Dodla Dairy Limited (DODLA) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Dodla Dairy Limited Q4 FY26 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of richer performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the lesson-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dodla Sunil Reddy, Managing Director of Dodla Daily. Thank you, and over to you, sir.

Thank you very much. Good morning to all the participants. On behalf of Zorla Dairy Limited, I extend a very warm welcome to everyone joining us on our call today. On this call, I'm joined by our CEO, Mr. B.B. K. Reddy, CFO, Mr. Murali Mohan Raju, and SGA, our Investor Relations Advisors. I hope everyone has had an opportunity to go through the financial results and investor presentation, which have been uploaded on the stock exchanges and our company's website. Now coming to the business, financial year FY26 was a year that tested the dairy industry. Milk supplies remained constrained for most of the year. Procurement cost inflation was sharp, and erratic rainfall affected demand for certain value-added products in some regions. Against that backdrop, Goddard Daily delivered resilient performance. Revenue growth was 11% year-on-year, EBITDA margin stood at 7.5%, and a PAT margin of 6.5%. Notably, the performance is overall on the healthy base of FY25, which delivered an exceptional growth of almost 20 years over the previous. To better understand the trends of the dairy industry, one should look at the three to four-year cycle. On that basis, our four-year CAGR stands at a healthy level of 16%. Based on our growth and expansion plans for the next three to four years, we are confident to maintain or even surpass this CAGR number in the long run. The pressures we faced were industry-wide. In such tough times, the diversifications which we have built via Africa and Orga feed played a critical role. Now coming to the quarter performance. During the quarter, we recorded our highest ever revenue growth for the fourth time in a row, with the top line of rupees 1,074 growth, reflecting a year-on-year growth of 18%, primarily driven by volume expansion. EBITDA for the quarter stood at 5% and PAT margins stood at 6.5%. Margins remained under pressure due to elevated milk procurement costs and a calibrated pricing strategy. An increase in procurement price was not fully passed on to the selling price to maintain the market share. Our pricing strategy is in line with the overall industry. Going forward, the situation is turning positive. Milk supply is improving, which would result in a normalization of procurement costs. For milk sales, some price hikes will also be considered. Some trends are already visible, where a few of the northern players have already increased their milk prices. Our value-added product segment witnessed steady performance during the quarter. Due to operational variability, the overall WAP portfolio could not grow to its full potential. Once our planned expansion fully stabilizes, our planned expansion directionally, we are confident that the WAP mix will improve further. This growth will be delivered by curd, paneer, and ice cream, and broadly, we are targeting closer to 32% to 34% in terms of WAP contributions. Africa business recorded a revenue of Rs. 151 crore, reflecting a robust growth of 48% year on year, driven by more than 60% growth in liquid milkshakes. As a result of continuous increase in the scaling of business along with better operational efficiency, we have achieved our highest ever EBITDA number of rupees 18 crores in Africa. And this is for the quarter, the fourth quarter. The decision that we took 12 years ago to extend our footprint in Africa has now become an important engine for long-term growth of the company. We see Africa scaling towards 15% to 18% of consolidated revenue by FY28, supported by a phase 2 expansion in Uganda, which will include pasteurized milk and milk products that will be sold in Uganda. Orga feed business delivered a strong revenue growth of 23.2% year-on-year, with a slight dip in margin as a factor of higher home material cost and expansion of our footprint of distribution. This business complements our core dairy operations with a strategic angle. It helps in strengthening farmer relationships through assured feed supply and creating an important loyalty loop in our procurement network. OSAM business reported a steady progress with our focus remaining impact on enhancing operational efficiency in this business to improve profitability. I also would like to welcome Ms. Dabla Silpa Reddy, who got appointed by the board as a senior management personnel for strategy and transformation. Silpa has spent considerable time understanding the business across verticals, and now she is increasingly taking responsibility in the strategic and operational areas. Now, speaking about the operation, about expansion project. Our Maharashtra project is progressing as per the scheduled timeline and is expected to start commercial operations by the end of FY27. The work is under progress, and this is 106 crores' worth of capex has already been deployed, cumulatively across 25 and 26. We have also made decent progress towards improving our operational efficiencies of the OSAM business, improved its product quality, and upgraded the infrastructure. We should continue in this direction till margins are at par with the overall company-level margins. We were also allocated a 7-acre land parcel by the DR

Industrial Area Development Authority for a daily project,

which will call for additional investment of around 4.4 pros towards the land. The project is presently under consideration, and further details shall be disclosed after Board approves. On the Uganda expansion plan, we acquired 70 acres of land parcel for a greenfield expansion. Total capex budgeted for this project is currently around 60 crores, including land as well as the plant. It will be executed in a phased manner and will be completed by year end of 29. Before I hand over to BDK, let me share our directional views for REFY 27. We expect revenue growth to be in the low to mid-team, supported by Ossam's full-year contribution, Africa continuing on its current trajectory, and an 8% to 9% organic growth in our India business. We are expecting a gradual gross margin recovery of 50 to 100 basis points over FY26 levels as procurement normalizes and our pricing actions take effect. Effective tax rate will return to the normal 25 to 27 range post-completion of the favorable tax orders we received in FY26. On capital allocation, let me articulate the firm clearly. Our priority order is first fund growth capex, where Maharashtra, Uganda, and our current regular capex are both covered from our internal accrues. Second, regular dividends. Third, selective bolt-on acquisitions where we see procurement or distribution synergies. The combination of strong company fundamentals, a clean balance sheet, healthy class flows, and all of these growth initiatives underpin their commitment towards the disciplined capital allocation and long-term sustainable growth of the company. With this brief, I will now hand over to our CEO of the company, Mr. B.B. Karey. Thank you very much.

Thank you, Mr. Sunil Reddy. I will now walk you through the consolidated performance highlights of our business. During the quarter, despite a shortage of milk in the overall industry, our milk procurement level remains stable at 18.5 lakh liters per day, which is an increase of 13.4% on year-on-year basis. However, we did not entirely pass on this increase in cost to the consumers. Our average milk sales price for the quarters took 58.4 per litre, which was 57.7 per litre in the previous quarter. This was primary reason for our margin being under pressure during the quarter. To give some context, our standalone India EBITDA margin for the quarter reflected shortest quarter of the procurement cost inflation in this cycle. In Q4, the consolidated EBITDA margin of 5% was supported meaningfully by AFRICA and ARGAPE, which together delivered around 22% EBITDA in Q4. On 9 months basis, our stand-alone India EBITDA margin was approximately 6-7%. In Q4, reprinted silica throw, we expect this begin to recover in Q1 FY27. However, we also witnessed some cost pressure in packing and logistic costs, among other things, due to the shift of bulk sales in higher liquid milk and milk product sales. Speaking of Africa, we continue with our growth momentum in the Kenya market. The business is now seeing the benefits of scale, with profitability improving steadily. Finally, we continue to price our products competitively to strengthen market presence and remain confident of gradual improvement in markets. Now, coming to our product sales mix, Dodla recorded its highest table mill sales of 14 lakh litres per day driven by the continuous efforts to our team towards expanding the geographic reach across India and Africa. Total value-added products stood Rs. 2,969 million as evidenced Rs. 2,841 million in Q4 FY25. Excluding bulk sales, WAP delivered growth of 21% on a year-on-year basis. Curd sales volume reported a healthy growth of 15.4% on year-on-year and stood at 442 millimetre tons in terms of value. Curd sales grew by 19.1% on year-on-year basis. Products like curd, paneer, buttermilk, flourmilk, lussey, etc., delivered a recent growth, whereas other products remained muted due to seasonal variance. Within the archipede business, the revenue growth is healthy, and utilization levels also are scaling up in a good way. However, raising the raw material input cost, I have not been fully passed on to the farmers. In order to sustain long-term efficiency, aim to low milk supply environment, height and competitively intensity. Some modernization in the input cost is expected in the upcoming quarter, which will improve the profitability of this business. Our pricing strategy in line with the overall industry, and we also see an opportunity to increase milk prices in the near terms to pass on some part of elevated procurement cost. We are also witnessing some modernization in procurement costs as a milk supply in the industry is coming back. Hence, we expect a gradual improvement in the market going ahead. With the strong underlining fundamentals and expansion plans in place, we remain focused on effective execution and achieving long-term objectives while delivering profitability growth. Now, I would request our CEO for Mr. Murali Mohan Raju to share the financial highlights for the quarter. Thank you.

Thank you, Mr. VVK Reddy, and a very good morning to all the participants on the call. Talking about consolidated financial performance in Q4 FY26, revenue from operations per Q4 FY26 today, 1074 crore, making its highest ever quarterly revenue, growing 18.1% on a year-on-year basis from 910 crore in Q4 FI 25. Gross profit to date 247 crore with a margin of 23%. Employee expenses for the quarter stood at 52 crore up approximately 27% from FI 25. Primarily reflecting Awesome Inclusion, Maharashtra Greenfield Expansion, and the Kenya Plan Tramper. Other expenses stood at 141 crore compared to 123 crore in the corresponding quarter last year. While other expenses remained broadly in line with the revenue as a percentage of days, the increase in abstinence terms was primarily driven by increase in infrastructure-related expenses, including rent, employee travel, and the conveyance costs due to an increase in the headcount of the employees. Higher transport costs going to shift in product mix from bulk sale towards liquid milk and wrap. We reported EBITDA of 54 crores per the quarter with an EBITDA margin of 5%. Depreciation expense increased to 22 crores during the quarter as again at 18 crores in the same period last year. Other income per the quarter stood at 20 crore, including 10 crore of interest income tax refund pertaining to interest on a tax refund following a favorable ITAT order. In Q4, we recorded an exceptional item that is 3 crore worth of reversal on the one-time labour code expenses, which was recorded in Q3 FY26. An exceptional expense of 5.7 crore was recognized in the previous quarter pursuant to the revised labour code guidelines. However, the actual impact was lower than initially estimated due to the restructuring of salary components. Additionally, the company recorded a tax reversal of 29.2 crore for the quarter relating to earlier year following favorable orders received from the ITAC. These tax credits represent the final portion and accordingly, no further impact shall be represented from the next quarter onwards. Net profit for the quarter today 70 crore with net profit margin of 6.5%. I want to call out the one-off support to Q4 part explicitly. The 70 crore reported Q4 part includes 29 crore earlier tax credit, which I just mentioned, and 10 crore of interest, income, and the related tax refund. Excluding these two one-off items, our Q4 underlying part is approximately 40 crores. For the full year, FI26 reported part of 267 crores includes total one-off benefits of approximately 70 crores, that is 58.7 crores of earlier tax credit through the year and 10 crores of related interest income. Adjusted FI 26 started, therefore, approximately 215 crore with an adjusted start margin of around 5.2%. This is the clean baseline, again a switch FI 27 should be evaluated. Now, coming to FI 26 performance. Revenue from operations grew by 10.9% year-on-year to the highest ever 4,125 crores compared to 3,720 crores in the previous year. Revenue remained over 1,000 crores for all the quarters of FI 26. Gross profit increased by 3.3% year-on-year to 1,055 crores. EBITDA for the year today 309 crore with EBITDA margin at 7.5%. The company reported a profit after tax of 267 crore translating into a fat margin of 6.5%. The company generated healthy cash flow from operations of 295 crore during the year, while total cash and cash equivalent to date 649 crore as of 31st March 2026. This includes cash and bank balance over cash and bank plus our current as well as non-current investment as all of those are liquid in nature. Our debt to equity remains under control at 0.03 level. The capital investment done in FI 26 is about 430 crores. This includes around 271 crore of expansion capex in Hectorpur, 86 crores in Maharashtra during FI 26, taking the cumulative Maharashtra spend across FI 25 and FI 26 to 102.

Thank you very much. We will now begin the question and answer session. Anyone who wishes If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Praveen Kumar from Equitas Capital Advisors. Please go ahead.

Hello. Yeah, hi. Thanks for the opportunity. I had a few questions. The first one was, can you give us a sense of what is the steady state margin that we can expect in this current environment? Because earlier in the call, you had specified 50 to 100 basis points improvement, margin improvement from FI26 level, which would still take you to about 8% at an EBITDA level, 8 or 8.5, which is at the lower end of the earlier margin band, which you were referring to. So, are you recognizing a structural lowering of the steady-state margin that you can achieve, or is it like, are you saying that FI27 is a year in transition, and then onwards, there are factors which can take it upwards?

Yeah, that's my point. So, thank you very much for the question. I think it's more in terms of being cautious with this whole uncertain environment that we are in, because none of us are able to take sure of what is going to be pricing of fuel, pricing of plastics, the whole agriculture under impact with urea production. None of this is very clear for us. So, that is what it's leaving. We'd rather be on the cautious side of taking what we can achieve even by considering all the uncertainties that are there. So, this is more a 27-year kind of year where, you know, taking into consideration uncertainties, what is going on. But we are trying to give this kind of guidance. Yes.

So, just as an aside to that, do you see, for example, when you're talking about the urea issues, etc., on one hand, it can indirectly impact your feed business, but on the other hand, you know, if farmers are constrained on the agricultural side of things, they might focus more on the livestock part and, you know, might improve on the dairy procurement side, right?

We are exactly right, right? If there is drought and less of agriculture, then animal husbandry steps in to become, acts as a buffer for the farmers to grow. But like I said, we are not too sure where that's going to end, right? Is Yel Nino actually going to play out and more procurement pricing coming in? So that is the reason we are being more cautious because A, you have a weather which is normally there as an uncertainty, but added to that, the uncertainty of the war and the pricing that is coming. So keeping that into consideration, we are being more cautious.

So, to understand you, you are saying that post FY27, assuming some of these things normalized, you can get back to a more normal kind of...

Yeah, it will come back to the normal, yeah. And also, one more thing is, like, in these uncertain times, right, you know, we have to be very careful of taking care of both the ends of the chain, that is, the farmer and the customer. If we go and unreasonably try to kill the customer, then we lose, not only consumption, we'll start taking a dip. If we are unreasonable with the farmer, long-term impact in terms of productivity also will get it. So keeping both into consideration is why we are being more cautious than being aggressive.

Understood. And on the WAP mix, can you throw some light on, you know, how are you trying, what are the steps that you're taking to reduce the seasonality of that? And I think you had already indicated some kind of a mix, a stable mix you want to get to. But if you can throw some light on, how do you, you know, plan to reduce the seasonality part of it to the action? Because a lot of your existing products in the VAP are somewhat seasonal in nature.

Yeah, basically seasonality impacts three major products for us. One is ice cream, which does not move the needle significantly because it's a smaller portion of the overall. Buttermilk, luffy, and curd are the ones which majorly go at it with the seasonality. That, I think, will be very, you know, it's a southern consumption habit that if there is more summer, people shift more towards the fermented product. We are trying to see that if it becomes a throughout-the-year product, what was exclusively two to three months, we are trying to extend that to a six-month period to see that people start using it as a refreshment rather than worrying about it as a summer product. On the other hand, products like paneer have improved for us. Paneer has seen a significant growth that has come in in the local consumption once placements are in place. And also that we are looking at things like our flavored milk, which is also expanding and growing at a bit of a steady state growth that we're looking at growing those products. I think in the days to come, depending on customer habits and health grounds, we will think that even buttermilk and such will become a regular product. Other than that, I think the shift will not be, we will not be able to change customer habits dramatically.

I understood. And the last question was on OSAM. What operations changes incrementally are you driving to, you know, converge OSAM margins with overall Yeah,

the operational margin that we're looking at, OSAM, basically, broadly, it's on all fronts, right? It is on production, it's on market, and it's on procurement. I think the operational efficiencies that you're, I think I'll ask BBK to give you more in detail what all are the operational efficiencies in

OSAM that we have undertaken, which will help us improve our margin. Yeah, yeah. See, some, you know, when we've, see, we have implemented SAP, you know, a lot of infracorrection we have done, a lot of stresses we have been doing towards quality, and a lot of logistics cost, you know, so everything, you know, streamlined. So, since, you know, once we are, you know, in a couple of months, it took, you know, maybe in the coming year, you know, you will see further refining and a lot of operational efficiencies, you know, some.

So, what kind of time will it take for it to converge, and how does this, you know, we are talking about now new land allocation and spending on that for expansion further in Bihar. So, how does that affect the margin convergence trajectory?

So, presently, what we are looking at is the land, because the government is operating, that's only for a future project, which will not be immediate, but more like we said, we'll have to go through the board approvals and get it. But existing operations improvement is still what we are looking at. We look at between 6 to 12 months will be that you will see all the improvements getting into effect fully. And then we want to come back to the regular margins of the overall company's perspective. Thank you. Thanks.

I'll fall back. Thank you.

Thank you. Next question is from the line of Yash Goenka from Avriga Capital. Please go ahead.

Hi. Thank you for taking my question. My question is on the cycle. Do you see anything different about this current dairy cycle?

Hi, Ashraf. Yes, what we have seen is there's a significant, like, you know, as usual when the summers come in, we have seen a significant offtake in volumes increasing in the first quarter. That is one on the sales side where we see a significant improvement happening in the product mix, giving a better realization over the previous last year, the same period. But on the other end, procurement was still under stress. We are seeing improvement time, and we hope that, you know, maybe in another month or so, that will also start to improve. I think Maharashtra and Karnataka have improved a bit in terms of productivity. We are waiting to see how the productivity in Tamil Nadu, Andhra and Telangana and other places will come into place. So, the shift has happened in the proper manner compared to the sales side. Procurement is also on track. We hope to see better results coming in the next month or so.

Okay. Secondly, are cooperators raising their prices in all the regions you are operating in the southern states? And over the next two to three months, would you be further taking price hikes? And what would that range be in?

We won't be taking price hikes per se, but we will be trying to correct certain things that are there, right? Like if our, for example, if the packaging material, it will be only minor corrections that we will take, not a major price correction because already we have a significant headroom over the cooperatives that are there. We will only correct more on the procurement side.

Okay, lastly, just to confirm, you said that margins will be reverting to mean by 528, right? Yes. Okay, thank you.

Thank you. Next question is from the line of Abhishek Mathur. From Systematics Group, please go ahead.

Yes, hi, sir. Thank you for your opportunity. I just wanted to check what is the mid-procurement cost that you're seeing currently as of today? What is that level? And also, with the pricing that you have taken so far, as of today, what part of the cost inflation is currently covered already as of mid-May? That's what I wanted to check first.

So, Murali will answer that, Abhishek, but what you are saying is, what is the price increase in procurement, and what is the price increase in sales to have compensated the price increase,

Yeah, broadly, yes, I just wanted to check, so, you gave the number for the procurement cost for the fourth quarter, but what is it today, and the pricing that we have taken so far, since we have indicated we are not planning any further major hikes, what part of inflation is covered as of now?

Yeah, majority of the procurement price in line with whatever the March price is, correct? There is no major increase, okay?

Whatever we provided as a consolidated 37.362, 40.97, that is a 9.7 of growth was there year on year. The same thing is continuing.

At a standalone, it is a 9.3 per cent, okay?

So, we are passed on around, I think we are passed on around 1 rupee of the inflation in the sales recovery that we have already done, currently that we are doing. We are anticipating the procurement improves. We should get down another rupee or so will be coming down in the procurement price.

Great. So, if I am hearing correctly, as of mid-May, there is no sequential increase from the number that you gave out on the procurement cost front. Is that the right understanding to take?

Yes, that's the right understanding. No price reduction, but we are anticipating certain areas of price reduction become effective in May.

All right, sir. And second question is, for FY27, if you can indicate what are the capex that we are planning and what will be, if you break up, I think you have given the FY26 to FY28 capex number, but what will be that number for FY27? And also, just some bookkeeping numbers, if you can share the console overall realizations and the WAP realizations for the fourth quarter. Yeah, that's it. Yeah.

So, basically, regarding the – I will give – Murali will give you the numbers specifically about the CAPEX up to the current year. And in the future, CAPEX that we are looking at, broadly, it will be the highest number which will keep coming from Maharashtra, Osam and Africa business. I think Murali will give you the specifics in terms of what we are looking at our CAPEX and also the, you wanted the fourth quarter numbers, right? Yes, yes. Of FY26, yeah. Both of them, FY26, fourth quarter numbers, we shall give it to you.

Fourth quarter, what are the CAPEX ES-20?

Fourth quarter, you want the CAPEX numbers or?

No, sir, I was asking for the CAPEX number for FY27. And for the fourth quarter, just needed the console, overall realization, and the VAP realization. Yeah, one minute, sir.

So, the fourth quarter, console, realization, sorry, you want to do the realization, not the capital. Okay.

Okay, overall budget for the FI23, what do you have considered?

One minute, we are just filling up the number.

So, what is...

Yeah, sure, sure.

So, 65 crores for the regular capex, what we consider. Around 33 crores for your control service, we see. And hardware, around 7 crores. And overall, standalone, we are expecting around 120 crores of capex. 2, 4. Yeah, that's what we're presenting here, object.

Without considering the Maharashtra project, which...

Maraswa, out of 280 crores, 20 crores we have spent in FI 25, 86 crores we spend in FI 26, and balanced 100 crores, 180 crores, we are planning to spend in FI 27.

Those will be the broad areas of capex that we will be spending.

Right, sir. And the realization, sir?

The fourth quarter realization for consolidated, I will just say.

Consolidation is 61.19, okay. That is the overall sales realization of me, including the product mix.

And you want also the procurement price for fourth quarter, Abhishek?

No, so just needed the Consolidation and the VAP realization for the fourth quarter.

So, for the milk procurement, we will talk about when you liquid, consolidated sales only. So, it is 55.16 of last year, Q42. We said it is 56.16. But when you talk about fiscal year of India, 56.15 to 58.25. That is 2.10 increase in the milk sales realization, especially, without the concern in the call draft. VAP is a blended, so I can tell you the blended size, stand alone, it is 60.892, it is reduced to 60.50, because the product peak was changed, because of the bulk phase, we are exited, so that's why there is a reduction it shows in the value of the consolidated number.

Sorry, the VAP consolidated realization was what, sir? It's 3.54.

Great.

That's it for me. Thanks and all the best, sir. Thank you.

Next question is from the line of Aditya from Securities and Investment Management. Please go ahead.

Yeah, I just wanted to understand what kind of price inflation we are seeing in our packaging and trade costs. So, is it manageable now, or it's going to be real? And how are you looking to mitigate the state?

So, I think packaging material as a number has gone up by 30%. Most of the plastics that are there, and we use a lot of the plastic, has gone up by 30%. That small correction is what we have passed on to the consumers in terms of the price corrections that we have taken. So, we are anticipating that the plastic prices will remain at the current elevated levels It's only because there was been some government support that came in in the middle in terms of excise, duty reduction, and such. So, unless something dramatic happens, we are thinking that it will hold port at the current 30% increase over the previous year.

And so, now with increasing petrol cost, how are you looking at a phase cost going forward?

So, the current 3 rupees, I think, temporarily for a month or so, we will have to look at it and we will absorb because a portion of it will be passed on to the transporters itself Because we take price corrections only periodically, and we normally try to keep it for that period. And if it remains at 3, that's the whole reason which I think there's a certain uncertainty of times. We don't know whether it's going to remain at 3, is it going to go up to 6 or 7. So that is the reason we'll wait and watch, I think, for another at least fortnight or a month before we decide how to take it forward in terms of price.

And now, sir, in such an inflationary scenario, is price increase the only solution for us, I thought there is an option for grammage reduction also in our kind of industry.

So, grammage reduction, which we normally used to do, we will not do much this time because it is not helping in terms of the consumers are also able to realize what is happening as grammage reduction towards price. I think it is going to be a blend today that we are going to do in terms of mooting up, what do you say, procurement, operational efficiency, and marginal increase in pricing. It will be a blend of all the three. For us, the way I look at it is we need to cover costs and to improve margins, maybe we need to increase the rupee or so more in terms of pricing. If we are able to manage 30-40 paisa overall in procurement, 20-30 paisa operationally and 20-30 paisa in terms of the front end, we should be able to improve our margin. And also because overall our volume growth is there, percentage might be a little bit on the lower side, but the absolute number will be higher. Because the volumes in the first quarter are seeming to be pretty reasonable in terms of the size of the sales that we are getting. Yes, sir.

And now, sir, you know, there are expectations of intense summer this season and L.A. No. Now, in such a scenario, while we will be positively benefited because of higher vaccines, but on the flip side, you know, the milk series might also take a hit, which would impact the procurement costs also. Also, and with the milk inventory in the system pretty low, how do you see both of these things intervening with each other and an impact on margins going forward? And what would be the factors, you know, things you would look at going forward which would give you the confidence of improving margin outlook for the company?

Broadly, like you said, the fluctuations will not be dramatic. If there is a severe drought, this is a two-way sword for us. So in areas where there is a drought, animal husbandry improves because there is no other income for the farmers. They concentrate more on animal husbandry, and therefore production normally improves. And also the sales mix continues to be high on the value-added product side because of higher farmers and more buttermilk, and lucky that goes up. Our average realization increases because of the product mix changes. So it sort of helps us, in a manner of speaking, to keep our costs going. So that is what we said. But we are more worried about the other costs that are going to shoot up dramatically more than

the price of milk itself, right?

None of us are certain about where is this price of fuel will be stopped because if you look at it and people, and this is my view, and please correct me if I'm wrong, $60 to $120 in my simple mathematics per barrel means it's a 100% price increase, which should translate even to a 25 or a 30% increase for us on fuel, which is not yet shown, right? We are not sure whether it is going to go up at 20% of fuel or only going to remain at the current level.

So, I think once we get more of a clarity

on this, we can think of where on we are going to pass on. How much to the customer, how much from the farmer, and how much in terms of operations.

Interesting. Okay. And now, so I have to understand when I looked at a liquid mill since when you're excluding USAM. So, we have been doing that more than 9%. So, I just wanted to understand what would be the growth in India specifically,

So, we will continue to grow with that volume terms of 5-6% in terms of liquid milk. Although, in the current year, we did excluding bulk, we did including value added, we did 9.4% of growth. We think that we will continue to maintain an average growth in terms of including value added to the 10% of volume growth.

So, what I wanted to understand was, we did not increase the milk prices because in the presentation you mentioned that we wanted to gain market share. So, in the last 2-3 quarters, has our liquid milk sales volume growth seen an uptick?

Liquid milk volume, I have seen an uptick, yes, but value added, we are pushing more. That has been, that has seen a significant uptick. Liquid milk has seen an uptick of around 5% to 6%, whereas value added has grown up by 16%.

Understood. Understood. And also, what is the sum revenue and EBITDA for this quarter?

For the both quarter of this year?

Yes. Q4 EBITDA is basically 2.7 crore and overall, no, no, we are talking about EBITDA. Okay, I will talk about even revenue also. For the Q4, the revenue is 81.9 crore, EBITDA of 2.7 crore, and fully here, it is 214.7 crore, and EBITDA is 4.8 crore.

Okay, and what kind of gross margins does OSAM make?

Gross margins of OSAM would be around 21%.

21.4.

Oh, okay. Okay. And just a last one, let's say. Sorry, can you repeat, sir?

It will move up to the 25% soon.

And this will be majorly due to price highs and improvement in WAPNIC?

Yeah, you know, price highs, improvement in WAPNIC, and also the efficiencies that we were talking about, increasing our own procurement, bringing down freight costs, you know, cutting down on losses, and all that will help you.

Understood. Understood. And so just last one question. Now, in Orga fee, we have seen a drop in margins. But what I understand that there has been a reduction in maize prices and margins should actually have improved. So what is the reason for this drop in margins in Orga fee?

So basically, although maize prices are reduced now, it will only be what we buy now will be used later. But I think the maize prices overall did go up and not come down. That is number one. And number two, earlier days, like when you're operating in a closer proximity of our area, we had the advantage of other operating costs like freight. Now, since we're expanding our volume and expanding into other areas, we have impact on freight and we have to be also competitive with the local producers. For example, if I am sending my capital fee to sell in Maharashtra, the transport cost from selling from Kuppam to Maharashtra will add on the margin pressure, and the pricing in Maharashtra in terms of the local competition will be there. But we are still maintaining that 11% margins that we are, and we think we will continue to maintain that kind of margin.

Thank you, sir, for answering questions. I will go on back in the queue. Thank you.

Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. We will take our next question from the line of Pradhyamna Chaudhary from Bowhead, India. Please go ahead.

Yeah, hi. Am I audible?

Yes, sir. Yes, sir.

So, my first question was about the butter prices. Last few quarters, due to elevated butter prices, is one of the reasons that we saw milk procurement sites being higher. So, what is the latest on the global butter prices and global S&P prices? And why were they lately elevated C2C?

Thank you. And that is the reason why the whole market surprises are elevated.

You know, so my question was more on the global butter and S&P prices. And not really India's perspective because we saw a lot of butter exports.

Yeah, so global prices also in a similar manner. You know, they are actually, I think, coming from now, they are looking at it as an oversupply. And India's export of butter is not much. It's mostly we got to export in terms of fat for the Indian diaspora which is there. That is what consumes more of the fat exports that India has.

So right now, we are seeing these prices coming down, the export prices for Bhatta and S&P?

No, not coming down. They are maintaining the same state as what they were earlier. We are not much into exports. I don't have the specific numbers, but I don't think they are coming down.

But that's not a risk to our thesis that German procurement prices would start coming down. We do not expect that elevated global data and S&P prices would be a risk to them.

Not much because I think the number of exports that we see out of the country is not that significant to change pricing patterns as much as also imports are very restricted because we have beauty structures so that we don't get the flood of imports coming in. It will broadly be dependent on domestic consumption and production, not much of variation due to exports.

And so then the last question is on the cost mix. If I were to look at our cost of goods sold for India business initially, so how much would be, what would be the mix of that, like how much would be milk as a percentage of the cost, how much would be packaging materials, what about logistics, if you can give that. And the second question would be on the Maharashtra side. I think we are storing close to 2.5 LSD already from Maharashtra, but we don't have any bulk sales as of this auto. So where is the trade going in terms of this?

Sorry, everyone, for the disconnection. I just know, Murali will give the break-up of the cost that we had asked for earlier in the last session.

Overall, the compounded is to be the breakup for the full year. It is a 24% which includes the packing materials. And employee density expenses is around 4.9%, and transport cost is 7.3%, foreign fuel is around 1.5%. Conditional stores is 1%. And balance all other miscellaneous conditions. Other to work, legal, traveling, immigrant, security, all those particular. So overall, the other expenses are coming to 13.2. Including the employment benefit expenses. That is the 18.1% of the P.A.

So, actually, I can do the raw material in this.

So, out of the 17.4%, 3.5% is the packing machine.

Sorry, how much?

3.5%.

It's the packing expense, and what about logistics expense in this?

Logistic expenses, 7.3%.

And remaining else is all milk.

74% is out of that. Only packing material is 3.5 out of the 74, plus 7.3% transport.

And 64, around 64 would be milk. Yes.

No, no, 74% transport is not excluded. 74.4 plus transport 7.3, you have to add. For the transport includes the four legs, that is the village to the chilling center, chilling center to the plant, plant to the sales office, sales office to the customer. All the transports are included, apart from the loading and unloading charges, the freight carry forward system, and the contract lever who works under the transport of that.

All that comes to 7.3%. It doesn't come in the 74% of raw material. 74% of raw material includes 3.5% of fat.

And remaining is all milk, right? 74% minus 3.5%.

I'm sorry to interrupt, Mr. Chaudhary. You may please rejoin Duki for more questions. Thank you. We will take our next question from the line of Asher from DT Portfolio Managers. Please go ahead.

Hello. Hi, Sunil. Hi, Murray. Hi, Sunil. Hi, Murray. I just wanted to know, how are you thinking of the risk of LNU on your gross margins? I think earlier in the call, you referred to like a 50-100 basis points improvement in your gross margins. So, how are you thinking of that?

Yeah, that's fair.

Thank you. And so my second question is a little more broad. Your Africa business seems to be going strong and growing a lot. What is going right then? How do you see that continuing into the future?

So I think what is growing right is basically Uganda, we have become a significantly large player. And in Kenya, we're just beginning to see that. And Kenya is a much larger market than Uganda. Earlier, we used to cater from Uganda to Kenya. And due to the border disputes, we were not able to cater to it properly because there would be restrictions on how much we could send. Once we have now entered in Kenya with our own operations and our own plant and having the stability of the product, we are able to do better. And I think in terms of comparison, like we said, it's more keeping your quality in the improved quality, making sure that operational efficiencies are maintained. And we are still a smaller market share in Kenya, and that gives us growth options. So, like you said, in Uganda, we are expanding. Earlier, we were into long-life products only. Now, we are entering into the pasteurized and other milk products.

Okay, perfect. Thank you.

Thank you. Next question is from the line of Darshit from Asit C. Mehta Institutional Liquidity. Please go ahead.

Yeah, hello.

So, your audible. You may please proceed.

Yeah. Thanks for the opportunity. And I actually just wanted CURD sales in Rupi terms for this quarter Q4.

CURD sales Q4 in Rupi terms. Right, Darshan? Yes.

Consolidated CURD sales for now Q4, 2 Rupi terms, 230 crore. And for the full year, it is 845.7 crore.

All right. And secondly, I just wanted to understand, is there any considerable difference between procurement and realisation, you know, cost and realisations between domestic overall business and OSAM? And if you were to like, you know, just see a broader trend, do they move in tandem or are there certain gaps between the trends?

Okay, so I was not able to get the question clearly about Osam, but what you are saying is the difference between Osam and price realisation and the rest of India price realisation. Am I correct? So actually Osam in fact has a better realisation than in the VAT portion than in here. Gurli will give you the specific number.

So with regard to good luck in India, so basically the milk realisation is around 58.1. And whereas HR is for the Osam, it is 50.7. And WAP, including the card product, it is 64.2 for the Vagla Dari. Paras for SR put to be 98.8.

Okay. Got it. All right. Yeah. I'll get back to the queue.

Thank you. Thank you. Next question is from the line of Deepak from Unify Capital. Please go ahead.

Hello, sir. Thank you for the opportunity. Congrats on good, top line good, but my questions were on the margin profile of the company. Sir, if you can explain as to how you will get to the 100 to 50-bit margin expansion that you're talking about in EBITDA for FF27, given that procurement costs are still elevated at the March levels, freight costs are up, employee and other expenses are also, the costs are up by anywhere around 15 to 20%. So, if you can explain, firstly, the gross margin trajectory that we should start looking at from Q1, and then the below gross margin line items that is under your control, employee and other expenses as well. So, yeah, that's your strategy.

So, you're right, Deepak. Basically, the employment expenses, this year, we actually bought it down in terms of the existing operational by only a 5%, 6% increase, but the overall impact It's still at 11% because of the new wage code impact that is there. All these costs, including packaging that you're looking at, and all that would have taken up our costs by maybe a rupee, rupee and a half. We are expecting that the procurement prices should come down to a rupee and a half to two. And because of the product mix improvement, our realization is on the higher side. As a permanation of these two, like I explained earlier, our 100%, I mean, 1% increase represents roughly 1 rupee, 1.5 rupee of price, the overall efficiency that we need to build up, which we think will come, you know, once, you know, in the following quarters, because normally price will come down, it will not come down for 1.5 rupee, it should come down as productivity increase.

So, if I hear you, are there any structural circumstances which occur in the May month or the June month which would lead to this price reduction? I don't understand as to why.

Yeah, because already Maharashtra and Karnataka have got a significant upward growth in the meat procurement. So, you will start seeing, you know, Maharashtra prices sort of correcting a little bit to, you know, because of the growth that is coming in. And similarly, when the seasons of the rest of the operations come in, you will see a drop.

So, next thing I wanted to understand on the price hikes, you know, your strategy on not taking more price hikes when you have the opportunity as the corporate is also taking. So, I just wanted to understand your mindset on taking more price hikes. Maybe you're not taking it right now. Will you take it later in the future? I just wanted to understand on the pricing action from the company.

Because we have basically taken a price hike in March, which the cooperatives have only followed later now in May. So we will again take, you know, the next round will be, as I said, the uncertainty of the fuel prices, packing material, and all that has to settle down. And once we see what the impact of that is going to be in terms of sort of a stable state, then the price hikes will again come in from all of us. It's only now that the difference in terms of us and the cooperatives are significantly higher. We don't want to keep expanding that more and more.

Okay. And lastly, on the volume growth for both the liquid milk and VAP, you mentioned that VAP had some operational challenge. So, if you can allude to what operational challenge and secondly, what kind of growth have you seen to the season which has started in April? So, if you can call out that. And any improvement that you've seen in the growth rates for milk, sir?

Yes, our milk growth rates have maintained around 4-5% even in the current scenario, but we have seen significant increase in the VAP growth. Like we normally say that our summers of VAP will be higher. So, VAP growth rates have been significantly higher. We are around 16-17% VAP growth. Okay.

I'm sorry to interrupt, Deepak. I'm really sorry. You may please reach on the key for more questions. Thank you. Next question is from the line of Rehan Bakuri from Umayu Advisors. Please go ahead.

Yeah. Hi. Am I audible? Yeah. So, my first question is regarding the impact of an increase in fuel price by 1 rupees on the logistic cost.

So, basically, when you look at fuel prices, the 3 rupee increase currently will have an impact of maybe not that much in terms of 0.5% is what the impact would be. But as I said, if we delay giving it to our transporters, normally they take a hit for a 15-day process and then we go in. So, currently, it will only be a small hit of 0.25% that we look at. But once we are sure of what the fuel prices are going to be stable at, then we can make a call of how to pass it on.

Okay. And my second question is regarding the Africa business, and what can be the sustainable growth number to look for there?

The sustainable growth numbers in terms of volume, we are confident of maintaining the 20% kind of growth numbers in the current year.

We have to answer your question.

Yeah, actually, I wanted to know the value as well, in terms of the sustainable growth.

In terms of value, you mean, sir?

Basically, sir, last year we ran around 500 crores, all that, what are you talking about? 20%.

600 crores.

That is a great income.

Gold. Yeah. Okay. That answers my question. Thank you.

Thank you. Next question is from the line of Anikej Shah from White Equity Investment. Please go ahead.

Thank you for taking my question. Sir, regarding the Africa sales, can you split it between Uganda and Kenya for S25 and S26?

Uganda and Kenya break up for S25 and S26. Uganda is almost stable, 1.45 to 1.5 lakhs. So, see now, you see, last year we have done, you know, FI 25, 180, 1,80,000. Out of that, you know, 1,45,000 from Uganda and balance, you know, 30,000 from, 35,000 from Genia. And the FI 26, you know, the similar number, you know, from Uganda, we have done 145, 150. And the total number, what we have done, average is 227, 2,27. So, 227, so 1,050,000 minus balance 87, 90,000 litres average we have done in Kenya.

So, F26 volume growth has largely come from the Kenya piece.

Yes.

And so, if you can give the Africa EBITDA numbers, we have the revenue numbers, but F25, F26

Yeah, EBITDA number, you know, in 25 was 11% EBITDA, and 26 is 11.3% EBITDA.

Okay. And, sir, the last question I have is on the Maharashtra plant. So, where are you on the procurement in Maharashtra in terms of black letters per day, and do we see it We go into 5 lakhs till end of 27.

So, right now, you know, the average procurement, what we are procuring is 3 lakhs. Average, right now. 3 lakhs. The last couple of months, almost. So, once season comes, you know, by end of this year, we are targeting, you know, minimum 5 lakhs. Yes, perfect.

Thank you for taking my question.

Thank you.

Thank you. That was the last question for today. I would now like to hand the conference back to the management for closing comments.

Thank you, everyone, for joining us today on this earnings call. We appreciate your interest in Dodla Davy. If you have any further queries, please contact SGA or Investor Relations. Thank you very much.

Thank you. On behalf of Dodla Davy Ltd., that concludes the conference. Thank you all for joining us today, and you may now disconnect your line.

Thank you all.