Dodla Dairy Limited (DODLA) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Dodala Dairy Ltd. Q2 FI27 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 date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dodala Sunil Reddy, Managing Director. Thank you, and over to you, sir.

Thank you very much. Good morning to all the participants. On behalf of Burla Dairy Limited, I extend a warm welcome to everyone joining us today on our call. I would also like to take this opportunity to wish everyone a very happy and prosperous Diwali. On this call, I am joined by our CEO, Mr. BVK Reddy, CFO, Mr. Murali Mohan Raju, and SGA, our Investor Nation Advisors. I hope everyone had an opportunity to go through the financial results and investor presentations, which have been uploaded on the stock exchange on a company website. Coming to our performance during Q2 FY27, we reported a revenue of 1,196 crores, registering a healthy year-on-year growth of 17.4%. EBITDA and PAD for the quarters stood at 64 crores and 37 crores, respectively. The performance was a combination of volume growth as well as some improvement in the realization, which is supported by a price increase of rupees 2.5 per liter, implemented during the back end of the second quarter. Full impact of the price increase is expected to be visible in the next quarter. However, the milk procurement price increase also remains elevated, keeping the profitability under pressure. Additionally, the margins are compressed due to the inflationary environment in terms of logistics costs, packaging costs, and other overheads. Despite a challenging and uncertain operating environment, Vodla achieved healthy revenue growth, demonstrating strong market presence, superior product quality, farmer relation, and executional expertise. The raw material supply stayed healthy during the quarter, as it strategically built adequate inventory to cater to the demand in the upcoming quarters. Coming to our value-added portfolio, the revenue from this category grew 11.7% on a year-on-year basis. However, the demand for the higher-margin summer-related products, such as buttermilk, flavormilk, ice cream, etc., remains softer as compared to the previous quarters due to seasonality factor. We are focused on strengthening our existing VAC portfolio and expanding to well-established categories like paneer and heat, The demand is stable throughout the year, and there is potential to build scale over time. Moving on to Africa business, it delivered strong water with a record of Rs. 179 crores, representing a year-on-year growth of 56%. We continue to focus on strengthening our presence across Uganda and Kenya. The planned greenfield expansion in Uganda is expected to support growing demand and provide additional capacity for future growth. In Kenya, our focus remains on increased market penetration and strengthening our own procurement network. I would also like to inform you that the Board has approved a proposal to establish a joint venture in India with Meadows India Holdings Limited, with Dodla Dairy and Meadows India Holdings Limited having an equity stake of 40% and 60% respectively. The proposed joint venture will focus on marketing and selling high-quality dairy ingredients to the B2B market. The proposal is subject to execution of the joint venture agreement, completion of the requisite formalities, and the reciprocal applicable regulatory and statutory approvals. We will keep you informed about any future material development in regard. Going forward, the operational environment remains dynamic with elevated raw milk prices, and inflationary pressure arising from geopolitical uncertainties continuing to pose challenges. We remain focused on strengthening our procurement and distribution capabilities, driving operational efficiency, expanding our value-added product portfolio, and executing our planned expansion initiatives, which are progressing as planned. With a disciplined approach towards product quality, cost management, capital allocation, we remain committed to strengthening our market position and deliver long-term profitable growth. With this brief, I will now hand it over to the CEO of our company, Mr.

Sunil Reddy, and Afi Diwali to everyone. I will now walk you through the quarter performance highlights our business, starting with our Indian operations. The overall milk supply situation began to improve during the quarter, supporting to recovery in our milk procurement volumes for Q2FI27. The milk procurement stood at 21.3 lakh litres per day, registering year-on-year growth of 9.3%. Average milk procurement cost increased 43.2 per litre in Q2 FY27, compared to with 41 rupees per litre in previous quarter, and 37.3 per litre in Q2 of FY26. In response to the rising procurement cost, we implemented the price increase of approximately 2.5 per litre. Consequently, our average mid-sales region improved to 61.9 per litre in Q2 FI27, compared with 59.4 per litre in the previous quarter, and 57.3 per litre in the corresponding quarter of last year. However, the increase in selling price was not sufficient, only offset the impact of the higher mill procurement cost, and profitability therefore remained under pressure during the quarter. To put this into perspective, the spread between the mill sales relation, procurement cost narrowed to 18.7 per litre in Q2 of F.27, compared to 2.3 per litre in Q2 of F.26. In addition, operating costs remained elevated primarily due to input cost inflation and shift in product mix from bulk sales towards milk value-added products , cost-related transportation, fuel, packaging, minimum wages, and other overheads continued to remain higher than the normal level. Going forward, we intend to gradually pass on the portion of these costs to increase the consumers over the next coming months. Our pricing strategy remains aligned with the broader industry trends, where high significant price highs have been taken by the regional cooperatives. We will continue to maintain a balanced rapport to consumer affordability and profitability. Coming to Wasam, Wasam Dairy, the business gave over healthy revenue growth and during the quarter and supported by strong sales volume. Although the profitability remained muted due to elevated raw material cost, witnessing a similar trend as our domestic dairy business. Speaking about our ArgoFeed business, it is continued to deliver a strong growth with revenue increasing 40% on year on year. In Q2, FY27, however, margins were impacted by higher raw material cost, which could not be fully passed on to the farmers. We are also exploring the opportunity to expand our food business in Maharashtra once our new integrated facility becomes operational. Our Africa business delivered very strong revenue growth of 56% on year-on-year, largely driven by a 68.5% increase in milk sales. As Mr. Sunariti mentioned earlier, in Kenya, we continue to focus on gaining market share, low strategic pricing, while simultaneously strengthening our market presence and procurement network. These targeted efforts are supporting our growth momentum and positioning the business for future expansion. So now coming to the product sales mix, our mill sales volume stood at 14.2 lakh liters per day, registering year-on-year growth of 8.4%.

During the quarter, our lab sales increased to Rs.

327 crores from 292.8 crores of Q2FI26, while curd and curd-based products recorded high-volume growth of 23% year-on-year, reaching 444.7 metric tons per day. Demand for our consumer-oriented products across the border, WAP portfolio, moderated during the quarter due to seasonal factors. As Q2 coincides with the monsoon season. Looking ahead, with milk availability, improving, and festive season approaching, we expect demand for the certain WAP categories, particularly sweets, ghee, and other festive-oriented products to benefit. We remain focused on capitalizing on these opportunities while maintaining the cross-discipline and the optimal pricing strategies. Further, as our new facilities in Maharashtra and Uganda become operational, we expect them to accelerate our growth and contribute to a stronger,

more profitable performance in the years to a head.

Now I would request our CFO, Mr. Mowgli Mohandraso, to share the financial ideas for the quarter. Thank you.

Thank you, Mr. Bini Karedi, and a very good morning to all the participants on the call. I wish everyone a happy and prosperous Diwali. Talking about consolidated financial performance in Q2 FY27, revenue from operations took a 1,196 crore, reflecting a year-on-year growth of 17.4%. Gross profit for the quarter amounted to 275.7 crore with a gross margin of 23.1%. Employee expenses increased to 55 crore in Q2 FI27 from 49.9 crore in the corresponding quarter last year, registering a year-on-year increase of 10.1%, mainly due to people's addition for osób as well as labor costs. Subsequently, the employee costs remained in line. Other expenses on the quarter stood at 156.6 crores and the greatest 139.3 crores in the corresponding quarter last year. Although other expenses remained broadly stable and the percentage of revenue, the increase in absolute terms was mainly attributable to higher overhead costs per litre due to inflation and geopolitical situation. In addition, pachymethyl cost rose 41.6% year-on-year for the quarter, going to macro factors and changing product mix. EBITDA for the quarter, today, 64.1 crore, translating into an EBITDA margin of 5.4%. Depreciation expense for Q2FI27 increased to 23.6 crore compared to 20.6 crore in the corresponding quarter of the previous year. Other income for the quarter amounted to 10.9 crore. Net profit for the quarters today 36.6 crore with a net profit margin of 3.1%. Now moving on to our H1 FI27 performance. Revenue from operations grew by 18.2% year-on-year to 2,394 crore compared to 2,025.7 crore in the corresponding period last year. Gross profit stood at 554 crore with a gross profit margin of 23.1%. A EBITDA stood at 129 crore, while profit after tax stood at 77.2 crore, translating with a hard margin of 3.2%. In H1F527, we recorded a deferred tax charge of 5.77 crore, which includes 4.6 crore in CDDL, that is the deferred tax liability decadentization, and 1.17 crore in HR4 due to a tax rate change. During the period, we incurred capital expenditure of 66 crores, primarily towards our Baharashtra Expansion Project. As of September 2026, we maintained a healthy cash and bank balance of 659.4 crores, which is sufficient for our future capex requirement. In H1, FI27, we are able to build up inventory of 76 crores, which includes S&P and butter for our future requirement.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhishek Mathur from Systematics. Please go ahead.

Yeah, hi sir. Good morning and thank you for the opportunity. I have noticed that our gross margin trend for the past three quarters has been quite firm. Gross margins have stayed in that range of 23% or so, despite the high raw material inflation that we have seen. In that context, the question was that, you know, what is now our outlook on the milk procurement cost? What is the trend that we are seeing in October and for the next one to two months? And with our gross margin maintenance background in mind, what would be the pricing approach here? Can we assume that we will take price size equivalent to the sequential increase in milk procurement costs in the near term? Just wanted some clarity on that.

Morning, Abhishek. Thank you very much for joining the call. Very good. Procurement, we assume, will remain at the same elevated levels, and we don't see the procurement prices dipping down in the coming quarters or even the next quarter. What has happened is we were waiting for other price increases to happen, for example, like the Karnataka State Government announcement of an 8 rupees price, which did happen on the ground. Therefore, we took our price increase called a little later in the second quarter, which is mostly in September, which the effect of improvement is showing in the future quarters going forward. Subject to that, if there is even further price increases done by the cooperatives After the price increase that we have taken, we will also increase our prices commensurately. So I think the next quarter that we are looking at, at the current price increase level that they have done itself, we should come back to a 7.5, 8% kind of an EBITDA level. If the cooperatives take a significantly larger price increase as announced but not yet implemented, we will be able to take a further price increase to improve our profitability With this, I think we have put behind the bad quarters and we are assuming our quarters going forward will be improved.

Got it, sir. Just a quick follow-up here, again on the mid-procurement cost. So, we have seen a 5% sort of sequential inflation in the procurement cost in Tokyo. If I can just probe a bit here, in October, what is the sequential inflation that you see now building? Just wanted to check that.

So, we are not building inflation in procurement because we are assuming that this has reached its peak. There might be slight difference of 20-30 prices depending on the locations of where we are procuring and the mixed variation coming into place. But other than that, we don't see an immediate price increase happening further in the coming quarters in procurement.

Oh, understood, sir. That's good to hear. And then, so then, fair to assume that if the procurement cost stays where it is sequentially going forward, let's say, for the next few months, we will not require to take any incremental pricing, is that understanding correct?

If the status quo remains, yes, we won't take the price increase. Whatever we have taken in September, that implications will come throughout for the full quarters. But if there is further increases done by the co-operators as announced by then, we will also react accordingly and increase further prices of sales prices.

Very clear, sir. And the 70% to 80% guidance that you gave is for what period, sir?

For the next quarter that is coming in as the October, November, December quarter is the guidance that they are giving. And I hope unless there is some other major changes, that should continue for the future quarter also.

Very clear.

Secondly, just some bookkeeping questions if you can. Disclose the overall realizations for the quarter, console overall realization, console WAP realization, and the standalone in Africa realizations.

So, the realizations we will give you including product, MUTLI will give you including the product and everything as console and the breakup between Africa and India. Am I right in asking that that's what you wanted?

Yes, sir. The consolidated relations, everything included, yeah.

Yeah. Okay, the consolidated for the quarter is 65.06. Last year, it is 62.53. That is the console. For India, it is 63.59. And last year, the same quarter, it is 63.07. Overseas, for the current quarter, 73.14. Last quarter, the same year, previous year, it is 60.11.

And the difference in India quarter is because we had bulk G sale, which was there, which was not there this quarter. That is the reason you will not find much of a difference in the India overall number.

HR foods we are tracking separately. It is 67.05 and 63.36.

Right, and for the value-added products, the console realization for value-added?

Great, sir.

And finally, sir, the awesome sales have not been disclosed. The VAP sales have been disclosed, but if you can help with the sales for the quarter for awesome.

Yeah, so the sales flow for the quarter of Awesome has been around, I think, 1.43 lakh liters. We have not seen any significant increase in volume there. That is the reason is because even in Bihar, our procurement prices have gone up significantly. We have passed it on. But to keep the margins, otherwise if I increase my sales a lot more now, my margins will come under pressure. So we are holding back on that till we get our procurement, own procurement improvement happening there, and then we will again start pushing for the market. Right now there, that is the reason we are maintaining our status quo. But I think in this quarter, again, this festivity is coming in where the East of India has a surge in products during the festivities. That will help us improve our margins and also our volume. But we will take a call more appropriately to start pushing the market further once our procurement price is stabilized.

Sir, I meant a rupee sales for awesome, if you can give.

So, also, 1.33 lakh is the LPD, and the total revenue for the quarter is 82.37 crore.

Great, sir. Thanks and all the best. That's it from me.

Thank you. The next question is from the line of Nikhil Upadhyay from Simple. Please go ahead.

Yeah, hello. Good morning. Am I audible? Yes, Nikhil. Go ahead. Yeah, I have one question on the procurement prices. See, you mentioned in the call just to the previous participant that the procurement prices may not go up from where we are other than that 20-30 pressure. But generally in Q4, we see when the season dries up and the supplies get difficult, the procurement prices do again see an inflationary pressure. Would that scenario be very different this year, or is it like a lot of it has already been, like, front-loaded, and you don't see that scenario playing now?

Yeah, B.R. can answer that question regarding your Q4.

Yeah, see, this is a front-loaded already in the first, second quarter. So, this is unusual, you know, earlier years, you know, normally, you know, quarter-two, you know, prices used to come down, quarter-two and quarter-three, and quarter-two, quarter-four used to go up. Now, this year, you know, see, quarter 1 and quarter 2, already prices have gone up, quarter 2 also substantially, you know. We don't see any price hike. We don't see, as of now, Q3 and Q4, you know, coming quarters, you know, there is any price hike.

But, sir, there are two ways to look at it then. One is the reason why Q1, Q2 prices have gone up because the availability has been constrained. And considering the kind of rainfalls and the environment we are seeing, wouldn't it get further constrained in Q4, which generally is the pattern every year?

Yes, sir. More interestingly, because already like you're saying, from a price point of view, it's built up. And also what's happening is like we had earlier informed like our inventory levels are building up. Everybody now is able to get their little surpreses and the inventories are also building up. So when I have enough of volume and the inventory build-up takes place, that is a sign that the volumes have come into place. So the question of, I think, like we said earlier, the production is also changing, where we are not seeing significant drops like we used to see earlier in the Q4s. In fact, the meat volumes are maintaining a steady state. So that is the reason we think prices have already been front-loaded. In my opinion, the farming variabilities are coming down. So, therefore, we will not see further increases because there won't be a steep drop also.

So, then the price increase, just last point here, then the price increase which we have seen in Q1 and Q2, is it more driven beyond the supply issues? Like, because what we understand theoretically is that, like, the prices increase when the supplies dry up or the supply is constrained. But as you are saying, there is supply, people are building inventory, but still the pricing has gone up in Q1, Q2. So, are there other factors than the pure demand supply?

Yes, but there is demand supply plays a role, but also the actual cost of the inputs also plays a role. There has been a significant cost increase even from the farmer level in terms of weed and fodder. If that does not happen and you don't give a remunerative price, which will not help him also, then we will lose in the long run. So, it's not us, but the industry as a whole has also increased the prices, keeping into consideration the other input costs increased to the farmer side also.

Okay, fine. And lastly, on the WAC side, if we look at the, can you talk about how the business, other than curd, which would like categories like paneer or categories which sell throughout the year, how is our performance improving on those? Other than the seasonal categories.

And with the volume of differences being around 15,000 liters or so, and ice cream is also grown as a volume for us. So all the other volumes have also considerably grown, but it is not showing as a significant off-take because in the previous year, we had taken our bulk sale of ghee into the VAP, and that was there as a large number. That is the reason why it is not showing a significant increase as overall VAP, but each product other than that has increased significantly.

Sure, I'll come back in the queue. Thanks.

Thank you. The next question is from the line of Yitendra Pradhan from Maximal Capital. Please go ahead.

Hi, sir. I hope I'm audible. Thanks for the opportunity. So, just one question. If you can give us some color on the CORD realizations, I mean, what kind of gross margin that we own in CORD, you know, product, and any price action that we have taken in the last few quarters. You can give us some YOYE and QOQ.

Yeah, Mughi will give you the specifics. We have taken some price increases in CURD also. Go ahead, Mughi.

The CURD realization per liter, now we are at 59.15. And again, last year it is a 56.16. That is a realization. The profits are in the range of 12% now. EBITDA only 12%.

So EBITDA, you are saying 12%?

Yeah, EBITDA is at 12%, the gross margin is at 19% for the quarter, in the CARD.

And CARD is, like, within our BAHP portfolio, like, adjusting for the seasonality, it will be 60 to 70% of our BAHP, right? Yeah, yes.

And Butterfield and Luxie will have a higher margin, those are about 20%, between 20 to 23%, we have a margin.

Understood, sir. Thank you.

Thank you. The next question is from the line of Yash from Avriga Capital Advisors, LLP. Please go ahead.

Hi, sir. Thank you for taking my question. Can you talk about the dairy which you've announced for selling high-quality B2B dairy? Will it be milk or more like cheese wrap? And how will it help your consumer-facing business?

So, Yash, this JV that we have done, basically Meadows is a UK-based entity which is of the similar size that we have, and we are just trying to explore the probability of how we will get into B2B ingredients phase, not necessarily the B2C phase, as we will be overall expanding our volumes of milk significantly in the years to come. We assume that we will have a balancing factor with the B2B that we will be able to sell at a higher realization in terms of ingredients. So it's just an exploratory JBA that we are doing from both the sides. This is a small venture where we are investing one crore for our 40% and they'll be investing the remaining for the venture. We will look at it in the long term as supply agreements versus them being our front end of marketing and we'll see how do we take it forward. They are also the global ingredient suppliers for all the large entities. So, I think in the long run, we're just looking at it as seeing how these entities will be able to merge, to help each other in terms of expanding our horizons beyond just the milk and B2C milk, but also into the value-added ingredients space.

So, if I got it right, it will just be milk or it will be value-added products like cheese and paneer as well for them, which will help your scale?

No, no, it's not going to be cheese and paneer, sir. It will be other things like if you take it as, you know, there are these mixes that they make in terms of what goes as inclusions into ice cream making. It goes as some kind of a sweetener, like, for example, the caramels that you eat. How do we make those caramels that go into other products? So it won't be a consumer selling product. It will be ingredients that are used for the consumer selling products.

Okay, and so next question would be, is your Maharashtra plant online? Because I checked the measures which you put in the presentation. It doesn't seem like it will be commissioning by end of February 7th.

No, it will go ahead, sir. March to April, we'll start our liquid milk operations will start, and by September, we'll start our powder operations.

A reminder to all participants, you can press star and 1 to ask questions. The next question is from the line of Ojas Savant from Auckland Capital. Please go ahead.

Yeah. Hi, sir. Thank you for the opportunity. Sir, we're just continuing with the previous participant's question on the JV that we have recently signed. If I got correct, we are investing 1 crore for 40% is what you mentioned.

Correct. So, this is basically like we are doing it as an exploratory JV that both of us are going to look at it and see what ingredients should be created and how to take it forward in the years to come.

Understood, sir. And, sir, when we talk about high-quality ingredients, what type of ingredients are these? Are we currently making these? Or is it something like a skim milk powder?

We will start with the basic ingredients like you said, skin milk powder, but it will be only like low heat, high heat, where it will be specifically tailor-made for certain requirements or certain products that certain people need, but later it does progress into other inclusions that come into the food industry per se. So that is the reason it's a very small start that we are going to do research of which ingredients, what is possible, what is not possible, and therefore we will take it forward there. So keeping that in view, we're just announcing it because we will be entering into the JV to start exploring the process going forward.

Yes, sir.

And so a similar initiative that we have already taken is in the 2% stake that we have taken in Sibs firm. So, sir, how has been the development there, you know, like how has been our learning there, and, you know, do we see, like, a potential, you know, increase in stake in the recent times, you know, marking our entry into high-value-added products through SIDS firm?

So, I think it's very early for us. It's hardly been, I think, for Inc. has dried on the agreement that we have signed only a month ago, although we had earlier talked about it in the paper. Like we said, it's a very small investment for us. We keep looking at it and seeing because they are exactly what we are not. We will learn from them as to see where it is going. And in the future, as things progress, we will have to take a call when it happens.

Understood, sir. Sir, and one last question on, so if you can just, you know, give up, what were our margins for the OSAM business for this quarter?

The OSAM business in terms of for the quarter of, second quarter has been one minute. I'll get you the exact number.

So, margins are further shorter, EBITDA margins are 1% this year, this quarter. Last quarter, we had actually 2.6%. It was reduced. Due to the milk prices increasing, we are now very aggressively going, and we are more focusing on stabilizing the operation rather than focusing on the EBITDA. Once we stabilize, then we can be able to increase the margins.

Understood, sir. And if I got it correct, Is it 7% to 8% margins that we are expecting in the second half, is what we mentioned earlier?

Overall, that is, India, what we are operating is what we are looking at, those kinds of margins, not OSAA, but consolidated also, we will look at it to be maintaining at those levels.

Yes, sir. That's it from my end. Thank you so much for your answers. Thank you.

The next question is from the line of Ritesh Shah from Investec. Please go ahead.

Hi, sir. Thanks for the opportunity. Just a few questions. One is on procurement volumes. Would it be possible for you to dissect it by state?

One minute, we'll just do state by state in terms of the India side of procurement volumes, right? Yes, sir. Yes, I'll just give it to you one minute.

Procurement volumes, AP we have done 4.76, and Karnatazide is 5.1 black. Maharashtra, 2.99, Tamil Nadu, 4.25, and Telangana, 45,000.

Correct. And, sir, in this related question, what will be the volume-weighted distance?

Volume? Come again with the question.

Sir, volume-weighted distance, so basically when we procure the mill, what will be the weighted average distance, basically if we do a sum product on volume 2 distance?

From where, sir? From chilling center to plant or farmer to chilling center?

Sir, both, basically. Both included.

I think I don't have a specific number right now, sir. We'll get it back to you and later offline. But roughly, we'll look at procurement, which we have multiple operations. If it is a chilling center, we will have around 40, 45 kilometer kind of a radius. If it comes down to bulk coolers, the radiuses will come down and village level chilling will be absolutely up the village level itself. From the chilling centers slash cooling a cooled milk into the plant, if you look at it, it will be anywhere between 300 to 400 kilometer radius for the plants to be able to pick up them. The specifics I think will work out and it will get back to you, sir.

Sir, second, I just wanted to understand on the comfort on procurement volumes given rot in a few states and given the El Nino impact, does it have yield on the cows with respect to So, how much milk did they give? Like, how should we look at these two variables?

See, the amino effect is more in, actually, Maharashtra compared to Karnataka. There is no much impact. Karnataka, we have very good growth in procurement. And also, AP is also not very much impacted as we really know. A slight impact is there in Tamil Nadu and Maharashtra.

Okay. And so, just last question. Then are we looking at further cost inflation with respect to the feed that we sell, or I think we call it concentrate, right, on what we sell to the farmers?

Yes. The price increase will get inflation a little more going ahead, because I think it is not only going to be for us, but for the industry as a whole, because of ethanol coming into play, compressed biogas coming into play. I think we have to wait and watch how the government policies and government action because of the amount of the maize being the basic crop they use by poultry and dairy for the concentrate feed is also the one that is being fed into ethanol. So we'll have to take a call as and when it happens.

So would it be possible for you to quantify rupees per kg for Q1 and Q2?

Yeah, sure. So, basically, there is an increase of 3.35, 3 rupees, for a sales relation last year, quarter to this quarter, whereas the procurement price, the lender price was increased by 4.84, okay? But when you talk about the last quarter, it is under 399 price was increased, whereas the procurement cost was increased by 2.93.

So, basically, the lag, once the procurement prices go up in raw material, there is a lag before we pass it on to the farmer. But there also, it's the same that we keep passing it on to the farmer.

Right. So, just a follow-up, just to understand, you indicated a lag from procurement to when we pass it on to the farmer. But again, when we look at it from the economics of the farmer, they also see certain cost escalation, and hence, they would also demand a higher price. So, when we earlier indicated that we don't see procurement prices to move up much, does it take into account this particular variable as well?

It's a minor variable if you look at it because it's a multiple factors of fodder also availability, feed availability, and the volume of milk that the farmer is producing for animal. Concentrate will form, let's say, 30 to 40 percent or 50 percent of his overall cost that he feeds the concentrate to the cattle. And if it goes up by a rupee or rupee and a half, on a per liter basis, it doesn't show a significant variation unless it moves up by 5 or 7 rupees per kg kind of an impact that you look at it. Because the rationing comes in that we use concentrate only to balance the protein requirement of the animal, whereas the fiber and energy comes from the other sources. Part of the energy also comes from concentrates. So, in the farmers, when we look at the overall requirement, the concentrate feed element doesn't play as significant a role as much as it is played by fodder and productivity based on the climatic conditions.

Perfect. So, this is very useful. Thank you so much for the answers. All of us.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Should you have follow-up questions, please rejoin the queue. The next question is from the line of Shirish Pardeshi from Modilal Oswal. Please go ahead.

Hi, Sunil and team. Thank you for the opportunity. Just a quick question on OSAM. Can you share what are the things which we have solved and what are the things we have yet to solve before OSAM really takes off? And maybe some color of competition, how the competition is behaving, specifically in the area of Ossam geography.

I'll answer your questions. First of all, Ossam, we acquired a year back now, just one year we completed. Initially, we have done a lot of modifications in the plant. See, there were so many things, automatic CIT system, proper equipment, proper layout, all that. But, you know, it took six to seven, eight months, you know. Once we identified the shortcomings, and then we bought out all the equipment and replaced and corrected. And a lot of, you know, corrections have been done in the plant, in the operation side, number one. Number two, you know, the procurement side also, now slowly we are going to the Dorla model. There, you know, see, we are done. There, you know, is the agent model. Total collection is the agent model. So where we have in Dorla is a direct, you know, farmer payment model. So that, you know, we have already done 25 to 30 percent, that amount, and balance we are expecting by March. So at least 70-80 percent of the procurement model also will bring it to development. So that is the major changes what we are bringing, number two. Number three, the market, you know, see, the major market holder is by Sudha, both in Jharkhand as well as Bihar. So Jharkhand, though they made a different name called Sudha, since, you know, you see, from Bihar, you know, when they separated Jharkhand stay. Okay, so Sudha, still Sudha also is there in Jharkhand, and also they have created one more cooperative, the separate cooperative for Jharkhand, you know, Isamneda. And apart from that, you know, see, the ITC also is there since 5-6 years on boards, and recently, a couple of years back, Amul also entered, and there are also some one or two UP brands also evented, Gya and I.D., Namaste India. But, you know, since, you know, now slightly it is now coming a competition, so compared to last 5 years. But, you know, overall market is there, but, you know, still, you know, there's a good scope for the web. So, maybe it will take little time to catch that market.

That's helpful. I'm just trying to compare because ITC has also been there and Amul is now getting into it. It's a little hard and sticky market to my understanding. So, obviously, the traditional player and you've been dealing with the cooperatives across other states also, So, I think what I understand, you definitely have some understanding of this competition. But then what are the things which we can see actually a scale-up which can happen in this business? I suspect whether Sudha and Medha is giving you a kind of competition, they're in a different league and price point. So, if you really need to develop a value-add portfolio, if the market is ripe or you will do the seeding and maybe over a period of time you can expect the quote results.

Yeah. See, first of all, you know, Sudha and Medha. Medha, of course, it is a very recent one, but Sudha and all, you know, as usual, you know, are very lazy cooperative, you know, they are not very active. So, that's why, you know, see, the other people are now occupying the market and they are taking the market share. So, their payment cycles are not up to the mark. So, there are a lot of issues as far as Sudha is concerned. Almost, you know, 70% of the market share is Sudha. But, you know, Sudha is not very active. As usual, you know, the payment running late by one or two months. There are a lot of market complaints. So many things are there. So, definitely, you know, we will have advantage. Especially, you know, see the Bihar market, you know, the very good market actually compared with Japan. There is a big scope.

And also, sir, there is going to be GDP prevalent. BR's GDP was always lower. As the state is improving and the GDP improves, we will see the shift happening. That is why we always say that we see a significant offtake during festival for base products like sweets or paneer or other value-added products is because of affordability. And as the growth of BR and improvement of BR happens and affordability comes in, we will see a significant growth in the value-added profile because the consumption pattern there has a lot of the value-added as a part of the daily diet. It's only affordability that is holding it back.

Sunil, you are buying one. I recently visited, and I saw that Pihar is really doing well, and followed to that is Yarkin. So, I think it's a big market, but then, I mean, it's a right strategy, but I'm saying this execution needs to ramp up, or really the market dynamics or product profile has to change for us.

Yes, we are looking at it and changing it, yes. Okay.

Okay. Last question on the Africa business, and this is related to more of the CAPEX side. I think in the past we said about 600-3rd crore. Is there any change in CAPEX which will happen for India and even Africa?

You see, not much of a change, actually. In Africa, as we said, we acquired 70 acres of land, and we already started greenfield work. So our civil work already commenced a month back. So that we are targeting by FI28 beginning, you know, running the operations. So as far as Africa is, we have very good growth, and Kenya also has done very well. Actually, very good growth market share we have taken from Kenya. As far as ACIP, even EBITDA level also is very good. As far as other CAPEX, you know, in Maharashtra, what we are doing, you know, there's not much of increased CAPEX what we projected earlier.

So, basically, what happened to 600 crores that you were asking as CAPEX, we had earlier assumed Africa to be around the 60-70 crores, Africa, I mean, Maharashtra to be 280, and the acquisition of OSAM that we did net of cash of what was available in OSAM to be around 600 crores. I think that it might marginally go up by 5% to 10% as the inflation takes into place over the project period, but nothing significant in terms of movement otherwise. So our major capex going forward will be completion of Maharashtra and Africa to be implemented. And feed also. And feed, we are looking at it now, as they have mentioned as DBK, that in Maharashtra, once a itchal plant comes to more of production and facility, We might consider looking at another feed operation to cater to the Maharashtra area rather than moving it all the way from Chittur to Maharashtra. As is, I think slowly our cattle feed has also come to 6-7,000 tons out of the installed capacity or utilization capacity of around 8-9,000 tons that we can do. So we are coming closer to the full capacity utilization of our old feed plants. So by the time these are done, we will get another feed plant also going. That is not considered at the moment, which we might take a call two to six months later.

Thank you, and all the best.

Thank you, sir.

Thank you. The next question is from the line of Vandit Dharamshi from Antra Growth Capital. Please go ahead.

Hi, sir. Thank you for the opportunity. Just one question. Again, the dairy sector, for obvious reasons, has been impacted by weather-related challenges for all these years. So the next two, three, five years, do you think, is there anything that industry can do differently to make sure that these weather-related challenges impact is likely lesser than what they do today? Maybe some kind of sale development or inventory built up, I don't know what, but do you think we are thinking in that perspective or is it possible?

Yes, sir. Basically, going forward, I don't think only us, but the whole industry per se, we will see that the country will move from the same trajectory like the rest of the world, which was the dairy farming, which was backyard farming, which had more of the impact on weather or free, is slowly moving to organized. So what I mean by that, it was backyard farming of 1-2 animals, and if you look at our own history of those days, the average being 2 litres per animal kind, it's now moved to 8-10 litres per animal average lactation period. I think now we are seeing some states taking the leap forward like Punjab or Gujarat or Maharashtra, where the farmers are moving away from the backyard farming and bringing it to a per acre mainstream farming, where it will become more in terms of productivity and efficiency. Once that comes into place, you will find that because the farmers have more control in terms of not have a fan to cool down the animal, the temperatures go up, stocking of, you know, feed and water in the form of silage or other practices, we will be able to move forward. I think already we are seeing the impact of artificial insemination coming into play, where sex semen plays a role of having only more female animals than having male animals, and also improving of the productivity of the breed. So all the companies are also along the way taking their own respective path in trying to see how best we can associate and help the farmers grow. Some companies are creating their own breeding. We, for example, conduct common health camps, education of farmers, and trying to get more farmers to become more in terms of organized structure. With this going, I think the signs are showing, as you can already see, that the fluctuations in volume, earlier when it used to be in buffalo milk, it used to be around 50-60%. Now, that has dropped to 25-30%, and cow has hardly come to a 10% variation in terms of volume. If these continue, that means it's showing signs of the farming industry itself becoming more organized rather than being unorganized backyard farming.

Understood. Okay, sir.

Thank you so much.

Thank you. The next question is from the line of Mishita from Sapphire Capital. Please go ahead.

Yes, hello. Am I ordering?

Yes, Mishita, go ahead.

Yeah, so I just wanted to understand again on our EBITDA margins. So you mentioned that our OSAM margins have fallen this quarter, and you also mentioned that consolidated, we can still do around 7.5% to 8% of EBITDA margins for H2FI 27. So, I just wanted to understand how are we going to achieve that margin, because since we are not going to focus on EBITDA margins in OSAM, so, like, isn't the margin going to still be under pressure only because of OSAM?

Yeah. See, originally, you know, what we projected OSAM is only 4 to 5% EBITDA margin only. See, the main, see, margin, you know, we were expecting only from the main company, from Dodla only. So, already in third quarter, we are seeing that change. So, definitely, we will see even Wasam, see, first and second quarter also not performed at the expectation level. But, you know, Wasam also now, you know, we are seeing that third and fourth quarter, they also do around 4 to 5 percent EBITDA. And overall EBITDA of dobla, overall EBITDA of dobla will be around 7.5 to 8 percent coming quarters.

So, I'll also add here, Panushita, is the basic thing is when you look at Wasam can be We have a revenue of 250 or 300 crores. The 4% on 300 crores is around 12 crores. And even if we do 2% or 3%, we will make up the absolute difference of Osam. Pulling down the overall EBITDA is very small in the absolute number of most 3-4 crores difference only. Whereas the India side of the operation is substantially larger, maybe we'll add another 1,000 for the next half year. India will be adding more than 1,300 to 1,400 crores of revenue, and that is where we are seeing the improvement coming, and therefore, because of the price increase, which will therefore bring it to 7.5. So, OSAM alone won't drag it down much. It is the overall India improvement that will take us to be at a higher level.

Okay. So, we can expect India revenue to be around 1,300, 1,400 crores for H2O 527. Is that right?

Basically, current year, we have come around 900 to 1,000, so maybe, you know, depending on seasonality of, you know, the summers coming earlier or later, we can be between 1,001 to 1,200, anywhere in that range. That's the other one, sir, India operations.

Oral operations, we are going to have done that, so we'll... We'll again reduce the doubling of that.

Then, India's total operation, we have, you know, including Africa, Ossam, and feed put together, it is roughly about, you know, 5.8 pros, half yearly. So, 333 cores, operation business, Africa business, 173 cores from Mossam, and net trust cores from our field. So, it is coming close to 600 cores. Out of 2,391 cores, close to 2,400 cores, minus 600, is around 1,800 cores we have done only India Dodla. So, in coming quarter also, we are going to do a similar number.

Okay, okay, understood. Yeah, that is excellent. Thank you so much.

The next question is from the line of Siddharth from CWC. Please go ahead.

Hi, thanks for the opportunity. A few questions. Did the buttermilk, crepe, and paneer volume increase come with similar gross margins as earlier? Were you able to pass on the price increase, the cost increase to consumers, or is there an impact there too? Okay, so the impact really comes in terms of not being able to fully pass on only in milk. Milk products you are able to pass on the cost increase to customers. Is that a fair way of understanding?

And also a certain amount of it we do not pass on, and third also we wait for some time to pass on. It is basically the question of the time lag. So when my prices increase, they are passed on much later in terms of a month or two, because of again waiting to see how the other prices will react. And waiting to see when they are stabilized for us to pass on is where the delay happens in terms of profitability getting impacted. So for example, when my procurement prices went up in April and May, The impact of that increase is only coming in terms of June is when we pass on. Similarly, when it happened in the second quarter, we were anticipating procurement to come down and it didn't come down. Our effective price increase has happened in September. So we got into a little bit of that first quarter, second quarter impact of three, four months, which is showing the overall profitability being lower. But once we have passed it on, like we were saying, the coming quarters, you will see the improvement in profitability going back to normal.

Got it. So, but outside of that lag, is it fair to understand that structurally you are able to pass on the cost increase for milk products, but for milk and curd, you may not always be able to pass on the cost increase completely to the customer?

We will not pass on immediately, but over a period of time, it will be passed on to the customers. Instinctly, we will not pass it on. We'll wait and see because if there is a correction that we were happening with, if the procurement prices come down, then we don't want to bring it down. So we wait for a while and they do, but average it will be passed on.

Got it. And what a trend that you're seeing in the procurement challenge between cow and buffalo milk supply, especially in Maharashtra and AP, which are decent buffalo salians. Are you seeing buffalo milk being a bigger challenge or cow or is it both?

See, see, overall, you know, buffalo meat is, year on year, it is going down, because there is a big demand for the buffalo meat, and also, you know, see, it is not viable for the farmer to raise the buffalo, so, because there is a huge variation between, you know, plus season to summer season, so, because of that variation, so, farmer is preferring only a cow. That's why year on year, you know, cow milk, entire India, cow milk production is going up. Even if it is in Anthropologie, also earlier, you know, predominantly, you know, coastal area, it is a buffalo milk. Even in Maharashtra also, some part of the buffalo milk. But, you know, buffalo milk slowly, see, year on year, it is a diminishing. Cow milk ratio only is going up.

Sure, but this year, did you see buffalo milk fall more sharply than cow milk? Because, and I'll tell you where I'm coming from, right? We have seen fat short pages in, you know, the market at a different level. I'm sorry to interrupt you, sir.

If you have follow-up questions, please rejoin the queue. Sure.

It's just a clarification on this, but happy to rejoin it.

Siddharth, you can also reach out to me or anybody directly. Siddharth will give you the answer. You can get the number from AC and reach out.

Will do. Thank you. Thank you.

Thank you. The next question is from the line of Monish Godgir from HDFC Mutual Fund. Please go ahead.

Hello. Thank you for the opportunity. So, this 327 crore of VAP sales we had, what is the split between various categories?

One minute, sir.

So, the revenue of 327 crore, so it's basically the 580, sir.

Which quarter are they talking about, sir? They're talking about the quarter of the...

327, you have mentioned, that is only DDL, India sales, sir.

Only India sales, sir, that is, basically the corn yogurt, lussey and buttermilk all the And, sir, the share of that will, by and large, will remain the same at, like, around 30% on medium-term basis?

So normally we keep saying that we will grow by 1-2%, sir, because it depends also on which one you look. For example, it's a difficult, revenue will grow up by 2-3%, because for example, if I sell more of paneer, it's 6 litres being sold in the form of 1 kg, so from a revenue percent it will be a little higher, maybe 2-3% in terms of revenue, but from a volume perspective it cannot be apple to apple because some of them are in litres, some of them are in kgs If you add ghee to it, it will go substantially larger and it can reach up to 40%.

Actually, you know, see, we have grown in WAP compared to the last year, this year by 1.5%. But, you know, last year, you know, there was some ghee portion. So, this year, you know, that ghee portion is not there. That's why, you know, it appears that, you know, so the WAP, you know, there's no mass operation. But actually, WAP, we have grown. WAP, you know, including buttermilk, curd, everything we have grown.

And so, last question, this milk procurement price, can we safely say that the 62-63 litres is now a top and going forward, the increase should not be there?

And that is one part. And another part is, how do you see this animal impact on milk availability?

Yeah, see, now, see, because, you know, in the first and second quarter itself, you know, they have loaded enough in the procurement, we are seeing, you know, the availability of milk also now. So, last one month, we have seen, you know, some rains in the southern part coastal area, and also availability also has been improved. We are hoping that, you know, this third quarter and fourth quarter, there won't be much price hike in the procurement side. It may be, it will stand still.

Okay. Okay, sir. Thank you.

Thank you.

Thank you. That was the last question for today. I now hand the conference over to the management for closing remarks.

So, I thank everybody for joining our conference and we're looking forward to meeting you guys up next quarter. Thank you very much, everyone, for joining our conference.

Thank you. On behalf of Dodla Dairy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.