM Financial Family Office. Please go ahead. Yeah, hi. Thank you for the opportunity. A couple of questions. One is on the milk volume growth. That has been only 1% in Q2. What is the reason for this, sir? Why has it really slowed down so badly? Last three quarters, the volume growth on the milk sales has been 3%, 3%, and now it is 1%. Yeah. This is Srideep. Milk growth has been a bit subdued for our liking. Usually, we see that whenever we take up prices, it has some impact in terms of volumes. Consumption drops a little bit. It is something that we have seen in the past as well. In this quarter, we have taken up prices of milk by about 4.5%. We had no goal but to do that because raw milk prices had increased by about 6.3%. Although we were not able to pass on the full cost, 4.5% out of that raw milk price increase was passed on to our consumer, and that impacted the volumes. Understood. Second, on the procurement side, the procurement actually declined by 2% in this quarter. What could be the reason for this, sir? Would it be attributable to the weather, the milk demand itself, or was there any other reasoning for the decline in procurement? I thought I answered that in great detail. Just to summarize, multiple factors impacted. One is on the commodity side, across we felt a shortage of butter and that put pressure on milk demand. Secondly, the weather. There was too much of excess rainfall, which affected production and transport of milk. I had addressed this question earlier. All right. Understood. That's what I just wanted to confirm, whether it was weather-related or something else is there. Just one more question. On the OPEX side, if I look at both your employee expense as well as other expenses, that's been growing really fast. It's been growing at mid-teen or even higher levels for the last seven quarters. Even if you look at the current quarter numbers, our gross margin actually has been slightly up year-over-year. The reason for that EBITDA margin decline is due to the growth in OPEX. What's really happening here? What are the things due to which the OPEX is really growing fast, and when do we expect it to stabilize eventually? The related question will be on the normalization that you mentioned that we are already seeing signs of normalization. What really is making us believe in terms of are we seeing the procurement prices already falling? Or is there some other reason for us to believe that normalization is underway? Marketing spend side. Yeah. A few cost lines, Srideep. A few cost lines are higher. For example, you spoke about employee expenses. Employee expenses are higher compared to same period last year by 13.8%. Excuse me. Similarly, like you rightly pointed out, operating costs are also higher compared to last year, which is related to, again, the same thing. Marketing costs are also higher this year compared to last year because, let me put it like this. We are a tad below our own expectation. Not a tad below, I think, like I mentioned, about 4%-5% below expected growth trends that we have been expecting in this particular period. Finally, impacted because of weather. When you build capacities, you're building capacities hoping that these numbers are going to happen, right? From that point of view, we are probably performing a tad below that number. Which means that you have already invested to deliver the growth, and for that growth is below what we had invested for. The numbers currently is all a reflection of that. Assume the growth is 5% higher than what we have delivered. All these numbers would look very different to you, right? You will probably say that, okay, the employee cost has fallen, operating cost has declined, et cetera. The gap is primarily driven only because the top line is not, or rather actually the volume growth is not as much as we would have wanted it to be or as much we would have planned it for. I believe it is a matter of time. Like I mentioned and described before, despite a very bad quarter in terms of weather and all of that, we were still able to pull up the numbers, which gives me hope that if we actually get a little bit of normal weather, we are not asking for, we are not expecting any tailwind and all of that. But if things normalize, our performance will be much, much better. Because our business is so much volume dependent, all these numbers would look very, very different. No, I am telling you where I am coming from. Yeah, partly it has been answered. Just to follow up where I am coming from. Last 2, 3 years, most of our expenses below the gross margins have been growing upwards of 15%-20% YoY. At such rate of growth of these expenses, there is no scope for any operating leverage to play out really. How do we really keep these expenses in check, right? Be it something like employee expense, be it freight cost, be it selling and distribution, be it other expenses. All these have been growing very fast, which is leading to higher than already flowing into higher margins. I do not know. We will have to define very fast. In my opinion, employee cost has been growing at 13%-14%. I agree with you that we also would like that to be in single digits, right? But the fact is we are expanding and we are adding more people. We are investing in facilities for manufacturing, et cetera. This is a people-intensive operation. This is a people-intensive business. Which means that the headcount will increase and hence the cost will increase. Now, the reason why I said operating leverage, we are operating below our expectation as far as the operating leverage is concerned or actually in terms of capacity utilization is concerned, is because we know which are the investments that we have made or which are the markets we have opened and how much we are expecting and how much we are doing. I know for a fact that these numbers will look different in a normalized scenario. Now, coming to initiatives we are taking for reducing the operating. There are many, as in we have been talking about this for the last several years, and all of those initiatives are in full play. Starting with, let's say, milk procurement itself. A few years ago, maybe three years ago, we used to have 214 chilling centers and we were procuring about 13 lakh liters of milk. Today, we are procuring 17 lakh liters of milk with just 186 chilling centers. Which means actually, if you look at it, the throughput per chilling center has almost doubled. Which means actually my operating cost per chilling center would have, if not half, must have significantly reduced. Of course, in this period, people's salaries and other costs, electricity and everything has gone up. But had I not done this, my operating cost would have completely gone out of pa. Secondly, we used to have close to 1,300 vehicles to pick up the 13 lakh liters of milk. Today, we actually have lesser number of vehicles, about 1,200 odd vehicles, which is procuring the higher volume that I'm talking about. Because we are sharply focused on a metric called as the milk collected per kilometer, and the milk collected per kilometer is increasing, which means actually the distance that we need to travel to get the milk is coming down, which improves the freshness of the milk, as well as reduce the cost of pickup. Same is the case in terms of operations also, conversion of milk. For example, the number of liters produced per person has gone up by almost 10% across our factories. Electricity usage has come down. One metric that we track is liters of milk produced per kilowatt hour or unit of energy. That has gone up tremendously. While we are improving all these parameters, what is also to be noted is that we are also investing in CapEx in terms of increasing capacity. For example, we had invested close to 150 tons of additional manufacturing capacity for curd, for example. We increased our paneer capacity, we increased many of our value-added product capacity. It's a bit of improved efficiency in our existing, but additional new facilities coming up and the volumes not catching up to the expectation. It's simply a math which needs to work out, which I'm very pretty sure that in a normalized scenario it will. Do we have any margin targets for maybe FY 2027? FY 2026 can be a washout year, but FY 2027, do we have certain margin improvement targets in our internal calculation? My request is you look at the progression over the last three or four years, and my request to our GoIndia Advisors to send across a comparison of how it has progressed over the last three or four years for you to better appreciate and understand the long-term trend. The reason why I am saying is that our industry is volatile. It has a large dependency on weather. So some of these factors will play. We have seen in the past that every third or fourth year, the milk prices really go up, and then it comes down. You must have seen that in FY 2022, 2023. It was a peak inflationary period where milk prices went up so high, and then it came crashing down, and then we had a good two years. Now this is another year where it is seen to be going up. This volatility is something that we will not be able to do anything much because it is a very large industry. India is the largest producer of milk and despite our size, we have only a very small percentage of contribution. As an individual player, there is very little we can do in terms of managing the industry volatility. That said, we are hoping that, like I mentioned before, law of averages catch up and next year prices soften. Usually it happens after a peak in inflationary year, and it is good for all of us. Thank you. Mr. Choudhury, please rejoin the queue for more questions. A reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Tisha Giria with Ashika Institutional Desk. Please go ahead. Hi, sir. My first question is regarding the ice cream CapEx. Is there any recent update on it, and when do we actually see the factories being commissioning? Now that because of the seasonal impact, I am presuming that the ice cream sales would not have had happened as much as you had expected. So if you have your own capacity, right now it is more of on an outsourced manufacturing. So how do you plan on kind of utilizing it to its max, or what is your initial utilization targets, if you have anything in mind? Sure. I will take this question. This is Brahmani, Executive Director. Actually, in fact, we are manufacturing our ice creams internally only. We have our own processing facility with a capacity of 25,000 liters per day, which is in fact maxed out in peak summer season in the 3 months of Q4. Which is why we had taken the board approval to invest into a larger automated ice cream facility, not just to produce our existing range of SKUs, but also to widen our portfolio with exciting new SKUs, which is the need of the market or what consumers are asking for. Having said that, in terms of capacities, we are commissioning our ice cream plant as mentioned by whole-time director, sir, that it will be commissioned by the end of the financial year, just in time for the summer season. We intend to use a fair amount of the budgeted capacity for the next financial year in Q1 of the coming financial year. Uh- That is Deepak. Yeah. My question regarding the outsourced manufacturing was basically because I remember last time when I met you during the plant visit, we had this discussion that for this summer season, you had already onboarded outsourced manufacturers to meet the excess demand. But because of the weather-related impact, I am assuming that demand would have not been- Correct generated. Yeah. We had. I think that sometimes we said- Yeah. We did outsource part of our manufacturing, expecting a normal season. But had the season been normal, that would have been required. But since the season was different, we could have done it internally. However, given the current growth rate of 15%, 16%, and that is expected to grow during the later quarters, we will definitely need this higher capacity that we are investing into. All right. Okay. If I could just add, the growth of ice cream in Q2 was 16.5%. Volume growth. It is only volume growth because revenue growth is about 20%. Okay. With the existing SKUs? Yes. That is right. Okay. All right. Thank you. Thank you. Next question comes from the line of Pratik Kothari with Unique PMS. Please go ahead. Yes, hi. Good morning, and thank you. My question again on operating leverage. One of our intent was to grow our revenue curve much faster than the cost curve, and this is I think mentioned in the annual report too. Even if assuming this non-weather effect and let's say we were growing 5 percentage points higher, still our other expense, our employee expense, is growing faster than that number. Our other expense has been growing at 20% or this year, even last year. I am not just talking about Q2. You can look at H1 last year, last four, six, eight quarters. My question is to achieve our intent of growing cost curve lower than revenue curve, how much more investment per se is required? When can we see that our other expense, employee expense, goes up 10%, but revenue starts growing at 15%, 17%? How far are we in that journey? Yeah. Yeah, Pratik, this is Srideep here. See, it is not linear. I am not very sure if I was clear in my answer. It is not a very linear thing, right? The way we report employee benefits, we are also talking about the indirect manpower that we have in our system to produce. We have equal number of indirect employees as direct employees, right? At the moment you have production usually as per budgeted numbers or rather planned numbers, the unit drop of our cost is significant. Because please understand that we are a volume player, right? As in we call ourselves a mass premium player for a reason, because everything for us is actually volume driven. Everything. Right? If those volume numbers happen, the cost structures look significantly different. Significantly. Right? It is not a linear equation. That is all I am trying to say. Hypothetically, if I just say that if I had crossed the numbers that I had planned to with the kind of capacities that were installed, the EBITDA margin and everything shoot up because of the better cost absorption across board. The overhead per se, in terms of where we are investing in terms of fixed people, where it will stay fixed, is only at the management level. Which is an investment which the company has consciously made because the company believes in investing in building people assets, operating assets, as well as brand assets. This is something that, Pratik, in the previous conversations also I have mentioned to you, that we are investing in building brand assets. For example, marketing cost has gone up and we are okay with it, because we are very confident when we see the numbers such as, for example, awareness level going up by 25%-30%, trial rates going up by 25%-30%. These are fantastic numbers, because this is what is going to pay returns in the long run, right? Similarly, operating assets. We are investing CapEx. In the last several years, we've been putting in CapEx of INR 150 crores on an average per year. This has all gone into creating capacity for value-added products, and we are happy with it. Similarly, we have invested in people assets as well. Today, we have got a bunch of fantastic people who is helping us deliver results despite weather downturn. All those assets are going to perform better, and operating leverage is exponential and not linear. These are two points I just want to plan. Correct. On liquid milk sales, right? Last, I think, six, eight quarters, we've been growing at 5%, 6%. Last year we did not take any price hike, so all growth came from volume growth. This year we took price hikes, so volume is off. Because for us as a consolidated company to grow much faster in early teens that we kind of aspire to, liquid milk also then has to ramp up from 5%, 6% to maybe 8%, 9%. I believe this would not be as weather dependent. If you can just highlight what can we do, what are the plans to take this up from 5%, 6% to 8%, 9%? I understand that the price hike that we took this year, but last year we didn't, but still the volume did not come through. Sure, Pratik. Sridhar again. Yeah, a very fair question. We are looking at what to do internally to see pricing, raw material price, market price, weather. These are all external factors, and we are trying to reduce the impact of these in our business through actions we are taking internally. One of the most important initiatives which we have taken this year was to invest in building our brand in milk itself. I mentioned it previously. We had run a very successful television campaign on "Pure Doodh ki Shakti," which clocked 5,000 GRPs. 5,000 GRP, if I can just give you a sense of it, we were the most visible advertiser in our core market. Roughly about 40% of the GRPs share of voice we had got with this campaign. The same campaign on digital ran very strongly in Q2 with almost 47 million views. Similarly, at this point in time, as we speak now, we are the co-sponsor for one of the biggest television properties called "Bigg Boss" in both Telugu as well as in Kannada. This is primarily led by milk, and you can see how the contestants use our milk in their kitchen and stuff like that. These are things which we believe are very fundamental in building people's belief and trust in our brand. Secondly, we just launched, I spoke about Sampurna Cow Milk, which just got launched in this particular quarter. We are in the process of scaling it up. In fact, day before yesterday, we launched two new variants for our country markets, which is called Sab Jago Milk, which will come in Q3. These are all initiatives we are taking to drive milk volumes through new product introduction. Third is continued investment in expanding retail distribution. There's no substitute to that. In Q2, we had expanded 60 distributor points and retail points. We should assume that every retail point should give us at least 5 to 6 liters of milk. That's about 20,000. If we have to sustain and get growth to 8% or 9%, like you rightly mentioned, we need to sustain this growth momentum, which means that in Q3, we need to add 10,000 more retail outlets. If we add 10,000 more retail outlets, that will give me 50,000 liters of milk. We are absolutely focused on doing what needs to be done on the ground so that irrespective of price increases, irrespective of whether we can continue to drive growth, especially in milk. Thank you. Mr. Kothari, please rejoin the queue for more questions. Next question comes from the line of Resha Mehta with GreenEdge Wealth Services. Please go ahead. Thank you. Good morning, and Diwali wishes to the team, and I think a really good performance, especially under that load, given the challenges we had. I have a couple of questions, maybe I will outline all of them in one go. So Q1, I think our ad spends seem to have been up, if that could be quantified for this quarter as well as previous quarter, the previous year. Novandie, what is the path to profitability? I think we were envisioning a break-even in Q2. So have we achieved that? If not, how far away are we from that? And new markets, so if you could just comment on how is the yogurt market doing for us? And also sometime back we had entered into Singapore and U.S. So what is the kind of traction that we are seeing there? And overall from next quarter, do we see any meaningful numbers going ahead? So these are my three questions. Thank you, Resha. This is Sridhar. First on marketing spends. I think marketing spends went up from Sorry, one second. Please hold on. Is it okay if we send across the number? But I can tell you that roughly it has gone up by about 60% year-on-year. Okay. Yeah, sure. I mean, very remarkable numbers. Yeah. We'll give the numbers to you. I'm speaking from memory. We are looking for the numbers. It has gone up significantly. Significantly, it has gone up in marketing, and it's something that we are very happy about. We're very happy about because it's going to really give us leverage in the long run, for sure. Right? Sorry, can you just please remind me the other questions? I was trying to go through them. Could you please tell Resha, I don't. Ah, Novandie. So see the yogurts, I think there is a misunderstanding. We never said that the business will break even in Q2 because we just started the business in Q2, so it's not possible to break even so quickly. But we can tell you that the operating metrics are looking already wonderful, right? In just a couple of months, we have already achieved the volumes that Mamie Yova was doing. So imagine Mamie Yova was doing X volume. We are doing the same volume with Livo brand in just 2 months time, right? Which means we could actually grow tremendously from here. This despite the bad weather, because yogurt is also a category which is weather dependent. Consumption goes up during summer and during rains it comes down. So volumes wise it is a great performance. In terms of unit economics also, I believe that the losses are much lesser compared to the previous operation. We'll share those specific numbers with you one on one. Thank you. Ms. Mehta, please rejoin the queue for more questions. A reminder to all the participants, please restrict yourself to one question. Next question comes from the line of Param Vora with Trinetra Asset Managers. Please go ahead. Hello, thank you for taking my question. What I wanted to ask was that with growing lactose intolerance amongst the nation, are there any plans for Heritage to introduce a concentrated portfolio of low lactose or lactose-free dairy products? Yeah, thank you. Yes, our entire portfolio of fermented products are all low lactose or no lactose. If you are lactose intolerant, you can consume curd or buttermilk and lassi and all of that because they are low in lactose or no lactose. We also have plans to look at lactose-free milk. It is something that we are thinking about. Thank you. Mr. Vora, please rejoin the queue for more questions. Next question comes from the line of Mahek with NV Alpha Fund. Please go ahead. Hi, sir. Thanks for taking my questions. My first question is, if you could give us the breakup between your VAP products, what percentage of it is coming from curd and what percentage coming from non-curd? And attached with the same, additional question is that, how would this sort of look like a year or two down the line once the ice cream facility comes online? Curd is still about 70% of our. Actually, curd is our biggest differentiator. Let me just put it like this to give you a sense. If you look at global large dairy players, whether it is Danone or Lactalis and all of that, they all talk about yogurts and cheese as two products that they sell, right? I mean, bulk of their revenue comes from these two. In India, the equivalent of a yogurt and cheese is actually curd and paneer, right? This is what is the leading element in our portfolio also. Curd will be what, 70%? 71. 71%. 71% of our all value-added products will be curd for us, and after that will be paneer. These are two main value-added products that we are trying to build. Apart from that, we have about 5% of our revenue is coming from ice creams and roughly around 10% of revenue coming from drinkables. The contribution of sweets is very small. Paneer is 12%. Yeah, thank you. Of course, ice cream will grow faster, drinkables will grow faster, and paneer will also continue to grow. So over a period in time, the contribution of curd will reduce. But curd is very important for us. Thank you. Mr. Mahek, please rejoin the queue for more questions. Next question comes from the line of Sucrit D. Patil with Eyesight Fintrade Private Limited. Please go ahead. Good morning to the entire team. I have a specific question for Mr. Naidu. As you plan for the coming quarters, what steps are being taken to improve margins, especially in terms of pricing, supply chain efficiency, or cost control? How do you see profitability evolving in the medium term? Thank you. This is Brahmani, Executive Director. I think this question has been answered by my colleagues already. But, of course, I think for us, value-added products drive margins. So I think getting our distribution network expansion, which we've done very successfully in the second quarter, will continue to be a focus area in terms of driving margins. Aside from that, there's a lot of work that we're doing on the operations side, some of which has been mentioned by CEO already. But aside from that, automation is something that we are heavily focused on. All our new processing facilities are fully automated facilities, and whatever expansion is happening in existing facilities or renovation is happening in existing facilities is in that direction. Aside from that, when it comes to our transactions, our daily operations as well, we are automating a lot of processes. Heritage Milk is the first dairy company to go on SAP end-to-end to also evolve in SAP. Now we are using a lot of RPA. We are using copilots and agents to improve efficiencies in which we operate and do things. CEO also had mentioned about the other initiatives that we are taking in terms of logistics. We are constantly tracking the amount of milk collected per kilometer. We are constantly looking at productivity of people at different levels, both on the sales side as well as on the procurement as well as operations side. We are also measuring things as minute as milk handled per unit electricity in our operational facilities. Of course, renewable energy is a huge focus area as well, both from reducing our carbon footprint and managing our power costs or operating costs. There are several initiatives that are being taken, both from a monitoring standpoint and a tech-enabled sort of growth standpoint in terms of improving our margins. Of course, value-added products in terms of sales will drive this through continued strong distribution network expansion that will happen. Thank you. Mr. Patil, please join the queue for more questions. Next question comes from the line of Kiran with Green Investor. Please go ahead. Mr. Kiran, please go ahead with your question. Mr. Kiran, please unmute yourself and go ahead with the question. Since there is no reply from the line of Mr. Kiran, we will come up the next, Ashutosh Jhaveri with Crown Capital. Please go ahead. Hello. Ashutosh Jhaveri. Thank you so much for taking my question. A lot of the questions you already answered. There is one question from my end. Based on how H-One has gone so far, what is the outlook that we see for H-Two in terms of our revenue growth and margin? As in margin, we were trying to get a better picture to quantify it, but it is really difficult. Sir, it is difficult to quantify. I can only say that usually the milk supply getting better in quarter three, and during flush season, the prices come down. Which means, if X is the price in quarter two, X minus delta X will be the price in quarter three. Assuming the market prices we do not change, because we usually do not drop our market prices, it should be better. That said, I want all investors to know that each of our quarter has a unique mix. Like quarter one is very high on value-added products. This year it did not happen because of bad weather. Quarter two is high on milk but moderate on value-added products. Quarter three is low on value-added products as far as mix is concerned. We will continue to grow value-added products. We might grow at 20% in quarter three also, value-added products. Every indication shows us that value-added product growth in quarter three will be higher than quarter two. That said, the mix changes because quarter three is more festive and all that, so our fat sales go up. Fats is not as profitable as value-added products. Even though raw milk prices might come down, the product mix change is something that will influence. Rather than look at it on a quarter-on-quarter basis, you should look at a long-term trend. The long-term trend is that as long as we keep improving the contribution of value-added products, like in quarter two, we were able to improve the value-added products by almost 3%. If you continue to do that over a long period in time, this is a great business, and that is what we are focused on. My request is to look in long term and not quarter-on-quarter. Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of question and answer session. I would now like to hand the conference over to Dr. Rao for closing comments. Thank you very much to all the participants for your continued interest in Heritage. Looking forward to catch up with you for the next earnings call quarter three later. I again extend heartfelt Diwali greetings from myself and on behalf of Heritage family here. Thank you very much. Thank you. On behalf of Heritage Foods Limited, that concludes this conference. Thank you for joining us. You may now disconnect your line.