Value-added portfolio sustains momentum as quarterly revenues cross Rs 11,000 million for the third consecutive quarter

Heritage Foods Limited, a leading dairy company offering milk and value-added dairy products (VAP), reported a resilient performance for the quarter ended December 31, 2025 (Q3 FY26), delivering 8 per cent year-on-year growth in consolidated revenue to Rs 11,192 million. This marks the third consecutive quarter in which the company has crossed the Rs 11,000 million revenue milestone, despite a challenging operating environment characterised by milk shortages, adverse weather conditions, and sustained input cost inflation.

The quarter was anchored by consistent value-added product–led growth, even as retail offtakes remained slow in parts of the market. The consumer dairy business, excluding bulk fat sales, grew 13 per cent year-on-year, driven by a 13.8 per cent increase in value-added products. Consumer fats such as ghee and butter delivered particularly strong performance, growing 22.6 per cent year-on-year and increasing their contribution to 38.4 per cent of overall revenues, compared to 33.5 per cent in the same period last year. In contrast, the B2B bulk fats business saw a sharp decline during the quarter.

Value-added product volumes remained resilient despite adverse climatic conditions, including higher-than-normal rainfall and prolonged periods of below-average temperatures. Overall VAP volumes increased 6.8 per cent year-on-year, with nearly all categories recording positive growth. Category-led momentum was evident across the portfolio, with curd volumes rising 6 per cent and crossing 400 tonnes per day for the first time in a third quarter. Paneer continued its strong trajectory with 25 per cent growth, while ice creams grew 18 per cent, supported by improved market execution. Drinkables also saw robust traction, with lassi growing 29 per cent and milkshakes 36 per cent, underscoring sustained consumer engagement despite weather-related headwinds.

Strategic pricing actions and brand strength helped offset rising input costs. A calibrated 4.9 per cent price increase, along with an improved product mix, supported 7 per cent blended volume growth. Net milk realisation increased by Rs 2.67 per litre year-on-year, representing a 4.9 per cent rise, reflecting resilient demand and the strength of the Heritage brand in core markets.

To support continued VAP-led growth, the company is advancing key capacity additions. Trial production has commenced at the Shamirpet ice cream plant, with commercial commissioning expected in Q4 FY26. In parallel, a new flavoured milk facility is also slated to begin operations in the same quarter. These investments are expected to strengthen Heritage Foods’ presence in high-margin categories ahead of the peak summer season and beyond.

On the procurement front, milk availability remained tight across regions. Year-to-date milk procurement volumes declined marginally by 0.82 per cent to 16.86 lakh litres per day (LLPD) for the first nine months of FY26, following three consecutive years of strong growth. In Q3 FY26, procurement volumes declined 9 per cent year-on-year to 16.73 LLPD, reflecting the impact of climatic disruptions on milk production. Encouragingly, raw milk volumes showed sequential stabilisation of approximately 4 per cent quarter-on-quarter, indicating early signs of recovery.

Input cost pressures remained elevated throughout the quarter. Average landed raw milk costs increased by approximately 9 per cent year-on-year and 6 per cent quarter-on-quarter to Rs 45.55 per litre, materially impacting margins. Tight butter availability in the domestic market, combined with soft ghee prices, further compressed fat margins during the period.

For Q3 FY26, Heritage Foods reported gross margins of 23 per cent, down 120 basis points year-on-year, while EBITDA declined 15 per cent to Rs 629 million, with EBITDA margins at 5.6 per cent, down 154 basis points. Profit after tax stood at Rs 346 million, a 20 per cent year-on-year decline, reflecting cost pressures and a one-time employee cost impact related to the notification of new labour codes. The company recognised a one-time provision of Rs 27.78 million on a consolidated basis under Ind AS 19 for defined benefit obligations.

Operationally, milk sales volumes grew 2.1 per cent year-on-year to 11.94 LLPD, supported by market expansion and strong brand recall. Average selling prices increased 4.9 per cent year-on-year to Rs 57.31 per litre. Revenue from value-added products excluding fats rose to Rs 3,271 million, contributing 30 per cent of total revenue, while total consumer VAP revenue reached Rs 4,189 million, reflecting a 22.6 per cent year-on-year increase.

Heritage Nutrivet Limited, the company’s wholly owned subsidiary, delivered a strong performance, recording 27 per cent year-on-year revenue growth to Rs 645 million. Profit before tax surged to Rs 55 million, highlighting effective execution and operational efficiency. During the quarter, Vice Chairperson and Managing Director Nara Bhuvaneswari was honoured with the “Outstanding Dairy Professional Award – 2025” by the Indian Dairy Association (South Zone).

Commenting on the results, Brahmani Nara, Executive Director, said the quarter was marked by an exceptionally tight industry supply environment, but the company delivered growth through disciplined execution and a strong value-added portfolio. She noted that broad-based category growth across curd, paneer, drinkables, ghee, and ice creams reflects resilient consumer demand and the effectiveness of Heritage Foods’ market expansion and engagement initiatives.

Looking ahead, she added that the commissioning of new ice cream and flavoured milk capacities in Q4 FY26 positions the company well to capture incremental demand. With improving supply conditions, continued premiumisation, and a strong innovation pipeline, Heritage Foods remains confident in delivering sustainable growth while maintaining its commitment to consumers, farmers, and all stakeholders.