Value-added dairy products drive growth as higher milk procurement costs weigh on margins
HYDERABAD: Heritage Foods Ltd reported a 19% year-on-year increase in consolidated revenue to ₹1,319.6 crore in the second quarter of FY2026–27, supported by strong growth in value-added dairy products. However, profitability remained under pressure from higher milk procurement costs, with profit after tax (PAT) declining 39% year-on-year to ₹30.9 crore.
The company’s EBITDA stood at approximately ₹74 crore, while its EBITDA margin improved by 98 basis points sequentially to 5.6%. Despite the improvement from the previous quarter, rising input costs continued to affect operating profitability.
Higher milk procurement costs weigh on margins
Heritage Foods reported an 11% year-on-year increase in average landed milk procurement prices to ₹47.73 per litre during the quarter. Milk procurement volumes rose 7% to 17.28 lakh litres per day.
The increase in procurement costs contributed to a 271-basis-point contraction in gross margin to 21.8%.
The results highlight the pressure dairy companies face when raw milk costs rise faster than their ability to adjust product pricing and improve operational efficiency.
Value-added dairy products record strong growth
Revenue from value-added products (VAP), excluding ghee and butter, increased 32% year-on-year to ₹451 crore. The category’s contribution to revenue rose to 35.4%, compared with 31.3% in the corresponding quarter of the previous year.
Several product categories recorded strong growth:
- Lassi: 91%
- Ice cream: 81%
- Buttermilk: 66%
- Paneer: 38%
- Curd: 26%
Revenue from milk increased 8.5% year-on-year, supported by 2.5% volume growth and higher average realisation. The reported average realisation reached ₹60.34 per litre.
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The performance indicates that value-added products are becoming an increasingly important contributor to the company’s revenue mix.
First-half FY27 performance
For the first six months of FY2026–27, Heritage Foods reported consolidated revenue of ₹2,657.7 crore, an 18% year-on-year increase. However, earnings declined amid continued cost pressures.
| Financial metric | H1 FY27 performance |
|---|---|
| Consolidated revenue | ₹2,657.7 crore, up 18% |
| EBITDA | ₹135.8 crore, down 10% |
| Profit after tax | ₹55.8 crore, down 39% |
| EBITDA margin | 5.1%, down 161 basis points year-on-year |
| VAP revenue growth, excluding ghee and butter | 36% |
Value-added products accounted for 39.6% of revenue in the first half, compared with 33.7% in the corresponding period a year earlier.
Subsidiaries and emerging brands contribute to growth
Heritage Nutrivet, the company’s wholly owned subsidiary, reported a 47% year-on-year increase in quarterly revenue to ₹85.3 crore and profit before tax of ₹3.7 crore.
The company also reported growth in its yogurt business, Heritage Novandie, and its 71%-owned brand, Get-A-Way.
Focus on procurement, capacity and premium products
Heritage Foods said it would continue strengthening its milk procurement network, expanding capacity for value-added products and introducing products in premium and nutrition-led categories.
For the dairy sector, the company’s results illustrate a continuing business challenge: growing demand for value-added products can support revenue diversification, but higher raw milk procurement costs can limit margin expansion.
The key indicator for the coming quarters will be whether Heritage Foods can sustain value-added product growth while improving its ability to manage milk costs and protect profitability.
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