Heritage Foods Ltd (NSE: HERITGFOOD) Q2 2025 Earnings Call dated Oct. 25, 2024
Corporate Participants:
Anuj Sonpal — Analyst
Sambasiva Rao — President
Srideep Kesavan — Chief Executive Officer
A Prabhakara Naidu — Chief Financial Officer
Upendra Pandey — Chief Executive Officer – Heritage Nutrivet
J Samba Murthy — Chief Operating Officer
Analysts:
Sandy Mehta — Analyst
Digant Haria — Analyst
Sameer Gupta — Analyst
Ankit Gupta — Analyst
Resha Mehta — Analyst
Kiran Kumar — Analyst
Pratik Kothari — Analyst
Jayvansh Mehta — Analyst
Sneha Jain — Analyst
Parikshit Gupta — Analyst
Govind Lal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Heritage Food Q2 H1 FY ’25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anuj Sonpal. Thank you, and over to you, sir.
Anuj Sonpal — Analyst
Thank you. Good morning, everyone, and a very warm welcome to you all. On behalf of the company, I would like to thank you all for participating in the company’s earnings call for the second quarter and first half of financial year 2025.
Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs, as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review.
Let me now introduce you to the management participating with us on today’s earnings call and hand it over to them for opening remarks. We firstly have with us Mrs N, Brahmani, Executive Director; Dr. Sambasiva Rao, President; Mr. Srideep Kesavan, Chief Executive Officer; Mr. A Prabhakara Naidu, Chief Financial Officer; Mr. J Samba Murthy, Chief Operating Officer; Mr. Upendra Pandey, CEO of Heritage Nutrivet Limited; and Mr. Umakanta Barik, Company Secretary and Compliance Officer.
Without any further delay, I request Dr. Sambasiva Rao to start with his opening remarks. Thank you, and over to you, sir.
Sambasiva Rao — President
Thank you, Mr. Anuj. Good morning to everyone joining us today on this call. We are pleased to welcome you all to the earnings call for the second quarter and first half of financial year 2025. The financial results and earnings presentation have been uploaded on the exchanges and I hope you have had a chance to review them by now.
Let me take you through the financial performance for the quarter under review first. For the quarter under review, on a consolidated basis, we recorded revenue of INR1,020 crores, reflecting a 4.2% year-on-year increase. EBITDA for the quarter was INR83 crores, representing a 77% year-on-year growth with EBITDA margins at 8.16%. Additionally, net profit for the quarter was INR48 crores, which surged by 117% year-on-year, resulting in PAT margins of 4.77%.
On a half yearly basis, we recorded revenue of INR2,052 crores, reflecting an 8% year-on-year increase in-quarter. EBITDA for the period was INR177 crores, representing a 103% year-on-year growth with EBITDA margins at 8.63%. And additionally, net profit for the period was INR107 crores, which surged by 173% year-on-year, resulting in PAT margins of 5.22%.
Now moving on to operational performance, milk sales volume continued its steady growth in Q2, increasing by 5.11% year-on-year to 1.19 million liters per day. However, revenue growth in milk was slightly lower with average milk selling price at INR54.59 per liter, a 0.31% decline compared to the same period last year. Average milk procurement in Q2 FY ’25 stood at 1.64 million liters per day, marking a growth of 11% year-on-year. Average milk procurement prices for Q2 ’25 decreased by INR2.94 per liter compared to Q2 of the previous financial year.
The growth momentum in value-added products remained strong in Q2 with a robust 16% increase, reaching to INR298 crores in revenues and VAP contribution to total revenue rose to 30% compared to 27% in Q2 of FY ’24. In anticipation of the festive season, the Company launched several engaging consumer promotions and advertising campaigns, including TV campaign and the scan and win offer across the ghee and sweets range, further accelerating the momentum in value added products.
Lastly, Heritage Nutrivet Limited, the wholly owned subsidiary experienced robust top line growth of 18% year-on-year, reaching INR86 crore during H1 with a healthy 117% increase in PAT totaling to INR4 crores.
With that, we can now open the floor for question-and-answer session. Thank you very much.
Questions and Answers:
Operator
Thank you. Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Kiran Kumar from Investwise. Please go ahead. Mr. Kiran, I would request you to unmute your line and speak, please. Due to no response from the current participant, we will move on to the next participant. The next question is from the line of Sandy Mehta from Evaluate Research. Please go ahead.
Sandy Mehta
Yes. Good morning. Congratulations on strong bottom-line growth. What is your expectation of normal margins going-forward? So I think the management, you have previously talked about 7% to 8% EBITDA margins, as normal. But in a recent media interview, I believe the CEO talked about 9% to 9.5% EBITDA margins, as a sort of a normal level going-forward. And especially as you get closer to that INR6,000 crore revenue target, which you have publicly stated, would at that level on a normalized basis, then would you target 9.5% EBITDA margins? Thank you.
Srideep Kesavan
Yeah. Good morning, Mr. Mehta. This is Srideep Kesavan, CEO. We have always maintained that we will be — we are aiming to keep our EBITDA in the range of 7 percentage to 8 percentage. And that’s our long-term outlook, and this is something that we have maintained. And just to correct, I have not mentioned 9 percentage to 9.5 percentage in the TV interview that you mentioned. You could listen to it again.
The question asked was would the EBITDA margins be sustained in the near-term? The answer to that would be that the raw material prices are expected to remain stable, as in not too much volatility, hence, it will be in this particular range that we are seeing. We did not mention 9 percentage to 9.5 percentage. Even though that will be very good for us to achieve that, but our objective is to keep it in the range of 7 percentage to 8 percentage.
Sandy Mehta
But so as you grow your revenue substantially, there has to be some operating leverage, operating synergies and also your value-added products continue to increase. So is it reasonable even if you are not articulating and publicly stating a higher margin target, is it reasonable for investors to expect that over time margin may possibly increase. Thank you.
Srideep Kesavan
Mr. Mehta, this is exactly what happened on the TV interview also. If you try to put words in my mouth, then it is difficult. See, the thing is we do not give guidance. Of course, because you’re asking this question in this particular aspect — in a particular point of view, I will have to agree with you that in every business, our objective is keenly on increasing the margin over a period in time, and that’s what we also aim to do. But at this point in time, we are not promising that we’ll go to a 9% to 9.5% range immediately. But that’s what we will aim to do, right?
Sandy Mehta
Okay. Best of luck. Thank you so much.
Operator
Thank you. The next question is from the line of Digant Haria from GreenEdge Wealth. Please go ahead.
Digant Haria
Yeah. Thanks for the opportunity. I have three questions. So the first question is that, you know in the last five quarters, we have been in that INR1,000 crores kind of revenue, you know, say, plus, minus INR20 crores. So why is this stagnation in revenue that we are seeing? Like is it just because of the prices, which have come down or is it something on the sourcing side or is it just that whatever preparation we did as an organization for last two years, three years, we have probably grown there and now we need more infra and more setup to reach that number. So that’s my question number one on revenue stagnation.
Question number two is on the employee cost that for us, employee costs are roughly around 8%, they used to be around 6%. They are now around 7.5%, 8% of the revenue. Is there any sort of operating leverage here or this is the new heritage, which will incur this 8% employee cost? And I ask this because your competitor is at around 4%, 4.5% kind of employee cost, the one, who is in the neighboring [Phonetic] state?
And my third question is on the Nutrivet business, like has cattle feed business really picked up and you know, despite the low milk prices, are farmers investing in giving good cattle feed to their animals? What’s — any color what’s happening in this cattle feed market, that would be useful. So these are three questions from my side. Thank you.
Srideep Kesavan
Yeah. Thank you. There are three parts to a question and three of us will try to answer it. I’ll — this is Srideep Kesavan. I’ll go first and then I’ll request our CFO to speak specifically about the numbers that you’re mentioning as far as the human resource cost is concerned; and then Mr. Upendra Pandey, CEO of HNL Nutrivet Limited will answer the feeds question.
So to the first question, I’m just reading out the numbers. Q1 of last year, the number was — I’m reading out last six quarter numbers. Q1 of last year was INR913 crores. This is standalone numbers, INR913 crores, Q2 is INR962 crores, Q3 is INR922 crores, Q4 is INR935 crores. Q1 of this year is INR1,020 crores and Q2 of this year is INR1,007 crores. These are standalone numbers. So I don’t see why you say it is stagnant. Last year, around same time we had breached the INR900 crore revenue in a quarter for the first time. This year, we’ve breached INR1,000 crore in a quarter in a revenue for the first time and we are sustaining that.
Secondly, our business has — you know, whenever you look at our revenue and this we have consistently maintained in the past as well, that you need to look at our revenue in three or four buckets, right? Let me just break it down for you. Now one, of course is a question that you asked of Heritage Nutrivet Limited, which is the feeds business that is one part of our business.
Apart from that, on the standalone basis, when you look at the revenue, you will find our numbers reported as milk, value-added products and bulk fat, right? And bulk fat is something that we do not take position in commodity. So as and when we accumulate the butter because of excess raw milk and lower sales, we liquidate that as bulk fat and which is usually a loss-making proposition, right, for — or not just for Heritage, but for the industry.
Now, apart from that, there is milk and value-added products. I request you as investors to stay sharply focused on the milk and value-added products growth, as far as we are concerned. So last year, if you recall, in quarter two, we had reported that our profitability was much lower because we had booked a large quantum of bulk fat sale, which helped, of course in the top line growth, but did not help much in the — in terms of bottom-line growth.
This year, we have very little of bulk fat growth, whereas what a year of [Phonetic] — what is of interest to you is that the milk revenue growth is upwards of 5% and primarily driven by volume growth. In fact, actually, volume growth is ahead of revenue growth, as far as milk is concerned. And similarly in value-added products, without consumer ghee, we are at 16 percentage growth, including consumer ghee, if I consider, value-added products is growing at 19%.
And in our investor presentation, we have shown a graph, which shows the milk and value-added products growth, which is consistent in terms of high-teens in terms of value-added products and single — high-single-digits, as far as milk is concerned. The core of the business remains strong and robust. There is nothing that needs to be of concern. And there is a small concern for us, which is the value-added product growth has come down by about 3 percentage to-4 percentage, primarily this is on account of adverse weather we have seen.
In fact, in the first half of the year, we have seen roughly around 60 percentage increase in rainfall in absolute millimeters of rainfall and you have — you must have read about this in all news articles and rainfall impacts at least three of our value-added product categories, which is primarily curd, drinkables and ice creams, all three of that gets impacted because of rains.
And everybody is aware of the floods and the cyclones and the repeated climatic calamities we have seen in the last quarter. So your company has delivered 19 percentage value-added products of growth despite of all these adverse conditions. And I request you to compare our numbers with any comparable competition on this parameter.
And before I hand over to the CFO, I’d like to comment on the human capital cost, whereas in our case, we capture all the human capital cost, whether it is direct or indirect cost, our competitors might be booking it as other operating expense. So the two are not comparable. I’ll request our CFO to talk about those numbers.
A Prabhakara Naidu
Yeah. And good morning, sir. Actually, as compared to Q2 to Q4, there is actually around INR55 crores of employee cost last year, INR59 crores, now it has gone up to INR75 crores because the profitability has gone up by more than 100%, variable component of the — variable component of the employee cost has been provided accordingly. So that is the main reason.
And over a period of 12 months actually, there is new employees also and the business is expanding, the new geographies, new employees are also joined. So these are the two reasons. And top line growth, it has come down as compared to the previous year. That is also another contributor, where the percentage has gone up actually by 1.3% as compared with Q2 to Q2. Thank you.
Upendra Pandey
Good morning, sir. Upendra here from Heritage Nutrivet. To answer your question, we have realizing the market scenario, we have taken couple of new initiatives few months, few quarters back and that has started giving us positive results. One is that we have launched high protein and high-fat product in multiple geographies and products are very well accepted by farmers. They have seen a significant improvement in their milk production, as well as fat and SNF improvement and that led to growth of the cattle feed volume.
Also seeing the market trend that price has come down and farmers were struggling, what we did is that further we improvised the quality of our product without changing the price and that led to increase in the improvement in the fat and SNF of milk, which is giving a better realization to farmers. So farmer continuing our feed and helping us to grow our cattle feed volume.
Digant Haria
All right. All right. Thank you so much for these detailed explanation, Srideep, Upendra ji and the CFO ji. Thank you very much.
Operator
Thank you.
Digant Haria
Thank you.
Operator
The next question is from the line of Sameer Gupta from India Infoline. Please go ahead.
Sameer Gupta
Thanks, and thanks for taking my question. Good morning, everyone. Firstly, sir, outlook on milk procurement, given we are at the cusp of the flush season, do you expect the prices to soften further as usually that happens with a healthy flush or — and I’m asking this question because there has been a persistence in food inflation over the last few months and generally what we see is that it lingers into other categories sooner or later. Do you see that risk currently or whatever information we have on the ground, any suggestions on the procurement flush, how it is going to be?
J Samba Murthy
Good morning, Mr. Sameer. This is Samba Murthy. So procurement as on date now currently it is stable, then going forward, it may — little bit — some changes will be there, but there won’t be again major changes in the procurement prices, little bit here and there. And now currently, it is going stable actually, consistently it is.
Srideep Kesavan
So I’d like to — I’ll address a question on inflationary trends. See, there are two parts to a business, right? One is on the procurement side, we are actually — we have actually seen solid good monsoon and the crops and crop season is looking — crops are looking much better. MSP from the government is also looking good, which means actually the rural economy is actually looking very good positively.
We have had some setbacks because of — we might have lost a 3 percentage or 4 percentage growth in value-added products because of the negative impact of the weather on the sales side, so that — these are two different aspects, right? You can’t take the rural economy, robustness and apply to the inflationary trends in the urban India. So I don’t think the two go hand-in-hand.
At this point in time, you know, you must have seen that our prices have remained stable for the last five quarters. In fact, milk prices, as well as the value-added product prices have not gone up in the last 15 months. So if you look at our net revenue per liter on milk or in value-added products, it’s roughly the same, as what we had in Q1 of last financial year. So without — so we haven’t seen any revenue increase or sorry, a price increase, as far as the market — products are concerned.
J Samba Murthy
Got it. Got it. Thanks for this detailed answer. Secondly, on ice cream, so we have a major player, Hindustan Unilever, who just announced that as part of their overall strategy, they will be exiting the segment. Do you think this is a good opportunity for Heritage? And if so, any plans to capitalize on this opportunity, your thoughts?
Srideep Kesavan
Yeah. Yeah. This is Srideep here, Sameer. First of all, I’m not sure if Unilever said that they’re exiting the ice cream. They said they are restructuring the business is my understanding, which could be probably in the way the company is structured. Yes, you know, ice-cream, you know, Unilever is a large player, I believe they are the number two player in India. And I think their business will continue is my understanding. But see the opportunity that we are looking at in ice cream is the industry itself waiting to explode. It’s in very nascent stage, if you ask me.
The per-capita consumption in India is quite low. The category penetration, whether it is at a retail level or household level is still very insignificant compared to many of the other indulgent categories like carbonated beverages or juices and all of that. So I feel that there is — there is a huge headroom to grow, and which is the reason why we are bullish on it. And we very recently-announced our capital investment to create a new greenfield facility as well.
Sameer Gupta
Just a follow-up here. So let’s say they do divest it. I understand that they might not have finalized that plan, but let’s say they do divest it. Will we look at that as an opportunity to accelerate whatever we are doing or will stay where we are like in a normal way? That was actually my question.
A Prabhakara Naidu
We didn’t get this capex [Indecipherable].
Srideep Kesavan
Yeah. Yeah. Of course, that’s what I’m saying, Sameer. See, whether they divest or not divest, we are anyway looking at capturing all possible opportunities, which is why we have gone ahead with the capital investment of INR200 plus crore in this particular category. So we are going to set-up an ice cream plant, which will come up roughly around the same time next year, maybe towards the end of 2025, we’ll see that. And we are putting in all efforts to accelerate our growth in ice creams.
Sameer Gupta
Got it, sir. Last bookkeeping question. Can you quantify the bulk fat sales during the quarter, which is apart from the — which included in the INR76 crores that you have reported, but unbranded?
Srideep Kesavan
Yeah, just give us a minute. Yeah, INR26 crores is the revenue from bulk fat in this quarter.
Sameer Gupta
And corresponding figure in the base quarter?
A Prabhakara Naidu
INR72 crores.
Sameer Gupta
Got it, sir. That’s all from me. Thanks, again. I’ll come back in the queue for any follow-ups.
Operator
Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Ankit Gupta
Yeah. Thanks for the opportunity and congratulations for a good set of numbers. Sir, my question was on the — on the milk sales growth, last few quarters, we have been doing very well on that. But over the medium-term, how do you see the milk sales growth for us in over the next year or two? And in correlation with that, on our target to achieving INR6,000 crore, how do you see milk growth panning out from — for us?
Srideep Kesavan
Yeah. So thank you. This is Srideep again. There are two components to it. One is the volume growth and then there is the revenue growth, right? See our — and while quarter-to-quarter or year-on-year, it might change because of dynamics of the business of the market. And on a continuing basis, you should expect that about 50 percentage to 60 percentage of the growth to come from volume growth and 40% of it to come from revenue, which is revenue price increases, right?
What is missed at this point in time is only the price increase because the price increases have not happened for the last five quarters, which is why the top line at this point in time is primarily driven only by volume growth, right? And as far as volume growths are concerned, the industry grows at around 2% or 2.5%, 3%, whereas we are growing at double that rate as we speak. And we have maintained this growth level for quite some time now as far as milk is concerned.
So our objective will be to keep it at this level, 5 percentage to 6 percentage range the for the near future. What we are hoping is probably a couple of quarters down the line, we’re able to take price increases, as well so that we are able to push the revenue growth on milk towards a double-digit kind of thing or high-single-digit.
As far as revenue — as far as revenue growth on value-added products is concerned, it will be similar. We are currently growing at about 16%. Earlier this used to be about 18 percentage, 19 percentage. Again, here also what is missing is the 4 percentage or 5 percentage of revenue top of which is supposed to come through price increases, which has not happened. We hope to maintain the growth momentum as far as the volumes are concerned.
And we are hoping that maybe a couple of quarters down the line, we are able to take the price increases, so that the revenue growth on value-added products goes to high-teens or even 20%, 21%, as it used to be earlier. So that’s — so as far as we are concerned, the underlying volume growth is what is keeping us all really excited and that continues. That momentum is sustained.
Ankit Gupta
Sure, sir. And sir, second question was on the — on the milk procurement front, you know, last few quarters, we have seen surplus availability of milk from farmers. And how do you see the next few quarters and any indication how the next flush season is looking like? I know it’s a bit premature to talk about it, but any indications that you can give how the next season is — is expected to pan out.
J Samba Murthy
Procurement side — this is Samba Murthy. Procurement side, whatever we just planned, and we are getting it. And even Q3 also, whatever we have planned actually, we are going to get it and there is no problem in getting the procurement. So as we mentioned, the prices are stable and a little bit changes in the prices, but we are going to get the procurement.
Ankit Gupta
So you expect [Speech Overlap].
Srideep Kesavan
In terms of volumes, in Q2 also, we reported 11.4% growth in procurement volume. It’s looking pretty good for us.
Ankit Gupta
And on the pricing front, the prices continue to remain a bit tepid on the procurement side.
J Samba Murthy
Yeah. As of time, it is stable, but there won’t be much changes in that, maybe little bit fluctuations here and there either upside or downside. But overall, it is stable currently.
Ankit Gupta
And any indication that you’re getting for next flush season, how is that expected to pan out?
J Samba Murthy
Yeah. Already, we have planned increase in the procurement that we are also going to get that whatever we planned. But in Q3, yes, we are going to get more procurement than Q2.
Ankit Gupta
Okay. Okay. [Indecipherable] understood. Yeah.
Sambasiva Rao
You know that we are currently entering flush, right, as and so, so the numbers that he — when he mentioned Q3, he was talking about flush.
Ankit Gupta
Okay. Okay. Okay. Okay and thank you and wish you all the best.
Operator
Thank you. The next question is from the line of Resha Mehta from GreenEdge Wealth. Please go ahead.
Resha Mehta
Hello.
Operator
Yes, ma’am, you’re audible.
Resha Mehta
Yeah. So first one is a suggestion. So actually, if you know, you can also put out the revenue growth clarification even as a part of the press release, it would have been great because I think we had to wait for the investor presentation to figure out that your revenue growth ex of fat bulk [Phonetic] products was 10%. So that’s a suggestion.
My first question is on the fat part. So you know in a bid to kind of reduce the fat losses or provisions that we have, one of the measures that we had outlined was that we’ll try and increase our cow milk procurement cooldrinks. So can you just talk about the progress there? And related bookkeeping question, any PAT losses for the current quarter? So that’s my first question.
J Samba Murthy
This is Samba [Phonetic] speaking that we are actually procurement our cow milk contribution is going — going to — is going up. So it is about — currently it is about Q3, it is about 85%. H1, it is 83% cow milk ratio. And compared to the previous year, the cow milk contribution is going up. And as you know, all of you know that, that in the cow milk, the fat will be less compared to the butter milk. So that is why we are not generating a surplus of butter. So to the extent of our — yeah.
Srideep Kesavan
See Resha, we — I don’t think that this is something that you know, because the cow and buffalo both have different flush seasons. So in sometimes you will see that the buffalo milk has gone up. So unless there are so many dynamics in the business, like for example, in Q3, buffalo milk goes up, right, in Q2, cow milk goes up. So I don’t think that this is something that we should be very much worried about at this point in time.
The company has a very clear action plan on exactly how the butter is sold in consumer packs and our — what is encouraging for us is our consumer fats business, whether it is ghee or butter is all strongly growing upwards of 50%, so which means actually that means that the quantities that we have left with to liquidate and B2B bulk is coming down quarter-on-quarter, right. So strategically speaking, we will maintain a certain ratio of cow milk and buffalo milk, but I think that we should leave that it’s a very business call.
Resha Mehta
Understood. And the PAT losses for Q2?
Srideep Kesavan
PAT losses in Q2…
A Prabhakara Naidu
Q2 PAT loss is INR7.68 lakhs [Phonetic].
Resha Mehta
INR7.5 crores [Phonetic] right, roughly.
A Prabhakara Naidu
[Indecipherable] both including bulk.
Resha Mehta
Sorry, I did not get that number.
J Samba Murthy
Yeah. Yeah. It is about INR7.5 crores to INR8 crores. Yeah. That’s right.
Resha Mehta
Got it. Got it. The second question is on the feed business. So you know, what is the revenue potential here with our existing capacity and what kind of margin improvement can we see over, let’s say, over the next two years to three years in this business? And because if we see our peer is doing around 13% EBITDA margins in the feed business with a slightly lower revenue profile. So is this because you know the raw material baskets in our feed would be different from theirs or just some color on the feed business’s growth potential and the margin potential with current capacity.
Sambasiva Rao
So what I can say right now is that we will continue to sustain the growth momentum. We’ll not give any indicative number, but we’ll continue to sustain the growth momentum in terms of top line. Bottom-line, we are continuously improving, and we’ll keep targeting the 7% to 8% of EBIT, what we had done in the previous two quarters. We will continue with that. Our focus will be on top line growth in next few quarters. And we have — we are taking several new initiatives to ensure that we continue on the top line growth part.
Resha Mehta
Got it. And what are raw material — can you just outline what would be our raw material mix here for the feed business?
Sambasiva Rao
Feed business, critical raw materials are like BRB [Phonetic], maize, molasses, rice TDGS, rape seed, these are the critical raw materials. And we keep some of the raw materials we do the strategic purchase. We buy at a right time when the prices are extremely low, and we stock it in our warehouses. So we gain some advantage because of that and that helps in improving our profitability.
Resha Mehta
Got it. And lastly, any pricing actions or grammage actions we took in Q2? Because I think Q1 we held steady despite competition kind of increasing grammage or reducing prices, we will not go ahead with that.
Sambasiva Rao
So we have not taken any pricing corrections, and we don’t think that in next quarter also we are going to take any pricing corrections.
Resha Mehta
No, this is for the dairy business. I’m asking, sorry, not the feed business.
Srideep Kesavan
Okay. Resha, could you please repeat the question? This is Srideep here.
Resha Mehta
Yeah. So I was just asking that in Q1 in line with competition, if I recall correctly, we have not, you know, restored grammage or increased grammage or taken any pricing actions. Just wanted to check in Q2, have we taken any pricing action for the dairy business?
Srideep Kesavan
No, Resha. I already addressed this question earlier to someone else who had asked similar. The last five quarters, our prices are stable, as and we have not increased prices. Here and there, there might have been, but overall, our revenue per liter is same, flat.
Resha Mehta
And nor have we increased the grammage, is that understanding right?
Srideep Kesavan
No, there’s, there’s no change. It’s a — yeah, overall, there’s nothing much to talk.
Resha Mehta
Got it. All right. Thank you so much. All the best and Diwali wishes to the entire team.
Operator
Thank you.
Srideep Kesavan
Thank you. Happy Diwali to you.
Operator
The next question is from the line of Kiran Kumar from Investwise. Please go ahead.
Kiran Kumar
Thanks for the opportunity. So I have one question. How much is our curd growth?
Sambasiva Rao
We are growing curd at around 11%.
Kiran Kumar
Is this volume or revenue growth? Is it seen for the both…
Sambasiva Rao
Volume, volume.
Kiran Kumar
Volume, okay.
Sambasiva Rao
Volumes and revenue is also same because price per liter is the same.
Kiran Kumar
Yes. Got it. And one other thing, actually the previous — one of the participants was asking. So it’s on the employee cost. So I heard the answer of our CFO — means, CFO what he had said. It’s around 16% if I compare both the Dodla and Heritage. Do we have any plans for optimizing some cost of any costs like outbound costs and all selling and distribution to have an edge because we are concentrated in certain areas. So do we have an edge over competitors or is it the same with other competitors?
Srideep Kesavan
Okay. So first of all, Kiran, I don’t think the two — this is Srideep here. I don’t think the numbers are comparable because I don’t think other people report the employee cost in the same way as we do, right? So I do not want to compare versus anyone. I can give you the commentary as far as we are concerned. We are investing at this point in time on three things, as we continue to drive growth in the long-term, right, because that’s a single-minded objective — long-term profitable growth is a single-minded objective that we are working with.
The three things are, number one, we are investing in-human assets. So we are increasing the quality of people, we are increasing feet on street, which will keep our growth momentum trajectory ahead of the industry and ahead of our competition, right? That’s something that we are focused on.
Secondly, we are investing in our marketing assets. You will see that our brand investments have gone up. We are currently investing about 0.8 percentage, 0.9 percentage of our revenue in marketing, advertising and marketing and promotions, which is also another thing that is driving significant growth, as far as value-added products are concerned, and we keep updating you. You must be seeing our brand more and more.
And the third is we are investing in capital assets for increasing the capacity of production, as far as value-added products are concerned. So most of the capacity increases is going either in value-added products or in terms of increasing our procurement capability or in terms of like there is some replacement capex that keeps happening. So these are three things that we are continuously investing on. And it’s — it’s our endeavor to ensure that the revenue growth is ahead of the growth of cost on any of these three line items, so that the overall profitability is looking good.
In this particular quarter, because we haven’t had any price increases, so our revenue would have been probably 3 percentage or 4 percentage lower than what we would have wanted it to be because of — because price is remaining flat and the top line only driven by volume growth. That is the reason why your percentage of any of these costs to the revenue would look slightly higher than what we would like. But we are absolutely on track, as far as our long-term growth plan is concerned and there is nothing that there is of any concern.
Kiran Kumar
Yes. Thanks for the detailed answer. And one last thing, do we exhaust our entire provisioning on which we made last year on PAT? Or still continuing in our provisions?
A Prabhakara Naidu
PAT, I think almost except [Phonetic] INR1 crores and INR1.5 crores, where everything has been taken.
Operator
Thank you. The next question is from the line of Pratik Kothari from Unique PMS. Please go ahead.
Pratik Kothari
Yes. Hi, good morning. Thank you. Sir, on this INR7.8 crores fat loss, can you break it between bulk and consumer?
Sambasiva Rao
It’s — you could say it’s roughly equal. Of course, the consumer fat loss will be marginal. Bulk fat losses would be there, which will be large part of it.
Pratik Kothari
Correct. So sir, even…
Sambasiva Rao
Yeah. If you need further information, we can speak to you on one-on-one.
Pratik Kothari
Correct. Correct. Understood. My question [Indecipherable] so our understanding was as we keep growing our consumer fat business, which is the retail butter ghee, we will run down on our bulk fat losses, right? So if you look at our quarter one, we did some INR6 crores, INR7 crores of loss on our consumer fats. Again, we did some like this quarter, INR3 crores, INR4 crores of loss there. So if you can explain, I mean, so how do we solve for this fat loss? Our assumption was that we’ll do more of consumer fats and that will get solved. But if you’re making losses in consumer fat also…
Sambasiva Rao
See Pratik — yeah. Pratik, do you see that this quarter overall profitability is far better than last year same quarter profitability?
Pratik Kothari
100%.
Sambasiva Rao
Yeah. So Pratik, this year’s quarter two profitability is roughly 117 percentage higher than last year same quarter without any revenue increase, and primarily this is because of two aspects. One is milk prices having come down by about 6%, which is contributed to it. The second thing is the bulk fat sales having significantly come down about INR50 crores to INR52 crores of bulk fat sale is less. That’s the top line — that’s the highlight that you need to look at.
Beyond that, actually there is — when we look at the — at a PBT level, there is a way we apportion and allocate our overhead costs and stuff like that, marketing costs and all of that. I think that there’ll be like unnecessary details to get into. Eventually, if we move from bulk fat to consumer fat, which is ghee and all of that, which ideally is what we desire to have, this particular loss over a period in time will come down a lot. But even in this quarter, even though we had much lower bulk fat sale, we had bulk fat sale in this quarter. So there will be a little bit of say, loss, which will continue to incur, over a period in time, which will become negligible.
Pratik Kothari
Correct. Fair. Actually, my question was more on consumer fat loss, not bulk fat loss, but we can take it as [Indecipherable]. And second, I mean, in respect to what our margin guidance etc., is we are currently higher than where we are. So any plans to utilize this excess margin? I mean, it may not be passing in terms of price, but accelerating our distribution reach, something on the procurement side. Anything that you can highlight, how are we using this extra margin that we have currently from our intended band to kind of drive growth faster?
Srideep Kesavan
So see, milk prices are down by about 6.5%, 6.8% or so. Is it 6.8% or 6.4%. 6.8%. Milk prices are lower. But you also know that revenue is flat, flat in the sense I’m talking about revenue per kg, which means that we have not increased prices at all, whereas ideally if you consider cost inflation, whether it is human capital, somebody asked, there were lots of question about people cost, like every year there is increment and incentives and variable pay and stuff like that, right? The costs are going up, operating costs, electricity cost has gone up. Fuel cost has gone up. Correspondingly, the revenue price increases have not happened.
So a large part of it has — of the procurement price drop has been compensated by the loss of revenue increase in terms of prices remaining stable. So in a way, you can say that, yeah, that’s an investment that we’ve made into building the business over a long period in time. We hope we can recoup that in the next couple of quarters.
Pratik Kothari
Correct. Correct.
Srideep Kesavan
Not in the next two quarters. See in the — maybe after a couple of quarters, we hope we can recoup that. Yes.
Pratik Kothari
Correct. Correct.
Srideep Kesavan
We don’t see any price increase immediately. Yeah.
Pratik Kothari
Fair enough. Point taken. And sir, last comment, in the last call, we had spoken about some competitor entering our home market and cutting slashing prices, where we were able to maintain a ground. 90 days has passed since and we still hold on to that.
Srideep Kesavan
Milk volumes are growing at 5.1%. Value-added products are growing at 16%, so I don’t need to, yeah.
Pratik Kothari
Yeah. Thank you.
Srideep Kesavan
The volumes are growing strong.
Operator
Thank you. The next question is from the line of Jayvansh Mehta from Care PMS. Please go ahead.
Jayvansh Mehta
Yeah. Good morning, sir. Thank you for the opportunity. Sir, I just had one question. Like what is our outlook on the dairy industry for the full year and also in the coming quarters?
Sambasiva Rao
Can you repeat please?
Jayvansh Mehta
Yes, sir. Sir, I was asking like what is your outlook on the dairy industry for the full year and also in the coming quarters?
Sambasiva Rao
Okay. Outlook of dairy industry.
Srideep Kesavan
I think see outlook of the industry is something that is so good. I can — I’ll first start with what is the fundamental drivers of industry, right? In India, the per-capita consumption of dairy is still very low at about 350 grams per person. So there is tremendous potential for the per-capita consumption to grow.
In terms of population, roughly 40 percentage, 45 percentage of our population are vegetarian population for who the primary nutrition comes from milk and milk products for — it’s the primary source of protein, as far as one out of two Indians are concerned and even the balance 50 percentage, 60 percentage who would eat non-vegetarian food are all flexitarians, who would eat five days vegetarian and two days non-vegetarian. So dairy has got a huge potential right.
And the second biggest driver as far as the — this is as far as dairy in a — in the larger scope of things, right? And out of this 350 grams consumption or the paneer consumption and all that I spoke about, 70 percentage — 65 percentage of the consumption even today is in the unorganized sector. The organized sector contribution is at best about 35% or 40%, which is highest in milk, which is about 50 percentage organized. But if you take any category, paneer, paneer for example, 5 percentage is organized, 95 percentage is unorganized. If you look at curd, 20 percentage is organized, 80 percentage is unorganized. Moving from unorganized to organized because of either — because of hygiene, because of availability, because of brand consciousness, because of urbanization, primary — multiple reasons are driving this growth. So one, dairy as such is growing, then within dairy, there is move from unorganized to organized.
And the third, there is consolidation with, you know in the industry either in terms of retail, for example, more and more growth coming from e-commerce, quick commerce, modern trade and all of that, where our branded play is most important. That is where your company is getting stronger because even within organized play, this play gets limited to a fewer companies, who have got stronger brand and access to these organized channels. So overall, we are actually sitting at the pinnacle of all this growth momentum.
Jayvansh Mehta
Thanks for the detailed explanation. And sir, just one last question like have you seen good amount of demand in the [Technical Issues] for the full year and also in the coming quarters?
Srideep Kesavan
Yes, yes, yes.
Jayvansh Mehta
Okay. And that’s all from me.
Srideep Kesavan
Yeah. Demand-wise, there is no problem. Demand-wise, there is no problem. I’m reiterating, we might hit air pockets in the middle sometime due to weather because three — at least three of our value-added product categories are weather-dependent, curd, drinkables primarily whether it is buttermilk, flavored milk and all, milkshakes and ice creams. If it continuously rains and if there is flood and all of that, we might have little bit of a slowdown in growth rate, but otherwise the underlying demand is very strong.
Jayvansh Mehta
Okay, sir. Thank you so much for the answer and all the best.
Operator
Thank you. The next question is from the line of Sneha Jain from SKS Capital. Please go ahead.
Sneha Jain
Hello, good morning, fellows. Thank you for the opportunity. I just had one question. Recently in Bengal, particularly Kolkata and the Durga Pujo, I saw many like branding of Heritage being done on a large scale, but I do not see any like retail presence there. So are we thinking of expanding or is there anything?
Srideep Kesavan
Okay. Thank you, Sneha. This is Srideep here. Thank you for that feedback. So I’m happy that you noticed our brand, but not our products. So yeah, this feedback we’ll take. We launched in Bengal in the — not Bengal, Calcutta, you could say and southern part of Bengal in August. So it’s been two months. We have appointed certain number of distributors, and we are expanding distribution. So just like you already saw the brand, I’m sure that you will see our products also everywhere now.
Sneha Jain
Oh, that’s great. Yeah. Thank you so much, sir.
Operator
Thank you. [Operator Instructions] The next call — the next question is from the line of Parikshit Gupta from Fair Value Capital. Please go ahead.
Parikshit Gupta
Hello. Am I audible?
Operator
Yes, sir.
Parikshit Gupta
All right. Thank you very much for the opportunity. I just have one question. This is more to do with the festive sales at this point. I wanted to understand how was the performance of the sweet segment or any related products that were — that are more privy to being purchased during the festive period? Just that question and thank you very much.
Sambasiva Rao
Yeah. Thank you, Parikshit for that. We are actually having a very good festive sale. The demand is good. So your question was specifically about sweets. Our sweets for the first six months has grown — it’s almost like pretty much grown in line with our expectation. We are growing about 40% or so. So that’s — and even in quarter two also, we have grown at including laddu [Indecipherable] yeah, we have about 40 percentage is the growth that we are seeing in our sweets in quarter two. So it’s quite strong. And we are currently running a very innovative QR code promotion, as well for consumers, which is actually giving us further traction.
Parikshit Gupta
Just a follow-up on this. I believe the sweet segment would be across channels, retailing as well as e-commerce. Do you have a high-level of demarcation of the split among the two?
Sambasiva Rao
Okay. So for us, e-commerce and modern trade roughly contributes about 15 percentage to 16 percentage of sale and same would be in sweets as well.
Parikshit Gupta
Understood. Thank you very much and best wishes for the festive season.
Operator
Thank you. The next question is from the line of Govind Lal [Phonetic], who is an Individual Investor. Please go ahead.
Govind Lal
Good morning, Heritage team, and thanks for the opportunity. I got two questions, sir. First one is, in first half, we have done around 8% top line growth. Generally, we are guiding around 15%, 18%. So second half how it is looking, sir, we’ll make up the shortfall of 7%, 8% so to catch-up with [Indecipherable], we have to do 20% in second half. Just your assumption on that?
Srideep Kesavan
Sir, thank you very much for the question. See, I’ll just repeat again, we have to look at growth in two parts. One is the volume growth; and the other is revenue growth. Volume growth, we are aiming to keep mid-single digits for milk, and you know, mid-teens for value-added products. And this is what we are aiming consistently. And in quarter two also, it was same, 5.1 percentage of milk and about 16 percentage of value-added products.
There is also another component, which is a price-led growth, which is the MRPs, and the revenues increase, right, which is about — usually every year there is a 3 percentage, 4 percentage price increase that happens because of inflation. This year, we have not seen any price increase at all. So that’s 3 percentage, 4 percentage is what is being missed as far as the top line is concerned.
We hope maybe after towards the end of this financial year, maybe we’ll be able to take those price increases and that will also add it. Otherwise, the momentum of growth in volumes we will make every effort to sustain the current growth.
Govind Lal
No, no, we are net debt. We generally — the volume and price the top line growth we — what we guide on that I was asking. So another thing, sir, Dodla also in standalone, they have done quarter-on-quarter 9% growth, sir, we have not done anything. It is flat and year-on-year, we have done 26% growth, our competitor. So any view on that, sir?
Srideep Kesavan
Sir, I — okay. Maybe, sir, you joined little late. Initially, there was a lot of discussion on the same. What we were trying to say was that we are cycling much higher growth because last year same quarter, which is quarter two of FY ’24, there was about INR72 crores, INR73 crores of revenue, which came through bulk fat disposal, which is a B2B sale, which is not something that we — it’s not our focus, right? And that’s not something that the company is building. It’s not — it’s something that we will — we were liquidating excess inventory that was sitting with us. So that is absent now.
Now if you remove that, the core business that you should look at is the milk, value-added products and the feed sale. Milk is growing at about five-plus percentage. Value-added products is growing at about 16 percentage to 19 percentage and feeds is growing at about 18%. So everything is strong. It’s just that the bulk fat has de-grown at about 80 percentage. That is the reason why overall top line is looking like 4.5%. Otherwise, we are in double-digit growth.
Govind Lal
Got it, sir. So coming back to again, just second half, how it is looking, sir. I am asking top line, how we should look whole year top line, just this first half we have done around 8%. So how should we look this another 8% second half also it was better we can do and overall, it can improve net-net.
Srideep Kesavan
We’ll work hard, sir.
Govind Lal
Okay. Followed [Phonetic]. Then last two questions, sir. This — I am new to this industry and your company investment-wise as an investor. So just I want to understand, sir, how seasonality factor plays in quarter to quarter, in four quarters, how we should distribute our revenue of INR1 in milk and value-added products, which are the good quarters, which are the weak quarters. So shall I presume that the second quarter is the weakest one? Yeah, yeah, sir [Indecipherable].
Srideep Kesavan
It’s a good question and I don’t know if you have time. Just quickly maybe take one minute. See quarter-on-quarter the revenue…
Govind Lal
Yeah. I have got — I have got — please sir. I have got sufficient time.
Srideep Kesavan
Yeah. Usually our — I think our — yeah, okay. So I’ll just take one minute to explain the quarter — every quarter, the shape of the business changes. Quarter one, the summer months usually is heavy on many other value-added product categories such as curd and drinkables and ice cream. Quarter two usually is slightly heavy on milk. Quarter three is slightly heavy on festive sale, which is sweets and ghee and all of that. Quarter four is also very similar to quarter one. So roughly, you know, something or the other is always growing as far as this industry is concerned. So overall revenue growth will remain robust. But yeah, the shape of the business categories will keep shifting, as we move from quarter-to-quarter.
Govind Lal
Okay, sir, net-net, again, you can summarize, I guess, I want to tell you how INR1 revenue, should we split the quarter one, two, three, four, seasonality how it plays. Overall revenue, I’m asking INR1. So quarter one will be 25%, 27% equal, how it is split, just in your view, if possible on that.
Srideep Kesavan
My request is, sir, if you could connect to us on one-on-one, we’d be more than happy to explain you. But overall, like I said, because we are a growth company and milk is growing at 5% and value-added products are growing at 14%, 15%, over a period in time, the value-added products share will keep growing. Okay. So which means, let’s say, for example, if — but still in quarter two, the ratio of milk to value-added products will again tilt towards milk. In quarter one, it will tilt towards value-added product. That ratio will always remain like that. But except that the size of value-added products will keep growing over a period in time. I hope I am able to answer. Yeah.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to Dr. Rao for closing comments.
Sambasiva Rao
Thank you for participating in this earnings con call. I hope we were able to answer your questions satisfactory and at the same time offer insights into our business. If you have any further questions or would like to know more about the company, please reach out to our Investor Relations Managers at Valorem Advisors. Thank you.
Operator
[Operator Closing Remarks]