Dodla Dairy Ltd (DODLA) Q2 FY23 Earnings Concall Transcript

Dodla Dairy Ltd. (NSE:DODLA) Q2 FY23 Earnings Concall dated Oct. 27, 2022

Corporate Participants:

Aniruddha Joshi — Investor Relations

Sunil Reddy — Managing Director

BVK Reddy — Chief Executive Officer

Anjaneyulu Ganji — Chief Financial Officer

Analysts:

Ramesh — Smart Investments Solutions — Analyst

Resha Mehta — GreenEdge Wealth Services — Analyst

Sameer Gupta — India Infoline — Analyst

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Rohan Kamath — SunTrust Capital — Analyst

Aejas Lakhani — Unifi Capital — Analyst

Tarak Mehta — Kotak Securities Limited — Analyst

Unidentified Participant — — Analyst

Pranjal Garg — ICICI Securities — Analyst

Aniruddha Joshi — ICICI Securities — Analyst

Presentation:

Operator

Good day, ladies and gentlemen. Welcome to Dodla Dairy Q2 FY23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities. Thank you and, over to you sir.

Aniruddha Joshi — Investor Relations

Yeah, thanks, Lisan. On behalf of ICICI Securities, we welcome you all to Q2 FY23 results conference call of Dodla Dairy Limited. We have with us senior management represented by Mr. Sunil Reddy, Managing Director; Mr. BVK Reddy, CEO; and Mr. Anjaneyulu Ganji, CFO. Now I hand over the call to the management for their initial comments on the quarterly performance and half yearly performance and then we will open the floor for question and answer session. Thanks and over to you Sir.

Sunil Reddy — Managing Director

Thanks Aniruddha. This is Sunil here. Thank you very much once again Aniruddha for getting us on the call. Hello, everyone. I welcome you all to our Q2 and half yearly FY23 Earnings Conference call and I hope all of you are doing well. I’m glad to announce that the operating revenues grew by 22.8% year-on year to INR695 crores, supported by a gradual rise in selling prices, coupled with strong demand for milk and value-added products during the festive season.

Milk procurement grew by 11.2% year-on year, it grew 14.3 lakh liters per day-in Q2 FY23. On average our milk sales also increased by 14.7% year-on year to almost close to 11 lakh liters per day. The company successfully navigated lot of sectorial headwinds including lumpy disease outbreak among cattle, which all of you must be aware of which impacted milk procurement, rise in material and packaging cost and inflationary trend due to global reasons. So, VAP sales upsurged by also 19.3% year-on year to INR173 crores during the Q2 of FY23, this is thanks to a strong recall of Dodla brands, which is also because of strong quality focus that we have on our products.

The VAP overall dairy revenues stood at 25.3% in Q2 of FY23. The integration of Sri Krishna Milk is progressing as planned and we continue to strengthen our footprint in southern Karnataka and Goa markets Dodla remains committed to strengthening its procurement network in its existing states and continuing to also scope for organic and inorganic opportunities without compromising its existing balance sheet strength and also looking-forward to creating long-term value for the existing stakeholders. I would also like to extend my gratitude to all our stakeholders for their continued support of Dodla Dairy vision. We, as you know, have a strong governance framework. Our business model is an end-to-end enterprise, which positively impacts over a lakh dairy farmers on one end, and on the other end we ensure health and nutrition to millions of our consumers through our milk and VAP products.

Our long-term growth engines and our continual focus on ESG practices and sustainable business model with a balanced ecosystem. With this brief I will hand over to CEO, Mr. BVK Reddy, for taking it over. Thank you.

BVK Reddy — Chief Executive Officer

Thank you so much sir. Very good afternoon to all the participants. We have [Indecipherable] healthy quarter showing growth in revenue and other parameters. We are moving towards enhancing our footprints, strengthening our pan-India stance. As on 30th September 22, we have procured milk around 1.2 dairy farmers daily, of which 88% provide a regular direct payment to the bank accounts. Our direct procurement, more or less further strengthened wherein we are buying almost all the milk directly from the farmers across, more than 8000 villages as compared resulting in cost-savings and establishment of deep routed relationship with them.

Our Orgafeed operations wherein we provide high-quality to the dairy farmers help us strengthen this relationship with them and also ensure that both parties get benefited. Orgafeed revenues stood INR28 in H1 23 with EBITDA of approximately INR3 crores during the same-period. In terms of our presence we continued to have third highest market presence across 13 states in India, supported by third-largest recruitment network, 15 processing plants with 22 lakh liters per day capacity. We currently have 113 chilling centres as on 30th September 22. We have around 555 Dodla retail parlors. We also have a strong network 1,300 milk and milk distributor channel so we have around 2,700 distribution agents networks that all are well-established in many areas of the country.

We aim to adapt to state of art dairy processing technology with a focus on automation which will help us in reducing operational costs and increase efficiencies. We continue to strive for enhancing our footprints and brand visibility with every passing year and we are making constant efforts to expand our geographical footprints, distribution network, strengthen the brand recognition, and improve our margins too over unmatchable growth in the industry. With that said, I would request our, CFO, Mr. Anjaneyulu to give a financial overview of this quarter. Thank you.

Anjaneyulu Ganji — Chief Financial Officer

Thank you sir. Good, morning, everyone. I would like to briefly touch upon the key performance parameters for the second-quarter of the financial year 2023. We have also submitted a detailed presentation of our financial performance on the stock exchanges and also we have uploaded the same on our website. Now taking a glance at the financial highlights for the quarter ended September 30, 2022. The operating revenues stood at INR695 crores, for Q2 financial year 2023, compared to INR566 crores of Q2 FY22 with a strong growth of 22.8% year-over-year.

The Company’s domestic business surged by 20.1% Year-over-Year to INR644 crores whereas the international business registered a strong growth of 70%[Phonetic] Year-over-Year to INR52 crores for the quarter. EBITDA was at INR59 crores in Q2 of FY23 compared to INR61 crores in Q2 of FY22. Profit-after-tax was at INR39 crores in Q2 FY23 compared to INR29 crores in Q2 FY22 registering a growth of 34% year-over-year owing to the decline in the finance cost, raise in other income coupled with declining [indecipherable] Earnings per share for Q2 FY23 stood at INR6.58 compared to INR4.90 in Q2 FY22. Now, talking about our operational highlights for the quarter ended September 30th, average milk procurement during quarter two of FY23 was at 14.3 lakh liters per day as compared to 12.8 lakh liters per day in Q2 of FY22 registering a 11.2% Year-over-Year growth.

Average milk sales during Q2 FY23, we’re at 10.9 lakh liters per day as compared to 9.5 lakh liters per day in Q1 FY23 growing by 10.7% Year-over-Year. Curd sales during Q2 FY23 was at 292 metric tons per day as compared to 252 metric tons per day in Q2 FY22 increasing by 16% Year-over-Year. Revenue from value-added products, including fat and fat based products grew by 19.3% Year-over-Year to INR173 crores in Q2 of FY23 with only vis-a-vis INR145 crores in Q2 FY22. That including fat and fat based products contribution stood at 25.3% of the overall dairy revenue during the second-quarter of FY23 as compared to 26% contribution of the overall dairy revenue during the same-period last year.

That concludes our update on the finance and strategy which we believe has been positive in most of the actions. With that being said, we would now like to open the floor for questions. Thank you.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen we will wait for a moment while the question queue assembles. The first question is from the line of Ramesh from Smart Investments Solutions. Please go-ahead.

Ramesh — Smart Investments Solutions — Analyst

Hello good morning. Actually good afternoon. I’ve have seen the investor presentation, it is very good actually, you grew quarter-on-quarter. Am I audible?

Sunil Reddy — Managing Director

Yeah, yes sir. Go ahead sir.

Ramesh — Smart Investments Solutions — Analyst

So, I have a couple of questions. When I see quarter-on-quarter, your Q1 versus Q2 you have improved your gross margin on a standalone basis. Is it something specific you have done or it is based on procurement price reduction or something happened?

Sunil Reddy — Managing Director

Actually, a lot of effort that goes there on specific things that have been done. So selling price has moved up and commensurately we kept our procurement prices almost on an even keel, so the earlier quarters when our procurement prices have gone up our selling prices didn’t move-up. There is always a time lag of what happens, so second-quarter we got the benefit of the full price increases that happened. So that’s the reason the gross margin shows an improvement, which is shown in the EBITA and growing[Phonetic].

Ramesh — Smart Investments Solutions — Analyst

And is there any flesh[Phonetic] concept coming this year, because last couple of years we were not having any flesh in dairy industry? So do we have some flesh disease?

Sunil Reddy — Managing Director

This year also we won’t see any pressure because it’s not only that because also we have seen the growth in terms of volume has also been high if we compare it to pre COVID it’s caught up with more than pre COVID, let’s say 15% more so I guess now whatever was subdued earlier by the farmers will take another year for it to catch-up with [Indecipherable] so this year we, don’t see [Indecipherable].

Ramesh — Smart Investments Solutions — Analyst

Okay, and for my record-keeping can you just share the procurement price per quarter and selling price per quarter for milk — liquid milk?

Sunil Reddy — Managing Director

Quarter-four. This the current quarter, sir.

Ramesh — Smart Investments Solutions — Analyst

Thank you [Indecipherable].

Sunil Reddy — Managing Director

And then we will just review the Q2 procurement and selling prices. So the procurement prices for Q2 FY23 stood at INR35 per liter, it is procurement not the consumption. So per liter of procurement. And coming to the sales, so we have INR52.90 net sales realization.

Ramesh — Smart Investments Solutions — Analyst

This is only for liquid milk or entire product base?

Sunil Reddy — Managing Director

On the whole the whole mix-up. It is whole mix up.

Ramesh — Smart Investments Solutions — Analyst

Okay. And one small question I was hearing heritage call also previously so they were saying some BM, CM mix, they use 25%, 75%. What mix we use sir in that?

Sunil Reddy — Managing Director

Buffalo and cow milk sir, one minute. We will tell the answer for Buffalo and cow milk. We have only 5% Buffalo balance 95% is cows.

Ramesh — Smart Investments Solutions — Analyst

Okay is this because our geography what we’re cattering is different compared to heritage or is it?

Sunil Reddy — Managing Director

Correct, Correct. See because you know specifically where we are selling in Karnataka our quantity 40% of the quantity, sales quantity is coming from Karnataka. In Karnataka predominantly it is cow milk.

Ramesh — Smart Investments Solutions — Analyst

Fine. Okay in last quarter also we will be in the same BM, CM ratio or is it something we were changing consciously quarter-on-quarter to improve our margins, because I understand Buffalo is costlier than cow.

Sunil Reddy — Managing Director

It’s almost 95% and 5% but consciously earlier itself we have corrected and now we are carrying both. So because you know, see the Buffalo if it is costly also because Heritage is selling more milk in Hyderabad. Their MRPs are very-high.

Ramesh — Smart Investments Solutions — Analyst

Okay sir. Thank you sir. If anything is there I will join the queue again. Thank you. Thank you so much sir.

Sunil Reddy — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Resha Mehta from GreenEdge Wealth Services. Please go-ahead.

Resha Mehta — GreenEdge Wealth Services — Analyst

Yeah, hi. So congrats on a good set of numbers and also on your silver Jubilee year. So firstly I wanted to understand that in your Annual Report you have spoken about having, hello?

Sunil Reddy — Managing Director

Yeah, go-ahead ma’am.

Resha Mehta — GreenEdge Wealth Services — Analyst

Yeah, you’ve spoken about having agents and distributors so what, are these two different distribution models between agents and distributors, and which model is adopted in which, let’s say, urban, rural and if you could just expand a little bit on this. That’s the first question.

Sunil Reddy — Managing Director

Yeah so thank you very much for your wishes Resha. Basically the difference between agent and distributor, agent is somebody where-he is a retailer himself and we directly deliver to him as a company, he delivers it to the customers. Whereas the distributor is some where we give it to him as any other FMCG distributor with a larger area and give it to him and he takes care of the secondary transportation and distributing it to the consumers itself, and we have another module which is DRPs, which basically are company-owned franchisee operated retail outlets. These are three broad distribution methodologies that adopt.

Resha Mehta — GreenEdge Wealth Services — Analyst

All right so rural would essentially see the distributor model, right.

Sunil Reddy — Managing Director

Yeah, majority of — the smaller [Indecipherable] where we have almost substantially large market-share and we are very strong. We have now — we’ve got distributors and we control sales for distributors.

Resha Mehta — GreenEdge Wealth Services — Analyst

Got it and secondly if you could just talk about what is your revenue from you know B2C and HoReCa, these two channels?

Sunil Reddy — Managing Director

Majority of ours is B2C. Anyway we don’t have our own direct control so the distributor might go to few of the Tea shops but we are predominantly B2C which was demonstrated during COVID that we didn’t see much of a drop.

Resha Mehta — GreenEdge Wealth Services — Analyst

Okay and so HoReCa would be negligible. Is that understanding correct?

Sunil Reddy — Managing Director

Yeah.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right and even within the Southern states if we could just break-up your sales between the metros, Tier-one, Tier two towns or would it largely be metros?

Sunil Reddy — Managing Director

No, it will be almost, let’s say, metros will be smaller. Comparatively it should be around 30% Metro, sir. I mean I don’t have the specific numbers but 30%, 35% metros compared to 60%, 65% of non-metros. That will be a rough range.

Resha Mehta — GreenEdge Wealth Services — Analyst

Got it, Got it, Got it. On your operating costs right so when I look at your annual report right your ad spends are very negligible. They are just 0.3% of your net sales so can you just talk a little bit about how do you, think about marketing, what are the budgets, like how much would be AT, how much would be trade promotions. Can you just expand on this?

Sunil Reddy — Managing Director

Yeah, so basically. I also think it’s a question of how do you look at ads and cost that we normally take. For us ads and cost are very direct in terms of what we do in terms of outdoor visibility and painting an ad and that kind of thing. The other spends which we have we reduced it from our cost whatever we give and all that we do not consider it as a part of the ad spend. In the dairy industry the ad spend is very visible with our regular moving Media, point-of-sale spend is what we do. So we are very cautious in what we do as our ad spend because although we do a large spend but if availability is not there, it doesn’t seem to be very effective for us so that way we do a lot of localized ads and we do it very cost franchising [Phonetic] that is the reason why their ad spend is low.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right, so when you say this localized marketing right so below-the-line right so what are the — so what would be the quantum of these trade for promotions as a percentage of net sales. I understand that when you report these numbers they are netted off from your top-line but if you could just talk about?

Sunil Reddy — Managing Director

It should be a very small. It should be only 0.2% to 0.3% at the most that we give it rather than at the point-of-sale promos that happened, nothing more.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right, so basically above-the-line, below-the-line all put together would be less than 1% of topline, right?

Sunil Reddy — Managing Director

Yes, yes.

Resha Mehta — GreenEdge Wealth Services — Analyst

Okay and also if I look at the freight outwards line-item in your operating other expenses right so that’s, almost 8% of your net sales, which is almost 2x that of the other two listed dairy companies in the South so is there some issue of reclassification of expenses that that is why this number is looking very big almost 2x that of other two companies or is that structurally our freight costs have been higher.

Sunil Reddy — Managing Director

So basically it also depends on how reclassification can happen and some of them will not consider fuel as a part of we didn’t give you more at the reimbursement of the petrol bunks and I don’t know where we book that, some of them will be booking — we booked the whole lot of rural, whatever, all under great outlet. So that’s why if you look at all the cost put together will invariably be there in the same base one.

Anjaneyulu Ganji — Chief Financial Officer

So, Anjan here, so that’s why you also see the same level the gross profit vary when you compare the [Technical issue] It is basically the way of booking, sometimes based upon the agreements recognition principle sometimes they have to book it in top-line and some agreements requires us to book it in other expenses.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right okay and what would be? [Multiple speakers] Yes, so what would be your annual capex plans and what is your maintenance capex number.

Sunil Reddy — Managing Director

So annual capex plan for us broadly you can look at it as procurement, which will have the INR15 to INR20 crores every year that we keep spending. For the current year we have taken a budget of almost INR90 crores — INR90 to INR95 crores of capex out of which we have already spent around INR66[Phonetic], which was majorly what we did was we had another [Indecipherable] which we have updated and made it on par and we’re spending a bit on-going into being more [Indecipherable] and going for solar, powering all the plants and trying to maximize solar wherever we can and that’s the major expense that we have done.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right, so this INR90 crores would also include your maintenance capex.

Sunil Reddy — Managing Director

Maintenance capex also yes, so invariably it would be around INR50 to INR60 crores of maintenance capex and chilling centers normally if you look at the years going-forward, because every year if we take lakh on behalf of volume it is added in sale we have to add some kind of number in the back-in the procurement also to keep matching the growth of sales so that will be our constant expenditure in terms of capex and maintenance capex will be maybe INR10 crores at the most for all 14 or 15 plants put together.

Anjaneyulu Ganji — Chief Financial Officer

Maintenance capex will be INR10 to INR15 crores remaining things is either expansion in procurement and our distribution networks.

Resha Mehta — GreenEdge Wealth Services — Analyst

Sure and any guidance that you would like to provide for capex for the next, let’s say, two to three years broadly.

Sunil Reddy — Managing Director

Other than mergers and if we do any acquisitions or major capex plan we will be in the same 30% to 40% at the most for expansion.

Resha Mehta — GreenEdge Wealth Services — Analyst

Got it, got it.

Sunil Reddy — Managing Director

In chilling centers and regular capex.

Resha Mehta — GreenEdge Wealth Services — Analyst

Lastly okay — and lastly just one data question so this is Q1 so if you could just share the selling price for Q1 FY23.

Sunil Reddy — Managing Director

Market sales realization was INR50.9 per liter.

Resha Mehta — GreenEdge Wealth Services — Analyst

Okay.

Sunil Reddy — Managing Director

That is for the standalone.

Resha Mehta — GreenEdge Wealth Services — Analyst

Okay, that’s it from my side. Thanks and all the best.

Sunil Reddy — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Sameer Gupta from India Infoline. Please go-ahead.

Sameer Gupta — India Infoline — Analyst

Hi, sir, and thanks for taking my question. Just one from my side. So just wanted to understand your outlook on margins so right now it is around 8.5%. There is a lumpy skin disease, which has gone, unseasonal rains this quarter and as you rightly pointed out, under investments by dairy farmers so there is an expectation of a [Indecipherable] have already taken large price hikes and passed it on to consumers so technically is this understanding correct that at least for this season where you are not expecting a great flush EBITDA margin should only trend downward over the next few quarters from the current level.

Sunil Reddy — Managing Director

More than downwards, sir. I think if we are actively involved in managing it we can manage to keep it at the same trends that we are now, maybe a little bit of one month more of price differential might happen and procurement again increases dramatically to, see where we can pass-on but tentatively we can keep these margins at these levels at the moment.

Sameer Gupta — India Infoline — Analyst

And any guidance [technical issue]

Sunil Reddy — Managing Director

Medium-term would be the same as the current margins will continue to be going-forward the same to maybe appoint a 0.5% plus or minus that can happen current term and, especially for us that’s what we are looking at, and the next year onwards if the productivity increases and milk procurement prices come down we will see reasonably good margin improvements.

Sameer Gupta — India Infoline — Analyst

Got it sir, thanks. That’s all from me.

Sunil Reddy — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Abhishek Maheshwari from SkyRidge Wealth Management. Please go-ahead.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Hi. Thank you for the opportunity and congratulations on good numbers. So just a follow-up on previous participant’s question, so you already mentioned that flush season will be tapered and now we are already hearing about shortages and lack of availability, so in South in newer geographies are you facing any procurement issues?

Sunil Reddy — Managing Director

Procurement issues, meaning that demand is higher than production therefore the prices have gone up and are maintaining this. This normally should get corrected by the next monsoon because of higher production, higher prices will normally get the farmers interest back and productivity should increase and come back because the animal cycles, things take, at least six to nine months for animals to have and production to increase and better feeding systems coming into place, so that is, how it will be. But in the south I think we’ll still continue with the same trends of matching our input and output, then we’ll have to look at it next season how it takes off on this.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

And secondly the larger peers like Amul, Mother diary, and all they are still hiking their prices. Are you also able to do that or we are maintaining in previous quarters.

Sunil Reddy — Managing Director

So we also keep continuing to increase the prices and correcting by including the prices as and when required, so as the procurement increase we do increase the prices proportionately and keep going but, we’re also cautious not to outprice it from comparative from market to let people have a shortfall in growth. Very easy to increase price but it’s a tight balance between growth and margin and price increase so we very cautiously do that and keeping in growth not to get into it.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

So, let’s say. In this sense procurement prices are increasing is that a set from the fall in other raw-material crisis, for instance, packaging cost has started to come down and what is the cattle feed price.

Sunil Reddy — Managing Director

So from my broad view the price direction that will be given the uncertainty yes has tapered off a bit but. I don’t think it will be dramatic but BVK will answer it more deeply.

BVK Reddy — Chief Executive Officer

Also now slightly last before month and all the raw-material grades are now gone up but most likely now it is coming down.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Okay and packaging costs.

BVK Reddy — Chief Executive Officer

Packaging costs also slightly has come down. First quarter to second-quarter so the packaging material costs also has come down. First-quarter it was slightly higher side and second-quarter it is down. This we don’t think will come down dramatically but keeping in view that assuming the same status quo is maintained that is what we are saying margins also will be the same status. Overall we see procurement enough correction is already being done so the sales person also keep on doing as and when it is required so, mostly it is done. I think it will become stable now.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Okay. Any price hikes are we planning in Q3 also or you will decide when it is time.

Sunil Reddy — Managing Director

When it’s time to normally what we do is going to be slight correction, which only will benefit the company’s pricing structure as we go-forward and also taking a mix of both products and price. I think you can maintain status quo because we are confident that we’ll maintain status quo it is comfortable. Comfortable in third-quarter, nothing will happen. Let us see after Pongal maybe in the month of February-March.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Okay, thank you very much and all the best.

Sunil Reddy — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Rohan Kamath from SunTrust Capital. Please go-ahead.

Rohan Kamath — SunTrust Capital — Analyst

Okay, sir my first question is on the outlook on this business going ahead what is the aspiration growth are you looking for this business?

Sunil Reddy — Managing Director

So Rohan basically if you look at us historically, we’ve been growing by 10% or 11% by volume and around 15% by value. I think in the short-term basis these things are going to continue with that kind of a trajectory for the next two-three years actually so that will be our immediate short-term two-three years goal and as we go beyond that as the normal global scenario dairy companies normally tend to grow into becoming a food company in the longer-term because we have the network availability of placement of products and other items. Even if you compare Amul in India so they have gone into a whole host of other products like chocolates also. I think we are following the same path that we still have a lot more room to grow and short-term of two to three years and later we’ll be the multiple products that food can also come into play.

Rohan Kamath — SunTrust Capital — Analyst

Great sir. And sir on the capex sir what are the capex expectation for financial 24 and finance 25?

Sunil Reddy — Managing Director

Subject to not getting the good opportunity in terms of M&A, we have regular capex to the tune of around INR40 crores to INR50 crores, out of which INR20 crores, INR25 crores will go to procurement and INR15 crores for regular maintenance of capex. We still are identifying the opportunity to go into Kenya which we have already announced earlier as and when we get there, because Africa, it normally takes time, that will be one which we’ll have can be to the tune between INR25 crores to INR30 crores. And if it is an acquisition opportunity in India, we’ll have to wait and watch, we’ll only wait and see we get a good opportunities, if we do get an opportunity, we will go there. Nothing more than that majorly.

And maybe if we come to a greenfield also, it will take another two years to basically start and complete the greenfield. You have already announced our earlier cattle feed that we’re spending our INR40 crores, which we have spent INR20 crores already and that should be done by another INR10 crores, not much INR50 crores, INR60 crores maybe, subject to acquisitions.

Rohan Kamath — SunTrust Capital — Analyst

Got it. Thank you, sir. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead.

Aejas Lakhani — Unifi Capital — Analyst

Yeah. Mr. Reddy, just one question. Hello?

BVK Reddy — Chief Executive Officer

Yes, go ahead.

Aejas Lakhani — Unifi Capital — Analyst

Yeah. Mr. Reddy, one quick question, you mentioned the most productivity increases and most of prices coming down to ’24. So what I’m looking to learn is, do you have any levers in the short run —

Operator

Sorry to interrupt. Members of the management team, there is lot of disturbance from your line.

BVK Reddy — Chief Executive Officer

Is it still there, ma’am?

Operator

Yes sir.

BVK Reddy — Chief Executive Officer

How about it now? Are you able to hear clearly or it’s still —

Operator

This is a little bit better sir. Please proceed. Thank you.

BVK Reddy — Chief Executive Officer

Okay.

Aejas Lakhani — Unifi Capital — Analyst

Yes, should I repeat the question or —

BVK Reddy — Chief Executive Officer

Yes, could repeat the question?

Aejas Lakhani — Unifi Capital — Analyst

Yeah. Sir, just wanted to check that you mentioned that levers for the coming years will be productivity increases by farmers and milk procurement prices coming down. So a quick check here is do you have any levers to accelerate your volume growth from the existing 10%, 12% to slightly more higher levels in the short duration and if yes what are those diverse?

BVK Reddy — Chief Executive Officer

So basically, so when we look at it in terms of the sales and procurement, we have actually been well geared up for a larger procurement volume, saying that we were net buyers of milk powder where we wouldn’t be there and we would be having our own milk procurement network and increase in our sales. But presently because of the lower volumes that network is still not fully utilized, we are confident that as we go forward, the levers are already in place with the procurement to absorb a large volume in terms of when we go forward, this is the confident will happen in ’24.

And in terms of sales also, there has been a lot of work that we have done regarding our DRPs and streamlining our — the sales and distribution process. So the levers are in place, we’re just trying to match. So we are cautious of both in terms of the growth and the profitability, so we have to be very careful about both input and output, so it won’t be a substantial change in number for growth but it will be major growth between that 15% to 17% by volume, by value and 10% to 12% the volume. Because both the input and the output to maintain even the bottom line as much as a profit.

Aejas Lakhani — Unifi Capital — Analyst

Got it. But sir, is it fair to say that you’re choosing to not accelerate the pedal on volume growth because the prices of procurement are slightly higher and the minute it starts to taper down, you could sort of just accelerate the volume growth and that could help even on the margin front in ’24 as we look forward?

BVK Reddy — Chief Executive Officer

So actually even if the price gets corrected by even a INR1 or INR2 in terms of procurement that itself will accelerate the margin growth, because even if I take a conservative, let’s say, 13 lakh, 14, lakh liters of India standalone sale if you look at it also, that gives around INR28 lakh per day as profitability improvement, and the profitability goes through the roof. So at that point of time we also have to ensure that we are also making sure that our sales are doing well, obviously. But keeping a longer-term view, we have to be careful about both the prices, the procurement and the selling. So for example, if Tamil Nadu prices really crash, there is no point in me just picking up milk in Tamil Nadu, because I have to transport it to, let’s say, North Andhra Pradesh market.

So we try to keep that synergy of input and output prices matching so that even when there is a fluctuation, we are sort of stable, we don’t want to be caught in backward. Potential is there, yes, for growth, we will continue to move it forward when we get better margins, we are more active in trying to do placement into other areas also, so that way it does help us, we will grow forward, little more aggressively when it comes to the year when it’s good.

Aejas Lakhani — Unifi Capital — Analyst

Got it. And sir, is it — is just a fair statement to make that the gross profit per liter from a spread perspective, is at the levels what it was in 2Q FY ’22? Because last year was, I mean, far more favorable year, this year is the tougher year, but despite that the gross profit is per liter on milk is relatively same?

BVK Reddy — Chief Executive Officer

Yes. So because this is — we are maintaining the relatively same, because the selling price increase we have been able to compensate along with our procurement price increase, so that is what we are saying, that this is the — procurement prices are always coming up with an all-time high, we never had these high prices average, which are coming up with the all-time high, which in my view will get the farmers to be more interested, more production will come, more efficient production will come, which will taper down the procurement prices therefore leading to our margin expansion.

Aejas Lakhani — Unifi Capital — Analyst

Got it, sir. That’s it. All the best.

BVK Reddy — Chief Executive Officer

Thank you, sir.

Operator

Thank you. The next question is from the line of Tarak Mehta from Kotak Securities Limited. Please go ahead.

Tarak Mehta — Kotak Securities Limited — Analyst

Yeah, hi. Sir, I’m just new to the company, just wanted to explore what are the cash balance that we have as on September?

BVK Reddy — Chief Executive Officer

Tarak, that Anjan the CFO will give you the exact numbers. Go ahead, Anjan.

Anjaneyulu Ganji — Chief Financial Officer

So overall we have cash balance of INR340 crores in terms of overall cash balance that we have. So that is — for the farmer payments that we utilize around INR40 crores to INR50 crores of cash, so net-net we will have around INR300 crores cash balance as on September 30.

Tarak Mehta — Kotak Securities Limited — Analyst

Great. Sir we — I can see some finance cost during the quarter of INR3 lakhs.

Anjaneyulu Ganji — Chief Financial Officer

Yeah. That is Ind AS 116 adjustment, so for long-term leases you have to convert that in Ind AS 116 that is not actual finance cost.

Tarak Mehta — Kotak Securities Limited — Analyst

Perfect. Sure. One more thing, sir we are currently focusing on Karnataka, can you just explore more, in case we want to go for pan-India growth. What are the levers to foresee forward? And what can be the strategy?

BVK Reddy — Chief Executive Officer

So basically normally, we try to see as far as possible if we get contiguous growth, for example, Orissa is contiguous to us now because we have almost reached all the parts of Northern Andhra and Orissa does act to us to be one of our contiguous growth plans, Maharashtra is available for us. We’re doing procurement there, slowly we will have to enter into market in Maharashtra, but we are also open for other acquisitions that come up subject to return on capital being healthy based on whatever we can do locally. So immediately we look at contiguous advantages if we get opportunities, we are okay as long as the return on capital is good.

Tarak Mehta — Kotak Securities Limited — Analyst

Okay. Sure sir. Thanks.

Operator

Thank you. The next question is from the line of Ambrish Kumar from GSP Capital [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Thank you for the opportunity sir. Sir I just wanted to understand, how does the transmission of external factors into procurement prices happens so quickly? I mean, what are the pressures we are having? How many buyers are there in particular village along with you so that these external factors are so quickly transmitted.

BVK Reddy — Chief Executive Officer

Basically, we will have at least three to four companies, one cooperative or two or three private sectors in every village that we go and procure, four to five at least will be there. So the transformation does not happen more than the outside processing, the supply-demand issue that majorly happened. So in that hurry, somebody who is having a shortage will try to increase their price, they open the mill, get a little more is one of the way to look at it. The other way that company is also look at it is come from a farmer’s point of view, for example, if the cattle feed prices are going up to the farmer also has to get that price increase because 50% of the cost for a farmer will be the feed that he incurs.

So the thumb rule is normally cattle feed prices increasing will add on to the farmer I think milk price is increasing. And for us the other things to add is our own cost of freight or transport, which can add fuel prices increase. So that’s all the transmission happens very quickly because even for us or the farmers, this is a daily business, right, profit and loss can be seen every 10th day or the 20th day, the farmer is losing money. We will feel the pinch immediately so that is why the transmission happens quicker.

Unidentified Participant — — Analyst

Okay. So related question would be, so as I understand your answer, you take into view the farmers profitability in mind and adjusted pretty accordingly?

Unidentified Participant — — Analyst

Yeah because basically the farmer viability has also happens to be a code, we can’t just squeeze him out of this business so that we always if we get rid of the animals, to get an animal back into cycle takes almost two to three years.

Unidentified Participant — — Analyst

Got it, sir. And so what is the farmer stickiness with you in these circumstances? Can you just —

BVK Reddy — Chief Executive Officer

See, farmer stickiness has been good, so for the past 25 years if you look at it, I mean, there will be a little bit of fluctuation here and there. But I think it has been reasonable, we can say 70%, 80% of our farmers continue to stay with us.

Unidentified Participant — — Analyst

Okay. Got it, sir. So that was my question. Thank you so much.

Operator

Thank you. The next question is from the line of Pranjal Garg from ICICI Securities. Please go ahead.

Pranjal Garg — ICICI Securities — Analyst

Thank you for the opportunity, sir. Congratulations on a good set of numbers. Sir, my first question is regarding, can you help with the update on Sri Krishna Milks. How is the performance of the business during the quarter revenue and margin as well?

BVK Reddy — Chief Executive Officer

Yes. Sri Krishna has done well, Anjan, will give you the specifics of what the numbers have been. Go ahead, Anjan.

Anjaneyulu Ganji — Chief Financial Officer

Yeah. So thank you, sir. On the Sri Krishna Milks, so for this quarter ended Q2 FY ’22, we have made a sales of around 36,000 liters per day with the net revenue of INR17.6 crores for the quarter and an EBIT of around 3.8%. In terms of YTD, we have made around our EBITDA of INR81 lakhs from Sri Krishna, so with NPD of 34,000 liters, we generated INR30.3 crores in terms of net revenue.

Pranjal Garg — ICICI Securities — Analyst

Okay. Sir, next is also a little bit of a bookkeeping question, just wanted to understand your territory-wise revenue and procurement mix for the quarter.

BVK Reddy — Chief Executive Officer

Could you repeat the question sir?

Pranjal Garg — ICICI Securities — Analyst

I wanted to understand your territory-wise revenue and procurement mix.

BVK Reddy — Chief Executive Officer

Territory-wise revenue and procurement mix, okay. So we will normally give it to you broadly as state-wise that we normally have with us, sir, we’ll give that, that would be okay I guess sir. Yes, state-wise, Anjan will just give you the state-wise procurement and sales realizations.

Anjaneyulu Ganji — Chief Financial Officer

Yeah. So coming to the sales for quarter two of FY ’23, so form AP we have sold around 4,42,000 liters per day and Karnataka at around 5.3 lakh liters per day. In Tamil Nadu we have sold like 2,10,000 liters per day and some Telangana around 1.3 lakh liters per day. So overall, this is for India business. So that is territory-wise sales in terms of volume. And coming to the procurement, for Q2 FY ’23, so from AP we have procured around 4.8 lakh liters per day and Karnataka 2.7 lakh liters per day and Tamil Nadu around 4.4 lakh liters, Telangana around 40,000 liters and Maharashtra around 1.1 lakh liters per day in India.

Pranjal Garg — ICICI Securities — Analyst

Thank you sir. That’s very helpful. Sir what has been our exit price hikes during the quarter and what has been the [Indecipherable] conclusion on the consumer demand for dairy products —

BVK Reddy — Chief Executive Officer

So the price hike, we have almost got rupee and from quarter-to-quarter, I think we’ve got almost close to INR1 plus price hike, sir, whereas the procurement has been almost static. From a consumer demand point of view, I think milk will be the last — like I keep repeating in saying that milk being an essential commodity people do look forward to it and our price hikes if you compare with other inflation, the impact on the household budget will normally due to the tune of even if it is 1 liter if there is a rupee or two increase that comes to INR50 rupees, INR60 increases within the INR30 to INR60 increase, which consumers are able to take in their stride. So I think the consumer impact, who will be the last one that will be get impacted they would rather sacrifice hopefully on the other sources of expensive food is what we look at sir, that is from impact point of view, the exact price increases, Anjan will just take you now sir for quarter-on-quarter.

Anjaneyulu Ganji — Chief Financial Officer

So year-on year basis, the net realization is the same, revenue per liter so last year for this quarter Q2, we have a net realization of INR49.36, whereas this year we have a net realization of INR52.75, so around INR3.40 beta is where the net improvement year-on year and quarter-on-quarter last quarter we have a net realization of around INR51.78, it is at a consol level not a standalone, compared to last quarter INR51.78 to INR52.75 around NPE increase over the last quarter.

Pranjal Garg — ICICI Securities — Analyst

Okay. Thank you so much, sir. And sir my last question is regarding the performance of Africa business that we have seen a good growth in that business as well during the quarter. So what are the timely growth drivers there and what is your outlook for the business? Thank you sir.

BVK Reddy — Chief Executive Officer

So Africa has always been good and Anjan will give you the breakup of detail, sir. So Africa also like India, we have that little bit of a price fluctuation depending on the seasonality, compared to last year this year is doing much better and Anjan will give you the specs of what was the comparison between last year to this year in terms of the improvement that we had. So — and as a guidance of that, it will be — this year will be a much better year than last year in terms of both top line and bottom line, sir. Continuing with the same half yearly trend, I think it will be going-forward also it will continue the same trend. Anjan, can you give the specifics please?

Anjaneyulu Ganji — Chief Financial Officer

Yeah. So coming to the quarter, so this quarter we have around 93,000 liters per day in terms of volume from our African operations, we generated a revenue of around INR52 crores and an EBITDA margin of 13% for this quarter. Coming to year-over-year comparison, the volume improved from 63,000 to 93,000, which is a 47% volume improvement and revenue improved from — on a year-on year basis INR30.5 crores to INR52 crores which is a 70% improvement in terms of revenue.

Pranjal Garg — ICICI Securities — Analyst

Thank you so much, sir. That was all my questions. Thank you so much.

BVK Reddy — Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.

Aniruddha Joshi — ICICI Securities — Analyst

Yeah, sir three questions.

Operator

[Technical Issues] [Operator Instructions] Sir, we have the line for Aniruddha reconnected. Aniruddha, please proceed.

Aniruddha Joshi — ICICI Securities — Analyst

Yeah. Sir, three questions, how do you see the ice cream business panning out. Then secondly we had also introduced Dodla+ premium milk, so any update on that? Second question, how is cattle feed business doing? Any growth plan that you can indicate three-year five-year growth plan that is an indicator for cattle business as well as capex plans here. And lastly the third question is, how do you see the global S&P prices situation now? Do you see any structural downtrend in the global S&P prices?

Sunil Reddy — Managing Director

There are — so three questions regarding ice cream, cattle feed, future and global S&P. I just say global S&P prices seem to be pulling mouth and BVK will give us the thing of what we expect the cattle feed in the short-term or let’s say the two or three-year period what size we think we’ll get this. And the capital was also INR30 crores, INR40 crores that we are looking at decline and ice cream and other milk, BVK will just give you those things.

BVK Reddy — Chief Executive Officer

Yeah. See the cattle feed, this half yearly we have done INR28 crores top line and roughly about 9.5%, 10% EBITDA. And this year, as per the target, so we will achieve 100% in the cattle feed and also we are putting up another cattle feed plant, it is in the middle by March, we will be commencing the new cattle feed plant, so that is as of the plan now, it is going ahead. And I think cattle feed, we are hoping that we’ll get a —

Sunil Reddy — Managing Director

So I think the total capacity installed for the old existing one and the new one BVK will explain.

BVK Reddy — Chief Executive Officer

Yeah, the existing one only 2,000 tonne capacity, that 100% we are doing now and the new cattle feed plant now we’re putting up 12,000 tonne capacity, so that will be ready by only the month of March or April. So with the 2,000 capacity, we have done around INR28 crores to INR30 crores for the half year, so it will be the INR60 crore and you can extrapolate from the 12,000 tone capacity over a period of three years where we’ll be going Aniruddha.

Regarding ice cream and dairy plus milk variant — I think milk variants we keep trying, ice cream, BVK will again give a brief idea about what ice creams are doing and where do we think we can go with ice cream. So ice cream, I think this year we have done fairly — compared to last year we have done around 3,000 liters per day ice cream sales and roughly about turnover how much is — last year compared to quarter-on-quarter, so last year we have sold around 1,800 liters per day, so this year for the same period, we were selling around 3,000 liters per day. So almost double the volumes. In terms of revenue generated, around INR2.7 crores is what revenue generated from the ice creams and this year we have made a INR4.4 crores in terms of revenue.

Sunil Reddy — Managing Director

So it will not be something substantially large Aniruddha, but it will keep improving year-on year.

Aniruddha Joshi — ICICI Securities — Analyst

Okay. Sure, sir. Thanks. Last, how do we see about the Dodla+ premium milk that we had introduced? Yeah, that’s it from my side, sir. Thanks.

BVK Reddy — Chief Executive Officer

So Dodla + it is there only Dodla + in Africa, so we are trying to — wherever we have other brands, we also try to keep pushing balancing the how the offtake is, if the Dodla brand improves then we can start to relaunch the other brands.

Sunil Reddy — Managing Director

There we have only Dairy Top is one brand, so we started co-packing in Kenya, from Kenya we started in a Dodla + that is a small quantity. And also we are doing even from Uganda also now started the second brand as a Dodla +. It is picking up, not in India much.

Aniruddha Joshi — ICICI Securities — Analyst

Yeah, thank you. Thank you, sir.

BVK Reddy — Chief Executive Officer

Thank you.

Sunil Reddy — Managing Director

Thank you, Aniruddha.

Operator

Thank you. The next question is from the line of Hanumantha Rao, an individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Good afternoon, madam, and congrats and complement say management team for the good numbers. I have two, three questions. One is the what is the general market share — average market share in your operating area. And the second one is, what is your IT spend for the — today back information [Indecipherable] and various things. Third one is —

BVK Reddy — Chief Executive Officer

So our market share — sorry, go ahead.

Unidentified Participant — — Analyst

Third question is that how do you incentivize the farmer for retailing them, continuity with them and like advances or something like that? And fourth one is curd, third business, please elaborate please, three questions.

Sunil Reddy — Managing Director

Yes, curd and IT spend, Anjan will be giving you sir, basically our — normally market we take an average we will be now 7% of the market share in the areas where we are operating that is our numbers which we have computed that is what our numbers indicate to us sir.

Unidentified Participant — — Analyst

Are there any incremental from year to year or what is your further plan of the future years for indicate, 7% to 10% or like that?

BVK Reddy — Chief Executive Officer

See basically, the increment has happened sir, because there is a national status which says that there is a 3%, 4% growth by volume in terms of general consumption. So that itself is that we have to — the 7% itself indicates a certain amount of growth and we also add maybe our market share previous years, two year has been growing by the 0.5 — maybe 0.5% overall as market share has been increasing for us, rather than the growth. Compared to that and when we look at the incentives to farmers, I think at the present day, the farmers are more happy with the service that we provide in terms of prompt payment, now we have eliminated the middlemen and they get clarity of what milk we are giving them, giving them the facility of cattle feed, bring door delivered. And as we go on adding, we try to make it more convenient for them to do dairy business of farming, dairy farming rather than having to run around for 10 people.

So today when we are paying all our farmers directly into the bank account without any middlemen, based on the quality which is automated and comes to the company when we keep verifying. So those eliminations or keeping the partners more comfortable with us. Now regarding the IT spend and the IT spend normally I think is averaging around INR2 crores to INR3 crores because not considering the hardware that we have to spend a bit on the hardware where we call as the testing equipment for each village that we enter into. And other than that we have our own in-house like we are doing our SAP upgradations, security, all those things that keep happening, those are the two major areas of our —

Anjaneyulu Ganji — Chief Financial Officer

So apart from the general IT expenditures, INR3 crores is on the improvement for the programs for automation, that is what we normally spend on budgeted for, so that is — apart from that we have regular IT expenditures everything going on as per the planned budget. So this is further improvements in the — for automation and IT projects for SSB developments that we spend on.

Sunil Reddy — Managing Director

And also because our IT is one of our key enablers. Right now when we look at it every day that 8,000 villages, now lack of farmers, we are now on a daily basis we monitor what they’re getting, is there any variation and the whole process being automated with — thanks to GST now coming in invoices have to be generated live and the whole thing, so that upgradation has been happening sir. And coming to curd, I think we had an improvement in our curd volume compared to last year revenue improved. So Anjan will give you the specific of the curd volume.

Unidentified Participant — — Analyst

Please, little more specific about the curd business, sir, is it a substantial business or any —

Sunil Reddy — Managing Director

Curd volume and specific, Anjan will give you sir.

Unidentified Participant — — Analyst

Yes, please.

Anjaneyulu Ganji — Chief Financial Officer

On the curd as we discussed earlier also, for FY ’23 we have sold around 92 metric tonnes per day compared to last year, year-over-year, we have 252 metric tonnes per day, so it is a 16% year-over-year improvement. Coming to the revenue generated from the curd sales, so this quarter we have generated revenue of INR125 crores from curd sales with an average EBITDA margin hovering around 15% to 16%.

Unidentified Participant — — Analyst

Okay, sir. Thank you, sir. That’s all from my side.

BVK Reddy — Chief Executive Officer

Thank you, sir.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.

Sunil Reddy — Managing Director

So thank you, everyone for joining the call of Dodla Dairy for the second quarter. We really appreciate you spending time with us. If there is any other queries, we have our email ID on the investor presentation, please do reach out to us and we’ll get back to you. Thank you so much for sparing time with us. Thank you.

[Operator Closing Remarks]