Q2 24/25

Oct 25, 2024

Summary

Q2 EBITDA and net profit grew sharply, while milk volumes and VAP remained strong; lower bulk-fat sales tempered reported revenue growth. Management retained a 7%–8% long-term EBITDA margin objective and cited weather and flat pricing as key constraints.

Ladies and gentlemen, good day and welcome to the Heritage Foods Q2 H1 FY 2025 earnings conference call. As a reminder, all participants line 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 during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Sonpal. Thank you, and over to you, sir. Thank you. Good morning, everyone, and a very warm welcome to you all. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the second quarter and first half of financial year 2025. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audience are cautioned not to place any undue reliance on these forward-looking statements when making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us on today's earnings call and hand it over to them for opening remarks. We firstly have with us Mrs. N. Brahmani, Executive Director; Dr. Sambasiva Rao, President; Mr. Srideep Kesavan, Chief Executive Officer; Mr. A. Prabhakara Naidu, Chief Financial Officer; Mr. J. Samba Murthy, Chief Operating Officer; Mr. Upendra Pandey, CEO of Heritage Nutrivet Limited; and Mr. Umakanta Barik, Company Secretary and Compliance Officer. Without any further delay, I request Dr. Sambasiva Rao to start with his opening remarks. Thank you, and over to you, sir. Thank you, Mr. Anuj. Good morning to everyone joining us today on this call. We are pleased to welcome you all to the earnings call for the second quarter and first half of financial year 2025. The financial results and earnings presentation have been uploaded on the exchanges, and I hope you have had a chance to review them by now. Let me take you through the financial performance for the quarter under review first. For the quarter under review, on a consolidated basis, we recorded revenue of INR 1,020 crores, reflecting a 4.2% year-on-year increase. EBITDA for the quarter was INR 83 crores, representing a 77% year-on-year growth, with EBITDA margins at 8.16%. Additionally, net profit for the quarter was INR 48 crores, which surged by 117% year-on-year, resulting in PAT margins of 4.77%. On a half-yearly basis, we recorded revenue of INR 2,052 crore, reflecting an 8% year-on-year increase. EBITDA for the period was INR 177 crore, representing a 103% year-on-year growth, with EBITDA margins at 8.63%. Finally, net profit for the period was INR 107 crore, which surged by 173% year-on-year, resulting in PAT margins of 5.22%. Now moving on to operational performance. Milk sales volume continued its steady growth in Q2, increasing by 5.11% year-on-year to 1.19 million liters per day. However, revenue growth in milk was slightly lower, with average milk selling price at INR 54.59 per liter, a 0.31% decline compared to the same period last year. Average milk procurement in Q2 FY 2025 stood at 1.64 million liters per day, marking a growth of 11% year-on-year. Average milk procurement prices for Q2 2025 decreased by INR 2.94 per liter compared to Q2 of the previous financial year. The growth momentum in value-added products remained strong in Q2 with a robust 16% increase, reaching INR 298 crore in revenues, and VAP contribution to total revenue rose to 30% compared to 27% in Q2 of FY 2024. In anticipation of the festive season, the company launched several engaging consumer promotions and advertising campaigns, including TV campaign and the scan and win offer across the ghee and sweets range, further accelerating the momentum in value-added products. Lastly, Heritage Nutrivet Limited, the wholly-owned subsidiary, experienced robust top-line growth of 18% year-on-year, reaching INR 86 crore during H1, with a healthy 117% increase in PAT, totaling INR 4 crore. With that, we can now open the floor for question and answer session. Thank you very much. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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 Kiran Kumar from Investwise. Please go ahead. Mr. Kiran, I would request you to unmute your line and speak, please. Due to no response from the current participant, we will move on to the next participant. The next question is from the line of Sandy Mehta from Evaluate Research. Please go ahead. Yes. Good morning. Congratulations on strong bottom line growth. What is your expectation of normal margins going forward? I think the management, you have previously talked about 7%-8% EBITDA margins as normal. But in a recent media interview, I believe the CEO talked about 9%-9.5% EBITDA margins as a sort of a normal level going forward. Especially as you get closer to that INR 6,000 crore revenue target, which you have publicly stated, at that level, on a normalized basis, then would you target 9.5% EBITDA margins? Thank you. Yeah. Good morning, Mr. Mehta. This is Srideep Kesavan, CEO. We have always maintained that we are aiming to keep our EBITDA in the range of 7%-8%. That's our long-term outlook, and this is something that we have maintained. Just to correct, I have not mentioned 9%-9.5% in the TV interview that you mentioned. You could listen to it again. The question asked was, would the EBITDA margins be sustained in the near term? The answer to that would be that the raw material prices are expected to remain stable, as in not too much volatility. Hence, it will be in this particular range that we are seeing. We did not mention 9%-9.5%, even though that'd be very good for us to achieve that. But our objective is to keep it in the range of 7%-8%. But as you grow your revenue substantially, there has to be some operating leverage, operating synergies, and also your value-added products continue to increase. Is it reasonable, even if you are not articulating and publicly stating a higher margin target, is it reasonable for investors to expect that over time, margins may possibly increase? Thank you. Mr. Mehta, this is exactly what happened on that TV interview also. If you try to put words in my mouth when it is difficulty. The thing is, we do not give guidance. Of course, because you're asking this question in this particular aspect, particular point of view, I will have to agree with you that in every business, our objective is keenly on increasing the margin over a period in time, and that's what we also aim to do. But, at this point in time, we are not promising that we'll go to a 9%-9.5% range immediately. But that's what we aim to do, right? Okay. Best of luck. Thank you so much. Thank you. The next question is from the line of Diganth Rai from GreenEdge Wealth. Please go ahead. Yeah. Thanks for the opportunity. I have three questions. The first question is that, in the last five quarters, we have been in that INR 1,000 crores kind of revenue, say plus minus INR 20 crores. So, why is the stagnation in revenue that we are seeing? Is it just because of the prices which have come down, or is it something on the sourcing side? Or is it just that whatever preparation we did as an organization for the last two, three years, we have probably grown there, and now we need more infra and more setup to reach that number? So that is my question number one on revenue stagnation. Question number two is on the employee costs that, for us, employee costs are roughly around 8%. They used to be around 6%. They are now around 7.5%, 8% of the revenue. Is there any sort of operating leverage here or, this is the new Heritage which will incur this 8% employee cost? And I ask this because your competitor is at around 4%, 4.5% kind of employee cost, the one who is in the neighboring state. And my third question is on the Nutrivet business. Has cattle feed business really picked up? And, despite the low milk prices, are farmers investing in giving good cattle feed to their animals? Any color, what is happening in this cattle feed market, that would be useful. So these are three questions from my side. Thank you. Yeah. Thank you. There are three parts to your question, and three of us will try to answer it. This is Srideep Kesavan. I will go first, and then I will request CFO to speak specifically about the numbers that you are mentioning as far as the human resource cost is concerned, and then Mr. Upendra Pandey, CEO of Heritage Nutrivet Limited, will answer the feeds question. The first question, I am just reading out the numbers. Q1 of last year, the number was, I am reading out last six quarter numbers. Q1 of last year was INR 913 crores. These are standalone numbers. Q2 is INR 962 crores. Q3 is INR 922 crores. Q4 is INR 935 crores. Q1 of this year is INR 1,020 crores, and Q2 of this year is INR 1,007 crores. These are standalone numbers. I do not see why you say it is stagnant. Last year, around the same time, we had breached the INR 900 crore revenue in a quarter for the first time. This year, we have breached INR 1,000 crore in a quarter in our revenue for the first time, and we are sustaining that. Secondly, our businesses, whenever you look at our revenue, and this we have consistently maintained in the past as well, that you need to look at our revenue in three or four buckets. Let me just break it down for you. One, of course, is the question that you asked of Heritage Nutrivet Limited, which is the feeds business. That is one part of our business. Apart from that, on the standalone business, when you look at the revenue, you will find our numbers reported as milk, value-added products, and bulk fat. And bulk fat is something that we do not take position in commodity. As and when we accumulate the butter because of excess raw milk and lower sales, we liquidate that as bulk fat, which is usually a loss-making proposition. Not just for Heritage, but for the industry. Apart from that, there is milk and value-added products. I request you as investors to stay sharply focused on the milk and value-added products growth as far as we are concerned. Last year, if you recall, in quarter 2, we had reported that our profitability was much lower because we had booked a large quantum of bulk fat sales, which helped, of course, in the top-line growth, but did not help much in terms of bottom-line growth. This year, we have very little of bulk fat growth. Whereas what is of interest to you is that the milk revenue growth is upwards of 5%, primarily driven by volume growth. In fact, actually, volume growth is ahead of revenue growth as far as milk is concerned. And similarly, in value-added products, without consumer ghee, we are at 16% growth. Including consumer ghee, if I consider, value-added products is growing at 19%. And in our investor presentation, we have shown a graph which shows the milk and value-added products growth, which is consistent in terms of high teens in terms of value-added products and high single digits as far as milk is concerned. The core of the business remains strong and robust. There is nothing that needs to be of concern. And there is a small concern for us, which is the value-added product growth has come down by about 3%-4%. Primarily, this is on account of adverse weather we have seen. In fact, in the first half of the year, we have seen roughly around 60% increase in rainfall, in absolute millimeters of rainfall. You must have read about this in all news articles. Rainfall impacts at least three of our value-added product categories, which is primarily curd, drinkables, and ice cream. All three of that get impacted because of rains. Everybody's aware of the floods and the cyclones and the repeated climatic calamities we have seen in the last quarter. Your company has delivered 19% value-added products of growth despite all these adverse conditions. I request you to compare our numbers with any comparable competition on this parameter. Before I hand over to the CFO, I would like to comment on the human capital cost. Whereas in our case, we capture all the human capital cost, whether it is direct or indirect cost. Our competitors might be booking it as other operating expense. The two are not comparable. I will request our CFO to talk about those numbers. Good morning, sir. Actually, compared with Q2 to Q4, there is actually around INR 55 crores of employee cost last year, INR 59 crores. Now it has gone up to INR 75 crores because the profitability has gone up by more than 100%. Variable component of the employee cost has been provided accordingly, so that is the main reason. Over a period of 12 months, actually, there is new employees also. When the business is expanding in new geographies, new employees are also joining. These are the two reasons. Top-line growth, it has come down as compared to previous year. That is also under contribution, where the percentage has gone up actually by 1.3% as compared with Q2 to Q3. Thank you. Good morning, sir. Upendra here from Heritage Nutrivet. To answer your question, realizing the market scenario, we have taken a couple of new initiatives few quarters back, and that has started giving us positive results. One is that we have launched high protein and high fat product in multiple geographies, and products are very well accepted by farmers. They have seen a significant improvement in their milk production as well as fat and SNF improvement, and that led to growth of the cattle feed volume. Also, seeing the market trend that price has come down and farmers were struggling, what we did is that further we improvised the quality of our product without changing the price, and that led to improvement in the fat and SNF of milk, which is giving a better realization to farmers. So farmer continuing our feed and helping us to grow our cattle feed volume. All right. Thank you so much for the detailed explanation, Srideep, Upendra Ji and Sriyakul. Thank you very much. Thank you. Thank you. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead. Thanks for taking my question. Good morning, everyone. Firstly, sir, outlook on milk procurement, given we are at the cusp of the flush season. Do you expect the prices to soften further, as usually that happens with a healthy flush? I am asking this question because there has been a persistence in food inflation over the last few months, and generally what we see is that it lingers into other categories sooner or later. Do you see that risk currently or whatever is information we have on the ground, any suggestions on the procurement flush, how it is going to be? Good morning, Mr. Samir. This is Somamurti. Procurement as and date now, currently it is stable. Going forward, it may little bit, some changes will be there, but there won't be any major changes in the procurement prices, little bit here and there. Now currently it is going stable actually. Now consistently it is. Yeah. I will address a question on inflationary trends. See, there are two parts to our business, right? One is on the procurement side. We have actually seen solid good monsoon and the crops and crop season, crops are looking much better. MSP, from the government is also looking good, which means actually the rural economy is actually looking very good, positively. We have had some setbacks because we might have lost 3 or 4 percentage growth in value-added products because of the negative impact of the weather on the sales side. These are two different aspects, right? You can't take the rural economy robustness and apply it to the inflationary trends in the urban India. I don't think the two go hand-in-hand. At this point in time, you must have seen that our prices have remained stable for the last five quarters. In fact, milk prices as well as the value-added product prices have not gone up in the last 15 months. If you look at our net revenue per liter on milk or in value-added products, it is roughly the same as what we had in Q1 of last financial year. We haven't seen any revenue increase or, sorry, price increase as far as the market products are concerned. Got it. Thanks for this detailed answer. Secondly, on ice cream. We have a major player, I understand, Unilever, who just announced that, as part of their overall strategy, they will be exiting the segment. Do you think this is a good opportunity for Heritage? If so, any plans to capitalize on this opportunity? Your thoughts. Yeah. This is Srideep here, Samir. First of all, I'm not sure if Unilever said that they're exiting the ice cream. They said they're restructuring the business, is my understanding, which could be probably in the way the company is structured. Yes, ice cream, Unilever is a large player. I believe they are the number two player in India. I think their business will continue, is my understanding. But see, the opportunity that we are looking at in ice cream is the industry itself waiting to explode. It's in very nascent stage, if you ask me. The per capita consumption in India is quite low. The category penetration, whether it is at a retail level or household level, is still very insignificant compared to many of the other indulgent categories like carbonated beverages or juices and all of that. I feel that there is a huge headroom to grow, which is the reason why we are bullish on it. We very recently announced our capital investment to create a new greenfield facility as well. Just a follow-up here. So let's say they do divest it. I understand that they might not have finalized that plan, but let's say they do divest it. Will we look at that as an opportunity to accelerate whatever we are doing or we will stay where we are, like in a normal way? That was actually my question. I did not get the second question. Yeah. Of course. That is what I am saying, Samir Gupta. See whether they divest or not divest, we are anyway looking at capturing all possible opportunities, which is why we have gone ahead with the capital investment of INR 200 plus crore rupees in this particular category. So we are going to set up an ice cream plant, which will come up roughly around the same time next year, maybe towards the end of 2025, we will see that. And we are putting in all efforts to accelerate our growth in ice creams. Got it, sir. The last bookkeeping question: Can you quantify the bulk fat sales during the quarter, which is included in the INR 76 crores that you have reported, but unbranded? Yeah, just give us a minute. Okay. Well, correct. That's due to this question. INR 26 crores. Yeah. INR 26 crores is the revenue from bulk fats in this quarter. And the corresponding figure in the base quarter? It's INR 72 crores. INR 72 crores. Got it, sir. Thanks all for me. Thanks again. I'll come back in the queue for any follow-ups. Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead. Yeah. Thanks for the opportunity and congratulations for good set of numbers. My question was on the milk sales growth. In the last few quarters, we have been doing very well on that. Over the medium term, how do you see the milk sales growth for us in over the next year or 2? In correlation with that, on our target to achieving INR 6,000 crores, how do you see milk growth panning out for us? Yeah. So thank you. This is Srideep again. There are 2 components to it. One is the volume growth and then there is the revenue growth, right? While quarter-to-quarter or year-on-year it might change because of dynamics of the business of the market. On a continuing basis, you should expect that about 50%-60% of the growth to come from volume growth and 40% of it to come from revenue, which is revenue price increases, right? What is missed at this point in time is only the price increase, because the price increases have not happened for the last 5 quarters, which is why the top line at this point in time is primarily driven only by volume growth. Right? As far as volume growths are concerned, the industry grows at around 2% or 2.5%, 3%, whereas we are growing at double that rate as we speak. We have maintained this growth level for quite some time now as far as milk is concerned. So our objective will be to keep it at this level of 5%-6% range for the near future. What we are hoping is probably a couple of quarters down the line, we are able to take price increases as well, so that we are able to push the revenue growth on milk towards a double digit kind of thing or high single digit. As far as revenue growth on value-added products is concerned, it will be similar. We are currently growing at about 16%. Earlier this used to be about 18%, 19%. Again, here also what is missing is the 4% or 5% of revenue top-up, which is supposed to come through price increases, which has not happened. We hope to maintain the growth momentum as far as the volumes are concerned, and we are hoping that maybe a couple of quarters down the line, we are able to take the price increases so that the revenue growth on value-added products goes to high teens or even 20%, 21% as it used to be earlier. So, as far as we are concerned, the underlying volume growth is what is keeping us all really excited and that continues. That momentum is sustained. Sure, sir. Second question was on the milk procurement front. Last few quarters we have seen surplus availability of milk from farmers. How do you see the next few quarters and any indication how the next flush season is looking like? I know it's a bit premature to talk about it, but any indications that you can give, how the next season is expected to pan out? Procurement side, whatever we just planned and we are getting it, and Q3 also, whatever we have planned, we are going to get it. There's no problem in getting the procurement. As we mentioned, the prices are stable and a little bit changes in the prices, but we are going to get the procurement. You expect- In terms of volumes, in Q2 also, we reported 11.4% growth in procurement volume. It's looking pretty good for us. On the pricing front, the prices continue to remain on the taper on the procurement side? Yeah. As of now it is stable, but there won't be much changes in that. Maybe little bit fluctuations here and there, either upside or downside, but, overall it is stable currently. Any indication that you're getting for next flush season? How is that expected to pan out? Yeah. Already we have planned increase in the procurement. That we are also going to get whatever we planned. But in Q3, yes, we are going to get more procurement than Q2. Okay. You know that we are currently entering flush, right? The numbers that when he mentioned Q3, he is talking about flush. Okay. Thank you very much. Thank you. The next question is from the line of Resha Mehta from GreenEdge Wealth. Please go ahead. Hello. Yes, ma'am, you are audible. Yeah. First of all, a suggestion. Actually, if you want to put out the revenue growth clarification even as a part of the press release, it would have been great because I think we had to wait for the investor presentation to figure out that your revenue growth ex of bulk product was 10%. That is a suggestion. My first question is on the fat part. In a bid to reduce the fat losses or provisions that we have, one of the measures that we had outlined was that we will try and increase our cow milk procurement share. Can you just talk about the progress there and a related bookkeeper question, any fat losses for the current quarter? That is my first question. For sure. This is Soumok again. We are actually procurement our cow milk contribution is going up. Yeah. Currently, Q3 it is about 85%, H1 it is 83% cow milk ratio. Compared to the previous year, the cow milk contribution is going up. As all of you know that in the cow milk, the fat will be less compared to the buffalo milk. That is why we are not generating surplus butter to the extent of our. Yeah. See, Resha, I don't think that this is something that. Because see, cow and buffalo both have different flush seasons. Sometimes you will see that the buffalo milk has gone up. There are so many dynamics in the business. For example, in Q3, buffalo milk goes up. In Q2, cow milk goes up. I don't think that this is something that we should be very much worried about at this point in time. The company has a very clear action plan on exactly how the butter is sold in consumer packs. What is encouraging for us is our consumer fats business, whether it is ghee or butter, is all strongly growing upwards of 50%. That means that the quantities that we are left with to liquidate in B2B bulk is coming down quarter on quarter. Strategically speaking, we will maintain a certain ratio of cow milk and buffalo milk, but I think that we should leave that. It is a very business call. Understood. And the fat losses for Q2? Fat losses in Q2. Q2 fat loss is INR 76.8 million. 7.5 crores, right, roughly? It's 8. That's including bulk. Sorry, I did not get that number. Yeah. It is about 7.5 to 8 crores. Yeah, that's right. Got it. The second question is on the feed business. What is the revenue potential here with our existing capacity, and what kind of margin improvement can we see over, let's say, over the next 2 to 3 years in this business? Because if you see our peer is doing around 13% EBITDA margins in the feed business with a slightly lower revenue profile. Is this because the raw material basket in our feed would be different from theirs or just some color on the feed business' growth potential and the margin potential with current capacity. What I can say right now is that we will continue to sustain the growth momentum. We will not give any indicative number, but we will continue to sustain the growth momentum in terms of top line. Bottom line, we are continuously improving, and we will keep targeting this 7% to 8% of EBIT. What we have done in the previous two quarters, we will continue with that. Focus will be on top line growth in next few quarters. We are taking several new initiatives to ensure that we continue on the top end growth part. Got it. What are raw material? Can you just outline what would be our raw material mix here for the feed business? Feed business critical raw materials are like DORB, maize, molasses, rice DDGS, rapeseed. These are the critical raw materials. We keep some of the raw materials, we do the strategic purchase. We buy at the right time when the prices are extremely low, and we stock it in our warehouses. We gain some advantage because of that, and that helps in improving our profitability. Got it. Lastly, any pricing actions or grammage actions we took in Q2? Because I think Q1 we held steady despite competition increasing grammage or reducing prices, we did not go ahead with that. No, we have not taken any pricing corrections. I do not think that in next quarter also, we are going to take any pricing corrections. No, this is for the dairy business I am asking, sorry. Not the feed business. Okay. Resha, could you please repeat the question? That is really clear. Yeah. I was just asking that in Q1, in line with competition, if I recall correctly, we have not restored grammage or increased grammage or taken any pricing action. Just wanted to check in Q2, have you taken any pricing action for the dairy business? No, Resha. I already addressed this question earlier to someone else who had asked similar. The last five quarters, our prices are stable, as in we have not increased prices. Here and there might have been, but overall, our revenue per liter is same, flat. Nor have we increased the grammage. Is that understanding right? No. There is no change. Okay. Thank you. Yeah. Overall, there is nothing much to talk. Got it. All right. Thank you so much. All the best, and Diwali wishes to the entire team. Thank you. Thank you. Happy Diwali to you. The next question is from the line of Kiran Kumar from Investwise. Please go ahead. Yeah. Thanks for the opportunity. I have one question. How much is our curd growth? We are growing curd around 11%. Is this volume or revenue growth? Is it same for both? Volume. Volume. Okay. Volumes. The revenue is also same because price per liter is the same. Yes. One other thing, actually, the previous one of the participants was asking. It's on the employee cost. I heard the answer of our CFO, what he had said. It's around 16% if I compare both Dodla and Heritage. Do we have any plans for optimizing some costs, like outbound costs and all, selling and distribution, to have an edge? Because we are concentrated in certain areas, do we have an edge over competitors, or is it the same with other competitors? Okay. First of all, Kiran, this is Srideep here. I don't think the numbers are comparable because I don't think other people report the employee cost in the same way as we do. I do not want to compare versus anyone. I can give you the commentary as far as we are concerned. We are investing at this point in time on three things as we continue to drive growth in the long term. Long-term profitable growth is the single-minded objective that we are working with. The three things are, number one, we are investing in human assets. We are increasing the quality of people, we are increasing feet on street, which will keep our growth momentum trajectory ahead of the industry and ahead of our competition. That's something that we are focused on. Secondly, we are investing in our marketing assets. You will see that our brand investments have gone up. We are currently investing about 0.8, 0.9 percentage of our revenue in advertising and marketing and promotions, which is also another thing that is driving significant growth as far as value-added products are concerned. And we keep updating you. You must be seeing our brand more and more. And the third is we are investing in capital assets for increasing the capacity of production as far as value-added products are concerned. Most of the capacity increases is going either in value-added products or in terms of increasing our procurement capability, or in terms of there are some replacement CapEx that keeps happening. These are three things that we are continuously investing on. And it's our endeavor to ensure that the revenue growth is ahead of the growth of cost on any of these three line items so that the overall profitability is looking good. In this particular quarter, because we haven't had any price increases, our revenue would have been probably 3% or 4% lower than what we would have wanted it to be because price is remaining flat and the top line only driven by volume growth. That is the reason why your percentage of any of these costs to the revenue would look slightly higher than what we would like. But we are absolutely on track as far as our long-term growth plan is concerned, and there is nothing that there is of any concern. Yeah. Thanks for the detailed answer. And one last thing. Do we exhaust our entire provisioning which we made last year on fat? Or are we continuing in our provisions? I think almost except INR 1 crore on the growth, everything has been written, Kiran. Thank you. Yeah. The next question is from the line of Pratik Kothari from Unique PMS. Please go ahead. Yes. Hi, good morning. Thank you. Sir, on this INR 7.8 crore fat loss, can you break it between bulk and consumer? You could say it's roughly equal. Of course, the consumer fat loss will be marginal. Bulk fat losses would be there, which will be last part of it. Correct. Sir, even if- Yeah, if you need further information, we can speak to you one on one. Correct. No, that's fine. Sir, my question, our understanding was, as we keep growing our consumer fat business, which is the retail butter, ghee, we would run down on our bulk fat losses, right? So if you look at our quarter 1, we did some 6, 7 crores of loss on our consumer fats. Again, we did some, like this quarter, 3, 4 crores of loss there. So if you can explain, how do we solve for this fat loss? Our assumption was that we'll do more of consumer fats and that will get solved, but if you're making losses in consumer fat also- Pratik, do you see that this quarter overall profitability is far better than last year same quarter profitability? 100%. So Pratik, this year's quarter 2 profitability is roughly 117% higher than last year same quarter, without any revenue increase. Primarily this is because of two aspects. One is milk prices having come down by about 6%, which has contributed to it. The second thing is the bulk fat sales having significantly come down, about INR 52 crores of bulk fat sale is less. That's the top line. That's the highlight that you need to look at. Beyond that, actually, when we look at a PBT level, there is a way we apportion and allocate our overhead costs and stuff like that, marketing costs and all of that. I think that there'll be unnecessary details to get into. Eventually, if we move from bulk fat to consumer fat, which is ghee and all of that, which ideally is what we desire to have, this particular loss over a period in time will come down. Even in this quarter, even though we had much lower bulk fat sale, we had bulk fat sale in this quarter. So there will be a little bit of loss which we'll continue to incur. Over a period in time, which will become negligible. Correct. My question was more on consumer fat loss, not bulk fat loss. We can take it as extra. Second, in respect to what our margin guidance, et cetera, is, we are currently higher than where we are. Any plans to utilize this excess margin? It may not be passing in terms of price, but accelerating our distribution reach, something on the procurement side. Anything that you can highlight, how are we using this extra margin that we have currently from our intended band to kind of drive growth faster? Milk prices are down by about 6.5%, 6.8% or so. Is it 6.8% or 6.4%? 6.8. 6.8% milk prices are lower. You also know that revenue is flat. Flat in the sense I am talking about revenue per kg, which means that we have not increased prices at all. Whereas ideally, if you consider cost inflation, whether it is human capital. Somebody asked, there were lots of questions about people cost. Like every year, there is increment and incentives and variable pay and stuff like that, right? The costs are going up. Operating costs, electricity costs have gone up, fuel costs have gone up. Correspondingly, the revenue price increases have not happened. A large part of it, of the procurement price drop has been compensated by the loss of revenue increase in terms of prices remaining stable. In a way, you can say that, yeah, that is an investment that we have made into building the business over a long period in time. We hope we can recoup that in the next couple of quarters. Got it. Thanks. Not in the next couple of quarters. Maybe after a couple of quarters, we hope we can recoup that. Correct. We don't need any price increase immediately. Fair enough. Point taken. The last comment, in the last call, we had spoken about some competitor entering our home market and cutting, slashing prices, and we were able to maintain our ground. 90 days have passed since then. Do we still hold on to that? Milk volumes are growing at 5.1%. Value-added products are growing at 16%, so I don't need to. Got it. Thank you. Our volumes are growing strong. Thank you. The next question is from the line of Jayesh Mehta from Care PMS. Please go ahead. Yeah. Good morning, sir. Thank you for the opportunity. Sir, I just had one question, like what is our outlook on the dairy industry for the full year and also in the coming quarters? Can you repeat, please? Yeah, sir. I was asking, what is your outlook on the dairy industry for the full year and also in the coming quarters? Outlook of the industry. I think, see, outlook of the industry is something that is so good. I will first start with what is the fundamental drivers of industry, right? In India, the per capita consumption of dairy is still very low, at about 350 grams per person. So there is tremendous potential for the per capita consumption to grow. In terms of population, roughly 40, 45% of our population are vegetarian population, for who the primary nutrition comes from milk and milk products. So it is the primary source of protein as far as one out of two Indians are concerned. Even the balance 50, 60% who would eat non-vegetarian food are all flexitarians who would eat five days vegetarian and two days non-vegetarian. So dairy has got a huge potential. The second biggest driver as far as this is as far as dairy in the larger scope of things, right? Out of those 350 grams consumption or the paneer consumption and all that I spoke about, 70, 65% of the consumption even today is in the unorganized sector. The organized sector contribution is at best about 35% or 40%, which is highest in milk, which is about 50% organized. If you take any category, paneer, for example, 5% is organized, 95% is unorganized. If you look at curd, 20% is organized, 80% is unorganized. Moving from unorganized to organized because of either because of hygiene, because of availability, because of brand consciousness, because of urbanization, primarily for multiple reasons are driving this growth. So one, dairy as such is growing. Then within dairy, there is move from unorganized to organized. The third, there is consolidation in the industry, either in terms of retail, for example, more and more growth coming from e-commerce, quick commerce, modern trade, and all of that, where branded play is most important. That is where your company is getting stronger. Because even within organized play, this play gets limited to a fewer companies who have got a stronger brand and access to these organized channels. Overall, we are actually sitting at the pinnacle of all this growth momentum. Yes. Thanks for the detailed explanation. Just one last question. Are we seeing good amount of demand in the product fully and also in the coming quarter? Yes. Okay. Demand-wise, there is no problem. I am reiterating, we might hit air pocket in the middle sometime due to weather. Because at least three of our value-added product categories are weather-dependent. Curd, drinkables, primarily, whether it is buttermilk, flavored milk, and all, milkshakes and ice creams. If it continuously rains and if there is flood and all of that, we might have a little bit of a slowdown in growth rate, but otherwise, the underlying demand is very strong. Okay, sir. Thank you so much for the answer and all the best. Thank you. The next question is from the line of Sneha Jain from SKS Capital. Please go ahead. Hello. Good morning, sir. Thank you for the opportunity. I just had one question. Recently in Bengal, particularly Kolkata and the Durga Puja, I saw many branding of Heritage being done on a large scale, but I do not see any retail presence there. Are we thinking of expanding, or is there anything? Okay. Thank you, Sneha. This is Srideep here. Thank you for that feedback. I am happy that you noticed our brand, but not our product. This feedback we will take. We launched in Bengal, not Bengal, Calcutta, you could say, and southern part of Bengal in August. It has been two months. We have appointed a certain number of distributors, and we are expanding distribution. Just like you already saw the brand, I am sure that you will see our products also everywhere now. Oh, that's great. Yeah. Thank you so much. Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Parikshit Gupta from Fair Value Capital. Please go ahead. Hello, am I audible? Yes, sir. All right. Thank you very much for the opportunity. I just have one question. This is more to do with the festive sales at this point. I wanted to understand how was the performance of the sweet segment or any related products that are more to being purchased during the festive period. Just that question, and thank you very much. Yeah. Thank you, Parikshit, for that. We are actually having a very good festive sale. The demand is good. Your question was specifically about sweets. Our sweets, for the first six months, has grown. It's almost pretty much grown in line with our expectation. We are growing about 40% or so. Even in quarter 2 also, we have grown at. We are about 40% is the growth that we are seeing in our sweets in quarter 2. So it's quite strong, and we are currently running a very innovative QR code promotion as well for consumers, which is actually giving us further traction. Understood. Just a follow-up on this. I believe the sweet segment would be across channels, retailing as well as e-commerce. Do you have a high level demarcation of the split among the two? Okay. So, for us, e-commerce and modern trade roughly contributes about 15%-16% of sale. The same would be in sweets as well. Understood. Thank you very much. Best wishes for the festive season. Thank you. The next question is from the line of Govind Lal, who is an individual investor. Please go ahead. Good morning, Heritage team, and thanks for the opportunity. I have two questions for you. First one is in first half, we have done around 8% top line growth. Generally, we are guiding around 16%-18%. Second half, how it is looking, sir, we will make up the shortfall of 7%-8%. To catch up with the FY 2025, we have to do 20% in second half. Just your view, sir, on that. Sir, thank you very much for the question. See, I will just repeat again. We have to look at growth in two parts. One is the volume growth and the other is revenue growth. Volume growth, we are aiming to keep mid-single digits for milk and mid-teens for value-added products. This is what we are aiming consistently. In quarter 2 also, it was same, 5.1% of milk and about 16% of value-added products. There is also another component, which is the price-led growth, which is the MRPs and the revenues increase, right? Which is about, usually every year, there is a 3%-4% price increase that happens because of inflation. This year, we have not seen any price increase at all. So that 3%-4% is what is being missed as far as the top line is concerned. We hope maybe towards the end of this financial year, maybe we will be able to take those price increases, and that will also add in. Otherwise, the momentum of growth and volumes, we will make every effort to sustain the current growth. No, we have netted. Generally, the volume and price, the top line growth, what we guide on that, I was asking. Another thing, sir, Dairy also in standalone, they have done quarter-on-quarter 9% growth, sir. We have not done anything. It is flat. And year-on-year, they have done 26% growth, our competitor. Any view on that, sir? Sir, okay. Maybe, sir, you joined a little late. Initially, there was a lot of discussion on the same. What we were trying to say was that we are cycling much higher growth because last year same quarter, which is quarter 2 of FY 2024, there was about INR 72 crores-INR 73 crores of revenue which came through bulk fat disposal, which is a B2B sale. It is not our focus, right? And that is not something that the company is building. It is something that we were liquidating excess inventory that was sitting with us. That is absent now. Now, if you remove that, the core business that you should look at is the milk value-added products and the feed sale. Milk is growing at about 5-plus percentage. Value-added products is growing at about 16%-19%. And feeds is growing at about 18%. Everything is strong. It is just that the bulk fat has de-grown at about 80%. That is the reason why overall top line is looking like 4.5%. Otherwise, we are in double-digit growth. Got it, sir. Coming back again, just second half, how it is looking, sir. I am asking top line how we should look whole year top line. This first half we have done around 8%, so how should we look? Is another 8% second half also? Is there better we can do and overall we can improve net mix? We'll work hard, sir. Okay. Then last two questions, sir. I am new to this industry and your company, Investwise, as an investor. So I just want to understand, sir, how seasonality factor plays in quarter to quarter in four quarters. How we should distribute our revenue of INR 1 in the milk and value-added products, which are the good quarters, which are the weak quarters? So shall I presume that the second quarter is the weakest one? Yeah, sir, your view. It's a good question, and I do not know if you have time. But I'll just quickly maybe take one minute. Yeah. See quarter-on-quarter, the revenue- Please, sir. I have got sufficient time. Every quarter No. Yeah. Yeah. Yeah, okay. I'll just take one minute to explain. Every quarter, the shape of the business changes. Quarter 1, the summer months usually is heavy on many of the value-added product categories, such as curd and drinkables and ice cream. Quarter 2 usually is slightly heavy on milk. Quarter 3 is slightly heavy on festive sale, which is sweets and ghee and all of that. Quarter 4 is also very similar to quarter 1. So roughly, something or the other is always growing as far as this industry is concerned. So overall revenue growth will remain robust. But yeah, the shape of the business categories will keep shifting as we move from quarter to quarter. Okay, sir. Net net, again, you can summarize. I just wanted to have INR 1 revenue, how we should split quarter 1, 2, 3, 4. So seasonality, how it plays. Overall revenue, I'm asking INR 1. So quarter 1 will be 25%, 27%, 24%, how it is? Just your view, if possible, on that. My request is, sir, if you could connect to us on one-on-one, we would be more than happy to explain you. No. But overall, like I said, because we are a growth company and milk is growing at 5% and value-added products are growing at 14%, 15%, over a period in time, the value-added products share will keep growing. Okay? Which means, let's say for example, but still in quarter 2, the ratio of milk to value-added products will again tilt towards milk. In quarter 1, it will tilt towards value-added product. That ratio will always remain like that. But except that, the size of value-added products will keep growing over a period in time. Thanks. I hope I am able to answer. Yeah. Thank you. As there are no further questions, I would now like to hand the conference over to Dr. Rao for closing comments. Thank you all for participating in this earnings phone call. I hope we were able to answer your questions satisfactorily and at the same time offer insights into our business. If you have any further questions or would like to know more about the company, please reach out to our investor relations manager, Valorem Advisors. Thank you. On behalf of Heritage Foods, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.