Heritage Foods Limited — Q3 FY26

Heritage Foods Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=PhQUM8sp3Ok Published: 3 months ago

0:01 1 second Ladies and gentlemen, good morning and welcome to the Heritage Foods Q3 9month FY26 earnings conference call hosted by Go India Advisor. 0:13 13 seconds As a reminder, all participant lines will be in the listen only mode and you will get an opportunity to ask questions after the presentation concludes. 0:23 23 seconds Should you need assistance during this conference call, please signal an operator by pressing star then zero on 0:29 29 seconds your touchstone phone. Please note that this conference is being recorded. 0:35 35 seconds I now hand the conference over to Miss Diia Kaswa from Go India Advis. Thank you and over to you Miss Dia. 0:43 43 seconds Thank you. Good morning everyone. I am Diya Kazwa and it's my pleasure to welcome you on behalf of Heritage Foods 0:50 50 seconds Limited. Thank you for joining us today for Q3 and 9M FY26 earnings call. This call is being hosted by Go India 0:58 58 seconds advisers. Please note that today's discussion may include certain forward-looking statements. Therefore, they must be viewed in conjunction with the risks that the company faces. 1:08 1 minute, 8 seconds Today on the call, we are joined by Mrs. Brahmi Nara, executive director, Dr. M. 1:14 1 minute, 14 seconds Sambbas Rao who director, Mr. Shi Shep Kesan, CEO, Mr. A prabhakaran Naidu CFO 1:24 1 minute, 24 seconds Mr. J. Sam Shamba Morti COO M Dr. Bridge Moan CEO Heritage Mutate 1:30 1 minute, 30 seconds Limited and Doc Mr. Umar Ganta Barek Company secretary and compliance officer. I now invite Dr. Ra to present 1:39 1 minute, 39 seconds the company's business outlook and performance after which we will open the floor for Q&A. Over to you sir. 1:50 1 minute, 50 seconds Thank you dear. Good morning to everyone on the call. 1:56 1 minute, 56 seconds At the outset on behalf of the management team at Heritage Foods, I would like to extend our new year wishes to all our shareholders, farmers, 2:05 2 minutes, 5 seconds employees, customers, consumers, and all stakeholders. 2:09 2 minutes, 9 seconds We wish everyone a healthy, prosperous, and successful year ahead. 2:16 2 minutes, 16 seconds Now turning to quarter 3 of FI26. 2:20 2 minutes, 20 seconds The quarter is marked by an unusually industry supply environment. Even during 2:27 2 minutes, 27 seconds what is typically a seasonally strong flush quarter, milk shortages, elevated procurement 2:35 2 minutes, 35 seconds costs, and butter supply tightness continue to weigh on operating performance leading to margin pressure despite steady demand conditions. 2:47 2 minutes, 47 seconds Procurement and raw material costs rose sharply during the quarter driven in part by industry-wide butter tightness. 2:55 2 minutes, 55 seconds Attractive global dairy trade prices led to significant butter exports from India resulting in domestic butter shortages and firm pricing. 3:05 3 minutes, 5 seconds For the first time in the last two years, constrained raw material availability even during flush quarter necessitated a bulk butter purchases at 3:13 3 minutes, 13 seconds elevated market prices in November, impacting overall profitability. 3:20 3 minutes, 20 seconds At the same time, milk procurement volumes were impacted by supply side constraints. For the first time in several years, YTD milk procurement 3:28 3 minutes, 28 seconds volumes declined marginally by82% to 16.86 86 lakh liters per day for 9 3:36 3 minutes, 36 seconds months of FI26 following three consecutive years of 9 to 10% yearon-year growth. 3:45 3 minutes, 45 seconds Q3 procurement averaged 16.73 lakh liters per day down 9% year on year reflecting milk shortages. 3:54 3 minutes, 54 seconds However, procurement volumes showed sequential stabilization during the quarter supported by our farmer first philosophy. 4:04 4 minutes, 4 seconds We continue to prioritize timely payments, feed support, and on ground engagement, reinforcing long-term farmer 4:12 4 minutes, 12 seconds relationships and ensuring continuity of supply during a challenging period. 4:19 4 minutes, 19 seconds On the sales sides, milk sales volume grew 2.1% yearonear to 11.94 lakh liters 4:27 4 minutes, 27 seconds per day. While net milk realizations improved to 57 rupees 31 pesa per liter, 4:34 4 minutes, 34 seconds reflecting pricing discipline and sustained brand trust. 4:39 4 minutes, 39 seconds Ongoing efficiency initiatives across a roaching chilling infrastructure, digital tracking continue to mitigate logistics and handling costs. 4:49 4 minutes, 49 seconds Despite multiple headwinds, company delivered resilient topline performance, reporting consolidated revenue of 11,192 4:59 4 minutes, 59 seconds million rupees, registering 8% year-on-year growth, crossing the 11,000 rupee million quarterly revenue mark for the third consecutive quarter. 5:10 5 minutes, 10 seconds This performance reflects resilient topline execution supported by sustained consumer demand, value added productled 5:19 5 minutes, 19 seconds growth and an expanding retail footprint even as elevated input cost constrain profitability. 5:28 5 minutes, 28 seconds Ei stood at 629 million rupees while packed was 346 million rupees. Margin 5:36 5 minutes, 36 seconds compression during the quarter was primarily driven by a sharp escalation in milk procurement prices which 5:42 5 minutes, 42 seconds increased by 9% yearonear outpacing consumer price realizations despite calibrated pricing actions undertaken by the company. 5:53 5 minutes, 53 seconds Following the notification of new labor codes, the company recognized a one-time increase in provision for defined 6:00 6 minutes benefit obligations under IND19 that is employee benefits resulting in 6:07 6 minutes, 7 seconds an incremental provision of 27.42 42 million rupees on a standalone basis and 6:14 6 minutes, 14 seconds 27.78 million rupees on a consolidated basis during the quarter and the same has been recognized as an employee benefit expense in the current reporting period. 6:26 6 minutes, 26 seconds Value added products remained central to our growth strategy during the quarter. 6:31 6 minutes, 31 seconds Value added product volumes grew 6.8% 8% yearonear with almost all categories delivering positive growth despite 6:39 6 minutes, 39 seconds adverse weather conditions. Strength was visible across cur paneer, drinkables, ghee and ice cream supported by strong 6:47 6 minutes, 47 seconds consumer engagement and market expansion which improved the quality of sales mix. 6:55 6 minutes, 55 seconds Including ghee and butter consumer packs, value added product revenues grew 22.6% 6% yearonear contributing 38% of 7:04 7 minutes, 4 seconds total revenue compared to 33.9% in the corresponding period last year underscoring sustained premiumization 7:12 7 minutes, 12 seconds and mix improvement. From a strategic growth perspective, capacity additions remain firmly on track. The Hyderabad 7:20 7 minutes, 20 seconds ice cream plant is progressing as planned with trial production underway now and commercial commissioning expected in current quarter. The 7:28 7 minutes, 28 seconds flavored milk plant is also expected to be commissioned in the current quarter, positioning the company well to capture 7:36 7 minutes, 36 seconds incremental demand across fast growing categories. I'm also pleased to share that Mrs. 7:43 7 minutes, 43 seconds Brahmi Nara, executive director, was honored at the business today most powerful women in business awards 2025 7:51 7 minutes, 51 seconds and Mrs. Nara Buneshwari Vice Chairperson Managing Director received the outstanding diary professional award 7:58 7 minutes, 58 seconds 2025 from the Indian diary association reflecting the strength of leadership and governance at heritage. 8:07 8 minutes, 7 seconds I'm also to announce Heritage Foods Limited has been recognized among India's top 50 manufacturing companies for its practices. 8:18 8 minutes, 18 seconds Looking ahead, near-term cost measures remain. We are confident that margins will progressively normalize supported 8:25 8 minutes, 25 seconds by improving supply conditions, higher value added products contribution and continued disciplined execution. 8:34 8 minutes, 34 seconds With that, now I open the floor for questions. Thank you very much. 8:43 8 minutes, 43 seconds Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press 8:51 8 minutes, 51 seconds star and one on the touchstone telephone. 8:55 8 minutes, 55 seconds If you wish to remove yourself from the question queue, you may press star and two. 9:01 9 minutes, 1 second Participants are requested to use handsets while asking a question. 9:06 9 minutes, 6 seconds Ladies and gentlemen, we will wait for a moment while the question assembles. 9:18 9 minutes, 18 seconds The first question is from the line of Samir Gupta from India infoland. Please go ahead. 9:25 9 minutes, 25 seconds Hi uh good good good morning sir and thanks for taking my question. Uh firstly sir I mean till last quarter we were expecting a normal flush but uh 9:34 9 minutes, 34 seconds you've seen milk prices rise even on a sequential basis. uh I understand you you mentioned that there were supply 9:41 9 minutes, 41 seconds shortages but can you just uh elaborate on the major reasons as to what resulted in this and the point the the reason I'm 9:49 9 minutes, 49 seconds asking is just wanted to assess if these are more like recurring things or more like a one-off 9:58 9 minutes, 58 seconds take yeah good morning Samir this isep here good good morning Samir this isep here uh thank you for your question. 10:09 10 minutes, 9 seconds Uh it was a bit of a surprise for all of us. Uh till uh I should say uh uh till 10:16 10 minutes, 16 seconds the month of August uh we were very hopeful and lot of uh mixed news were flowing in uh that the flush would be 10:26 10 minutes, 26 seconds normal and these things we would uh not know unless uh until it happens. But uh if you recall Q2 uh when we uh announced 10:35 10 minutes, 35 seconds the results we said that it was uh a period of excessive rainfalls. In fact, u many of the regions where we operate 10:43 10 minutes, 43 seconds saw upwards of 20 to 25%age of excess rainfalls and which uh which actually has caused a double whammy this year and 10:52 10 minutes, 52 seconds uh uh on the uh consumption side many of the key uh weather related value added product categories were impacted in 11:00 11 minutes terms of consumption momentum and uh the same excess rainfall actually caused stress at the animal level and which is 11:08 11 minutes, 8 seconds possibly what has caused uh uh productivity decline at the farm level and this was observed not just in one uh 11:16 11 minutes, 16 seconds procurement region but we procure from across nine states in the country and we felt this across uh usually in the flush 11:24 11 minutes, 24 seconds season we are uh uh we we receive a lot of milk uh this year if I can just give uh some numbers last year from Q2 to Q3 11:34 11 minutes, 34 seconds uh we had uh 1.8 8 lakh increase in milk right so so just to give Q2 last year 11:42 11 minutes, 42 seconds was about 16.44 lakh liters of milk and Q3 of last year was about 18.4 4 lakh lit. So two lakh increase from Q2 to Q3. 11:51 11 minutes, 51 seconds This year Q2 was about 16.1 lakh liter and Q3 was 16.7 lakh liter. Only 60,000 lits has increased. Uh so that's that 12:00 12 minutes that's primarily the big impact that we're talking about. Is it uh is it going to be like this? Uh usually no 12:08 12 minutes, 8 seconds because you know usually after a uh season of constrained supply usually uh it eases because uh prices are very firm 12:17 12 minutes, 17 seconds at this point in time. It is highly profitable for a dairy farmer to produce milk today. So we expect dairy farmers to increase production and that should 12:26 12 minutes, 26 seconds eventually sequentially uh uh bring uh down the prices. How long will it take? 12:32 12 minutes, 32 seconds We are not sure. We are expecting the mini flush season or the cow flush season in the south India which starts 12:39 12 minutes, 39 seconds from May onwards. We uh expect uh that at least to normalize because the prices in south of India is very firm at this 12:46 12 minutes, 46 seconds point in time. Uh so with that we expect things to ease out uh but we'll have to wait uh to see how how it happens. But 12:55 12 minutes, 55 seconds one thing is uh one thing we are observing now is um the impact of climate is palpable in our industry and uh you will see uh you will read upon a 13:05 13 minutes, 5 seconds lot of reports in this uh regard in the media. I hope I've been able to answer the question. 13:11 13 minutes, 11 seconds Yes. Yes. This is this is [clears throat] very very helpful. Just to reiterate, basically excessive rainfall is only the is the only reason 13:18 13 minutes, 18 seconds but usually what we have seen is that excessive rainfall also results in good groundwater and uh the next year 13:26 13 minutes, 26 seconds typically results in a uh a better year in terms of everything in terms of uh agree production in terms of milk production etc. something that happened last time. 13:37 13 minutes, 37 seconds Uh uh uh see we can't really uh predict as to other factors but this sole factor alone uh should result in better milk 13:45 13 minutes, 45 seconds productivity. Is that a fair understanding? 13:50 13 minutes, 50 seconds Uh I would say so. But see the are so complex uh with uh over a dozen variables is very difficult to predict. 14:01 14 minutes, 1 second We we we up to five six percentage of milk after up to five six percentage of rainfall 14:08 14 minutes, 8 seconds excess is good because you get a lot of green powder and uh you know the uh farmer income also improves but beyond 14:16 14 minutes, 16 seconds that point uh it creates stress for everyone uh yeah possibly you know that's what I'm you know we we we are waiting for 14:24 14 minutes, 24 seconds more scientific reports to come in and then we'll be able to update but what we felt was a palpable shortage of 14:31 14 minutes, 31 seconds Got it. Fair. Fair. And just uh another related question. So I I remember that uh during the analyst meet earlier this 14:39 14 minutes, 39 seconds last year, you had uh indicated a 7 to 9% kind of an AITA margin uh range. Uh 14:46 14 minutes, 46 seconds and this was taking into account the weather vagaries and milk price volatility. Now 9 months is 5.9% for standalone and 6.3% for console. Would 14:56 14 minutes, 56 seconds you still reiterate this margin guidance or do you think that there one should basically trim it downwards? 15:04 15 minutes, 4 seconds Uh the only some the only point I'd like to uh only word I'd like to call out here is guidance. Uh when we said 7 to 9 15:13 15 minutes, 13 seconds percentage is our uh target targeted range. Uh I I use the word I must have used uh the word targeted range and not 15:22 15 minutes, 22 seconds a guidance. um we would like to keep our AIDA towards the 7 to 9 percentage range. Uh which means that at this point 15:29 15 minutes, 29 seconds in time which I feel is the low lowest point we would have hit uh we still about 7 uh.9 percentage below that 15:38 15 minutes, 38 seconds level. So which means that we need to work harder on an appletoapple basis improve our business performance by about 1 percentage so that no we can 15:45 15 minutes, 45 seconds move um uh currently even this year also you must have seen that the uh the EITA has declined uh by nearly about 1.8%. 15:55 15 minutes, 55 seconds Which means that actually uh if I can improve the business performance uh on a like leg basis by about a percentage 16:02 16 minutes, 2 seconds point uh uh with similar uh raw material situation we should be around 7%age and 16:09 16 minutes, 9 seconds and a better raw material situation we should be around 9%. That's that's what I meant uh when I said what I said there is there is an impact of aida on account 16:18 16 minutes, 18 seconds of u various other factors which we need to uh work on as well. 16:25 16 minutes, 25 seconds Got it. I I'll come back in the queue. I have I have more questions but I'll come back in the queue. Thanks. Thanks for all this. 16:33 16 minutes, 33 seconds Thank you. We have the next question from the line of Sil Maha from KOTC AMC. Please go ahead. 16:40 16 minutes, 40 seconds Uh yeah, thanks for the question. Uh so if you can just quantify uh uh uh uh while the quarterly procurement prices 16:48 16 minutes, 48 seconds are very high what were the exit prices and what are the pricing trends you seeing at least for the month of Jan and 16:54 16 minutes, 54 seconds any price hikes we have taken in liquid sales for the regions where we operate. 17:04 17 minutes, 4 seconds Uh you were asking about exit price right? Uh yes the pricing trends in specific month of December and and the 17:11 17 minutes, 11 seconds Jan pricing yeah Jan I wouldn't be able to comment so December I'll be able to tell you just 17:18 17 minutes, 18 seconds give me one minute um uh have you got the weighted average procurement price for the month of uh for the quarter? 17:32 17 minutes, 32 seconds Hello. Yes, sorry I was not able to hear you. 17:38 17 minutes, 38 seconds Yeah. So the month ended month month ending cost of uh milk price in the month of December uh was uh weighted 17:46 17 minutes, 46 seconds average price was 46 rupees 1 by 46.0 4601. 17:53 17 minutes, 53 seconds So if it gives you a sense if it gives you a sense of uh how sequentially that 18:00 18 minutes is increased because uh for the quarter the reported number that we have uh we number that we have put is about 45.57 18:09 18 minutes, 9 seconds um so but December is 46.01 01 uh which means that you can see how it has climbed up from October, November, 18:16 18 minutes, 16 seconds December. Uh we expect the prices to uh further uh harden in uh in the next uh 18:26 18 minutes, 26 seconds 30 to 45 days but should ease off like I mentioned uh once the mini flush or the cow flush in the south starts from May onwards. 18:36 18 minutes, 36 seconds Sure. And uh in terms of our end product prices any any price h we've taken uh uh or at least we envisaged to take at 18:44 18 minutes, 44 seconds least in the forthcoming quarters at this point in time. 18:50 18 minutes, 50 seconds Yeah. So uh for the uh for the quarter that went by which is Q3 our raw milk uh while the raw milk prices increased by about 8.9%. 18:59 18 minutes, 59 seconds uh the market milk prices on a weighted average basis across our regions uh we have been able to inre increase by about 4.9%. 19:08 19 minutes, 8 seconds So we have passed on in in absolute terms if I can just give you the number uh the absolute uh milk uh price has 19:16 19 minutes, 16 seconds increased by uh 2.67 67 rupees per liter uh which is about 4.9% that's as much as 19:23 19 minutes, 23 seconds we could pass on uh which uh brought down the gross margin in milk itself by about 12%. Actually that has been the 19:31 19 minutes, 31 seconds biggest impact actually the impact everything is uh dependent on how much uh milk is absorbed uh you know how much 19:39 19 minutes, 39 seconds milk had to absorb of the raw material increase value added products also on a percentage basis uh we have taken up prices by about 6.6% 6% weighted average 19:48 19 minutes, 48 seconds value added re price per liter now is about 75 rupees compared to 70 rupees 40 peso last year u ghee also we have taken 19:58 19 minutes, 58 seconds up prices by about 15% compared to last year so we have we have taken significant price increase compared to last year uh uh but uh weighted average 20:07 20 minutes, 7 seconds if you look at all of this put together uh the uh revenue uh has not been uh has 20:14 20 minutes, 14 seconds not increased enough to compensate for the raw material increase. 20:20 20 minutes, 20 seconds Sure. And my last question, what would be the carrying inventory for the bulk fat? 20:28 20 minutes, 28 seconds Uh I'll I'll ask CFO to answer this. Please give me a second. Sure. Fat is nothing. 20:36 20 minutes, 36 seconds See uh okay without looking I can tell you that the fats we are carrying at this point in time is very very very uh 20:43 20 minutes, 43 seconds nominal. maybe 400 300 400 tons which is what would be less than a month's cover I believe 20:50 20 minutes, 50 seconds 390 tons of butter 390 tons of butter is exactly what we are carrying so we we don't have any butter 20:57 20 minutes, 57 seconds sure sure thank you so much and all the best for subsequent quarters thank you 21:05 21 minutes, 5 seconds thank you we have the next question from the line of syad from asset managers please go ahead 21:14 21 minutes, 14 seconds Uh yeah good morning your team and thank you for giving me the opportunity. Uh so sir I have a couple of questions first on your uh ice cream plant. 21:24 21 minutes, 24 seconds Uh so you you have said that uh that summer pet plant expected to commence commercial production by March 2026. So 21:32 21 minutes, 32 seconds what uh peak capacity utilization should we assume over the next two to three years and how margin accreditive is this facility at steady state? 21:44 21 minutes, 44 seconds Yeah. Um this is Shep again. Uh we are expecting the commissioning to happen uh towards the end of February or beginning 21:51 21 minutes, 51 seconds of March as we had comm uh promised earlier. Uh it's well on track as we speak now. Uh trial runs are happening. 22:00 22 minutes Uh we are just waiting for the commercial production uh date. Um in the 22:06 22 minutes, 6 seconds first year of operation we expect uh uh a capacity utilization of about 40 to 45%. 22:14 22 minutes, 14 seconds 40% is what we are expecting and this is on uh as per business plan. Uh we we 22:21 22 minutes, 21 seconds don't expect any surprises unless uh the summer goes bad and um you know ice cream business is impacted. As we speak 22:30 22 minutes, 30 seconds now, ice cream is a product category which has grown strongly for us in Q3. 22:36 22 minutes, 36 seconds Uh we are uh on the back of uh as in we are entering Q4 uh with a year-on-year uh growth of about 21% on ice cream. So 22:45 22 minutes, 45 seconds that's a very strong number. We are if you look at it uh Q2 the growth was about 16 17%. So every quarter we are increasing the growth rate of ice cream 22:53 22 minutes, 53 seconds which is which is actually good news. uh we are expecting to enter the summer season with a very strong uh uh growth 23:00 23 minutes rate as well as volumes. Uh in terms of uh how value accurative it'll be um uh 23:08 23 minutes, 8 seconds it it'll it is on an eida basis it is actually a very profitable business ice cream as you would know. Uh but then uh 23:16 23 minutes, 16 seconds there is also uh the the uh the you know the asset uh you know it's a new asset 23:24 23 minutes, 24 seconds investment with its depreciation and all that will come in. So it'll uh it'll take at least a year or two for the profitability to normalize. 23:34 23 minutes, 34 seconds Okay. Okay. So you have said right now that your ice cream business is really doing well from the last two to three quarters. So and you have also given the 23:42 23 minutes, 42 seconds commentary in the last uh in the last quarter that 20% keer over the that you that you can grow pane record in ice cream categories are expected to grow at 23:51 23 minutes, 51 seconds 20% ker over the next seven years. So how is heritage prioritizing capital and marketing spends across these categories 23:59 23 minutes, 59 seconds to maximize their returns on ROC basis. 24:05 24 minutes, 5 seconds So except uh except for ice cream where we you know ice cream is a you know it's the nature of the product that uh it is seasonal one. 24:13 24 minutes, 13 seconds Yeah. 24:13 24 minutes, 13 seconds Number two you you can't uh increase the capacity on an incremental basis except for uh ice cream. Uh most of our value 24:22 24 minutes, 22 seconds added product categories we are our capital investment over the years has been incremental to keep uh our uh you 24:29 24 minutes, 29 seconds know utilization plant utilization very high percentage. Uh and uh as we speak now uh the key categories for us as far 24:37 24 minutes, 37 seconds as value added products is concerned is curd, paneer, buttermilk uh ice cream that you called out uh flavored milk as 24:44 24 minutes, 44 seconds well as ghee uh these are the categories where we have uh these are the products where we have made capital investment 24:52 24 minutes, 52 seconds and uh kurd is something in which every year we make capital investment so that know we our planned utilization stays at around 90%. 24:59 24 minutes, 59 seconds uh uh paneer is something in which uh we have even this quarter also we have grown paneer by about 30%. So paneer is something which is growing very strong 25:08 25 minutes, 8 seconds for us. Uh so we have we have some cap capex in the pipeline which will get commissioned in the second second or third quarter of next financial year. 25:18 25 minutes, 18 seconds Oh okay okay fair enough. And one more last question uh like it's uh it's kind of if you can understand a bit 25:26 25 minutes, 26 seconds understanding regarding your uh like how uh uh am I audible? 25:36 25 minutes, 36 seconds Yes. Yes. Go ahead. 25:37 25 minutes, 37 seconds Yeah. Uh so like I want to be understanding regarding your uh southern market like how uh like if you see that 25:44 25 minutes, 44 seconds organized daily penetration expected to rise from 40 to 60% over the next decade. So like how heritage real 25:52 25 minutes, 52 seconds realistically targeting it in its course, thousand markets category 26:00 26 minutes overall dairy. Uh I believe your question is regarding overall dairy, right? Yeah. Yeah. 26:07 26 minutes, 7 seconds Yeah. Okay. So see we are very sharply focused on our core markets. Uh see the 26:13 26 minutes, 13 seconds size of dairy industry is huge. uh even in the markets where we operate the headroom for growth is tremendous. uh 26:21 26 minutes, 21 seconds like if I can just give you an example uh the penetration of curd package curd in a state like Andhra Pradesh which is 26:30 26 minutes, 30 seconds actually a very high curd consuming state is only 25%. 26:35 26 minutes, 35 seconds Okay. 75%age of curd that gets consumed in uh Andhra Pradesh is in the unpackaged form and in a city like 26:43 26 minutes, 43 seconds Hyderabad it is about 40% is the penetration of packaged curd. So the headroom for growth for us is tremendous and our own core markets are delivering 26:52 26 minutes, 52 seconds so much of growth. Uh so we we are our uh our uh priority at this point in time is doubling down and going deeper with 27:02 27 minutes, 2 seconds coal chain. Cold chain is one of the biggest uh uh enablers of our business. 27:06 27 minutes, 6 seconds With coal chain improving, what we are seeing is that the retail outlets that are stocking cur uh dairy especially value added dairy is expanding manifold. 27:16 27 minutes, 16 seconds uh maybe 5 years ago uh the uh the number of uh uh retail outlets that used to stock dairy were very limited because 27:25 27 minutes, 25 seconds you know you have to buy dairy you will have to either go to a uh you know milk booth or you have to go to a modern 27:32 27 minutes, 32 seconds trade. Today as an average uh retail outlet has started stocking dairy products and this is this is the biggest opportunity that we are capitalizing on. 27:42 27 minutes, 42 seconds The headroom for us is tremendous and we are working on expanding our distribution footprint as well as consumer traction for this. 27:49 27 minutes, 49 seconds I hope I have answered. It's a very simple strategy. 27:52 27 minutes, 52 seconds Stay focused on where we are strong and keep building strength. 27:56 27 minutes, 56 seconds Okay. Yeah. Thank you for thank you for detailed answer and jumping in the queue. 28:00 28 minutes See the for the for the benefit of all investors see the advantage we have is that we are dealing with products and categories which don't need explanation. 28:11 28 minutes, 11 seconds It's not something that you know you need to explain what this product is. 28:14 28 minutes, 14 seconds It's something that consumers are already consuming as in something that people are familiar for thousands of years. It's just that we are improving 28:21 28 minutes, 21 seconds the product uh delivery in terms of quality, taste and uh convenience. Uh which is what is switching people from 28:28 28 minutes, 28 seconds uh you know unpackaged to package um apart from other aspects such as trust built on purity and transparency. 28:38 28 minutes, 38 seconds Yeah. Okay. 28:44 28 minutes, 44 seconds Thank you. We have the next question from the line of Praam Chadri from GM Financial. Please go ahead. 28:51 28 minutes, 51 seconds Yeah. Hi. Uh so couple of questions. The first one is on uh like you mentioned 28:58 28 minutes, 58 seconds that uh margins should progressively improve from here on. But if I look at your commentary on the procurement 29:07 29 minutes, 7 seconds price, uh we are expecting uh the procurement price to further harden from here. Uh so why are we really like why 29:16 29 minutes, 16 seconds do we feel that the margins have bottomed out? Uh uh like are we expecting improvement in our selling price also 29:24 29 minutes, 24 seconds currently you mentioned that last quarter the selling price had increased by 2.9 rupees. So are we expecting a 29:32 29 minutes, 32 seconds further increase here? um uh in in the current quarter. 29:40 29 minutes, 40 seconds Uh thank you Pradhu. This is Shep again. 29:43 29 minutes, 43 seconds Uh yeah, you picked on that point when I said the margins probably would have bottomed out and probably should improve. Uh this is an estimate at this 29:51 29 minutes, 51 seconds point in time and we'll have to see how this plays out. There are two or three reasons why I mentioned what I said. One is raw material prices uh will uh 30:00 30 minutes increase at least in the very short term. Okay, let's talk about 30 days or so. That's that's a given. Uh we were 30:07 30 minutes, 7 seconds hoping number one to pass on some of this uh to the consumer through higher pricing. That is that is one. Number 30:16 30 minutes, 16 seconds two, we're also entering uh summer uh which means actually uh you know already in many of the regions and markets where 30:23 30 minutes, 23 seconds we operate the temperatures have started hitting 30°. 30:27 30 minutes, 27 seconds uh we are our business u many of our value added products especially the more profitable ones such as curd buttermilk 30:34 30 minutes, 34 seconds ice cream these are all highly seasonal so the contribution of these uh products to or the the salience of these products 30:43 30 minutes, 43 seconds in our kitty in Q4 will be much higher than that in Q3 so it's a it's an improvement of the weighted uh gross 30:51 30 minutes, 51 seconds margins as well as our ability to pass on some of this pricing to the consumer but You're right. Uh procurement price 30:58 30 minutes, 58 seconds at least in the nearshort term uh will increase. Uh this is something that we are cautious about. Uh but our effort at this point in time is that as we grow 31:07 31 minutes, 7 seconds volumes on the consumer side uh we need to keep growing our procurement in line so that we don't have milk shortage. 31:14 31 minutes, 14 seconds That's our highest priority. Uh we as we enter the season uh we will require at least couple of lit lakh lits of milk 31:23 31 minutes, 23 seconds from the current uh levels. Uh so our teams are focused on getting this milk at this point in time. Margins will be a 31:30 31 minutes, 30 seconds uh a result of how well we grow our value added products. 31:36 31 minutes, 36 seconds Sorry uh just to follow up here uh when was the last u price hike we took in 31:42 31 minutes, 42 seconds milk uh just to understand how much of it is yet to be passed on and are we planning to take any further or have we 31:51 31 minutes, 51 seconds already taken any further price hikes in the current quarter? We we operate in we we operate in close to 8,500 32:00 32 minutes villages and uh uh this is across uh some uh eight 15 or 18 regions as we 32:08 32 minutes, 8 seconds call it as in divided among all the nine states we operate at some point in time some price is always changing right you 32:16 32 minutes, 16 seconds know so it's not like you know on one particular day we change the price uh so this price movement is a continuous phenomenon 32:24 32 minutes, 24 seconds I won't be able to give a date on when was the last time it changed. 32:28 32 minutes, 28 seconds All right. Like let me just put it another way. The increase absolute increase in selling price we we are 32:35 32 minutes, 35 seconds expecting in the current quarter would it be higher than the absolute increase in the average procurement price. uh um 32:44 32 minutes, 44 seconds in the current quarter uh uh we would like to match it is the 32:52 32 minutes, 52 seconds way I'll uh put it and uh the weighted average improvement would be beneficial 33:00 33 minutes understood and my second question is on the slow growth in value added products right like um we mentioned you mentioned 33:07 33 minutes, 7 seconds that we took a 6.6% 6% uh price increase in value added products and despite that uh I think the VAP grew by around 14% 33:16 33 minutes, 16 seconds for us uh compared to uh earlier it used to grow at 18 20% this is the third 33:23 33 minutes, 23 seconds consecutive quarter of slower web growth while I understand the first half was 33:29 33 minutes, 29 seconds due to uh cooler temperatures but uh any particular reason to point out here 33:37 33 minutes, 37 seconds in Q3 as well the web growth was quite slow and especially if we look at the volume growth. 33:42 33 minutes, 42 seconds Yeah. So yeah so see value added products uh uh 33:48 33 minutes, 48 seconds we we uh primarily uh curd growth was lower this quarter curd growth came down 33:56 33 minutes, 56 seconds to about 10%. Usually we grow curd around 13 14%. uh support growth was lower. Uh we also saw uh muted growth in 34:05 34 minutes, 5 seconds uh drinkables uh primarily uh led by buttermilk and favored milk the growth was muted uh the drinkables grew only at 34:13 34 minutes, 13 seconds 16%. See we used to grow and rather actually our notar or rather actually our attempt and uh um objective we used 34:22 34 minutes, 22 seconds to grow value added products uh at 20 to 22% right you know the high 20 uh low 34:30 34 minutes, 30 seconds 20s is the uh targeted growth rate of uh value added products and if if it if it has to clock that kind of number then uh 34:39 34 minutes, 39 seconds our core value added products which is kurd etc has to grow at about 14 15%. 34:45 34 minutes, 45 seconds And uh then the the smaller value added products such as drinkables and ice creams and all of that need to grow at 34:52 34 minutes, 52 seconds around 50%. Only then you get a weighted average like that. So uh Q3 weather-wise was soft. It's something I spoke about 35:01 35 minutes, 1 second primarily due to excessive rainfalls and uh uh lower temperature uh on a weighted average basis. uh the 35:10 35 minutes, 10 seconds average temperature across our region was about 1 degree lower than not just last year but even last 10 year average. 35:17 35 minutes, 17 seconds So uh that that impacted the uh you know weather dependent categories with cur and uh uh the core value added products 35:26 35 minutes, 26 seconds coming to about 14 15%. and uh the smaller categories such as ice creams and drinkables going to about 30% which 35:33 35 minutes, 33 seconds is what we expect uh in Q4 uh and paneer holding strong at around 30% as it'll continue uh should give us a weighted 35:42 35 minutes, 42 seconds average of what 20% kind of value added products uh but but the key point to note if I may call that value added 35:50 35 minutes, 50 seconds product contribution to our revenue has expanded by 1.8% 8% in this quarter which is you can say roughly around 2% 35:58 35 minutes, 58 seconds which means that it is in line with the value added products contribution improvement uh over the years we've been growing value added product contribution 36:07 36 minutes, 7 seconds roughly 2% year on year understood and last couple of questions the first one is uh the like there are 36:16 36 minutes, 16 seconds two new plants that are starting one is on the ice cream side and one on the flavored milk side if you can tell me further revenue potential from these 36:23 36 minutes, 23 seconds plants once they are operating at full capacity. what sort of a revenue potential do these two plants hold and uh uh like that gives me an idea 36:31 36 minutes, 31 seconds regarding uh what sort of a value added products revenue potential I can expect and second uh on the continued growth of 36:40 36 minutes, 40 seconds other expenses right previously also we've spoken about this and that continues to uh be a concern so how are 36:48 36 minutes, 48 seconds we really addressing this part and uh how much of our other expenses uh I think we incurred close to around 117 36:57 36 minutes, 57 seconds 118 crores of other expenses in Q3. Uh how much of this would be related to the new plants uh starting up? 37:08 37 minutes, 8 seconds Thank you. Just quick answers to both. 37:10 37 minutes, 10 seconds Uh see the ice cream plant has a potential to deliver about 500 to 600 crores of revenue. That'll take about 6 to 7 years for us to realize that right. 37:22 37 minutes, 22 seconds uh our current revenues this year we might close at around 110 crores. Uh so that's a 4x or a 5x kind of multiple is 37:31 37 minutes, 31 seconds possible because it's not just with volumes also because of revenue per liter increase right over a period and it might take about seven years for us 37:38 37 minutes, 38 seconds to get there. Uh flavored milk on the other hand has a potential uh to grow up to about 120 crores in revenue. uh we 37:45 37 minutes, 45 seconds are targeting ourselves uh probably in the next four or five years we should be crossing the 100 crores mark uh with the flavored milk. So these are all 37:53 37 minutes, 53 seconds categories of uh um you know significant categories which are profitable which we are investing on. Um as far as the other 38:01 38 minutes, 1 second expenses are concerned, see primarily I'll just call out two numbers u while while there are many many smaller items but the two big ones which has changed 38:08 38 minutes, 8 seconds for us. One is uh uh the the whole logistics cost uh which uh has uh as a 38:16 38 minutes, 16 seconds percentage of revenue has gone up from 2.7% to 2.9% which is a roughly 2%age increase uh which you will see in the 38:23 38 minutes, 23 seconds AIDA decline also the 02 percentage is impacted because of logistics primarily uh because of u 38:33 38 minutes, 33 seconds um revenue not growing uh in in line with the cost and also our uh uh distribution expan expenses going up as we are pushing the distribution. Right? 38:43 38 minutes, 43 seconds So that's uh that's a small 2%age impact. Uh the other expense which has gone up is our marketing investments 38:50 38 minutes, 50 seconds this year uh in quarter 3 of this year compared to quarter 3 of previous year has gone up by about.5%. 38:57 38 minutes, 57 seconds Uh last year Q3 was about 1.2%age of revenue. This year Q3 is about 1.8%age of revenue. Well, this looks like a 0.5 39:05 39 minutes, 5 seconds percentage hit to the P&L. We consider it as a timely investment as we are getting on to high selling season. Um, 39:13 39 minutes, 13 seconds our salience in in terms of uh organized trade is increasing. Organized trade is already contributing about 18 19%age of 39:20 39 minutes, 20 seconds our sale and we are seeing a higher uptick, higher stickiness, higher retention rate for our brands uh in these channels thanks to these marketing 39:29 39 minutes, 29 seconds efforts. uh this is something that uh we are uh consciously doing uh which will help us uh differentially take up prices as far as the consumer is concerned. 39:42 39 minutes, 42 seconds So at 10.5% other expenses as per percentage of revenue in the current quarter. Uh can we say that most of it is sticky in 39:50 39 minutes, 50 seconds nature because a large increase has come from marketing cost which will continue going forward as well. So um the the 39:58 39 minutes, 58 seconds expense bit at least seems to be most yeah see the way I'll put it is that marketing is the only cost which is 40:06 40 minutes, 6 seconds absolute and it's not a percentage thing and so with revenues let's say for example moving up by about 100 crores or 40:14 40 minutes, 14 seconds 200 crores in the coming quarters as a percentage of uh revenue this marketing expense will continue to come down right because I'm I'm not going to see it's an 40:22 40 minutes, 22 seconds absolute spend it's it's let's say for example in a quarter I spent 20 crores Uh so that that will continue to come 40:29 40 minutes, 29 seconds down as a percentage. And in terms of other expenses uh we also count uh operating expenses which is also uh 40:38 40 minutes, 38 seconds which has also gone up uh especially uh the conversion cost which we feel as we as the volumes increase the absorptions 40:46 40 minutes, 46 seconds in our plans will be much better. Uh and uh that will also sequentially come down. 40:52 40 minutes, 52 seconds Uh basically the operating related cost on the so and the two plants which are starting what would be the two plants 41:01 41 minutes, 1 second which are starting I'm assuming that that will have no impact that no that that has 41:10 41 minutes, 10 seconds there any impact of pre-operating uh uh expenses paying no that I'll hand over to CFO to answer 41:17 41 minutes, 17 seconds that question pre-operating ice cream I right now it is not there 41:25 41 minutes, 25 seconds actually but uh it is not significant actually as far as ice cream is concerned uh because uh in the month of 41:34 41 minutes, 34 seconds February or March actually we are going to commission so nominal uh actually then revenue expenditure has been taken into account 41:42 41 minutes, 42 seconds to be charged not not very much nothing nothing significant at all 41:50 41 minutes, 50 seconds ideally get capitalized because it's a it's a total green field facilities. 41:57 41 minutes, 57 seconds Understood. Understood. Thank you. Thank you and all the best. 42:04 42 minutes, 4 seconds Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participants in the conference 42:12 42 minutes, 12 seconds call, we request you to kindly limit your questions to two per participant. 42:17 42 minutes, 17 seconds If you have a follow-up question, please rejoin the queue. Again, we have the next question from the line 42:24 42 minutes, 24 seconds of Pratik Kotari from Unique PMS. Please go ahead. 42:29 42 minutes, 29 seconds Yes. Hi, good morning. Uh uh so first on consumer fat, I think I mean very healthy set of numbers growth. So you 42:37 42 minutes, 37 seconds can talk about what is going right. One you spoke about the price hike we took but other than that uh uh how is our brand developing there? I mean we are 42:44 42 minutes, 44 seconds seeing quite strong ramp up there. uh and also the fat loss uh number for this quarter if you can share. 42:56 42 minutes, 56 seconds Yeah, thank you Pratik. Uh volumes have grown about 45% and overall revenue uh growth is about 69% and this primarily 43:04 43 minutes, 4 seconds in ghee. Uh the bulk fat has degrown 99.9%. 43:09 43 minutes, 9 seconds So practically there's no bulk fat this this quarter. uh unfortunately the milk supplies uh that we had raw milk 43:17 43 minutes, 17 seconds procurement was just enough for us to meet the requirement for our own uh thing. So there was no surplus butter 43:24 43 minutes, 24 seconds generated. So to meet uh the growing demand for ghee we had to actually buy butter from uh the market which happened 43:33 43 minutes, 33 seconds at a very high price uh because the butter prices in the market were quite strong comp quite high compared to last 43:40 43 minutes, 40 seconds year. So in terms of uh prices on a per liter or per kg basis while uh sales side we saw a strong improvement 43:49 43 minutes, 49 seconds weighted average basis prices went up by about 106 rupees. We never seen this kind of price increase uh anytime 106 43:58 43 minutes, 58 seconds rupees price increase per liter we have seen liter kg because I'm combining ghee and butter together. It's not the right way to look at it because you should 44:05 44 minutes, 5 seconds understand that there is a conversion factor of 81% to butter to ghee. But if I just do a simple weighted average, it's about 106 is the weighted average 44:13 44 minutes, 13 seconds price of u on the sales side. But the the the raw material side also went up about 103%. 103 rupees. Uh so which 44:22 44 minutes, 22 seconds means actually uh this u you know there's no benefit at all. Uh so because of which uh uh even though uh the 44:31 44 minutes, 31 seconds business shifted from bulk to consumer uh there is uh uh the losses are pretty much similar actually. uh 44:40 44 minutes, 40 seconds 9 10 crores 10.15 compared to 9 crores last year. So 44:49 44 minutes, 49 seconds it's no difference except that you know we are just cycling much higher volumes now. 44:56 44 minutes, 56 seconds Correct. uh and so secondly again on other expense so it's been about seven quarters since the good news the good news is I I'll 45:05 45 minutes, 5 seconds just indicate this but the good news is we have been able to uh establish a much higher consumer price uh in our ghee uh 45:15 45 minutes, 15 seconds the revenues are much higher like you know I just indicated the amount of uh the revenue numbers that I spoke about at a much higher volume level uh which 45:24 45 minutes, 24 seconds means that with commodities easing uh we should be in a very good position. We we just hoping for that. 45:31 45 minutes, 31 seconds Correct. No point taken. Uh so coming back on other expenses again. So it's been about seven quarters since we have not seen those the the targeted VAP 45:41 45 minutes, 41 seconds numbers or a consolidated revenue number. So and I understand that marketing is a good spend to have we want to build that brand. uh but x of 45:48 45 minutes, 48 seconds that are there no levers where we can kind of slow down cut cost at time when one we are not seeing growth one where we are seeing increase in milk price to 45:57 45 minutes, 57 seconds kind of manage our cost because for last many quarters our other expense has been growing at 20% year on year I think maybe 10 12 46:04 46 minutes, 4 seconds quarters now uh despite no revenue growth or lower revenue growth rather uh so I understand we were investing for growth but if that growth is not coming 46:13 46 minutes, 13 seconds do we not have any levers to kind of curtail this x of marketing which I understand is a good strength to have. 46:22 46 minutes, 22 seconds I agree. Uh so if I pratik uh a couple of things I'll call out. One is operating leverage right which is 46:29 46 minutes, 29 seconds actually the most important thing in our business because we we we are not while we call as premium but we are actually um mass premium players right you know 46:38 46 minutes, 38 seconds we uh we need we our business is totally dependent on volumes and if you look at the volumes of uh this year uh the the 46:47 46 minutes, 47 seconds volume growth is uh nothing great actually we we need strong volume growth and volume growth is what is going to uh 46:55 46 minutes, 55 seconds completely offset our uh uh operating costs and the operating leverage has to kick in. Um and uh you know for some 47:02 47 minutes, 2 seconds reason or the other this year has been uh you know from Q1 if you recall maybe two quarters ago in the same uh investor 47:10 47 minutes, 10 seconds call we mentioned that the Q1 was a wash out complete total wash out because of rains and uh and the rains continued 47:18 47 minutes, 18 seconds into Q2. Uh okay so so some somehow this this is a very very strange year which the way it is going they're actually 47:25 47 minutes, 25 seconds building strength because we know that the per uh per sales point offtake has improved uh per consumer stickiness has 47:33 47 minutes, 33 seconds increased uh you know per distributor sales has improved uh uh we we we know the unit metrics are looking good but we 47:40 47 minutes, 40 seconds have not been able to convert that in terms of large volume growth. We need volume growth coming back in uh uh you know uh low double digits and uh revenue 47:50 47 minutes, 50 seconds growth in mid- teens. Uh revenue growth is fine. 4 to 5%age of uh NR increase is fine but we need volume growth happening 47:58 47 minutes, 58 seconds in 10 to 11 percentage. That's when operating leverage kicks in and that will that is the reason why while I was answering a previous uh question I 48:06 48 minutes, 6 seconds mentioned that you know we can offset the cost by about what 6.7%age the AIDA on a on a like to like basis 48:14 48 minutes, 14 seconds today's AIDA would be instead of 6.2 or something of on consol basis will be close to 7%. Which I believe is a bottom 48:21 48 minutes, 21 seconds out uh number if you can do that then we are working in a range of 7 to 9%. 48:26 48 minutes, 26 seconds uh going forward that operating leverage is what we seek and uh I have no uh nothing to sorry we can't excuse here we 48:35 48 minutes, 35 seconds need to work harder to get those volumes no no correct but sir if other expenses growing at 20% the operating leverage will only come in if the top line starts 48:43 48 minutes, 43 seconds growing beyond 20 right I mean if you still grow volume at 10 price at four five and console at 15 you you'll still not see operating leverage kick in 48:52 48 minutes, 52 seconds no see operating uh I'm I'm talking See while while the operating expenses that we report a a good percentage of it uh 49:01 49 minutes, 1 second is actually fixed in nature as in we can't do anything about uh there are variable costs which uh will keep 49:08 49 minutes, 8 seconds increasing but uh the other expenses as a percentage of revenue will come down the moment volumes kick in that's what I 49:15 49 minutes, 15 seconds meant there are there are other factors as well which has gone little bit beyond our control like this this quarter uh we 49:22 49 minutes, 22 seconds had close to 1.7 7 crores of uh GST 1.2 1.2 2 crores of GST impact GST in the 49:31 49 minutes, 31 seconds sense actually uh the we are not able to uh absorb the ineligible portion of GST charged to the PINDA because the dairy 49:41 49 minutes, 41 seconds products GST has come down from uh in the case of actually G actually from 12% to 5% and paneer has become 49:49 49 minutes, 49 seconds zero those kind of things so the input uh input GST we are not able to recover then the ineligible GST we are charging 49:58 49 minutes, 58 seconds ing to the pendal in this quarter itself around 1.2 to see is the impact on on account of that. 50:04 50 minutes, 4 seconds So that that I'll consider as a variable number which is what actually has softened the gross margins of paneer a little bit. The only option for us is to 50:11 50 minutes, 11 seconds increase the NR but the accepting for these kind of things many of the other things other costs in the other expenses 50:19 50 minutes, 19 seconds are actually fixed in nature uh which will uh come down with operating leverage. 50:26 50 minutes, 26 seconds Fair we'll wait for that. Thank you and all the best. 50:32 50 minutes, 32 seconds Thank you. A reminder to all the participants. Kindly restrict your questions to two poor participant. 50:39 50 minutes, 39 seconds We have the next question from the line of Rajat Parab from systematics group. Please go ahead. 50:45 50 minutes, 45 seconds Yeah. Hi Shahib sir. This is Abhishek from systematics. Uh thank you for the opportunity. Uh just wanted to check on this mini flush or the cow flush that 50:53 50 minutes, 53 seconds you were talking about earlier. Uh what what is this? What would this be as a percentage of the main flush? Uh how 51:00 51 minutes significant would this be? Because what I'm trying to understand is you know in case for whatever reason there is some kind of a tidity or a failure to this 51:08 51 minutes, 8 seconds also. Uh is there a risk of me procurement cost remaining firm till the next flush uh and do things slide till 51:16 51 minutes, 16 seconds October? Uh just wanted to understand your perspective on that. 51:24 51 minutes, 24 seconds Yeah, possible the mini flush is witnessed over a period of decades in south India where the cows are 51:32 51 minutes, 32 seconds predominant. There will be two three months of milk production improvement and some amount of price softening 51:39 51 minutes, 39 seconds happens is a standard feature. But this climate vagaries and uh related issues like diseases can 51:48 51 minutes, 48 seconds sometimes impact like one year we had lumpy skin disease which had impacted and occasionally there would be some 51:56 51 minutes, 56 seconds problems but it is a standard feature of the cow. There will be many flush in the April May June period in South India that we expect to be normal this year. 52:06 52 minutes, 6 seconds Particularly the milk prices are very reminerative now to farmers. They would take greater care and production should 52:14 52 minutes, 14 seconds come and the buffalo flush will typically occur in October, November, December period. Uh which did not happen 52:22 52 minutes, 22 seconds in the expected or standard way this year. 52:30 52 minutes, 30 seconds Right. Understood, sir. And secondly on uh yeah second secondly on on uh this uh this the price hikes that you have just 52:37 52 minutes, 37 seconds detailed in your opening remarks. U I understand from from one of the earlier uh calls of the one of the listed 52:44 52 minutes, 44 seconds competitors that uh probably some of the other private dairies and probably some cooperatives have not uh taken price hikes. They've chosen to not take hikes 52:53 52 minutes, 53 seconds while we have taken something like a 4.9% on milk and 6.6% on VA. Is there a are we seeing some bit of market share 53:01 53 minutes, 1 second impact of that in January or is there a risk that we see in this current quarter mainly because of this? Yeah, that's that's it from me. 53:11 53 minutes, 11 seconds Y uh thank you Abishek Sep. Yeah. Uh yeah. So see some of the see there is um 53:19 53 minutes, 19 seconds there's also um you know see the volume growth I'm I'm sure that you must have done analysis of all uh uh you know the 53:28 53 minutes, 28 seconds operators of dairy others who have declared results as well accepting some of those uh new businesses uh the core 53:36 53 minutes, 36 seconds uh appletoapple business for everyone has been soft this quarter uh so uh you 53:43 53 minutes, 43 seconds know I I believe uh you know I think the industry will have to uh 53:49 53 minutes, 49 seconds increase prices. Uh it cannot remain like this. Everybody's cost has gone up. 53:55 53 minutes, 55 seconds Everyone has reported higher costs in uh Q3. It's not just heritage. So uh we have been uh we have passed on part of 54:04 54 minutes, 4 seconds it to the consumer. We believe others also will do so. Uh usually it is just before March that everybody passes on some bit to the consumer. So we are 54:12 54 minutes, 12 seconds waiting for waiting to see how this uh uh shapes up. Um I'll not be able to specifically comment why they have not increased prices or why they have 54:21 54 minutes, 21 seconds reduced why they have taken lesser price increase. Uh I can only uh tell you our reasons. 54:30 54 minutes, 30 seconds Uh fair enough sir. Thank it from me. Thanks and all the best. Thanks. 54:37 54 minutes, 37 seconds Thank you. A reminder to all the participants kindly rem restrict your questions to one per participant. We 54:45 54 minutes, 45 seconds have the next question from the line of Rishim Mahita from Green Edge Wealth. Please go ahead. 54:51 54 minutes, 51 seconds Yeah. Uh good morning. Uh thank you. I do have a couple of questions. Um so one is you know uh on the uh uh you know 54:59 54 minutes, 59 seconds heavy rainfall or erratic rainfall kind of disrupting uh uh growth. Well, that is well understood but uh you know how 55:07 55 minutes, 7 seconds does excess rainfall hamper uh milk production because so so does it happen that you know uh artificial insemination 55:14 55 minutes, 14 seconds or natural mating gets impacted or farmers become lax you know they don't give animal feed to their cattle h how 55:23 55 minutes, 23 seconds does this basically hamper milk production 55:39 55 minutes, 39 seconds Ladies and gentlemen, the line for the management has been disconnected. Please stay connected while we join them back. 55:54 55 minutes, 54 seconds [music] 56:50 56 minutes, 50 seconds [music] 56:54 56 minutes, 54 seconds Ladies and gentlemen, the line for the management has been connected. Over to you, sir. 56:59 56 minutes, 59 seconds Hormones where it gets uh a little bit reduction in milk as well as We are observing across Indian states now that 57:08 57 minutes, 8 seconds there's a there's a sharp decline in the milk uh happening in our crossbreed bread cattle. So as you all are aware we 57:17 57 minutes, 17 seconds are not having the pure uh genetics we are having the crossbreed cattle and uh after three or four years of sorry to 57:26 57 minutes, 26 seconds interrupt cycles they uh usually go for decline. So these are the two uh biggest factor. 57:35 57 minutes, 35 seconds Sorry to interrupt anything sir. Can you hear us? 57:44 57 minutes, 44 seconds Uh sir, are you able to hear us? Can you hear us? 57:48 57 minutes, 48 seconds Yes sir, I can hear you. Can you hear me? Are we audible? 57:56 57 minutes, 56 seconds Ladies and gentlemen, please stay connected. 57:59 57 minutes, 59 seconds Nothing is visible here connected. 58:04 58 minutes, 4 seconds Why is it not able to hear us? 58:10 58 minutes, 10 seconds No, we are. Yeah. 58:16 58 minutes, 16 seconds So, can you hear us? 58:20 58 minutes, 20 seconds Ladies and gentlemen, please stay connected. 58:23 58 minutes, 23 seconds Oh, okay. So which means uh here uh anyone from Go India can you hear us? 58:31 58 minutes, 31 seconds Yes, we can hear you. Hello. 58:41 58 minutes, 41 seconds Hello. Hello. 58:52 58 minutes, 52 seconds Hi. Can you hear us? Okay. Sir, are you able to hear us? Yeah. Can you hear us? 59:00 59 minutes Yeah. Now we got back. 59:04 59 minutes, 4 seconds I don't know. You heard Dr. Bridge clarification on animal health and milk production drop. 59:10 59 minutes, 10 seconds Uh sorry, I missed that. Uh if you could repeat your answer because Yeah, sure. Uh I'm uh uh repeating 59:19 59 minutes, 19 seconds myself. This is Dr. Bridge Mahan from Heritage Nutriet. uh we uh have observed that across Indian states we have uh the 59:28 59 minutes, 28 seconds cross-spread cattle and as you know that major milk collection is happening from the cattle not from the buffaloos and 59:36 59 minutes, 36 seconds these crossbread cattle they are 59:56 59 minutes, 56 seconds Yeah, Miss Ma, can you hear me again? Yeah. Yeah, I can. Please go ahead. 1:00:03 1 hour, 3 seconds Okay. So, uh yeah, I'm repeating again but very briefly now that Indian states we have the cattle which are crossbreed 1:00:11 1 hour, 11 seconds and they are found to have decline in their milk yield after a couple of lactations. So two or three lactation it 1:00:18 1 hour, 18 seconds goes down and second is there are hormonal cycles during especially during the rainide that time there are a couple 1:00:27 1 hour, 27 seconds of uh you know complications like mastitis infections which are widespread that reduces the milk. 1:00:38 1 hour, 38 seconds Hope I answer your query but then structurally how can this get resolved and you know from a midterm 1:00:46 1 hour, 46 seconds standpoint uh how can you know the milk shortage uh be addressed because you know seeing a 9% degrowth on milk 1:00:52 1 hour, 52 seconds procurement was really huge uh and and you know how also in terms of you know how do we meet this milk procurement 1:01:00 1 hour, 1 minute requirement uh considering the growth plans that we have. So my fear is that you know have we already lost out on some sales uh revenues because we were 1:01:09 1 hour, 1 minute, 9 seconds not able to procure milk and uh is that expected to continue? No, no Russia. 1:01:15 1 hour, 1 minute, 15 seconds No. Okay. So, Raa, no. We had sufficient, see what happened structurally, we had sufficient milk in Q3 to service our 1:01:22 1 hour, 1 minute, 22 seconds needs. Uh, you just see the quantity we procured, we procured about 6 16.8 17 lakh liters of milk and if you see our 1:01:30 1 hour, 1 minute, 30 seconds average total sale of Q3 is roughly around 17 lakh lit. So, we managed but usually what happens is in in Q3 we get 1:01:37 1 hour, 1 minute, 37 seconds about 19 lakh liters of milk. You see that historically you see the last quarter three that surplus milk is what converts into commodities. It also brings down the prices raw milk prices. 1:01:48 1 hour, 1 minute, 48 seconds It increases profitability. That butter we use it for ghee etc etc etc. That didn't happen right now. It doesn't mean 1:01:55 1 hour, 1 minute, 55 seconds that we don't have milk. Now what what we we we are currently um and and to address your question we you know we we 1:02:04 1 hour, 2 minutes, 4 seconds have uh we have about 1%age share of the industry right as an it's a very humongously huge industry Indian dairy 1:02:11 1 hour, 2 minutes, 11 seconds it's very difficult for one small actor to impact the whole ecosystem it's it's impossible nearly what we are focusing 1:02:18 1 hour, 2 minutes, 18 seconds on is to double down on what we do best which is actually in the villages in the farmers with the farmers that we work with we are trying to work on farmer 1:02:26 1 hour, 2 minutes, 26 seconds farmer productivity uh on an average three or four years ago an average farmer that we used to work with I'm going to talk about Indian average 1:02:34 1 hour, 2 minutes, 34 seconds farmer an average farmer that we used to work with used to produce about seven liters per day now it is about 10 liters per day now we need to okay we might 1:02:43 1 hour, 2 minutes, 43 seconds have hit a small air pocket that productivity has come down a little bit in Q3 of this year because of all these uh events but we'll have to continuously 1:02:52 1 hour, 2 minutes, 52 seconds working on taking this 10 liters to 11 to 12 to 13 kind thing that's what we can work on and but this is this this thing takes time it cannot be addressed 1:03:01 1 hour, 3 minutes, 1 second on a quartertoquarter basis. Uh so uh while the overall so we'll have to expect the overall milk availability to 1:03:08 1 hour, 3 minutes, 8 seconds improve which will also improve our farmers but our farmer productivity we work with let's say two lakh farmers these farmers are not going to produce 12 liters per day tomorrow this is not 1:03:17 1 hour, 3 minutes, 17 seconds going to happen right because this is a long-term thing and it'll take time so what we'll focus on here is that 1:03:25 1 hour, 3 minutes, 25 seconds structurally if you see while some some earlier somebody asked this question on like what changed IDA is down by about 1.8%. Let's let's look at it like that. 1:03:35 1 hour, 3 minutes, 35 seconds We are about at a console level five 6.2 and on a standalone basis about 5.4. We are saying that there should actually be 1:03:44 1 hour, 3 minutes, 44 seconds about uh out of this we spoke about marketing and other costs about 6.7%age which can be offset through operating leverage which is revenues and volumes 1:03:52 1 hour, 3 minutes, 52 seconds coming back which means on a like basis we should be we should look at this margin offset by that much amount 1:03:59 1 hour, 3 minutes, 59 seconds getting into the next uh quarter and beyond right and there are uh other operating leverages which I mentioned 1:04:07 1 hour, 4 minutes, 7 seconds alluded to once the volumes kick in because we are still cycling much lower volume growth We need the volume growth to come back for which uh we are working 1:04:15 1 hour, 4 minutes, 15 seconds I think uh all the metrics are looking good. Uh but we also need uh a little bit of you know weather and other 1:04:23 1 hour, 4 minutes, 23 seconds consumption uh boost everything all all of those things also to kick in. All in all all these factors are what's going 1:04:30 1 hour, 4 minutes, 30 seconds to stabilize normalize our uh re uh you know business in terms of margins potential. But that said 1:04:39 1 hour, 4 minutes, 39 seconds uh a one and a half to two percentage swing in Aida will always be uh because this this is a cyclical this is a cyclical business uh this is an 1:04:48 1 hour, 4 minutes, 48 seconds agriculture. No sorry shi sorry my sorry to interrupt my my question was not on margins I think 1:04:56 1 hour, 4 minutes, 56 seconds that was well covered uh my question was more on you know so so what I understood from sorry to interrupt in between uh rishim I would request you to kindly rejoin the 1:05:05 1 hour, 5 minutes, 5 seconds queue for the follow-up question I I think lot of time got spent uh you know in this uh uh you know the connection issue and I think all the 1:05:13 1 hour, 5 minutes, 13 seconds other participants were given a fair chance to ask their question I've just requested I'll So I'll answer very I'll answer 1:05:21 1 hour, 5 minutes, 21 seconds very simply that u you know we are working with the number of farmers and the villages where we are operating. 1:05:28 1 hour, 5 minutes, 28 seconds What we are trying to do is to recruit more farmers in the villages where we are operating. We're trying to get them uh uh to add more animals. We're also 1:05:37 1 hour, 5 minutes, 37 seconds expecting uh let's say the mini flush to play to our benefit. That's the only thing we can uh work on, right? We are 1:05:44 1 hour, 5 minutes, 44 seconds working on the variables that we have influence over. 1:05:50 1 hour, 5 minutes, 50 seconds So in the markets that you know um uh where we have taken price hikes would our peers would have also taken price hikes or is it only us? 1:06:02 1 hour, 6 minutes, 2 seconds Uh I I think uh about Mr. Samu Morti CEO will be able to 1:06:10 1 hour, 6 minutes, 10 seconds answer this better. Yeah, they uh yeah some places uh we have taken it up and 1:06:17 1 hour, 6 minutes, 17 seconds uh some competitors have taken it up but most of the competitors have not taken up but certain places certain markets 1:06:25 1 hour, 6 minutes, 25 seconds they have also taken up. So it's not that no but everywhere uh uh others have taken it up. So some places they have 1:06:33 1 hour, 6 minutes, 33 seconds taken it up along with us as well. So that's it. Sure. 1:06:41 1 hour, 6 minutes, 41 seconds Thank you. We have the next question from the line of Harve from LHS securities. Please go ahead. 1:06:49 1 hour, 6 minutes, 49 seconds Yeah, thank you for taking my question. 1:06:51 1 hour, 6 minutes, 51 seconds I just had one uh couple of questions but I will restrict it to one. Just wanted to understand that the Elmino effect that is going to come into the 1:06:59 1 hour, 6 minutes, 59 seconds weather. So what what is the expectation like uh clearly the milk supply is really low in the industry u as well as 1:07:07 1 hour, 7 minutes, 7 seconds the prices are stiff and you are saying that uh this is what something that we can expect in the next 30 to 60 days as well. So when we talk about the value 1:07:15 1 hour, 7 minutes, 15 seconds added product of how do you think that is going to do in this summer as well as u since we are not able to convert excess of the milk into the commodities 1:07:24 1 hour, 7 minutes, 24 seconds now so uh how about the prices and the margins will be will be sold on lower price and the margin 1:07:36 1 hour, 7 minutes, 36 seconds this isep here so I'll not be able to comment on leno um but but yeah excess of anything in 1:07:44 1 hour, 7 minutes, 44 seconds summer if there is excess heat also that affects milk production excess rainfall excess of anything impacts our business right you know business has to operate 1:07:52 1 hour, 7 minutes, 52 seconds in a particular corridor of comfort uh that said excess heat is good for our sales side that is for sure products 1:08:01 1 hour, 8 minutes, 1 second such as curd buttermilk ice cream and all of that uh should should be should go well whether it is El Nino or not we 1:08:08 1 hour, 8 minutes, 8 seconds expect the summer to be normal if if it's a normal summer I believe the growth that we'll deliver will be strong uh because we already have good 1:08:17 1 hour, 8 minutes, 17 seconds indications of uh even with soft weather when the days weather would open up our numbers are quite strong if I can just 1:08:24 1 hour, 8 minutes, 24 seconds say uh we crossed uh for curd for example 400 tons uh is a big number that we crossed and it's the first time we 1:08:31 1 hour, 8 minutes, 31 seconds crossed that number in uh uh quarter 3 uh you know all other numbers are also 1:08:39 1 hour, 8 minutes, 39 seconds strong uh so we are entering the summer in a strong Brainy here, executive director. I just wanted 1:08:46 1 hour, 8 minutes, 46 seconds to add one more point that um uh uh our numbers show a lot of uh positive um progress when we look look at uh 1:08:55 1 hour, 8 minutes, 55 seconds scientific numbers such as brand health track, loyalty, awareness, etc. Um so a lot of effort is going in that direction 1:09:02 1 hour, 9 minutes, 2 seconds to mitigate some of these external factors impacting our sales. Um and that's been quite positive. Aside from that uh we are also seeing through 1:09:10 1 hour, 9 minutes, 10 seconds platforms where things are measure measurable such as e-commerce platforms that the stickiness with the brand for our product in certain categories is 1:09:19 1 hour, 9 minutes, 19 seconds improving significantly. Uh last but not the least I think uh it is very important for us to a certain extent to deseasonalize ourselves as a business 1:09:28 1 hour, 9 minutes, 28 seconds and hence uh the functional proposition is becoming exceptionally important for us. I think all along we've been very focused on fortification as a lever to 1:09:36 1 hour, 9 minutes, 36 seconds be able to do it. We're also focusing significantly on probiotics. Um um our buttermilk um one of our variants of 1:09:43 1 hour, 9 minutes, 43 seconds buttermilk is probiotic in nature and is growing pretty well. Um so that people consume it um more for the functional 1:09:50 1 hour, 9 minutes, 50 seconds benefits and not just a seasonal uh um you know uh not just seasonal reasons. 1:09:56 1 hour, 9 minutes, 56 seconds Aside from that, protein is a huge huge proposition for us and dairy naturally is a great source of protein um if uh uh 1:10:04 1 hour, 10 minutes, 4 seconds R&D and packaging is done the right way and it's delivered to the consumer with a good amount of awareness. Uh I'm also happy to say that in the past quarter we 1:10:13 1 hour, 10 minutes, 13 seconds had um launched nourish plus paneer which is 60 grams protein paneer a high protein paneer along with nourish plus 1:10:21 1 hour, 10 minutes, 21 seconds milk as well and the initial um uh uptake has been very very positive through new age e-commerce platforms. So I think there are several levers that we 1:10:30 1 hour, 10 minutes, 30 seconds are working on very consciously to sort of season proof ourselves and to make ourselves a formidable brand. Um um so 1:10:38 1 hour, 10 minutes, 38 seconds we are less affected by external conditions and we're also putting in that effort in building awareness among our consumers. 1:10:46 1 hour, 10 minutes, 46 seconds Uh thank you for that detailed answer. I would just like to have one follow up in this that when we talk about the mill procurement that we were not able to 1:10:55 1 hour, 10 minutes, 55 seconds increase our mill procurement because of the industry uh problem that we are facing right now. I just wanted to understand since uh bulk commodities not 1:11:03 1 hour, 11 minutes, 3 seconds there right now on our balance sheet. So uh when we talk about value added product sales will there be milk shortages that you expect in the coming 1:11:12 1 hour, 11 minutes, 12 seconds quarters? Uh is there chances of that or will will we lose our sales because of that? Is that a possibility? 1:11:22 1 hour, 11 minutes, 22 seconds No, that is not uh foreseen. We will find the sources of milk and also we 1:11:29 1 hour, 11 minutes, 29 seconds have enough uh SMB purchased and stored for meeting the requirements of next season. 1:11:37 1 hour, 11 minutes, 37 seconds Perfect. Thank you so much. And and uh thank you so much. Yeah. Yeah. Thank you. 1:11:47 1 hour, 11 minutes, 47 seconds Thank you very much ladies and gentlemen. That will be the last question for today. I now hand the conference over to Mr. Dr. Raalo for the 1:11:55 1 hour, 11 minutes, 55 seconds closing comments. Thank you and over to you sir. 1:12:00 1 hour, 12 minutes Thank you very much for your continued interest in heritage. Uh I'm sure you got the essence of the quarter and we 1:12:08 1 hour, 12 minutes, 8 seconds look forward to meet you all soon for the next earnings call. Thank you again. 1:12:16 1 hour, 12 minutes, 16 seconds Thank you management members. On behalf of Heritage Foods Limited and Go India Advisers, that concludes [clears throat] this conference. Thank you for joining 1:12:24 1 hour, 12 minutes, 24 seconds with us today and you may now disconnect your lines.