Dodla Dairy

Dodla Dairy reported a robust Q3 FY25, with revenue growing 21% year-on-year to ₹901 crores. This growth was significantly propelled by the Africa and Ografeed segments, which achieved their highest ever quarterly revenues and whose 9-month revenues have already surpassed their full FY24 figures. Despite Q3 typically being a moderate quarter for the dairy business due to seasonality, the company maintained healthy margin levels.

The company's net profit for Q3 FY25 stood at ₹64 crores, with the net profit margin improving by 152 basis points to 7.1%. This was partly due to a tax saving of ₹5 crores, achieved after obtaining a tax residency certificate in Singapore, which exempts dividend income. Overall EBITDA for the quarter was ₹96 crores, maintaining a 10.6% margin, which management attributes to ongoing efficiency improvements in milk procurement and processing.

Dodla Dairy's board approved a substantial capital expenditure of ₹280 crores for a new greenfield facility in Maharashtra. This plant, with an approximate handling capacity of 10 lakh litres per day, is expected to be operational by the end of FY27. The facility will include a powder plant (60 tons/day) and also process liquid milk, curd, and other value-added products. Funding for this expansion will be a combination of debt and internal accruals, with a preference for debt if government interest subvention is available.

Value-added product (VAP) sales remained soft in Q3 FY25, contributing 32.3% to total revenues, reflecting the seasonal nature of the industry. However, management anticipates an improvement in VAP sales during the upcoming summer season and plans to expand into new geographies to mitigate seasonality. The India business, excluding bulk fat sales, experienced low single-digit growth in the last three quarters, attributed to volume reduction and higher prices, but is expected to return to 8-10% volume growth from January 2025.

Milk procurement prices are on the rise as the industry enters the lean season. Management expects further price hikes of ₹1-2 per litre, with ₹1 already implemented in some areas and another ₹1 anticipated in March/April. In response, the company has already initiated selling price corrections in regions like Telangana, Andhra, and parts of Karnataka. Dodla Dairy's direct-to-farmer model helps maintain milk quality and ensures consistent supply.

The Africa segment demonstrated faster revenue growth in Q3 FY25, driven by increased utilization of new capacity in Kenya. However, margins in Africa were temporarily impacted by delayed monsoons leading to higher procurement costs. Management expects these margins to improve within a couple of months and aims to maintain consistent margin levels despite seasonal fluctuations. The Kenya plant is currently operating at 40% capacity utilization, indicating significant headroom for future growth.

Dodla Dairy is actively exploring and expanding its presence in quick commerce and modern trade channels. Currently, quick commerce contributes a small 0.5% to total revenues, but management expects this to grow by another 0.5-2% in the short term. For the full financial year FY25, the company anticipates generating approximately ₹100 crores in revenue from modern trade and e-commerce combined, significantly higher than the previous year.

The company highlighted its strategic advantage in milk procurement, particularly against struggling cooperatives in states like Telangana, Andhra, and Karnataka, which often face delays in farmer payments. Dodla Dairy's prompt payment and service model helps attract and retain farmers, ensuring a stable and quality milk supply. The new Maharashtra facility is also strategically located to de-risk procurement from other states and support existing plants in Hyderabad and Karnataka.