Detailed Narrative
Q3 FY26 Performance Overview and Margin Pressure
Dodla Dairy reported a top line of ₹1,025 crores in Q3 FY26, marking a 13.75% year-on-year growth driven by strong volumes. Despite this, the company faced significant margin pressure, with EBITDA margin at 7.7% and PAT margin at 6.7%. This was primarily due to a ₹2.5 per liter sequential increase in milk procurement costs, coupled with subdued demand during the winter season which prevented full price pass-through. Gross margin compressed to 26% from 28.2% in Q3 FY25.
Strategic Expansion in Africa and India
The company is actively pursuing growth through strategic expansions. In Africa, Dodla Dairy delivered a strong 34.5% year-on-year revenue growth in Q3 FY26, with EBITDA for the nine months increasing from ₹31 crores to ₹39 crores. A greenfield expansion project in Uganda is planned with an indicative capex of ₹50-60 crores over two years, aiming to expand market share from low to high single digits. In India, the Maharashtra project is progressing, with ₹69 crores already invested out of a planned ₹280 crores, targeting commercial operations by end of FY27 and 5 lakh liters per day procurement by end of the current fiscal year.
Value-Added Products and Product Mix Challenges
While liquid milk sales remained healthy at 13.9 lakh liters per day (19.6% YoY growth), the contribution from higher-margin value-added products like ghee, lassi, and ice cream was lower sequentially due to early and severe winters. However, on a year-on-year basis, these products continue to deliver healthy growth. The company aims for value-added products to constitute 30-32% of the overall composition in the long term, with paneer and curd expected to drive this growth.
Orgafeed and OSAM Performance
The Orgafeed business delivered stable performance with 16% revenue growth and an EBITDA margin of 11.6% in Q3 FY26. For the nine months, Orgafeed's EBITDA improved from ₹13 crores to ₹17.6 crores, with margins at 14.3%. The OSAM acquisition is now fully integrated, contributing ₹80 crores in revenue and ₹85 lakhs in EBITDA in Q3 FY26. Management expects OSAM to improve its contribution to overall profitability as scaling up of revenues progresses.
Outlook on Pricing and Margins
Management anticipates a price increase of ₹2-3 per liter in the near term, aiming for a realization of ₹63-64 per liter in stand-alone India, especially with the onset of summer. They expect EBITDA margins to be maintained in the 8-9% range during challenging years and 10-11% in good years. For Q4 FY26, an EBITDA margin of 8-8.5% is projected. The company is closely monitoring weather patterns and market dynamics to determine the timing and extent of price adjustments.