Heritage Q2 call: 19% sales growth met by 11% milk cost rise

Heritage Foods, which collects milk from farmers and sells milk, curd and paneer to households, filed on October 19, 2026 the transcript of its October 16 call for Q2 and H1 FY27 . Revenue rose 19% to Rs 1,319.6 crore in Q2 with EBITDA margin at 5.6%, up from Q1 but below last year, as 11% farm-cost inflation outran 8% selling-price increases and value-added mix carried growth .

Sales rose fast but profit stayed below last year

Expenses grew 20% in both Q2 and H1, faster than revenue, so profit fell from a year ago even as the quarter improved sequentially . Management said the business exited Q2 in a stronger position, with staggered September price hikes set to accrue in Q3 .

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The half-year shows the same pattern of strong top-line and weaker conversion. H1 revenue was up 18%, while EBITDA and profit after tax were down about 10% and 39% from H1 last year .

The squeeze is not new. After a strong FY25, FY26 sales kept growing while margins stepped down .

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New plants lifted fixed costs below EBITDA

Higher depreciation and interest contributed to profit falling more than EBITDA from a year ago. Management linked higher depreciation to large projects capitalised at the start of the year . The comparison also included an exceptional gain of Rs 9.4 crore in Q2 FY26 that did not recur in Q2 FY27, alongside lower other income . Depreciation in Q2 was up 37% from a year ago and finance cost up 89%, continuing the annual rise in both lines .

Management expects throughput and capacity absorption to improve operating leverage from Q2 to Q3 . Other cost heads helped, with employee cost, operating expenses and freight each down as a share of revenue, leaving raw material as the only cost head rising as a share of revenue .

Milk cost rose faster than Heritage could price

Procurement grew while farm price hit Rs 47.73 a litre

Heritage procured more milk despite a difficult season, but paid materially more for it . Average landed cost was up 11% in Q2 after about 7.5% in Q1, driven by sustained demand, limited improvement in arrivals and higher feed and fodder costs .

Sources: Q4 FY26 — ; Q1 FY27 — ; Q2 FY27 — .

Q2 procurement was 17.28 lakh litres per day, up 7%, and H1 was 17.69 lakh litres per day, up 4%, despite monsoon-related constraints . October farm prices were slightly above September, and management hopes the buffalo flush after Diwali cools costs .

The season remains mixed. Management described floods in parts of the north and drought contingency in parts of the south in an El Nino year, with Q3 last year at Rs 45.55 per litre as context .

Cow milk is about 80% of procurement by volume . It has been more inflationary since April because constrained buffalo supply pushed farmers and companies toward cow milk, making it dearer and closer to buffalo on solids pricing, concentrated in hardcore cow-milk belts .

Selling-price hikes lagged and spill into next quarter

Liquid milk held volume while realisation rose, but not enough to cover farm inflation in the quarter .

Sources: Q4 FY26 — ; Q1 FY27 — ; Q2 FY27 — .

On the call, management reported Q2 milk sales of 12.35 lakh litres per day, up 2%, at Rs 60.34 per litre, up 6% . The presentation reports milk-volume growth of 2.5%; the two sources differ on the growth rate . Overall net realisation across milk and value-added products was up about 8%, with milk about 6% and others 9% to 10%, against the 11% rise in raw milk cost .

In core dairy, about half the revenue growth came from price and half from volume, showing volumes held despite hikes . Hikes were staggered through July, August and September, with September levels well above the quarterly average, so the benefit accrues in Q3 . October opened at much higher consumer prices than Q2 .

Management said milk prices cannot be raised click-and-drag by 11% when procurement rises 11%, so larger increases were taken where branding allows better pass-through . It quantified sensitivity as Rs 0.5 per litre lower procurement adding almost Rs 3 crore per month at current scale . Management distinguished two cooperative moves: Aavin raised its milk procurement price by about Rs 6 per litre, increasing farm-level cost pressure, while Karnataka's announced consumer-price increase from November 1 was expected to help Heritage raise selling prices in Bangalore, where it has sales but limited procurement .

Value-added mix kept revenue growing

Fresh categories grew on volume despite price hikes

Value-added products excluding ghee and butter outgrew liquid milk and lifted their share in both Q2 and H1 . Including consumer packs of ghee and butter, the broader share rose to 42.5% in Q2 and 45.7% in H1 .

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Growth was broad-based across lassi, buttermilk, ice cream, paneer and curd . Management said Q1 had help from normal weather, but Q2 was franchise-led across heat and non-heat lines, with temperature-sensitive lines sustaining Q1 rates .

Scale markers include daily curd crossing 500 tonnes and quarterly yogurt crossing 100 tonnes . Significant hikes were taken in ghee, paneer and curd, with volume holding in curd and paneer while ghee was flat ahead of the festive quarter .

Protein packs and ice cream lift premium share

Management frames the shift as building a larger, more premium branded business where rising premium share lifts realisation even without further price rises . In Q2 it launched high-protein curd and Greek yogurt, expanded Alpenvie ice cream and introduced organic curd .

Nourish+ paneer is already 16% to 17% of paneer volume and pulls up realisation, while yogurt share is rising and ice cream earns more than Rs 200 per litre . At a high level, management sized curd at about Rs 320 crore of revenue, paneer at about Rs 200 crore plus annualised and ghee at about Rs 350 crore annualised, with 100% of fat sales in consumer packs .

Capacity supports that push. The new ice cream facility serves Alpenvie and Get-A-Way, in which Heritage now holds 71% and to which it supplied 3,272 litres per day in Q2, while Heritage Novandie Foods is now wholly owned and its LIVO yogurt is among the top 5 brands in India . Own ice cream is tracking to about Rs 170 crore to Rs 180 crore this year excluding Get-A-Way, against a vision of Rs 500 crore in 6 to 7 years .

Farm network and feed arm cushion supply pressure

Heritage leans on village reach and nutrition support to protect availability . The base is over 300,000 farmers across 9 states at 17.70 lakh litres per day with no milk holiday, supported by chilling and digitally enabled processing capacity in a federated radius model that protects freshness .

Farmer terms rest on transparent solids-based pricing, thrice-a-month online payments and field veterinary support through the VET+ app, subsidised feed and third-party lending for working capital and animals . Management said farmer additions, activations, volume per farmer and collection-centre utilisation all trended positive this year .

The feed arm is growing with that effort. Heritage Nutrivet reported Q2 revenue up 47% with profit before tax of Rs 3.7 crore, after a difficult Q1 on ingredient costs and August-September price hikes .

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Cattle feed sale itself grew 47% in Q2 as Heritage pushed nutrition to protect yields . Further pass-through is planned in Q3 and Q4 to strengthen feed profit .

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Sources

1. 1 Transcript of Conference Call held on October 16, 2026
2. 2 Investor presentation, 2026-10-15
3. 3 Investor presentation, May 2026
4. 4 Investor presentation, Jul 2026