# 1. Financial Performance ## A. Key Figures * **Revenue:** **₹1,007 Cr** (Q1 FY'26, +10.5% YoY) · **₹538 Cr** standalone milk (+6% YoY) * **Gross Profit:** **₹260 Cr** (25.8% margin) * EBITDA: ₹83 Cr (8.2% margin) · 17.6% margin in Orgafeed * **PAT:** **₹63 Cr** (6.2% margin) * **Other Income:** **₹17 Cr** (+144% YoY) * **Employee Expenses:** **₹47 Cr** (+4% YoY) * Consolidated Margins: 25.78% gross · 8.19% EBITDA · 6.24% PAT ## B. Revenue Growth * **Milestone Quarter:** Revenue surpassed **INR1,000 Cr** for the first time, reflecting sustained scale and resilience despite a high prior-year base and seasonal headwinds. * **Stable Milk Demand:** Standalone milk revenue showed **strong low-single-digit growth**, outpacing volume trends and indicating pricing or mix benefits. * **Two-Year CAGR Remains Attractive:** Performance remains robust on a two-year stack basis, underscoring underlying demand stability. ## C. Profit Margins * **Orgafeed Margin Strength:** Business delivered **6% EBITDA margin**, supported by favorable procurement-to-sales delta and stable raw material prices, with **raw materials representing 75% of costs**. * **Standalone Margin Pressure:** Gross margin declined QoQ due to **adverse product mix shift**, despite higher value-added product share and stable input costs. * **Competitive Cost Challenges:** Standalone gross profit decline was steeper than peers, reflecting **industry-wide pressures from high procurement costs in India and Kenya**. * **EBITDA Benchmarking Validated:** Company’s EBITDA performance trend aligns with regional peers, reinforcing relative operational resilience. * **Profitability Normalization:** Absence of prior-year’s anomalous spike (driven by low base) enables more **consistent quarterly profitability outlook**, improving predictability. ## D. Cash Flow * **Cost Inflation Moderate:** Employee expenses rose modestly on annual increments and expansion-related hiring in procurement, sales, and Kenya. * **Other Income Surge Explained:** Sharp increase driven by **interest income** and **₹56 Cr provision reversal** on flavored milk GST, a one-time positive. * **Cash Deployment Ahead:** Balances to be used in Q2 for **flush season inventory buildup** and closing the **OSAM acquisition**, with working capital needs contained by cash-and-carry model. --- # 2. Volume & Product Mix ## A. Key Figures * **Milk Sales Volume:** **11.9 lakh LPD** (+4.9% YoY) * Curd Sales Volume: 452.3 million metric tons (-3.2% YoY) * **VAP Sales:** **₹289 Cr** (+4% YoY) * **Bulk Sales:** **₹57 Cr** (QoQ increase from ₹38 Cr) * Africa Procurement Volume: ~1.6 lakh LPD milk and 40,000 LPD yogurt (stable) ## B. Milk Volume Trends * **Resilient Milk Growth:** Strong double-digit volume expansion achieved despite adverse procurement conditions, supported by advertising and deeper market penetration. * **Regional Momentum:** Procurement volumes rising in India, particularly in Maharashtra, though seasonal volatility remains a persistent challenge. * **Stable Africa Base:** African operations show normalized procurement levels after prior-year spikes, providing a steady operational foundation. ## C. Curd & VAP Sales * **Curd Under Pressure:** High-margin curd segment faced de-growth, with sales volume and revenue declining, negatively impacting gross margins. * **VAP Diversification Gaining Traction:** Excluding curd, standalone VAP sales surged **~81% QoQ**, led by near-doubling of paneer volumes and growth in ghee, signaling successful product diversification. * **Mixed B2C Trends:** B2C growth driven by modern trade expansion, but lassi and buttermilk volumes collapsed—**buttermilk down ~29% to 32,000 liters**—with no clear recovery strategy outlined. * **Margin Headwinds from Product Mix:** Lower sales of high-margin curd and increased bulk sales of low-margin fat products diluted realizations, despite higher overall VAP revenue. ## D. Bulk Sales Impact * **Bulk Sales Diluting Margins:** Sharp QoQ rise in bulk sales—primarily SMP, butter, and milk fat—boosted revenue but carried lower margins, contributing to profitability pressure. * **Channel Strategy Shift:** Future B2B focus will center on SMP, while ghee and liquid milk are being prioritized in higher-margin B2C channels. --- # 3. Geography & Market Mix ## A. Key Figures * India Liquid Milk Volume: 10.27 lakh liters/day (+3%) · Africa Liquid Milk Volume: 1.6 lakh liters/day (+19%) * India Revenue Growth (ex-bulk): 9.6% * Africa Revenue Growth: 26.9% YoY · Milk Revenue: ₹81 Cr (+26%) * **Africa EBITDA Margin:** **13%** ## B. India Performance * **Resilient Growth Trajectory:** India delivered solid revenue growth despite regional weather disruptions, with strong early-July momentum indicating sustained demand. * **Brand-Led Acceleration:** OSAM brand contribution is a key growth catalyst, lifting India’s growth from lower-teens to higher-teens range and adding **~15% incremental revenue**. * **Regional Price Dynamics:** Tamil Nadu gained a slight pricing advantage over Karnataka, influencing regional performance amid divergent volume trends. ## C. Africa Operations * **Volume-Led Expansion:** Africa achieved robust double-digit volume growth and solid revenue gains, driven by successful market penetration in Kenya and leadership in Uganda’s yogurt segment. * **Margin Pressure from Strategic Investment:** EBITDA margin declined YoY due to launch costs and pricing strategy for the new mid-market-focused Kenya plant. * **Procurement Headwinds, Stable Outlook:** Higher input costs in Kenya and Uganda expected to ease, with stable market share supporting gradual profitability recovery. ## D. Regional Revenue * **Strategic Inventory Management:** Increased bulk sales of SMP and butter reflect deliberate drawdown in a falling price environment to preserve balance sheet strength. * **Revenue Distribution Skew:** Karnataka and Andhra Pradesh remain core revenue contributors, together accounting for over 70% of India’s ex-bulk revenue. --- # 4. Input Cost & Procurement ## A. Key Figures * Milk Procurement Volume: **18.7 lakh liters/day** Q1 FY'26 (+6.3% YoY) * **SMP Inventory:** **₹17 Cr** (down from ₹144 Cr in Jun-23) * SMP Sales Loss: **₹1.2 Cr** in June due to below-cost sales ## B. Milk Procurement Dynamics * **Margin Pressure in Q1:** Erosion from **faster rise in milk procurement costs vs. realization**, with lagged impact due to higher-cost inventory drawdown. * **Sequential Relief Ahead:** Procurement prices corrected post–mid-May; **declining input costs expected to boost margins in Q2 FY'26**. * **Procurement Strategy:** Volumes targeted **8–10% above sales** to manage fat content dilution (2–3% in vs. 6–7% out), ensuring production stability. * **Regional Stability:** Prices now stable in key markets including **Uganda and Kenya**, with **no major volatility anticipated**, unlike prior year swings. ## C. Raw Material & Cost Trends * **Non-Milk Input Improvement:** Raw material costs fell **12% YoY** while realizations dipped only 6%, driving **600 bps margin expansion** outside of milk line. * **Cost Inflation Elsewhere:** Other expenses rose due to **higher advertising, transport, and contract labor**, partially offsetting input gains. ## D. Inventory Utilization * **Aggressive De-stocking:** Sharp reduction in butter and SMP inventories—**down 95% and 88% respectively since June 2023**—improving working capital and reducing obsolescence risk. * **Strategic Stockpiling:** Company now prioritizes **ample milk inventory** after past fat shortage disrupted ghee output, enhancing supply resilience. --- # 5. Capacity & Expansion ## A. Key Figures * **Dairy Capacity Utilization:** **70–75%** (current) * **SMP & Butter Inventory:** **₹23 Cr** (total closing) * **Internal Consumption:** **10 TPD** (daily) * **Maharashtra Greenfield Investment:** **₹280 Cr** (approved) * Solapur Procurement: 2.6 lakh liters/day (current) · 10 lakh liters/day (planned capacity) * Africa Procurement: 198,000 liters (1.98 LLD) avg. daily * Kenya Plant Utilization: 65–70 KLD (current) · 1.3–1.5 Lakh liters (peak capacity) ## B. Plant Utilization * **Moderate Utilization with Strategic Intent:** Dairy operations running at healthy but sub-optimal levels, allowing flexibility to manage seasonality and stabilize B2C supply through increased self-sourcing. * **Tight Inventory Management:** SMP and butter stocks are closely aligned with internal demand, leaving minimal surplus for B2B monetization. ## C. Greenfield Projects * **Inorganic Reach Expansion:** Acquisition of **OSAM** strengthens footprint in Bihar and Jharkhand, advancing regional brand diversification. * **Integrated Domestic Growth:** Maharashtra greenfield project progressing with robust procurement ramp-up, positioning for full integration at scale. ## D. Africa Capacity * **Near-Balanced Operations:** African procurement and sales are closely matched, supporting efficient supply-demand alignment. * **Supply Chain Constraints in East Africa:** Kenyan plant underutilization persists due to restrictive cross-border permit policies from Uganda, impacting milk flow stability. * **Local Resilience Building:** Revamped Kenya plant now operational after 5–6 months of restructuring, reducing dependency on cross-border permits. --- # 6. Input Cost & Demand Risks ## A. Key Figures * **Butter Milk Sales:** **10%** of peak volume during June–August ## B. Seasonal Volatility * **Weather-Driven Demand Shifts:** Early and unseasonal rains disrupted seasonal consumption patterns, significantly dampening demand for key value-added products like curd, lassi, and buttermilk. * **Seasonal Supply Cycles:** African operations follow a biannual flush-lean cycle, with flush seasons (Nov–Jan, Apr–May) enabling higher raw material availability; lean periods (Aug–Oct) pose supply constraints, broadly consistent across regions. * **Product-Level Seasonality:** Lassi and buttermilk exhibit extreme seasonality, with peak sales in high-temperature months (Apr–May) and sharp volume drop-offs starting June, reflecting strong climate sensitivity. ## C. Monsoon Impact * **Q1 Growth Headwinds:** Unseasonal rains suppressed typical April–May sales momentum, leading to stagnant or lower VAP volumes and disrupting expected seasonal growth, particularly in South India and Maharashtra. * **Input Cost Relief Ahead:** Milk prices corrected in July due to monsoon-driven supply uptick, suggesting potential margin expansion in coming quarters versus a pressured June quarter. ## D. Price Fluctuations * **Competitive Margin Gaps:** Structural advantages among peers—such as higher procurement volumes from low-cost regions like Tamil Nadu—support stronger pricing power and margins. --- # 7. Guidance & Outlook ## A. Key Figures * **Revenue Growth:** **10–15%** projected (value growth) · **7–8%** volume growth expected * **EBITDA & PAT Growth:** **15–20%** absolute growth expected * **Segment Growth:** **Higher teens** for Africa and Orgafeed · **10–15%** for India ## B. Revenue Projections * **Broad Top-Line Guidance:** Revenue growth outlook set at 10–15%, with value growth outpacing baseline assumptions due to volume expansion and favorable realizations. * **No Granular Targets:** No specific volume or operating margin guidance provided for FY26–FY27, reflecting inherent seasonality and regional variability. ## C. Margin Expectations * **Margin Resilience:** EBITDA expected to remain stable QoQ with **< ₹1 Cr fluctuation**, supported by pass-through mechanisms and **minimal volatility (1–2%)** even under raw material cost pressure. * **Recovery Drivers:** Margin recovery anticipated on improved product mix and realizations, despite near-term stability in pricing due to lower milk procurement costs. * **Regional Profit Uplift:** Africa on path to **better year-on-year margins** as operations stabilize post-ramp-up; OSAM margins seen improving with economic premiumization in East India. ## D. Growth Targets * **Orgafeed Momentum:** Business serving **35–40% of farmers**, creating strategic stickiness and positioning for accelerated growth, with performance described as "exceptional." * **Sustained Regional Trends:** Management expects continuation of current growth patterns, with Africa and Orgafeed in the higher teens and India in the lower to mid-teens range.