Heritage Foods Limited — Q1 FY26 earnings call

Heritage Foods achieved its highest-ever quarterly revenue of INR 1,136.8 crores (INR11,368 million) in Q1 FY26, marking its third consecutive quarter of double-digit revenue growth. This was despite weather-related challenges, including an erratic monsoon and an unseasonably cool summer, which temporarily impacted demand for value-added products. EBITDA stood at INR 73.9 crores (INR739 million) with a 6.5% margin, and PAT was INR 40.5 crores (INR405 million) with a 3.6% margin, both softer year-on-year due to seasonality, input cost inflation, and product mix shifts. Management noted a strong recovery in June, with overall business revenue growth bouncing back to 15.1%.

Value-added products (VAP), including ghee and butter consumer packs, contributed over 40% to the top line with revenues of INR 454 crores (INR4,540 million), growing 7.4% year-on-year. However, early rains temporarily impacted demand for VAP like curd, buttermilk, flavored milk, and ice cream. The company reported curd revenue of INR 265 crores (INR265 million) in Q1 FY26, with daily sales crossing 510 tons, up from 494 tons last year. Management indicated that the lower-than-expected VAP sales and a temporary product mix shift were key factors in the Q1 margin softness, but they expect normalization as volumes recover.

Milk procurement demonstrated robust growth, rising 10% year-on-year to 17.8 lakh liters per day, supported by sourcing from over 300,000 farmers across 9,000-plus villages. Milk sales grew 2.8% year-on-year to 11.6 lakh liters per day, with average realizations improving to INR 56.4 per liter. Raw milk prices increased by 4.74% year-on-year in Q1, which management attributed to the peak lean season and considered normal. They anticipate some short-term increases but nothing extraordinary, expecting milk availability to be decent until December.

The Animal Nutrition subsidiary, Heritage Nutrivet Limited, continued its strong performance, with revenue growing 26% year-on-year to INR 53.3 crores (INR533 million) and Profit Before Tax surging 130% year-on-year to INR 6.7 crores (INR67 million). Heritage Foods increased its stake in Heritage Novandie Foods Private Limited to 94.4%, gaining strategic control of the yogurt supply chain. The new sub-brand 'Livo' for high-protein yogurts has been launched, with a target to build volume to 2 tons per day in the next year and 10 tons per day in three years, leveraging Heritage Foods' sales and logistics for distribution. Novandie recorded an operational loss of INR 1.31 crores (INR1.31 million) in Q1 FY26.

Heritage Foods reiterated its Vision 2030 to be the 'most admired dairy nutrition company' in India, focusing on premiumization, digitalization, sustainability, and people-first governance. The company aims for continuous double-digit revenue growth, targeting mid-teens in the near to short term. For FY26, management expects to return to 15-16% revenue growth and approximately 20% VAP growth, with 'at least a percentage correction' in margins, assuming market conditions normalize post-Q1 weather impact^🌐. An INR 220 crore capex for a new ice cream facility is underway, expected to be operational by the end of calendar year 2025.

The company continues to focus on operational efficiencies, with working capital cycle days at 19 days as of June 30, 2025, down from 20 days in the corresponding prior year. This includes 35 days of inventory, 3 days of trade receivable, and 17 days of trade payable. Management emphasized their B2C focus and efficient inventory holding, stating their intention to maintain working capital days under 20 days. This reflects a disciplined approach to capital management and supply chain agility.