Heritage Foods Limited — Q1 FY27 earnings call

Call held 17 Jul 2026

Management summary

Heritage Foods Limited reported a strong Q1 FY27 with record consolidated revenue driven by robust growth in its value-added products (VAP) portfolio, which now contributes nearly half of total revenues. Despite persistent challenges from elevated milk procurement and input costs, the company demonstrated operational efficiencies and strategic investments in capacity and brand building. Management acknowledged the need to improve liquid milk volume growth and navigate the cyclical nature of the dairy industry.

Highlights

  • Consolidated revenue increased 18% year-on-year to ₹1338.1 crores, marking the highest quarterly revenue in the company's history.

  • Value-added products (VAP) revenue grew 40% year-on-year to ₹563.6 crores, contributing a record 44% of consolidated revenues.

  • The broader VAP portfolio, including consumer pack ghee and butter, grew 39% year-on-year to ₹632.2 crores, contributing a record 49% of consolidated revenues.

  • The ice cream business demonstrated strong momentum, growing 65% year-on-year to ₹55 crores, with new brand Alpenvie growing 44% and Get-A-Way growing 196%.

  • Heritage Nutrivet reported robust revenue growth of 37% year-on-year to ₹72.8 crores, delivering a PBT of ₹2 crores.

  • Operating leverage improved, with operating costs (other expenses) as a percentage of revenue decreasing from 9.64% in Q1 FY26 to 9.01% in Q1 FY27, and employee benefits decreasing from 7.21% to 6.74%.

Concerns

  • EBITDA margin stood at 4.6% and PAT margin at 1.9% for Q1 FY27.

  • Milk procurement prices increased 7% year-on-year to ₹46.61 per liter, reflecting continued supply tightness across key milk-producing regions.

  • Gross margin declined by approximately 2.5% compared to last year, primarily due to a mix change (decline in buffalo milk volumes), higher SMP (Skimmed Milk Powder) costs, and increased packing material costs.

  • Liquid milk volume growth has been flattish to negative for the past four quarters and is acknowledged as the 'main problem that we need to solve'.

  • Raw milk prices have increased by ₹5.35 per liter over the last two years (Q1 FY25 to Q1 FY27).

Key financials

  1. Consolidated Revenue ₹1,338.1 Cr +18%YoY
  2. EBITDA ₹61.9 Cr
  3. EBITDA Margin 4.6%
  4. PAT ₹15 Cr
  5. PAT Margin 1.9%
  6. VAP Revenue ₹563.6 Cr +40%YoY
  7. Broader VAP Revenue ₹632.2 Cr +39%YoY
  8. Milk Procurement Volume 18.1 lakh liters per day +2%YoY
  9. Milk Sales Price 58.68 Rs per liter +4%YoY

What they filed

Q1 FY27: revenue up 17.7%, net profit down 39.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,020 1,034 1,048 1,137 1,113 +9%1,119 +8%1,158 +10%1,338 +18%
EBITDA81 72 78 73 77 −5%63 −12%52 −33%62 −15%
Net profit49 43 38 41 51 +4%35 −19%24 −37%25 −39%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentEBITDA Margin Q1 FY27EBITDA Margin Q1 FY26
Milk3%5.8%
Value-Added Products (VAP)8.1%9.7%
Heritage Nutrivet Limited——

Capital allocation

high confidence
  • Capex ₹250 Cr
    • Paneer project
    • Ghee project
    • Raw milk procurement side investments
    • Minor capex
    So, at this point in time, we have two projects that is being constructed, that's being executed. One is a paneer project and another one ghee. We have some other investments into raw milk procurement side, also minor capex. All of it should add up to about INR250 crores for the year.
  • M&A Heritage Novandie Foods Acquisition · Closed

    Reinforcing presence in the fast-growing high-protein yogurt category through Livo brand.

    Heritage Novandie Foods became a wholly owned subsidiary, reinforcing our presence in the fast-growing high-protein yogurt category through Livo brand.
  • M&A Peanut butter and Jelly Limited Acquisition · Closed

    Reflecting conviction in the long-term potential of the better-for-you nutrition segment and further expanding presence in attractive premium food categories.

    We also increased our shareholding in Peanut butter and Jelly Limited to 71%, reflecting our conviction in the long-term potential of the better-for-you nutrition segment and further expanding our presence in attractive premium food categories.

Guidance & targets

Volume

  • Value-added products (VAP) volume growth Volume · long-term · High confidence 25%
    value-added products in the range of 25%. Now this is what you should expect in the long period in time.

    — Srideep Kesavan

  • Milk volume growth Volume · long-term · High confidence 7-8%
    which requires milk to grow at about 7% to 8%

    — Srideep Kesavan

  • Overall volume growth Volume · long-term · High confidence 16-17%
    we are aiming to grow in the mid- to high teens, so 16 to 17 percentage kind of growth is what we are aiming to deliver

    — Srideep Kesavan

Revenue

  • VAP contribution to consolidated revenues Revenue · FY30 · High confidence 50%
    So, we would like to end at around 50% by FY30. Now that's a goal that we have.

    — Srideep Kesavan

Profitability

  • EBITDA margin Profitability · long-term · Medium confidence high single digits
    our objective is not a 6% EBITDA. That's not what we are aiming for. We are looking at high single digits EBITDA. In fact, our average or median EBITDA in the last several years has been 7% or higher, 7.5%, etcetera. So, we should be aiming for we are aiming for high single-digit EBITDA.

    — Srideep Kesavan

Input Costs

  • Raw milk price inflation Input Costs · long-term · High confidence 3.5-4% year-on-year
    And that long-term trend is about 3.5% to 4% year-on-year increase.

    — Srideep Kesavan

Portfolio

  • Value-added product portfolio expansion Portfolio · every single year · High confidence 3-4%
    as long as it can demonstrate that every single year, it can expand value-added product portfolio by 3% or 4%

    — M. Sambasiva Rao

What to watch in Q2 FY27

Liquid Milk Volume Growth

next quarter
Current Flattish to negative for past 4 quarters
Target Improvement through distribution expansion

Why it matters

Improvement in liquid milk volume growth is crucial for better overhead absorption and overall profitability.

So I should admit that this is the main problem that we need to solve. If liquid milk volume growth comes back, it supports overhead absorption and the numbers would look very differently. It's something that we are working on.

Risks & concerns

  • Elevated Milk Procurement Costs

    high

    Milk procurement prices increased 7% YoY to ₹46.61 per liter, reflecting continued supply tightness across key milk-producing regions, weighing on the dairy industry.

    Management acknowledged

  • Unpredictable Weather and Climatic Conditions (El Nino)

    high

    Weather plays a significant role in anticipating procurement prices, with current conditions showing deficit in the Southern Peninsula and overall unpredictability, especially with an El Nino year.

    Management acknowledged

  • Input Cost Inflation for Animal Nutrition

    high

    There is a very high, month-on-month increase in all ingredients for cattle nutrition, exacerbated by cyclical weather, ethanol industry impact, and reduced raw material availability for cattle feed.

    Management acknowledged

  • Stagnant Liquid Milk Volume Growth

    high

    Liquid milk volume growth has been flattish to negative for the past four quarters and is identified as the 'main problem' to solve for better overhead absorption.

    Management acknowledged

  • Industry-wide Milk Shortage

    medium

    The dairy industry is facing a shortage of milk on the supply side, impacting all companies, including Heritage Foods.

    Management acknowledged

  • Increased Packing Material Costs

    medium

    Packing material costs had a significant material impact, contributing almost 30 basis points of bottom line impact, due to global events.

    Management acknowledged

  • Cyclical Nature of Dairy Business

    medium

    The dairy business is cyclical, with prices fluctuating based on supply and demand, making future procurement costs difficult to predict.

    Management acknowledged

Q&A highlights

6 direct
Milk Procurement Outlook and Pricing Direct
this time actually, this season generally, we expect a mini flush in April, May, which because of this weather condition, climatic conditions that could not happen much. And however, we have procured about 18.1 lakh liters during Q1 and the prices have gone up actually.

Analyst sought clarity on the expected mini flush and current procurement price trends, which are critical for understanding raw material costs.

Asked by Sameer Gupta

Drivers of VAP Volume Growth Direct
Primarily, you can say that 90% or 80% of the growth is primarily due to distribution expansion, new distribution points opened in existing geographies. ... 20 to 25 percentage of the growth is on account of consumer traction increasing, which is where we have gained market share.

Analyst questioned the exceptional 35% VAP volume growth, and management clarified the split between distribution expansion and market share gains.

Asked by Abhishek Mathur

Gross Margin Compression Despite Stable Procurement Price Direct
But we saw in this quarter a heavy decline in buffalo milk volumes. We actually had over 20 percentage of decline degrowth in buffalo milk. ... And the other third impact that we have had is packing material. On account of the war, the packing material also had a significant material impact, almost 30 basis points of bottom line impact.

Analyst challenged the reported gross margin decline given seemingly stable weighted average procurement prices, prompting management to detail the underlying factors (mix change, SMP, packing material).

Asked by Pratik Kothari

Stagnant Liquid Milk Volume Growth Direct
So I should admit that this is the main problem that we need to solve. If liquid milk volume growth comes back, it supports overhead absorption and the numbers would look very differently. It's something that we are working on.

Analyst highlighted a persistent issue, and management acknowledged it as the highest priority, indicating strategic focus on distribution expansion to address it.

Asked by Pratik Kothari

Future Price Hike Plans Direct
No. Like I mentioned as an answer to the previous question, we are taking price hikes as we speak. Even this week, we have increased prices in certain markets. So we are continuously increasing prices, not just for milk, but also for value-added products.

Analyst inquired about the company's pricing strategy amidst firm raw material costs, and management confirmed ongoing, continuous price increases.

Asked by Vignesh Iyer

Procurement Costs Post-October Flush Partial
See what Kshitij, what we would say is that this is a cyclical business, and it's a very large industry. It's very difficult to predict. So best case, we are hoping that the buffalo flush is good and the availability is great and prices come down. Worst case is it doesn't happen, prices continue to decline.

Analyst sought specific guidance on future procurement costs, but management emphasized the unpredictable and cyclical nature of the business, offering only broad scenarios.

Asked by Kshitij Sowlani

Raw Material Cost Inflation in Feed Business Direct
there is a very high increase in all the ingredients which are going to the cattle nutrition. And they are increasing month-on-month. It started somewhere in quarter 3 of last year, and it's moving until today. Quarter 2 as well looks quite heavy on the cost part.

Analyst inquired about specific cost pressures in the animal nutrition segment, revealing ongoing and significant inflation in feed ingredients due to various factors.

Asked by Aditya Khandelwal

3 min read 6 chapters

Detailed narrative

Q1 FY27 Performance Overview and Strategic Priorities

Heritage Foods Limited commenced FY27 with a strong Q1, achieving its highest quarterly revenue of ₹1338.1 crores, an 18% year-on-year increase. Despite a challenging dairy environment, the company delivered an EBITDA of ₹61.9 crores (4.6% margin) and a PAT of ₹15 crores (1.9% margin). Strategic priorities included reinforcing procurement networks, expanding the value-added products (VAP) portfolio, investing in manufacturing capabilities, and building new growth platforms.

Robust Growth in Value-Added Products (VAP)

The VAP portfolio emerged as the primary growth engine, with revenues growing 40% year-on-year to ₹563.6 crores. This segment now contributes a record 44% to consolidated revenues. Including consumer pack ghee and butter, the broader VAP portfolio grew 39% year-on-year to ₹632.2 crores, accounting for 49% of consolidated revenues. Key categories like paneer (33% volume growth), curd (26%), ice cream (25%), buttermilk (60%), and lassi (98%) demonstrated strong volume-driven growth, with price hikes contributing approximately 5%.

Milk Procurement and Pricing Dynamics

Milk procurement prices increased 7% year-on-year to ₹46.61 per liter, reflecting continued supply tightness. Despite this, Heritage increased milk procurement volumes by 2% year-on-year to 18.10 lakh liters per day through sustained investments in farmer engagement and cattle programs. The average milk sales price improved 4% year-on-year to ₹58.68 per liter. Management noted that a mini flush in April-May did not materialize significantly, and prices have gone up, with expectations for a flush season from October onwards.

Strategic Investments and Capacity Expansion

The company continued to strengthen its long-term growth platforms. Heritage Novandie Foods became a wholly owned subsidiary, enhancing its presence in the high-protein yogurt category. Shareholding in Peanut butter and Jelly Limited was increased to 71%, reflecting confidence in the nutrition segment. The newly commissioned ice cream facility ramped up to approximately 40% capacity utilization, supporting the Alpenvie and Get-A-Way brands. For FY27, the company plans a capex of ₹250 crores for new paneer and ghee projects, along with raw milk procurement investments.

Operational Efficiency and Margin Drivers

Despite a 2.5% decline in gross margin year-on-year due to a mix change (buffalo milk degrowth), higher SMP costs, and increased packing material costs, the company demonstrated operational efficiencies. Operating costs as a percentage of revenue decreased from 9.64% in Q1 FY26 to 9.01% in Q1 FY27, and employee benefits as a percentage of revenue decreased from 7.21% to 6.74%. These improvements contributed to a 1.1% positive impact on the bottom line, partially offsetting raw material cost pressures.

Outlook and Industry Challenges

Heritage Foods aims for long-term volume growth of 16-17%, with VAP growing at 25% and milk at 7-8%. The target is for VAP to contribute 50% of revenues by FY30 and to achieve high single-digit EBITDA margins. Management acknowledged the cyclical nature of the dairy business and the unpredictability of procurement prices, especially with an El Nino year. They are continuously implementing price hikes for both milk and VAP to manage input cost inflation, which has seen raw milk prices increase by ₹5.35 per liter over the last two years.

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