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    Heritage Foods

    HERITGFOODGood
    Fast Moving Consumer Goods·16 Oct 2025
    Management Summary

    Heritage Foods demonstrated resilience in Q2 FY26, navigating an extended monsoon and butter shortage to deliver a 9% YoY revenue growth to ₹1,112.5 crores. Value-added products were a key driver, growing 18% YoY. Despite a YoY EBITDA margin decline due to higher milk procurement costs, sequential margins improved, and the company is focused on operational efficiencies, brand building, and distribution expansion to drive future growth and margin normalization.

    Highlights

    8

    • Consolidated revenue of ₹1,112.5 crores, up 9% year-on-year.

    • Value-added products (VAP) revenue at ₹413.2 crores, up 18% year-on-year, contributing 38% of total sales.

    • EBITDA stood at ₹77.2 crores with a 6.9% margin; PAT at ₹51 crores, up 5% year-on-year.

    • EBITDA margins improved 44 basis points sequentially, but were lower by 122 basis points year-on-year.

    • Milk procurement averaged 16.1 lakh liters per day (down 2% YoY), while milk sales grew 1.1% YoY to 12.1 lakh liters per day.

    • Heritage Nutrivet Limited reported revenue of ₹58.1 crores (up 34% YoY) and PBT of ₹5.4 crores (up 80% YoY).

    • Ice cream sales revenue grew 20% and volume grew 16.5% in Q2 FY26.

    • Expanded distribution by 60 points and 6,000 retail outlets in Q2.

    Concerns

    2

    • Weather Vagaries

    • Input Cost Inflation (Milk & Butter)

    Key financials

    Single quarter

    10 metrics
    1. 01Revenue₹1,112.5 Cr+9%YoY
    2. 02EBITDA₹77.2 Cr
    3. 03EBITDA Margin6.9%-1.2%YoY
    4. 04PAT₹51 Cr+5%YoY
    5. 05Normalized EBITDA Margin6.1%

    Segment breakdown

    • Value-Added Products (VAP)₹413.2 Cr87.7%
    • Heritage Nutrivet Limited₹58.1 Cr12.3%
    Donut· Share of Revenue

    Guidance & targets

    9
    CategoryTargetPriority
    Capacity
    Ice Cream Facility Commissioning
    By end of financial year
    		High
    Volume
    Milk Procurement Increase
    At least 1-2 lakh liters
    		Medium
    Volume
    Ice Cream Volumes & Market Share
    Stronger volumes and market share gains
    		Medium
    Volume
    Liquid Milk Sales Growth
    8-9%
    		Medium
    Input Cost
    Milk Prices
    Ease
    		Medium
    Employee Cost
    Employee Cost Growth
    Single digits
    		Medium
    Distribution
    Retail Outlets Addition
    10,000
    		High
    VAP Growth
    Value-Added Product Growth
    ~20% or higher than Q2
    		Medium
    Product Mix
    Curd Contribution to VAP
    Reduce
    		Medium

    Risks & concerns

    5
    RiskSeverity

    Weather Vagaries

    Extended and intensive monsoon, excess rainfall (up to 29%), and lower temperatures negatively impacted Q2 performance, especially VAP. — Management acknowledged

    high

    Input Cost Inflation (Milk & Butter)

    6.3% increase in milk procurement costs and intra-year butter shortage led to EBITDA margin compression (122 bps YoY). Global commodity prices and butter exports contributed to the shortage. — Management acknowledged

    high

    Industry Volatility

    The dairy industry is volatile and highly dependent on weather, with milk prices typically fluctuating every 3-4 years. — Management acknowledged

    medium

    Operating Leverage Not Playing Out

    Expenses (employee, other) growing faster than revenue (15-20% YoY), which management attributes to lower-than-expected volume growth and under-utilized new capacities. — Analyst acknowledged

    medium

    Areas of Evasion(1)

    • specific marketing spend absolute number (growth rate was given)

    Q&A highlights

    3

    “This quarter, our performance was about 15% and this performance is at least 5 percentage below our own internal expectation... And the prime reason, there is only one reason that I can attribute this to, which is the weather...”

    Reveals that VAP growth, while strong, missed internal targets due to weather, indicating potential for higher growth in normalized conditions.

    asked by Sameer Gupta

    3 min read8 chapters

    Detailed Narrative

    01

    Resilient Performance Amidst Headwinds in Q2 FY26

    Heritage Foods reported a consolidated revenue of ₹1,112.5 crores for Q2 FY26, marking a 9% year-on-year growth. This performance was achieved despite significant challenges, including an extended monsoon, a lean milk season, and an intra-year butter shortage. Management highlighted the company's strategic agility in navigating these headwinds, emphasizing a stable and credible performance.

    02

    Value-Added Products (VAP) Drive Growth

    The Value-Added Products (VAP) portfolio was a cornerstone of growth, with revenues reaching ₹413.2 crores, an 18% increase year-on-year, and contributing nearly 38% to total sales. Categories such as curd, paneer, drinkables, and ice cream registered double-digit growth. Curd remains the largest VAP contributor at 70-71%, with ice cream at ~5% and drinkables at ~10% of VAP revenue.

    03

    Profitability and Margin Dynamics

    EBITDA stood at ₹77.2 crores with a 6.9% margin, while PAT was ₹51 crores, up 5% year-on-year. However, EBITDA margins were lower by 122 basis points year-on-year, primarily due to a 6.3% increase in milk procurement costs versus a 4.5% rise in realizations. Positively, margins improved 44 basis points sequentially, and normalized EBITDA margin (excluding a ₹9.36 crore GST refund) was 6.1%.

    04

    Operational Efficiency and Procurement

    Milk procurement averaged 16.1 lakh liters per day, a marginal 2% decline year-on-year, with higher procurement costs. Milk sales grew 1.1% year-on-year to 12.1 lakh liters per day. The company has improved efficiency, with throughput per chilling center almost doubling (17 lakh liters from 186 centers today vs. 13 lakh liters from 214 centers 3 years ago) and liters produced per person up by 10% across factories.

    05

    Strategic Investments and Distribution Expansion

    Heritage Foods is investing in capacity, including a new greenfield ice cream facility on track for commissioning by the end of FY26. Distribution network expansion remains a key focus, with 60 new distributor points and 6,000 additional retail outlets added in Q2. The company aims to add 10,000 more retail outlets in Q3 to support a target liquid milk sales growth of 8-9%.

    06

    Brand Building and New Product Launches

    Significant investments were made in brand building, including a successful television and digital milk campaign garnering 47 million views and co-sponsorship of 'Big Boss'. Awareness levels in Bangalore, Chennai, and Hyderabad improved by 12%, 22%, and 30% respectively. New products like Sampurna cow milk and two new variants are being scaled up, with lactose-free milk also under consideration.

    07

    Nutrivet Subsidiary's Strong Performance

    The wholly-owned subsidiary, Heritage Nutrivet Limited, delivered a strong quarter with revenue of ₹58.1 crores, a 34% increase year-on-year, and PBT of ₹5.4 crores, an 80% increase year-on-year. This growth is attributed to higher feed adoption and efficiency improvements, also enhancing cost efficiency at the dairy level.

    08

    Outlook and Margin Normalization

    Management expects margins to normalize as milk costs ease and supply stabilizes in the upcoming flush season (Q3). They anticipate VAP growth of around 20% or higher in Q3, driven by festive demand and continued distribution expansion. The recent GST rate reduction from 18% to 5% for ice cream is expected to boost volumes and market share, reducing seasonality.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.