Dodla Dairy Ltd (DODLA) Q3 FY23 Earnings Concall Transcript

Dodla Dairy Ltd (NSE: DODLA) Q3 FY23 Earnings Concall dated Jan. 24, 2023

Corporate Participants:

Sunil Reddy — Managing Director

BVK Reddy — Chief Executive Officer

Analysts:

Aniruddha Joshi — Analyst

Nitin Awasthi — InCred Capital — Analyst

Vinayak Mohta — Stallion Asset Management — Analyst

Resha Mehta — GreenEdge Wealth Services — Analyst

Akshat Mehta — Pioneer Investcorp — Analyst

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Himanshu Nayyar — Systematix Group — Analyst

Ankit Shah — JHP Securities Private Limited — Analyst

Bharat Gianani — Moneycontrol Pro — Analyst

Dhiral Shah — PhillipCapital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY ’23 Results Conference Call of Dodla Dairy Limited, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities. Thank you, and over to you.

Aniruddha Joshi — Analyst

Yeah. Thanks, Michelle.

On behalf of ICICI Securities, we welcome you all to Q3 FY ’23 Results Conference Call of Dodla Dairy. We have with us senior management represented by Mr. Sunil Reddy, Managing Director and Mr. BVK Reddy, CEO.

Now, I hand over the call to the management for initial comments on the quarterly performance and then we will open the floor for question-and-answer session. Thanks. And over to you, sir.

Sunil Reddy — Managing Director

Thank you, Aniruddha. Thank you very much. Good morning. Hello, everyone.

I welcome you all to the Q3 and Nine-Months ended for the year ’23 earnings conference call. On behalf of Dodla Dairy Board and the entire team, I wish you all a Happy New Year. I’m glad to announce that operating revenues for the year have grown by 17.4% year-over-year to INR675 crores in Q3 in the current year. This is because aided by the gradual rise in selling price, coupled with the higher milk and value-added product sales. Dodla Dairy continues to go forward in the journey of operational excellence by overcoming the sectoral headwinds.

The company took a price hike to partially mitigate the increase in cost of milk production, owing to the rise of fodder and other prices. Additionally, the extension of the monsoon in the southern states and like little bit of disease impacted the flush season for the year ’23. Despite industry challenges, the VAP sales surged to 11.1% year-on year to INR153 crores during Q3 FY ’23, demonstrating the strong brand recall for Dodla products. The VAP share of overall dairy revenue stood at 23.1% in Q3 for the year ’23. The company continues to strengthen its footprints in Northern Karnataka and Goa markets through Sri Krishna acquisition. It gives me immense pleasure to share that Dodla Dairy bagged the CII Award for the Food Safety 2022 from CII’s Food and Agriculture Center of Excellence. It was a great reward for us. Dodla Dairy is geared towards creating also value for the stakeholders with its diversified product portfolio, excellence-driven corporate culture and coupled with a strong balance sheet position.

Now taking a glance at the financial highlights for the third quarter ended December 31, 2022. Operating revenues stood at INR675 crores in Q3 FY ’23 as compared to INR575 crores in Q3 for the financial year ’22, registering a growth of 17.4% year-on year. The company’s domestic business grew by 16.2% year-on year to INR618 crores, whereas international business surged by 32.7% year-on year to INR57 crores. EBITDA was at INR54 crores in Q3 FY ’23 as compared to INR52 crores in Q3 FY ’22.

Profit after tax was at INR35 crores in Q3 FY ’23 vis-a-vis INR27 crores in Q3 FY ’22, registering a strong growth of 31.7% year-on year. This is all due to a decline in financial costs, rise in other income, coupled with a decline in effective tax rate, which has come down to 19.5% in the quarter FY ’23. EPS for Q3 FY’ 23 stood at INR5.9 as compared to INR4.8 in Q3 FY ’22.

Now, talking a bit of our operational highlights for the quarter ended December 31, 2022. Average milk procurement in Q3 FY ’23 was at 12.8 lakh liters per day as compared to 12.4 lakh liters per day in Q3 FY ’22, registering a growth of 3.8% year-on year growth. Average milk sales during Q3 FY ’23 were at 10.5 lakh liters per day as compared to 9.9 lakh liters per day in Q3 of FY ’23, growing by around 6.7% year-on year.

Curd sales during Q3 FY’ 23 was at 260 metric tonnes per day as compared to 245 metric tonnes per day in Q3 FY ’22, increasing by 5.9% year-on year. Revenue from value-added products, including fat and fat-based products grew by 11.1% year-on year to INR153 crores in Q3 FY ’22, vis-a-vis INR138 crores in Q3 FY ’22. VAP including fat and fat-based products contributions stood at 23.1% of the overall dairy revenue during Q3 FY ’23 as compared to 24.4%, contributing — contribution of the overall dairy during Q3 FY ’22.

I would like to extend my gratitude to all our stakeholders for their continued support of Dodla Dairy. We have a strong governance framework. Our business model is an end-to-end socially positive impacts over one lack dairy farmers at one end. On the other end, we ensure health and nutrition to millions of consumers through our milk and VAP products. Our long-term engine — growth engines are continual focus on EFG practices and sustainable business model with a balanced ecosystem.

With this brief, I hand it over to our CEO of our company, Mr. BVK Reddy. Thank you.

BVK Reddy — Chief Executive Officer

Thank you so much, Sunil sir. A very good afternoon to all the participants.

We have a very good healthy quarter showing growth in revenue and other parameters. We are moving towards enhancing our footprint and strengthen our pan-India stance. As on 31 December ’22, we procured milk around 1.2 like dairy farmers daily, out of which 86% are provided with the regular direct payment to their bank accounts. Our direct procurement model has further strengthened, wherein we are buying almost all the milk directly from the farmers across more than 7,800 villages as compared, resulting in cost savings and establishment of deep-rooted relationship with them.

Our Orgafeed operations, wherein we provide a high-quality feed to the dairy farmers, help us strengthen this relationship with them and also ensure both the parties get benefitted. Orgafeed revenue stood at INR43 crores in FY ’23 and EBITDA approximately INR4 crores during the same period. In terms of our presence, we continue to have third highest market presence across 13 states in India, supported by third largest procurement network, with 15 processing

Plants with nearly 23 lakh liters daily capacity. We currently have 115 chilling centers as on 31 December, ’22.

We have around 565 Dodla Retail Parlors. We also have a strong network of 1,600 milk and milk distributor channel. We have around 2,700 distribution agents networks that all are well established in many areas of this country. We aim to adapt the 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 strengthen [Phonetic] our 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 to improve our margins to power unmatchable growth in the industry.

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

Questions and Answers:

Operator

[Operator Instructions] Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Ramesh Tota [Phonetic] from Smart Investment Solutions. Please go ahead.

Unidentified Participant — — Analyst

Hello. Good morning. Thanks for the opportunity for asking — an opportunity for asking a question. So, I was just following Dodla and retail [Phonetic] from last two, three quarters. So, I have couple of questions to ask management. So first thing I was looking at the stock line grew by 68.2% [Phonetic] quarter-on-quarter standalone. Is it because of that market share or inflation, whatever sales hikes you’re getting because of it? Or is it because of population increase or something? Can you just update on it?

Sunil Reddy — Managing Director

Yeah. So basically, our volumes also grew in terms of volume. Volume growth is roughly about 15%, so coupled with the revenue growth. But the whole intention of Dodla are three reasons. We did have a volume growth also on a consolidated level.

Unidentified Participant — — Analyst

And other thing I was looking at your nine-month YTD for last year versus this year, there is a drop of 2.3% in PBT. So how do you analyze that 2.3% gap? Is it because of your procurement prices increase or how much percentage of it is because of procurement? And are they taking our external factors including [Technical Issues]?

Sunil Reddy — Managing Director

PBT. So yes — so basically the drop will come there in terms of the gross margin will also be under pressure, where gross margin did come down because of our procurement prices increasing. And that is the reason the PBT had dropped a bit. And because of our other financial costs not being there and other income coming in, our EBITDA has also improved and it has been getting stronger.

Unidentified Participant — — Analyst

Okay. Thanks. How much of your gross margin is impacted by your procurement prices? Is it all or any other parting material? Or is it because of [Speech Overlap]

Sunil Reddy — Managing Director

I think majority of the further difference that you see is impacted only at the gross margin levels, which has came down from that — against maybe from what used to be around high 20s, it’s down to the — little bit down in the teens, lower teens.

Unidentified Participant — — Analyst

Yes. I see 4% drop in gross margin.

Sunil Reddy — Managing Director

Yeah. You can see this — you see this has dropped. So quarter two, see, the gross margin on a consolidated level is 25.6%. Now, it has come down to 25.3%.

BVK Reddy — Chief Executive Officer

Okay. Yeah. So that’s a drop in the margins.

Sunil Reddy — Managing Director

Yeah. So that is in consol level.

Unidentified Participant — — Analyst

And one more thing I was keen in seeing was, yesterday, I was running this Heritage call back, they were saying about their other expenses, which is like 7.5% of their grosses, but our company — in Dodla it is like 30-ish percent. Is it — structurally, it is different or is it because of grouping issues in financial?

Sunil Reddy — Managing Director

Majorly because of grouping issue, it’s not structurally different. So majorly grouping issues.

Unidentified Participant — — Analyst

Okay. You mean to say dairy industry across it will be — in the overall PBT, it is a standard, means we are under compression?

Sunil Reddy — Managing Director

Yeah.

Unidentified Participant — — Analyst

Are you [indecipherable]?

Sunil Reddy — Managing Director

Yes. You can refer it that way. Yeah.

BVK Reddy — Chief Executive Officer

And how do you foresee your raw material prices for coming FY ’24?

Sunil Reddy — Managing Director

I think FY ’24, at least for the fourth quarter, we think it will turn up a little bit more, raw material prices will turn up. But I think we’ll still be able to transmit to our consumers as we go forward, maybe with a slight lag of 15 days or so, because I think that’s what we’ve been doing for the whole year. I think that will continue as we go forward. But as the summer sets in, we normally have a mix of — product mix change which will happen, which will also help in improving the margins.

Unidentified Participant — — Analyst

Okay, sir. And one last question. Can you just tell me your numbers like procurement cost per liter and selling price per liter of milk?

Sunil Reddy — Managing Director

For the quarter, sir?

Unidentified Participant — — Analyst

Yeah. For the quarter, sir.

Sunil Reddy — Managing Director

So, I’ll just give you the numbers. I will give you. Procurement, year-to-date procurement is around INR36 rupees for this year compared to last year, which was at INR31.7, is the procurement rate.

Unidentified Participant — — Analyst

Okay, sir.

Sunil Reddy — Managing Director

And also sales, right?

Unidentified Participant — — Analyst

Yeah. Selling prices. Selling price of per liter of milk?

Sunil Reddy — Managing Director

The selling price per liter of milk moved up from — one minute, sir. INR48.9 last year to INR52.2 this year.

Unidentified Participant — — Analyst

Okay. Thank you, sir.

Sunil Reddy — Managing Director

This is only India.

Unidentified Participant — — Analyst

Thank you, sir. If anything is there, I’ll join the queue. Thank you so much.

Sunil Reddy — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Nitin Awasthi from InCred Equities. Please go ahead.

Nitin Awasthi — InCred Capital — Analyst

Hello, sir. Had a couple of questions on different aspects of the business. Firstly, on the feed plant, where are we on the expansion? And can you just give an update on where we stand as of today on the expansion?

Sunil Reddy — Managing Director

Nitin, BVK will answer that, Nitin.

BVK Reddy — Chief Executive Officer

Yeah. See, the new plant, which is coming up in Kuppam, that is the border between Tamil Nadu and Andhra, so 99% it is — end of March or first week of April, we are going to commence it with a 12,000 tonne capacity per month.

Nitin Awasthi — InCred Capital — Analyst

And ramp-up, how do you expect the ramp-up to be?

BVK Reddy — Chief Executive Officer

Yeah. Now see, out of 1 lakh, 20,000, 25,000 farmers now, we are only catering only 19,000 to 20,000 farmers. So the present existing plant is, we have a capacity of only 2,000 tonnes capacity, so that now we are yielding 100%. And once this plant comes to operational, then definitely at least another 15,000, 20,000 liters, this 23, 24 [Phonetic] itself we are targeting.

Sunil Reddy — Managing Director

15,000 tonnes.

BVK Reddy — Chief Executive Officer

Not 15,000 tonnes, 15,000 farmers established.

Nitin Awasthi — InCred Capital — Analyst

Got it, sir. Sir, also because now your feed project will keep getting bigger and you will keep getting bigger in the feed business, I wanted to ask you whether in the feed segment, can you use DDGS as a substitute for raw material because the availability of DDGS is going up in the country, Distiller’s Dried Grains Soluble feed?

Sunil Reddy — Managing Director

So basically, product mix is something which we have a multiple of options, which we keep looking at what is the optimal because in terms of the protein content to fiber content — to fiber content and energy. So normally, DDGS is also use to certain extent depending on what the prices are in the local area available. So it’s a huge range of mix that we managed to keep our price under control.

Nitin Awasthi — InCred Capital — Analyst

Noted. Noted, sir. Sir, how much percentage of our total sales happens from the Dodla Parlors that we have?

Sunil Reddy — Managing Director

The retail parlor sales are between 11.3% [Phonetic] of our sales. We are actively trying to streamline it, which is non-viable to bring them down and only pushing good products available still around 11% [Phonetic].

Nitin Awasthi — InCred Capital — Analyst

11% [Phonetic]. Okay. And how much — what would be the EBITDA difference for the product mix in Dodla Parlors and non-Dodla parlors?

Sunil Reddy — Managing Director

See, we basically try to keep the costs the same in terms of what we get as realization because are encouraging the franchisee who is operating there, but it gives us a lot of ability to be present in where areas we’re finding difficult to get our foothold.

Nitin Awasthi — InCred Capital — Analyst

Sir, again, the question I’m going to ask you was in a numerical terms, EBITDAs from the Dodla Parlors, if you do your sales, would it be higher than the non-Dodla Parlor sales or would be lower?

Sunil Reddy — Managing Director

It would be almost the same. It won’t be higher than the parlors. But the parlors gives us the strength of controlling our market share because we know exactly where the retail is happening, which is customer A. And B, wherever we are finding it difficult to penetrate into new areas or not getting traction, we are able to use the parlors and grow.

Nitin Awasthi — InCred Capital — Analyst

Noted. So it’s more strategic in nature. Understood. Sir, finally, the cash on books and liquid investments.

Sunil Reddy — Managing Director

Yeah. So cash on — the quantum of the cash on books and liquid investments, sir?

Nitin Awasthi — InCred Capital — Analyst

Correct.

Sunil Reddy — Managing Director

The cash on books right now is INR388 crores, sir.

Nitin Awasthi — InCred Capital — Analyst

INR388 crores?

Sunil Reddy — Managing Director

INR388 crores is the cash on things. We have in bonds and debenture of around INR122 crores, mutual funds INR138 crores and the balance in fixed deposits.

Nitin Awasthi — InCred Capital — Analyst

Noted. How do you — this question was related to something I’m going to ask right now, which is, how do you see the stress in the industry? Do you think the industry in the last decade, this will be the more stressful time for the industry?

Sunil Reddy — Managing Director

The stress in the industry, I think, has been felt by more of the people who are not been able to pass on the price to the customers who didn’t have a bit of a bank PRISM [Phonetic] and also those who had not invested in the back-end in the earlier days of procurement and taking it forward. So the stress is there in industry, more from a point-of-view, I think as overall food inflation itself, it’s been increasing. So, we have to be careful not to be — not to go overboard on price increases and just trying to pass on. In the same manner, not to be too conservative in terms of getting affected to our bottom line. So the stress has always been there. It’s been typically — this part of the year, I think it has extended for a little longer period. I hope by next quarter of — the first quarter of the next year, things will improve a lot more.

Nitin Awasthi — InCred Capital — Analyst

Understood. Sir, that’s the hope because you’ll have the flush coming in and things stabilizing and the rains should bring down the product cost. I understand all that. But what I’m trying to understand is because we have cash on the books, which makes us a very, very different company compared to the industry, because the industry is threshold capital to some extent. Are there bargains out there that we’re looking for?

Sunil Reddy — Managing Director

So the bargains are there, but we’ll have to make sure that they’re at the right bargains. So that’s what we are looking at. We will actively keep looking. So for example, this year we have already acquired Kenya. We have expanded our operations in feed and then, we have expanded our operations in Sri Krishna this year. Again, the same thing we will continue. We’re actively looking, but trying to see the best possible outcome for us.

Nitin Awasthi — InCred Capital — Analyst

Noted, sir. Thank you, sir. Thank you for answering all the questions patiently.

Sunil Reddy — Managing Director

Thanks, Nitin.

Operator

Thank you. We have the next question from the line of Vinayak Mohta from Stallion Asset Management. Please go ahead.

Vinayak Mohta — Stallion Asset Management — Analyst

Yeah. Hi. Good morning. Can you hear me?

Sunil Reddy — Managing Director

Yes, sir.

Vinayak Mohta — Stallion Asset Management — Analyst

Yeah. Hi, sir. Sir, just had a few questions. I’m new to the company. So just wanted to understand, I was looking at the broad capacity additions that you have done on the processing side. However, that kind of addition has kind of not being able to follow-up with the growth in the sales volumes and the milk procurement volumes. So could you help me with understanding two fold, like how do you see the volumes growth going forward? And simultaneously, what kind of capacity additions are we doing on the 20 number that is mentioned in the presentation?

Sunil Reddy — Managing Director

So, basically, I think capacity addition on the front-end, we are not looking at anything now until we get an acquisition, which gives us a new area or territory for us to enter, sir. In terms of capacity expansion on the backend, BVK will explain what we’re doing. So, this is predominantly what we do is to go hand-in-hand with what volumes we get as procurement and sales. We are actually built-up for handling the larger volume of procurement in this year, but unfortunately because of weather conditions and others, the volumes didn’t income, which we’re confident will come next year and it will add to our capacity. So BVK will explain more about how much of procurement capacities you are adding. And depending on the price increases, we’re trying to also keep that even still.

I’ll hand it over to BVK to give you more.

BVK Reddy — Chief Executive Officer

See, the plant capacity is now, if you see the nine months cumulative, now we are roughly about 64% to 65% plant capacity utilization what we are doing. But this year unlikely now, we have two fodder plants because there is no surplus milk in the system. So, we were not able to utilize our total plant capacities. See, if we had utilized the total plant capacity, then we would have been at 77% to 80% capacity utilization.

Vinayak Mohta — Stallion Asset Management — Analyst

Understood. So basically, what kind of growth can we expect following through in the next two to three years broadly? What is the management targeting?

BVK Reddy — Chief Executive Officer

So basically, as we have been doing, historically, that we have been growing by 10% to 11% by volume and 15% by value, because inflation has always been in the system a little bit. So, I think we will continue the same trend going forward for the next two years to three years.

Vinayak Mohta — Stallion Asset Management — Analyst

Understood. And where would the margins settle on a broad level? Because there have been quite recently [Phonetic] volatile even after the value-added product mix increasing in the chains? So where would you see this settling in?

Sunil Reddy — Managing Director

So basically what happens, sir, I have been saying that we normally try to look at also the absolute number of margin as comparative with an easier methodology in the dairy industry. But even if you look at it as a percentage, this is comparatively one of the years, which is the toughest years in terms of operational prices going up in terms of fuel, packaging material, procurement price, everything going up. And we’ve been able to maintain this margin level. Even now we are passing it on to the customer. Even if there is a slight improvement in milk or milk volumes, our margins will move up instantly. So basically, what happens is when there is an increase in procurement price or other costs, because there is a time lag of 15 days to a month before we passed on to the customer. But when prices come down, there is instinctively accretion to the bottom line. So that’s why our margins will improve very rapidly. So, I think we can look at what was in the previous year, coming to the higher profitability what we have been closer to the double-digit numbers.

Vinayak Mohta — Stallion Asset Management — Analyst

Understood. So the 10%, 11% that you had done before?

Sunil Reddy — Managing Director

Yeah.

Vinayak Mohta — Stallion Asset Management — Analyst

Yeah. Understood. Okay. Great. Great. Thank you so much.

Operator

Thank you. We have the next question from the line of Resha Mehta from GreenEdge. Please go ahead.

Resha Mehta — GreenEdge Wealth Services — Analyst

Yeah. Thanks. So first is the clarification. The procurement price of milk and the selling price of milk that you mentioned was that for Q3 or was that for average of nine months?

Sunil Reddy — Managing Director

Average of nine months, ma’am.

Resha Mehta — GreenEdge Wealth Services — Analyst

Okay. Can you also share for this particular quarter, which is Q3?

Sunil Reddy — Managing Director

Yeah. Q3 price is 37.8, procurement price. And the sales price for Q3 is 53.76 [Phonetic].

Resha Mehta — GreenEdge Wealth Services — Analyst

Sorry?

Sunil Reddy — Managing Director

53.8. Procurement is 37.8, and for sales price is 53.8.

Resha Mehta — GreenEdge Wealth Services — Analyst

Got it. And also, can you just broadly share on an average for the full year, typically what has been your cow to buffalo mix procurement?

Sunil Reddy — Managing Director

For us, I think 95% is cow. Only 5% is buffalo, ma’am.

Resha Mehta — GreenEdge Wealth Services — Analyst

All right. And also if you could share the procurement from AP, Tamil Nadu, Karnataka, Telangana for the full year on an average? I’m not talking for this quarter.

Sunil Reddy — Managing Director

For the volume or in terms of rate?

Resha Mehta — GreenEdge Wealth Services — Analyst

Volume, volume, volume. Maybe if you can share in percentage terms that is also fine. Like in FY ’22, you procured around 12 lakh liters. So…

Sunil Reddy — Managing Director

So looking at year-to-date volume, AP is around 4.73 lakh liters. In percentages, it’s far better. I’ll go with percentages.

Resha Mehta — GreenEdge Wealth Services — Analyst

Sure. Anything is fine.

Sunil Reddy — Managing Director

38% is AP. 21% is Karnataka. 31% is Tamil Nadu. 2% Telangana and 8% Maharashtra.

Resha Mehta — GreenEdge Wealth Services — Analyst

Got it. And how — in terms of revenue percentage, how much comes from AP, Tamil Nadu, Karnataka, Telangana?

Sunil Reddy — Managing Director

In terms of sales revenue?

Resha Mehta — GreenEdge Wealth Services — Analyst

Yes, yes. Top line or whichever, nine months, not looking for the quarter or even if your past history, if you can talk about.

Sunil Reddy — Managing Director

This quarter, right? So this quarter, I’m giving you by volume number, not by value. By volume [Speech Overlap]

Resha Mehta — GreenEdge Wealth Services — Analyst

Actually, I’m not looking for the quarter. I’m looking from an annualized basis. So maybe if you can share like for FY ’21 or ’22, what has it been on an averages? Ballpark will also do.

Sunil Reddy — Managing Director

Yeah. So for the year end — for the year, AP sales is 34%, Karnataka 40%, Tamil Nadu 16%, Telangana 10%. That is for the year ’23, not year-to-date.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right. And this is Tamil Nadu, 16%, right, you said?

Sunil Reddy — Managing Director

Tamil Nadu, 16%, yes.

Resha Mehta — GreenEdge Wealth Services — Analyst

And anything in Maharashtra?

Sunil Reddy — Managing Director

No sales in Maharashtra.

Resha Mehta — GreenEdge Wealth Services — Analyst

All right. Got it.

Sunil Reddy — Managing Director

Because it’s all there in Goa, which we have included in Karnataka.

Resha Mehta — GreenEdge Wealth Services — Analyst

Okay, okay. And lastly, if you could just comment on your procurement journey like when did you embark on a, building a direct procurement from farmer model? And also that — so if I see, if I were to just crudely calculate the milk procured per farmer, right, in terms of volumes, if I see 12 lakh liters procured in FY ’22 and 1.2 lakh farmers. So that’s broadly 10 liters per farmer. I know this is a very crude way of calculating. But if I were to just compare you with your peers, this number seems on a very high side, which probably implies that you have a very dense procurement network, right? So is it because you’ve started this direct procurement network journey very recently? Or if you could just comment on your direct procurement network journey and also your procurement density? Because I think your procurement for farmers seems on the higher side versus the industry.

Sunil Reddy — Managing Director

So, I’ll just give a broad picture and then BVK will take over for the detail and all. BVK will explain when we started the journey and how the things happen. But I think from a procurement side, the team has put in a lot of effort in terms of, actually, as you rightly said, bringing in more density, cutting out longer distances and that has been the effect of what you’re seeing now in terms of more improvement. BVK will give you more in terms of when it started and how the change happened.

BVK Reddy — Chief Executive Officer

See, basically, this procurement model, earlier it was only agent-model, madam. So, we used to procure milk directly from the agents from the village and in turn the agent used to make a payment and the agent used to be responsible to the direct farmers. But see, that we have been trying since seven, eight years, almost it took 10 years that now we have converted 100% into direct farmer accounts. So no longer the agent in the middle. The agent is now only — there is no agent. It is only aggregator in the middle. So, we are making all the payments from the past [indecipherable] to 125,000 farmers directly from the [indecipherable] division to [indecipherable]. So the aggregator what he is doing in the village, we are paying that separate charges for you. So, this took almost — to implement 100%, it took more than 10 years. And efficiency is also per farmer — that’s what you said by dividing 2 lakh farmers — 120,000 farmers with 10 liters, that is true. So, we started with seven, eight and then slightly nine. Now it is almost nine to 10 liters per farmer is giving yield. That also we are tracking sales numbers [Phonetic].

Resha Mehta — GreenEdge Wealth Services — Analyst

Right. Right. So do you see that as you expand your procurement network, do you see this number coming down drastically, which is average 10 liters per farmer? Because it seems a little or quite on the higher side versus the industry?

Sunil Reddy — Managing Director

So, I think it’s actually improving [Speech Overlap]

BVK Reddy — Chief Executive Officer

It is improving year-on year. When we started, it was six liters. Then after one year, it becomes 7 liters, 8 liters. See, that is — it is improving.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right. Right.

Sunil Reddy — Managing Director

For me, the way you look at it, even for me, I think it was — per liter, still low for farmer because if you take a good hybrid cow during a lactation cycle of her, she should be giving at least 12 to 15 liters because it’s a good hybrid. But even eight liters to nine liters, I don’t think we have any more of the smaller volume animals left. So that is the thumb rule, which is saying that we are — which will only go higher and not come down.

Resha Mehta — GreenEdge Wealth Services — Analyst

And typically, what — how many other dairy companies would be present in the, let’s say, the villages that you all are present for procuring the milk from farmers on an average? I’m sure it will be a mix of cooperative.

Sunil Reddy — Managing Director

Three, four, five of us will be there.

BVK Reddy — Chief Executive Officer

All major diaries are there. Each and every villages, there are — five major diaries are even competing each other. And even small, small diaries in certain areas. But major four to five diaries, each and every village, we are competing each other.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right. And anything that you can comment on in terms of the farmer attrition rate that you all may be seeing or let’s say, even the same farmers may not necessarily supply milk to you on two consecutive days, right? So anything here that you would like to comment on that? How do you all really manage this?

BVK Reddy — Chief Executive Officer

See, that is normally — see, whenever price is going up or whenever price is going down, there is a slight fluctuation. See, roughly about, we used to have 125,000 farmers. So now this third quarter, if you see, we have about only 120,000 farmers. Because this year April to December, almost four times price increase has happened in a procurement. So during this price increase, if somebody in a certain area quickly, so before us if he is taking a price hike in this or one week before us, there’ll be a slight, as a percent, 2% people will see the change.

Sunil Reddy — Managing Director

But coming to your question about daily change, it doesn’t happen that rapidly, ma’am. We keep track of every farmer on every month, every day, every basis or whether there is even a variation. And we have some bots which keep running through. So, we don’t see that alternative day drop, but it happens at a point of time and then again, they might come back and might go forward. The slight variation continues.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right. And you mentioned that now we only have aggregators, right? So, these are — sir, basically with the village level, collection center assets are owned by you, right, your electronic milk analyzers, etc.

Sunil Reddy — Managing Director

Everything is owned by us, even including the majority of the villages, small rentals also we are paying. Aggregator doesn’t own anything.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right. Right. And the other thing I wanted to check, right, the leader in the south, the largest private dairy, right, they are really focusing on building active bulk coolers at the village level collection centers. So if you could share your thoughts on how desirable this is, when does this become viable, let’s say, your market share from a village, let’s say, if there are five major dairies, then you have like a 30% market share from a village and that’s when it becomes viable to install an active bulk coolers at the village level collection center? And how do you all think about this and how are you all planning to ramp-up active bulk coolers, if you all think this is a desirable trend?

Sunil Reddy — Managing Director

Yeah. See, this we have been — it is called, what we call CMC, conventional milk cooler. We don’t call it a bulk cooler conventional — milk cooler, only 1,000 liters capacity. Now, we have been trying since one, one and a half years, we have already established around 22 — so far ’22 numbers. And then we are already experienced. We got some kind of experience with us. Now next year, we are trying to explore. So the community number of what the budget and per village that we are looking at, ma’am, the team actually goes and makes a route and sees wherever the viability is there.

So sometimes if there is a little or so viability, we’re able to manage a couple of villages and also get them going there because it not only is the benefit in terms of costing and return on capital, which is reasonably good when it comes to that — because vehicles don’t go twice a day, they go once a day, but also improves tremendously the quality of milk. So, we do it with the two-way [indecipherable] of quality of milk improvement as well as cost savings. But implementation, like you said, it’s work-in progress based on the volume number of villages. So, we hope that we’ll be able to increase these numbers as we go along.

Resha Mehta — GreenEdge Wealth Services — Analyst

Right. Right. All right. Thank you. All the best.

Operator

Thank you. We have the next question from the line of Rajesh Aynor [Phonetic] from ITI Limited [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Hello?

Sunil Reddy — Managing Director

Go ahead, Rajesh.

Unidentified Participant — — Analyst

Yes. Sir, thanks for the opportunity. Sir, not very familiar with the status. So just wanted to understand. We mentioned that there is some weather-related factors because of each — volume increase of procurement. So can you explain on this more, as well as how the dynamics — why the prices have certainly moved up, what is the outlook and what are the factors because of which we expect the prices to move up and down and those factors? I mean, can you please throw some light?

Sunil Reddy — Managing Director

So basically, Rajesh, the animals, when it has to be impregnated, deliver the milk during the lactation period, an average cycle of an animal’s lactation period will tend to be between 14 months or 16 months depending on the other factors. So bringing it to the factors of what can be other factors, by nature, when the weather is cooler when there is lot more fodder available for the animal to eat, it’s an optimal time for an animal to get impregnated and deliver. And that was how the cycle used to keep going.

In the recent past, when COVID had come, the cycle got disrupted because there was no — not much of uptake and farmers didn’t have the technicians to come in, innate the animals. And so that was one. Two, more of monsoon or more of rain, for example, if one month there is excessive monsoons and there is no place for the animals to go graze, disease or anything else come, that also pulls back. So the differential happens if there is a one month or a two month of a drop in production then from a normal cycle. Consumption continues to go and starts to get depleted. I think this year it’s added towards — there was a lot of global variation, even when the global prices went up, and India exported a lot of the stocks that they had of powder and fat, which made sure [indecipherable], that would have been a deficit of milk and milk products in the country compared to the — and also the market volumes came back with a bang.

So, I think there is a reason why there was this shortage and it will continue. It was there for a while. But we think coming — going forward when good prices are being paid, the farmers will in turn come back actively and unfortunately, like I said, this is a little longer in terms of cycles of six months to nine months of cycles. I think that’s the worst cycle that we have gone through. We are hoping that the cycle will improve and become better than expected.

Unidentified Participant — — Analyst

On a steady, state, what is generally the rate at which the demand is growing in a country like India?

Sunil Reddy — Managing Director

In terms of sales?

Unidentified Participant — — Analyst

Yeah, the volume and overall, the volume.

Sunil Reddy — Managing Director

The volume for us has been historically growing around 10% by volume and around 14%, 15% by value, with 15% being a factor of product mix and inflation.

Unidentified Participant — — Analyst

Okay. And the market, by and large, would be growing at what rate, similar or lower?

Sunil Reddy — Managing Director

3% to 5% is what we — I mean that’s what the estimates from…

BVK Reddy — Chief Executive Officer

All over India, it is roughly about 5% to 6%.

Unidentified Participant — — Analyst

Okay. I understood. Thanks a lot, sir.

Operator

Thank you. We have the next question from the line of Akshat Mehta from Pioneer Investcorp. Please go ahead.

Akshat Mehta — Pioneer Investcorp — Analyst

Hello. Yeah. Good evening. Good morning, sir. Sir, thanks for the opportunity. Sir, I have three questions from my side. Sir, what is our farmer network as of today? And what’s the addition we did during the quarter?

Sunil Reddy — Managing Director

So, you will ask one-by-one or you want to ask all the questions.

Akshat Mehta — Pioneer Investcorp — Analyst

I’ll ask one-by-one.

Sunil Reddy — Managing Director

One-by-one. Okay. BVK will answer.

BVK Reddy — Chief Executive Officer

Yeah. See, the first quarter — see, last FY ’22 March, see, my farmer count was around 121,000. And then in the first quarter, it went up by 129,000 and the second quarter, it has come down to 124,000. Now third quarter is 121,000 again. 121,000/

Akshat Mehta — Pioneer Investcorp — Analyst

121,000? Okay.

BVK Reddy — Chief Executive Officer

Yeah.

Akshat Mehta — Pioneer Investcorp — Analyst

So, sir, of these farmers, sir, like what percentage of farmers buy feed from us, our feed business? So what percentage buy from us?

Sunil Reddy — Managing Director

Yeah. Roughly about now — only 22,000 farmers are buying feed.

Akshat Mehta — Pioneer Investcorp — Analyst

Okay, 20,000 farmers. So, sir, what would be the average procurement price that we get from these farmers?

Sunil Reddy — Managing Director

These farmers, we are getting average procurement [Speech Overlap] Year-to-date has been INR36. That is the price.

Akshat Mehta — Pioneer Investcorp — Analyst

Yeah. INR33?

Sunil Reddy — Managing Director

INR36 what we are paying to the farmers.

Akshat Mehta — Pioneer Investcorp — Analyst

And sir, my last question, what is the attrition rate that we’re seeing for farmers?

Sunil Reddy — Managing Director

Like BVK earlier said, it’s partly the 4,000, 3,000 — 4,000 fluctuation on a base of 125,000.

Akshat Mehta — Pioneer Investcorp — Analyst

Okay. Okay, sir. Thank you.

Sunil Reddy — Managing Director

Thanks.

Operator

Thank you. We have the next question from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking. Please go ahead.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Yeah. Hi. So basically, sir, I just wanted to understand, are the procurement — is it on MFT [Phonetic] basis, bit new to the industry.

Operator

Mr. Gandhi, we can hear a follow-up. We request you to please keep the speaker a little bit farer from your mouth and speak.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Sure. Now, am I audible?

Operator

Yes. Please proceed.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Yeah. Sorry. So just wanted to understand how is the procurement amount paid? Like we pay directly to the bank account of farmers. And what is the role of agent? Hello?

Sunil Reddy — Managing Director

So the agent is basically a consolidator, meaning that he is doing a service where, when the milk comes from the center, he basically measures the milk, see what quantity it is and then the quantity and quality measurement, and he is responsible for the quantity and quality that comes in from the farmer, which is done from an automated system of cooler analyzer where it has done and the [indecipherable] is being automated. And when the same milk comes from the consolidated to the chilling centers or wherever the collection to be, it has to be there. He takes the responsibility for discrepancy in quantity or quality, which will be penalized. And that’s what he does.

So he has nothing to do with either the price or the payments. The prices, once we decide on the price it is announced. Then the consolidator automatically updates it on all the analyzers and based on that, the farmer gets his daily information of what quantity of milk he is pour and what price he has got. And once in a 10 day [indecipherable], most of the places, 10-day, 11-day, the payment is made into the bank account based on that systems generated reports that we get. So the consolidator only is responsible for the quantity that comes to him and maintaining the quantity, quality parameters is equivalent to receiving end from the company.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

So he gets a fixed remuneration, or is it a variable remuneration? How is this?

Sunil Reddy — Managing Director

It’s a variable remuneration. Initial raise maybe when it starts, we might give them a small fixed remuneration if it’s a new area. But otherwise, it’s a variable remuneration fixed on a per liter basis.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Okay. And in terms of pricing, we pay MSP to the farmers, how is it, because you have other cooperative societies also competing, right?

Sunil Reddy — Managing Director

So price is, basically, I think it depends on the company to company. Certain companies will — if you have a lot more of it, then strength and stickiness will delay like what the retailers and 15 days or 20 days later. But majority of the places, the price differential will be on par. It will not be — not much of a difference, might be marginal differences, but they will be on par.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

No. That’s based on what? Is it market supply-demand, MSP or based on competitor price?

Sunil Reddy — Managing Director

Market supply MSP — market supply-demand.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Okay. It’s not on MSP, right? There is no MSP as such that you have to pay a bare minimum 30 or maybe whatever the amount may be.

Sunil Reddy — Managing Director

No.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Nothing of that sort. Market supply-demand. Okay. And in terms of value-added products, wanted to understand which is the top product, which is showing high growth? Because as I see, you’ve been selling cheese in African market, but not in Indian market, maybe the unit economics. Or what is the thought process behind? Because large FMCG players are betting big on cheese and they are saying about the high-double digit growth. So what’s your take on that?

Sunil Reddy — Managing Director

Cheese and those products, basically the base volume is very low. So if I don’t add Paneer to it — even if I remove Paneer and take processed cheese, the average base volume is very low. Therefore, it will show little larger growth. But our take is that there is still lot more room left in products like curds, the flavored milk, we have ice-cream as a category, the Indian sweets and Paneer, which I think are growing. This year, we would have had a little better and 1%, 1.5% growth in our value-added segment. But as we were saying earlier because lack of adequate milk and prices going up, we curtailed our large format sale of lease, consumer levels or the [indecipherable] levels, brought it down to smaller level. That is the reason why it is showing a slight dip otherwise, our other products have increased by another 1%, 1.5%. So, we think those will go on increasing as we go forward.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Sir, possible to quantify in the value-add, which could be the sort of high-growth products or — that you are targeting?

Sunil Reddy — Managing Director

So, basically, if I look at values like you were saying earlier, if I take FY ’22, our curd was around INR107 crores. And this year, it has become INR127 crores. If we take our other VAPs, which was around just INR12 crores in ’22 has now become INR17 crores in ’23. And if I take my fat, which you said has come down, it has come down in Q3 from INR18 crores to INR7.9 crores. So that’s why we are seeing that lower, but is there. So like we were saying the other VAPs, which have increased from INR12 crores to INR17 crores, which include also products like ice-creams, flavored milk, Paneer, Indian sweets, we believe that will exceed a little more as we go forward. And curd, I think will also have another percentage of increase.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

In terms of growth percentage, if you can quantify maybe curd is growing industry-wide, I’m not talking about company per se. Say, industry-wide, what is the growth rate — which is the product which is growing at maybe fast double-digit or high-double digit growth?

Sunil Reddy — Managing Director

So not double-digits. Especially when you look at curd, I think everybody is know — we have moved it into every level of operation, but now we think that the growth is coming, because people look at it as more of a health product. So if I add the fermented products because people are going to be re-phasing with your — maybe your aerated beverage or things like that. So that is why we are seeing some traction on growth coming from curd. So that will be. So that is the reason I say it will be in the single-digit growth.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Okay. Okay. And sir, any thoughts going — for going into cheese or maybe allied products related to cheese?

Sunil Reddy — Managing Director

No, sir. Cheese is basically, in my view, our MRP seems to be higher, but if you consider all the costs of it, cheddar cheese, these holding costs too. If you’re not able to use whey properly as a byproduct and all that, the cost differential in cheese is normally I keep looking at it [Technical Issues] value-added product. It depends on how you view in terms of appropriating your costs.

Bhavya Gandhi — Dalal & Broacha Stock Broking — Analyst

Fair enough, sir. Thank you so much. Thank you so much.

Operator

Thank you. We have the next question from the line of Himanshu Nayyar from Systematix. Please go ahead.

Himanshu Nayyar — Systematix Group — Analyst

Hi, sir. Thanks for taking my question. So, firstly, just wanted to understand the status of Africa expansion project. By when do we complete that and what’s the revenue potential overall, I mean, once we reach full utilization, both of our existing and upcoming capacities?

Sunil Reddy — Managing Director

Yeah. Himanshu, BVK will give you the existing utilization, what we foresee with this acquisition. So basically what we have done is we had one manufacturing unit in Uganda and we were selling from that unit into Uganda and Kenya. Now, we have acquired another unit in Kenya, because that would also derisk each country in the future, if something doesn’t happen. Also, we’ll be able to have market share.

I’ll now hand it over to BVK to see where we are doing currently in terms of our African volumes and what we see in the — there’s no short-term, maybe in the couple of years where we will be. Go ahead, BVK.

BVK Reddy — Chief Executive Officer

Yeah. See, right now we are doing roughly about one lakh sales together in both the countries, Uganda, as well as Kenya. Now almost 60,000 liters we are selling in Uganda and 40,000 liters on an average now we are selling in Kenya. And see this — just before COVID, there were some restrictions from Kenya’s side. So, they were putting the permit system area — there is no permit system. So, they are restricting quantity — more quantity coming to Kenya. So, they are giving only 42 for 50 permit every month. That’s why you see our quantity now received today earlier in a prior to COVID in 2019, we

Sold average 70,000 liters in Kenya. Now that has become only 36,000 liters, 40,000 liters because of the permit. system.

So now, see the — keeping that in view, now, recently, we acquired a plant in Kenya. So it is in the process. Maybe in the month of February, we will — handover will take place. We’ll take couple of months to start the production.

Sunil Reddy — Managing Director

I think we will come back to — at least initially we will be able to add to that additional 20,000, 30,000 liters of sales.

BVK Reddy — Chief Executive Officer

Because beginning, in the first financial year, maybe 20,000, 30,000 liters we will add.

Himanshu Nayyar — Systematix Group — Analyst

Got it, sir. Got it. Sir, second bit was on our — I mean, on our acquisitions. Given that we have not closed anything in the recent past and our cash balance on books is accumulating. I mean, in case we are not able to close any acquisitions in the near future in the medium-term, say, next couple of years, do we have — I mean, have we already finalized our organic expansion plans in terms of entry into new states in the country?

Sunil Reddy — Managing Director

So, basically, we will be doing organic or inorganic growth as we go along the way, Himanshu, because we are actively looking at wherever we can get opportunities to grow. And I think this year we will find a few coming up because of the stress on the system for the dairy industry. We are actively evaluating a few of them. But as we go forward, yes, our cash will start to accumulate more, even though we are spending, I think between our capital requirement for procurement and going into newer territories. We might have marginal surpluses, but we will continue with this growth journey as we go forward. So, I think our cash will be used for our growth for the next couple of years.

Himanshu Nayyar — Systematix Group — Analyst

Any states we have finalized where we want to go next beyond our current markets?

Sunil Reddy — Managing Director

So, we look at all our adjoining states, we have opportunities from Maharashtra to Orissa that we are looking at. So, we will have to evaluate and go. Because current year the price is being so volatile. We didn’t want to be — to make acquisition because it might hurt us in the short term. That’s why we were a little low key this time.

Himanshu Nayyar — Systematix Group — Analyst

Got it. And my final question, sir, is a bit more strategic. I mean, given the way we’ve seen milk prices behave, do we see even if flush comes next season, do we see prices going back to historical levels? Or we see that structurally things have changed and milk prices will be much higher than historical levels? And what do you think, if that is the case, what could the impact be on price elasticity, whether people would cut back on consumption because of the elevated price levels on a more structural basis?

Sunil Reddy — Managing Director

I think long-term, strategically wise, with current prices, I think that’s been holding forward in terms of consumption, not getting impacted that much. Maybe the companies could have — by changing volumes size or pack size and keeping it, therefore, we might see some small volume uptake. If prices go up further, I think they will — what you’re saying strategically consumption might get affected. But at the current moment, no, the prices are not getting affected. I mean the consumption volumes are still going strong. From a procurement point of view, once the flush comes in, we can at least hope to see it’s not a major correction, back to the old levels, but at least a couple of rupees differential is a normal scenario in the industry, which will be there and the selling prices will continue to remain the same.

Himanshu Nayyar — Systematix Group — Analyst

Got it, sir. Got it. Yeah. That’s it from me. Thanks. And all the best to you.

Sunil Reddy — Managing Director

Thank you, sir.

Operator

Thank you. We have the next question from the line of Ankit from JHP Securities. Please go ahead.

Ankit Shah — JHP Securities Private Limited — Analyst

Am I audible?

Sunil Reddy — Managing Director

Yes, sir.

Operator

Yes.

Ankit Shah — JHP Securities Private Limited — Analyst

Yeah. Thanks for taking up my question. What is the main reason for the revenue growth year-on year? Is it a combination of volume growth, as well as the price increase?

Sunil Reddy — Managing Director

Could you come again, Ankit? I didn’t get the question.

Ankit Shah — JHP Securities Private Limited — Analyst

What is the main reason for the revenue growth? Is it a combination of volume increase as well as the price hike?

Sunil Reddy — Managing Director

Yes. It’s a combination of volume and price. This year, in fact, price has been contributing a little more than usual. But historically, we’ve been at 10% by volume and 15% by value. So 5% by price and 10% by volume, historically.

Ankit Shah — JHP Securities Private Limited — Analyst

Okay.

Sunil Reddy — Managing Director

And this year, I think it is a little more skewed to 8.9% by value.

Ankit Shah — JHP Securities Private Limited — Analyst

Okay, sir.

Sunil Reddy — Managing Director

The remaining coming from — up to third quarter slightly, the revenue growth is roughly about 24.3% [Phonetic]. And the volume growth is around 15% YTD of nine months.

Ankit Shah — JHP Securities Private Limited — Analyst

Okay, okay. And any guidance for the next two years to three years in terms of revenue growth?

Sunil Reddy — Managing Director

Next two years to three years, we will continue with the same historical numbers that we’ve been looking at, right, the 10%. Even though the sales have increased, we’ll strive to keep the volume growth growing because as I keep saying earlier, it is not just the sales growth, but we have to also commensurately buildup the procurement, which comes with the right price and the right locations that we are operating from a sales and procurement point of view. So that’s what we’ll be targeting first, growing at the more historical waves of growth with the [indecipherable].

Ankit Shah — JHP Securities Private Limited — Analyst

Okay. Okay. Thank you so much.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Bharat Gianani from Moneycontrol Pro. Please go ahead.

Bharat Gianani — Moneycontrol Pro — Analyst

Yes, sir. Thank you for the opportunity. So just wanted to understand in these nine months FY 23, one factor that I want to understand that there is also an impact of the Sri Krishna acquisition that you did. So, what was the impact of that on the margins? If you see — because that’s why I wanted to understand what’s the Sri Krishna acquisition doing in terms of the margins and how much impact that had on our margins in the first nine months?

Sunil Reddy — Managing Director

So Sri Krishna in terms of revenue has done from the year — for the year-to-date around INR47 crores for us. Margins, BVK will be answering.

BVK Reddy — Chief Executive Officer

Sri Krishna, we have done INR47 crores, INR48 crores top line and the EBITDA level is only 2.68%. So because of the Sri Krishna, slightly overall very slight, maybe less than 0.5% may be impacted of our EBITDA. Overall domestic.

Sunil Reddy — Managing Director

Overall domestic.

Bharat Gianani — Moneycontrol Pro — Analyst

Okay, okay, okay. And sir, another thing is on the tax rate. So this nine months, we have seen the tax rate going below the 20% mark. So, I mean it’s slightly — so what 2023 percent is the tax rate in the nine months period? So what should be the tax rate we should look going forward? What we should be building?

Sunil Reddy — Managing Director

It will be the same 23% because, basically, this little difference came through the goodwill that we have when we acquired KC Dairy. And in the current bucket, whatever the Finance Ministry has made an announcement, we had the advantage of costing written back to us. And that is the reason why it was. It will continue to be in the — it will be in the 23% range.

Bharat Gianani — Moneycontrol Pro — Analyst

Okay. And sir, just one clarification. In nine months, our selling price was INR52.2 and last corresponding figure was INR48.9, whereas the procurement price in the nine months this year was how much, sir? I missed that actually, sorry.

Sunil Reddy — Managing Director

Procurement INR36, sir. This is what we have reported. INR36 for nine months ’23. INR31.7, ’22.

Bharat Gianani — Moneycontrol Pro — Analyst

Sorry, sir. I did not get the numbers.

Sunil Reddy — Managing Director

INR31.7 for the year ’22 nine months.

Bharat Gianani — Moneycontrol Pro — Analyst

Okay.

Sunil Reddy — Managing Director

And for the year ’23, INR36.

Bharat Gianani — Moneycontrol Pro — Analyst

INR36 was the procurement price for this nine months. And the corresponding nine months was INR31.7, right? Yeah. Okay. Okay. Thanks, sir, and all the best.

Sunil Reddy — Managing Director

Thank you, sir. Thank you. Ladies and gentlemen, this would be the last question for today, which is from the line of Dhiral Shah from PhillipCapital. Please go ahead.

Dhiral Shah — PhillipCapital — Analyst

Yeah. Good morning, sir. Thanks for the opportunity. Sir, how much incremental price hikes we need to take in order to cover the entire cost push that we have seen in last multiple quarters?

Sunil Reddy — Managing Director

Could you come, again, Dhiral. Dhiral, I couldn’t get the question.

Dhiral Shah — PhillipCapital — Analyst

Sir, how much incremental price hike we need to take in order to cover the entire cost push that we have seen in last multiple quarters?

Sunil Reddy — Managing Director

The price increase, we need to look at the 31.70 to 36, I guess you should take a price increase of the INR5 odd is what the procurement price basically had gone up. So it was an impact of around 12% overall is what we have to be — cost of procurement that went up. We have taken around the sales realization increase of around 8%. Remaining we improved in operational efficiency, and that is the reason we’re able to maintain this. So, I think the differential of 1%, 3% to 4% would have compensated the increase.

Dhiral Shah — PhillipCapital — Analyst

Yes. So are we expecting any price hike in coming — maybe in days or months?

Sunil Reddy — Managing Director

Normally, not much. If the procurement does go up, maybe there will be a marginal correction that will be done to keep the same increase in procurement prices, but no major price increases.

Dhiral Shah — PhillipCapital — Analyst

And sir, do you still foresee the flush season kind of a situation, because already three months has been passed if we consider October to February?

Sunil Reddy — Managing Director

So the season again, I think post April, we are hoping for a good recovery coming in because certain states — in the Northeast, monsoon comes in the cow [indecipherable], so milk procurement does starts to increase. So, we are hoping that it will come up and it will ease the situation.

Dhiral Shah — PhillipCapital — Analyst

Okay, okay. Thank you so much, sir.

Sunil Reddy — Managing Director

Thank you, Dhiral.

Operator

Thank you. As that was the last question for today, I would now like to hand the conference over to the management for closing comments.

Sunil Reddy — Managing Director

So thank you, everyone, for joining our call. If you need any further information, you can always get in touch with us. Our CFO, Anjan, unfortunately was not here today for a personal emergency. But I think on the presentation we have our contact details. You can get in touch with us, and we’d more than happy to give you more information. And thank you very much for joining us, and have a great day.

Operator

[Operator Closing Remarks]