Q1 24/25

Jul 25, 2024

Summary

Q1 revenue reached INR 1,033 crore, with EBITDA up 133% and net profit up 249% YoY. Value-added products gained share; management aims for 17%-18% revenue growth and a sustainable 7%-8% EBITDA margin corridor.

Ladies and gentlemen, good day, and welcome to Heritage Foods Q1 FY 2025 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touch-tone 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, everybody, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the investor relations of Heritage Foods Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the first quarter 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. Audiences are cautioned not to place any undue reliance on these forward-looking statements in 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 in today's earnings call and hand it over to them for opening remarks. We firstly have with us Mrs. Nara 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; and Mr. Upendra Pandey, CEO of Heritage Nutrivet Limited; and Mr. Umakanta Barik, Company Secretary and Compliance Officer. Without any further delay, I request Dr. Rao to start with his opening remarks. Thank you, and over to you, sir. Thank you, Anuj. Good morning to everyone joining us today on this call. We are pleased to welcome you all to this earnings call for the first quarter of the financial year 2024. The financial results and earnings presentations 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 of the quarter under review. I am delighted to inform you that Heritage Foods crossed the INR 1,000 crore quarterly revenue for the first time ever in its history, along with very healthy improvement in EBITDA margins and profitability for the quarter. For the quarter under review, on a consolidated basis, we recorded a revenue of INR 1,033 crore, reflecting a 12% year-on-year increase. EBITDA for the quarter reached INR 94 crore, which grew by 133% year-on-year, with EBITDA margins at 9.08%. Additionally, net profit for the quarter was INR 58 crore, which surged by 249% year-on-year, resulting in PAT margins of 5.66%. Now moving on to the operational performance. Our milk sales volumes continued to grow steadily in quarter one, registering a 4.26% year-on-year increase to 1.13 million liters per day, with milk selling prices averaging INR 54.81 per liter, up by 0.40%. Average milk procurement for quarter one stood at 1.62 million liters per day, making a 6.66% year-on-year growth. Average milk procurement prices for quarter one decreased by INR 3.47 per liter, down by 7.75% compared to Q1 of previous financial year. Momentum in value-added products continued in quarter one with robust revenue growth of around 20%, reaching to INR 423 crore with value-added products contributing 41.5% compared to 38.6% in the Q1 of last financial year. This revenue includes consumer pack fat products of ghee and butter. Excluding ghee and butter, value-added products revenue was INR 382 crore, contributing 37.5% of revenue in quarter one, up from 35.3% in the same period last year, growing at a rate of 18.7%. This summer, we launched three new variants of lassi, that is sweet, mango, and strawberry, and three new variants of ball ice creams under Alpenvie brand, cotton candy, banana strawberry, and bubblegum. We also introduced long shelf life milk in UHT cartons of various sizes. Ahead of the festive season, we also launched a range of healthy yet indulgent laddus under Heritage Truly Good brand in three variants that is Ghee Besan, Ghee Jowar, and Ghee Millet Laddu. Lastly, Heritage Nutrivet Limited, our wholly owned subsidiary, achieved robust top line growth of 29% year-on-year to INR 42 crore, and an exponential bottom line growth of 363% to approximately INR 3 crore. Heritage Novandie Foods Private Limited, our joint venture company, reduced its losses by INR 23 lakhs year on year from INR 3.34 crore to INR 3.11 crore. Now the floor is open for question and answer session. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Abneesh Roy from Nuvama. Please go ahead. Yeah. This is Abneesh Roy. My first question is, given good monsoons are expected, that will lead to higher fodder crop, what is your expectation on milk prices over the next 2 to 3 quarters? Till now, how much would be the price cut you have already taken, given your gross margins have expanded? In Maharashtra, for example, we do see that milk cost has come down in the last 2 quarters. In your state, if you could tell us what has been the price cut in the last one year. Okay. See, Samba Murthy, would you like to take the first question on price outlook? Hello? Can you unmute? Yes, sir. Your line is unmuted. We can hear you. Yes. Going forward, there won't be much big thing in the procurement prices. There won't be the fluctuations will be there region wise, but there will not be any much change. Compared to last quarter to this quarter, there's a drop of INR 3.47 per liter, overall procurement cost. Looking forward, there won't be much change, looking at the current procurement and the current commodity availability in the country. What was the price cut till now? I meant with that. That is last quarter to this quarter, INR 3.47. INR 3.47 per liter. That is the cut? Yes. Are you seeing increase in competition? We do see whenever the margins expand in dairy and FMCG companies, local players become more aggressive. So local, smaller, unorganized players become more aggressive. Would you comment on how the competitive intensity is in your market? Yeah. This is Sreedeep here. See, these quarterly variances is nothing new to the dairy industry, because there is always a lean season and a flush season, and there is also inter-year cyclicity that we have seen that happens once in three or four years. So I don't think there is anything unusual. After a very bad 2023, this was bound to happen. So I guess the industry expected it. Because of this temporary phenomenon, I don't think that we are not seeing any significant change in terms of the competitive intensity. We continue to compete, and in fact, actually quite on the contrary, we are seeing consolidation happening in the industry at a very rapid pace, both on the procurement side as well as on the sales side. On the sales side, consumers are preferring known high-quality brands, which is helping all branded dairy companies like ours. On the procurement side, because of the growing demand with the branded players, we are able to procure strongly with the farmers. Okay, understood. That is all from my side. Thank you. Thank you. Next question is from the line of Sameer Gupta from India Infoline. Please go ahead. Hi, sir. Good morning, and thanks for taking my question. Firstly, on the milk prices front, on the selling milk prices. We have seen some pricing actions from industry leaders like Amul and Mother Dairy post the general election result announcement. Have we also taken any price hikes following them, or we continue to remain, and if so, do we have plans to take price hikes in line with the industry? Yeah. Thank you, Sameer. This is Sreedeep here. See, the price hike that Amul and Mother Dairy has done is in the northern part of India, where even farmer milk prices were slightly subdued. Alongside increase of the consumer milk prices, they also took up the farmer milk prices. For our business in the north of the country, we have also done similar as in line with what Amul and Mother Dairy has done. But the dynamic in the southern part of the country, that is Maharashtra southwards, is little different. We had a good milk production period from last October till now, which means that there is sufficient milk available. There is stability on the procurement side in terms of milk prices are concerned. As we explained before, the raw milk procurement prices are lower by about INR 3.5 in the southern part of the country per liter compared to same period last year. So there has been no need, as in there is no justification for us to increase the consumer prices at this point in time, and we do not anticipate taking up the prices immediately. Got it, sir. That is very clear. Secondly, on the EBITDA margin. Now, the company has done a 9% EBITDA margin this quarter, and this is a benefit of lower milk procurement prices. Also, the value-added contribution supposed to be the highest in first quarter of the year. If, let's say, milk prices remain where they are, would it be fair to assume that this is the peak, at least for the time being, and sequentially margins should start trending downwards? More importantly, where do you see this settling on a full year basis, the margin? Assuming that milk prices remain where they are and there is no bumper flush or a subdued flush. Yeah. Thank you, Sameer. This is a million-dollar question. You are asking us to predict the future profitability. But if I can say that, see, in the last many quarters, we have always mentioned and ensured that our objective is to stay in the corridor of 7%-8% EBITDA, and we have worked hard to get here. Yes, at this point in time, we have a slight advantage as far as the milk price is concerned, and which may or may not remain. We do not know. You also know that the dynamics of quarter 2 and quarter 3 are very different, both on the procurement side as well as on the sales side. On the procurement side, usually the flush season starts from the month of October, November, post-Diwali, which means that there could be further downside to the pricing. We do not know that yet. On the sales side, usually, the fat sales go up with the festive period, whereas some of the profitable value-added products like ice creams and all come down. There is dynamics on both sides. We will have to see. It will be our effort to sustain the margins, but it depends on many other factors. Thanks, Srideep. This is very helpful. I will come back in the queue for any follow-ups. Thank you. Thank you. Next question is from the line of Aniruddha Joshi from ICICI Securities. Please proceed. Yeah. Thanks for the opportunity. Sir, just on ice cream business, how was this season? Because we have seen across the board a strong growth in ice cream business. So for Heritage as well as Alpenvie, both the brands, how was the season? Secondly, we have seen multiple product launches from Heritage, and some of these products are actually competing with Novandie products also. How should we read this and any update on Novandie business as well? Yeah. This is Brahmani here. I can take the second question first, Mr. Joshi. Novandie is seeing. I am happy to say that we have seen strong growth, not just year-on-year, but quarter-on-quarter. We have seen significant growth in our existing markets itself across existing channels, as well as relatively newer channels such as general trade as well as e-commerce. So we are seeing really good consumer acceptance, consumer loyalty, and customer confidence when it comes to our Novandie set of products. In addition to that, as President sir had mentioned, we have seen improvement in bottom line, so lower losses this year. We are seeing that given the fact that we are scaling and increasing in terms of volume, our costs are also getting better optimized, for instance, with the fixed costs, et cetera. Strong growth over there and improvements in bottom line when it comes to Novandie business, which we expect to continue in the coming couple of quarters. In addition to that, there is no competition between Novandie and Heritage Foods when it comes to product portfolio. The joint venture company is into the business currently of making yogurt, curd as well as set yogurts, drinkable yogurts. So there is absolutely no overlap of product between the two. Thank you, Brahmani. This is Srideep here. Aniruddha, on the first part of the question, which is regarding ice cream business. Ice cream business has grown at a strong 18%, 19% in first quarter in terms of volumes. In terms of revenue, it is close to 20% growth that we have seen. The growth was very, very strong in the first part of the quarter one and you are right, as far as maybe national average is concerned, quarter one was excellent as far as ice creams are concerned. But in the southern part of India, we had exceptionally high levels of rainfalls in the second part of quarter one, which actually played a little bit of a spoilsport, and which softened the numbers a little bit. Otherwise, the numbers would have been even more higher. Okay, sure. Understood. Very helpful. Just last question. Just a quick update required on the subsidies. As we understand, there is INR 6 subsidy in Karnataka. I guess INR 3 subsidy in Andhra Pradesh and now Maharashtra government has also announced, I guess INR 5 subsidy per liter. Is this understanding correct? Please suggest if any changes are in this and any other state, if any subsidy is there. Thanks. That is it from my side. Aniruddha Joshi is here. There is a support price in Karnataka at the rate of INR 6 per liter if the milk is supplied to cooperative. In Andhra Pradesh, there is no subsidy, but in Telangana they have the same support price of INR 4 per liter. Maharashtra has announced very recently, this additional INR 6 or INR 5, I think it is INR 5, subject to milk procuring companies paying INR 30 per liter for a particular quality of milk. Over and above that INR 5, government would offer to the same farmers. There is no other state as of now giving such supports. Okay, understood. Maharashtra subsidy is not just for cooperative, even Heritage Foods or for that matter, any private company can also avail subject to they fulfill the required conditions. Correct? Absolutely correct. Is there any subsidy from central government? Because in last sub-cycle, we had seen there was a subsidy of around INR 50 per kg on SMP export. Now, I guess even most cooperatives are also full with huge amount of SMP. Do we see any such possibility in the sector or it would be a bit premature to say? As of now, there is no such support. We are not sure whether something is in the line. It is incentive and not subsidy. Export incentive. Export incentive. Okay. Correct. As of now, there is no such subsidy. Yes, you are right. Okay. Sure, sir. This is very helpful. Many thanks and congrats for great performance. Thank you. Thank you. Next question is from the line of Vandit Dharamshi from Alpha Invesco. Please proceed. Hi, team, and congratulations on great set of numbers. I think this is what you have been speaking about, and finally we are seeing that happen in numbers. First question is towards, I think some of our competitors and peers have taken some sort of price cut in our core Telangana, Hyderabad market while we continue to sell our products at the same price. So, any thoughts in terms of market share, gain, loss, or how do we think of this? Thank you, Vandit. Yes, we have seen that certain brands have dropped prices actually. This has never happened. For the last 45 days since this happened, we have not seen any change in market share at all for us. So we have sustained the prices. We continue to sustain the prices. We have no plans to drop prices. Secondly, we have put in place several strategies to ensure that the damage because of any price disparity is to the minimum. Got it. My second question is, as we see, say, some competition coming up and maybe we might not lose market share, but as more and more local competition comes up, would you think that our volume growth might take some kind of a softer hit in terms of how you've been doing right now versus what we have done historically? Do you think that can happen because of more competition? Mandeep, let me just break down the growth numbers or rather growth potential opportunity for you. Even today, of the total industry, roughly around 40% is what the organized players contribute. 60% is still in the unorganized sector, right? It's not like unorganized players have just come in or they're taking an opportunistic punt. It's a largely unorganized market. The level of organization varies from, for example, the highest level of organization is in the milk segment, where 50% of the volume is in organized, whereas the lowest would be in categories like paneer and all, where only 5% is organized. The growth that we are seeing is primarily because of consumers moving from unorganized to organized, not the other way around, right? Because consumers are demanding better and higher quality. They're also discovering their affinity towards brands. For example, we are seeing very clearly that our consumers who used to buy only Heritage milk are now buying Heritage curd, Heritage paneer, and even Heritage ghee as well. People are buying into the idea of the brand, and that is what is helping us drive our growth. Thirdly, the growth is not just because of milk, because milk as a category will always grow at the rate of population growth or organization. Because milk, I would presume that everybody is already having as much milk as they have. The growth we will differentiate will be in the value-added products where we do not have. The dynamics that you just mentioned don't come into play at all. Okay. Sir, last question from my end. I think the entire industry, including cooperatives and every other entire industry, I think is having good amount of SMP inventory with them. Looking at the kind of rains that we are seeing in Maharashtra, Telangana, Karnataka, and the further flush season that we see coming, what would be your view on SMP? Because I think most of the balance sheets are fairly loaded up with SMP. How do you see that play out for the industry and for us? Thank you. This is Srideep here. I will request our CFO, Prabhakara Naidu, to give a comment on our SMP stock, then I will answer the second question. Good morning, sir. We have an SMP stock as on June 30, 4,586 tons. Value? Value is INR 117 crores. INR 117. Thank you, Mr. Prabhakar. This 4,500 tons is the stock that we will require for the rest of the year, and there is nothing special for us because every year we cover ourselves for the commodities that we require till the end of the year, which end of the year in the sense calendar year, which is November, December. So the stock that we currently have should sufficiently cover us till the beginning of the next flush cycle. This is just a usual phenomenon. As far as the industry is concerned, you said there has been several reports that the industry is holding high stocks of SMP and butter. How the dynamics will play on this will depend on how the milk production will go in Q2 and Q3. The good news is that on the production side, so far we are getting signals of stability. So at this point in time, at least, we do not see any cause for concern. Got it. Sir, thank you so much, and wishing you all the very best for this great performance. Thank you. Thank you. Thank you. Next question is from the line of Rishabh Garg from Sancheti Family Office. Please proceed. Hey, sir, am I audible? Yes, you are. Please go ahead. Yeah. Thank you for the opportunity. I have been seeing your products. I think you are doing very good on branding and marketing of them. I wanted to understand what have been the initiatives that we have been taking on creating a key brand differentiator, and how much of our initiatives are in-house, and how much external help are we taking on the branding and marketing side in the last five years and maybe going forward also? Yes, sir. Okay. Thank you, Rishabh. This is Srideep here. Thank you for your nice comments. In terms of marketing, I think our differentiation story starts with our product itself. I think what makes Heritage very unique is our distributed network of procurement as well as sales. On the procurement side, we are closest to the farmer. We procure from over 10,000 villages. We have 198 chilling centers, which allows us to keep the milk as fresh as possible. On the sales side, we have 18 factory locations, which are again closest to the consumer, which means that both on the raw milk side or on the finished goods side, we do not transport the goods long distance. This is the biggest differentiator. When you taste any of our products, you will see that it is far superior to anything else that is available in the market. Further, in the last several years, our marketing team and R&D team have worked closely in improving our product superiority even further. We spend a lot of effort, time, and money in terms of improving our product. A good amount of investment goes into that as well. Apart from all of that is communicating the superiority to the consumer. For that, we work with multiple partners in this. On the creative side, we work with Leo Burnett as the agency, and on the digital side, we work with LS Media, which helps us with all our digital campaigns. We also work with several top-of-the-game packaging design firms, which help us really create clutter-breaking packaging designs. Which packaging design firm? Just curious to know. I think I can tell you one-on-one, but this is not- Yeah, fine. -for- Absolutely, fine. No, because your packaging is very beautiful. Second thing I wanted to understand is how much has been marketing spent as a percentage of revenue? Currently, we are tracking around 0.9%. Okay. On two points, on the distribution and the procurement side, what has been the key initiatives or practices which we have, which are different from the competitors, which has helped us across the procurement and distribution side? Because I think you're doing very well in procurement as well. We want to know on that. Yes. Yeah. Rishabh, this is Sreenivad again. I do not know. I think if your question is to differentiate with competition, because we have a very wide variety of competition. We compete with so many companies in so many states. You must be familiar that we procure from nine states and we sell in 12 states. The competition for us is such a huge spectrum. I wouldn't want to differentiate versus any of our competitors. I can tell you what makes us tick. On the farm side, it's the same principles that Heritage had established 32 years ago. We continue to follow that. First and foremost is the transparency in terms of measurement. So when a farmer pours milk to Heritage, they realize that the measurement that we give to the farmer is accurate. And for somebody who has been pouring milk to an unorganized vendor, collecting milk in the villages, the difference is so obvious instantly. Secondly, is fair price. Fair price in the sense that our pricing is always, in any of the procurement regions that we operate, our pricing is on par or better than anybody else offering in that particular region. In fact, we give a lot of stability, which gives our farmers a comfort and confidence in pouring milk to Heritage. The third is the most important part, which is payment on payday, which means that on 11th, 21st and 31st of the month, three times in a month, money will be in the bank account of the farmer, irrespective. Anything. If there is a bank holiday, the money will be paid the day before. Even if there is a cyclone, money gets into their bank. And this is not for one year or two years. This, we have been doing for the last 32 years. That's more than 1,000 payment cycles. This is actually what is the secret mantra on the procurement side. Another most important aspect is the assured marketing of the surplus milk as far as the farmers are concerned. 365 days, they do not have to worry will somebody buy the milk? There's a concept in our industry called milk holiday. Heritage has had not even one milk holiday. Even during COVID pandemic, when there was a lockdown, when many of the cooperatives also did not procure milk, Heritage went and procured milk. Not even one day we stopped procuring milk. So as far as the farmer is concerned, this is one assured bank, Heritage, right? So that's clearly the strength we have. Similarly, on the distribution side, we have a very clear omni-channel strategy, and this is something that we had spoken in the previous quarterly calls as well. We do not depend on only one channel. We are very strong in the traditional channels of distribution, which is what we call as milk agents. We also have roughly 50% of our business revenue come from milk agents. We continue to grow on that. For example, in quarter one, we added about 150 milk agents. So it's not just traditional and strong, but we also continue to expand in that. But we also have milk parlors. We have about 859 Heritage parlors, which service our consumers. We have a new concept called Heritage Happiness Centers. We have close to 300 Heritage Happiness points now. We are also very strong on the product side with close to 400 product distributors who are typically FMCG distributors, who take our products to grocery stores across the country. We also are very strong with our modern trade and e-commerce partners. In fact, we contribute a good percentage of their revenue, so they consider us as a key vendor as well. So we have strategic partnership with all the modern trade and e-commerce partners. So it's not just one. So we have an omni-channel approach, and that's what gives us strength. Thank you. I really appreciate the kind of clarity you have, and you have given to me. Thank you so much. Just one question, if I can ask more. What do you think about the competitive from cooperative societies? Such as these players like Amul, do not have a target of profitability. They can make breakeven, and they are fine with it. So, how do we think about that? Rishabh, this is Sreenivad here. I will just say that, maybe you are asking this question for the first time. Sorry. Every quarter we get asked, and I am sure Heritage has been asked this question for the last 30 years. All I can say is that in 1992, when the industry was liberalized, the private organization's contribution to the dairy industry was zero. Today, of the total organized play, private clients like Heritage contribute 55%, whereas all the cooperatives put together contribute only 45%. You have our revenue report in front of you. You will see that our growth is always ahead of cooperatives. How we do it, I just explained to you on the procurement side as well as on the sales side. I can't say anything more other than in the product. Okay. Understood. Thank you. Yeah. Yeah. Just to add to what Sreedhar beautifully articulated, which is very close to our heart, it is also the fact that we are always listening to the consumer in the different markets that we are operating, and we are heavily, not just qualitatively, but quantitatively driven in that direction. So we are listening to the consumers. We get brand insights through internal as well as external teams. What we are seeing consistently quarter on quarter is that our brand, Heritage as a brand, top of mind or in terms of trials or in terms of repeat purchases, not just for milk and curd, but also for other value-added products, has been significantly increasing. It is not me talking from my heart or my mind, but numbers show that to us. So, I am very happy to be sharing that. Also qualitatively what comes out is people trust us as a brand, and we are seen as a very hygienically produced set of portfolio of products. This is what drives them towards purchasing Heritage products. Also, our S&D is very effective. We have a large S&D team that, across channels, keeps growing the number of touchpoints in terms of retail stores as well as other channel sort of outlets that we touch. So that has been supremely effective for us in the last couple of quarters. Thank you so much. Excellent insight. Very grateful. Thank you. Thank you. Next question is from the line of Kiran Kumar from Investwise. Please proceed. Thank you for the opportunity. I have a couple of questions. How are we trending on curd? Since Q1 will be our biggest quarter for curd, what is our growth rates of curd versus last year same quarter? Kiran, our growth is 13% in terms of volumes. Okay. My second question is on procurement. From last year to this year, it is INR 3.47 you have dropped your prices. Can I just know the same number for Q4 to Q1, how much we have dropped? Just a moment. We will come back to you, Kiran, on that. Meanwhile, we can take another one. Yeah. Then my last question is on SMP. You said you have some around 4,500 tons of SMP. Can we know the mix of buffalo cow? Because I presume our buffalo BM:CM ratio, referring to our previous earnings call, it is some 80%-20% or something. So is the SMP also in a similar ratio, 80%-20%, or is buffalo more than cow? Is it something like that? Yeah. It will be more or less 50-50. And last thing is on sales distribution. So how are the sales mix in the geography, like agents, distributors, we have our parlors. How are we distributed among it? A rough percentage mix. Can we have that number? Sorry, Kiran Kumar, could you please repeat that question? What I was saying is the sales mix in the geography, what we sell. Among distributors, agents, we sell in modern trade, and we sell to our own parlors. Do we have a specific percentage, means rough percentages, how much percentage of our sale is going to agent, how much percentage of our sale is going to our parlor? Is there a rough percentage? Yeah. So we can give you very high-level numbers. Okay, so the traditional channels, as we call it, are primarily agents and parlors. They contribute about close to about 70%. And the rest is all the newer channels that we have opened. Yeah. Are you present on e-commerce also? We? Of course. Where are you based, which is your city of residence? I stay in Bangalore. Please order Heritage on Swiggy, Zepto, BigBasket. In fact, our presence in e-commerce in Bangalore is far stronger than in many other cities. Okay. I will do that. Thank you. I request you to buy and try our products today. Definitely, I'll do it. Yeah. You asked a question as far as the landed cost. That question. Yeah. 24 paise it has increased compared to Q4. Okay, got it. Thank you. Thank you for the opportunity. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please restrict your questions to two per participant. If you have any follow-up questions, you may rejoin the queue. Next question is from the line of Vicky Punjabi from UTI Mutual Fund. Please go ahead. Yeah. Hi, Srideep. Thanks for taking my question. Just two questions from my side. One is, in the past, we have alluded to the fact that there are margin expansion levers that we have, like cost efficiencies, the gain in share of value-added products. How much more juice can you extract from these aspects, going forward? I believe, currently, we are being helped by procurement prices being lower. But once the inflation returns, how much juice can be extracted from these levers, going forward? Sure. You hit upon a point which we have been discussing over the last several quarterly calls. One of the biggest lever that we spoke about is we shift from milk towards value-added products. You can pretty much imagine that we still have a long way to go, right? Last year, we closed with a value-added product contribution of close to about 29.6 odd percent. We can say roughly 30%. This year, it is our aim to improve it by another 3%. We still have some way to go before we reach the 40% target that we have set for ourselves. Hopefully, we should reach there in the next two years. The second is as far as the operational excellence is concerned. We had mentioned in the previous calls as well, that some part of the CapEx is allocated towards replacement CapEx. The replacement CapEx is done with a very clear automation and operational cost reduction perspective, which we still have some good way to go. Last financial year was a year where we were able to reduce operating costs by close to about INR 0.50 per liter, which is actually significant. We think that we can further reduce that, going into this year as well. So there's still a long way to go. There are many other operational efficiency initiatives that we are working on. For example, logistics. We're still on a single metric of liters of milk per kilometer, as a metric is something that we are trying to improve through better vehicle utilization, better route planning, conversion of fossil fuel vehicles to electric vehicles. We still have a long way to go in all of these things. We are making good progress. We are seeing those efficiencies kick in. But we are encouraged by the fact that we still have a long way to go. Sure. Thanks. Just last thing, I wanted to understand with realizations in milk kind of falling off, would the growth actually trend down going forward? Because I do not think more than a mid-single digit volume growth is actually possible in the liquid milk segment. So from the expectations of possibly around 6%-7%, would the actual growth in the liquid milk segment going forward be a little lower than what we generally and what would we be targeting? This quarter, we grew milk by 4.6%, and almost all of it came from volume growth, because we did not increase the prices at all. But that need not be the case forever. We do not anticipate any price increase in the coming three, four months. But usually, cost increase, inflation, it is not just the procurement price cost increase, right? There is fuel cost increase, there is employee benefit cost increase, general inflation that is happening in the country, overall consumers' grocery basket inflation increase. So in line with this, we expect before next quarter one, there will be an increase in milk prices as well. So which means that we should be able to sustain, either through volume expansion or through pricing initiatives, sustain a mid-single digit or a high single digit kind of growth rate as far as milk is concerned. Plus, we will also know that we are expanding into newer geographies, right? So that will also help us grow our business. Sure. Thanks. That was it from my side. Thank you. Next question is from the line of Pratik Kothari from Unique PMS. Please go ahead. Yes, hi. Good morning and thank you. Sir, first question on the bulk fat loss. Anything that we recorded this quarter? Yes. Seven. Yes. We booked 7 crores of loss as well. One second. The CFO will be answering this in a minute. In the meantime, there were a couple of initiatives that we are working on to bring this down. I mean, increase our procurement from, I mean, increase our farm milk procurement, do more value-added or do more consumer fats. Any update, any progress on that? You can. Bulk fat loss is minimum, actually only 3-4 lakhs. Then only consumer fat loss is INR 6.4 crores has been taken. Bulk fat loss is zero and consumer is 6.5. Yes, 6.4. Yeah. As far as the milk procurement expansion is concerned, it's an ongoing process and every year, we keep adding every quarter, in fact every month, we keep adding our, what do you call as like village level collection centers. That work is ongoing. So we expect by the end of the year, we would enter another 1,500 odd villages, which will keep the milk flowing. More importantly, in these villages what we are also trying to expand two other axes. One is the number of farmers in each of the villages, is something that consciously we are trying to increase. So, on an average, you might have 15 farmers in a center. We are trying to increase it to 20, let's say. I'm just giving some hypothetical numbers. Please don't hang on to those specific numbers. But increasing and expanding farmers in each of the centers is also something that we are consciously working on. Right. And sir, the margins that we did now or maybe even in the future, is this higher than what our aspiration band is? How do we intend to use this margin? I mean, do we pass it on to show more growth, use it to spend on our advertising? How are we thinking about this additional windfall that we are making? Maybe even for timing it. Pradeep, this is Srideep here. We are not making. We have a very clearly defined strategy. We are sticking to our plan. These things shouldn't deter us and suddenly change the plans. We are not doing anything which we hadn't said before. Even when times were hard, we stuck to our plan, and it helped us recover faster than others. We'll continue to stick to our plan. Right. Then how long, I mean, can we hold on to this spread that we are making between the procurement and the final side? I mean, at some point, I believe you would have to pass it along. No, this is very speculative. I wouldn't be in a position to answer it. I wouldn't know. I mean, whatever I say would be purely speculative. No, I'm asking because we have seen multiple such cycles in the past. I mean, like you said, every three, four, five years it comes along. No, listen, usually what happens, if this kind of margin sustains, let's say, for example, 10% EBITDA margin is a given forever and ever and ever. Right? If that's the case, then I think all dairy players, not just Heritage, forget Heritage, all private players have a serious job of expanding the category itself. Like I mentioned some time back, only 5% of the paneer consumption in this country is from organized branded play. Only 9%-10% of the curd consumption in the country is organized play. People still make curd at home. Only 20% of the ghee consumption in the country is organized play. People still make ghee at home. If this kind of margin is a given, then naturally, this is purely hypothetical, Pradeep, that then dairy will become like every other FMCG company, the advertising to sales ratio will go to 2%, 3%, et cetera. So the category momentum will increase. That is all I can say. But this is a very hypothetical question and purely speculative. Correct. And sir, last issue- Sorry to interrupt, Mr. Kothari. May I please request you to rejoin the queue. Thank you. Ladies and gentlemen, please restrict your questions to one per participant. If you have any follow-up questions, please rejoin the queue. Next question is from the line of Resha Mehta from GreenEdge Wealth. Please go ahead. Yeah. Thank you for the opportunity, and congratulations to the entire team for a very strong set of numbers. So my first question is only, and sorry for harping on this again, is on the Maharashtra subsidy bit. So two-part question here. So, I understand that I think we do have around 4% to 5% procurement from Maharashtra. So with this INR 5 subsidy, does this apply to us? Because I think you mentioned that, only if we pay INR 30 to the farmer, then the government will pay them INR 5 additional. So which effectively means the farmer gets a net realization of INR 35. So how does this affect our Maharashtra operations and the procurement price there? That is the first part. And second, the farmers demanding at least INR 40 in Maharashtra and procurement prices have been subdued. Do you think that this farmer disenchantment is probably spreading in the South as well, and how are you reading that? That very soon, while the commentary is that procurement prices are expected to remain stable, but if they remain stable for so long, then the farmer disenchantment increases and it also affects the South part of the operations. That is the first question. Yes, Resha, thank you. We don't see the spread effect as you visualized. There is an event coming up in Maharashtra, I am sure you are aware. That is why the aggression on ground. But the price, INR 35, is quite reasonable. The government policy says the procurement organization should pay INR 30 per liter. Over and above that, INR 5 government will give as a support. That is the 35. The milk prices went as low as INR 20 during COVID. Subsequently, it reached INR 40 during the last year's, when production wasn't so good. So now it has come to 30 plus five, and we don't have much impact. We are already paying INR 28, INR 29 per liter in that area. So for us, it is INR 1 or INR 2 on the volume we procure in that zone. It is good farmers are getting reasonable price, 30 plus five, which keeps them interested in the dairy sector and production will not fall in the following year. Whenever there is a low price, the following year had a production problem. This would ensure the production remains at the normal level in the coming year also. There is no such indication in any other state. All states are quite normal. It is only in that state this is happening. Very clear. Second question is, on the revenue growth part Sorry to interrupt, Ms. Mehta. May we please request you to rejoin the queue? This is just the second question. We are restricted on one question, ma'am. Thank you. Next question is from the line of Ankit from Adezi Ventures. Please go ahead. Yeah. Hi. Congratulations on the great set of numbers. My question is taking more of a medium-term view, say maybe kind of three years forward, till FY 2028 for the entirety of the business. If I was to take a three-year view, how do you see our growth profile, whether it is volume and value, trending over these three years? Also with the VAP business keep growing, how do we see our EBITDA margin profile evolving maybe by FY 2028? The idea being that obviously milk prices will fluctuate and that will affect it, but kind of just assuming some sort of constancy there. Overall, what should be our growth profile three years and margin profile after three years? Yes, Ankit, Srideep here. See, it is our intention to sustain the growth momentum. Part of the growth will come because of volumes expansion. It is primarily more number of consumers are consuming more of our products, more number of times. That is what we are working on, those three axes. Part of our growth will happen because of revenue. Roughly you can say if we aim to grow in high teens, let us say 17%-18% year-on-year, 5% or 6% should happen because of price increases. Price increase is actually partly because of MRP increase, partly because of mix change. With more and more value-added products, the weighted average revenue also goes up. That should contribute about 5%, 6%. 12%-13% should come from volume growth. That is what we aim to achieve. As far as the EBITDA is concerned, we would like to have the business sustainably delivered in the corridor of 7%-8%. That will be our aim. The 17%-18% that we talk about, is this for the VAP business or is it for the entire piece, including the milk? No, this is overall business. We are hoping that we will grow in the 17%-18% range. That is what our aim is. I am not giving any guidance or I have no ability to predict future, but that is what we are aiming to achieve. Okay, thank you. Thank you so much. Thank you. Next follow-up question is from the line of Sameer Gupta from India Infoline. Please go ahead. Hi. Just a follow-up. So this cow and buffalo milk share, just wanted some clarity over there. So 80% is cow milk, is that correct? Yeah, that is right. Okay, thanks. That is all from me. Okay. Thank you. Next question is from the line of Raj from Arch of Partners. Please go ahead. Audible? Yes, you are. Sir, I just skipped a point on the growth part. Actually, you are intending to grow 17%-18% on the sales side for FY 2025 and FY 2026, and with 7%-8% EBITDA. Am I right? Yeah, that is the intention. All right. How much is the fat sales for Q1 FY 2025? Are you asking in terms of revenue? In terms of volume. Volumes would be roughly around 700 plus tons. Just give me a- 750, I think. Continue, sir. Yeah. All right. How much Next question is from the line of Pradeep Rawat from Yogya Capital. Please go ahead. Yeah. Good morning, and thank you for the opportunity. I have one bookkeeping question. What is the procurement price for this quarter? Average procurement price. That is INR 41.31. Yeah. Yes. INR 41.31. INR 41.31. Okay. Thank you. Thank you. Next question is from the line of- Yeah. There was a question on what is the total fat sale during this quarter. The exact number is 1,084 tons. 1,084. Thank you. Next question is from the line of Pradeep, an individual investor. Please go ahead. Hi. Thank you for the opportunity. Am I audible? Yes, you are. Please go ahead. Yeah. Congratulations for the good set of numbers. I am from Odisha, and that is why last six months I could see your products in Bhubaneswar and interiors of Odisha. Congratulations for coming into Odisha also. That is great news. First thing is, what is the differentiation in the ghee part? If you see the competitors, they clearly write that they make it a slow-cook process for 3.5 hours or four hours, and the aroma of love, all those things is there. But in your website, it is not mentioned anything. That was my first question. Second part is, when you do eCommerce in Odisha? These are the two questions. Thank you. Okay, thank you very much, Pradeep, for appreciating our products and consuming our range as well. Thank you very much for that. The question on differentiation as far as our ghee is concerned, our ghee is made from milk. Most of the ghee that you buy in the market may not be. I think that is a very big differentiation. Most of the very well-known brands may have vanaspati. ITC brand, if you see here, it is the most prevalent here. Sure. Yeah. Yeah. There is something that our Executive Director mentioned some time back. When Ms. Brahmani spoke, she said that, "We listen to consumers." So we understand that, for example, ghee. We understand that the requirement or the consumer expectation of ghee varies from state to state, from region to region. We try to formulate our ghee in terms of the boiling point and consistency, granularity, color, all these things. We try to get it as close to the consumer's expectation as possible. There's a lot of work that goes in making sure that it meets your expectations. So that's one. As far as eCommerce is concerned, we are working with our partners. We are figuring out some of the backend logistics, et cetera. Once we have a solve for all of that, we'll be launching in eCommerce as well. Thank you. Ladies and gentlemen, due to time constraint, that was the last question for the day. I would now like to hand the conference over to Dr. Rao for closing comments. Thank you all for participating in the earnings 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 managers at Valorem Advisors. Thank you. Thank you. On behalf of Heritage Foods Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.