Heritage Foods Limited reported mixed financial performance for the second quarter of FY27, with strong revenue growth but a significant decline in net profit. The results for the quarter ended September 30, 2026, highlight the challenge of growing a dairy business while managing higher milk procurement costs and pressure on operating margins.

The company reported consolidated revenue of approximately ₹1,319.6 crore, representing year-on-year growth of around 19%. The increase reflects continued demand across its dairy portfolio and the contribution of value-added products.

However, revenue growth did not translate into higher profitability. Consolidated net profit declined approximately 38.5% year-on-year to around ₹30.9 crore, compared with approximately ₹51 crore in the corresponding quarter last year.

The divergence between revenue and profit is a key feature of the quarter. Heritage Foods continued to grow its business, but rising input costs and operating expenses placed pressure on the amount of revenue converted into profit.

Operating performance also reflected this pressure. Reported EBITDA declined around 4% year-on-year, despite the increase in revenue. The EBITDA margin was approximately 5.6%, indicating that profitability remained sensitive to procurement costs and the company’s ability to manage its product mix and operating expenses.

Milk procurement costs were a major factor affecting margins. The average landed procurement price reportedly increased around 11% year-on-year to ₹47.73 per litre. Milk is the primary raw material for the business, so even a moderate increase in procurement prices can have a meaningful effect on earnings when selling prices cannot be raised at the same pace.

Heritage Foods reported milk sales volume growth of approximately 2.5% year-on-year. Average realisation increased around 6% to ₹60.34 per litre, indicating that pricing and product mix helped offset part of the increase in procurement costs.

Nevertheless, the increase in selling realisation was not sufficient to prevent pressure on profitability. This highlights the importance of monitoring the gap between the price paid to farmers and the revenue earned from dairy products, alongside processing, packaging, logistics and distribution costs.

Value-added products were a positive area of performance. Revenue from value-added products grew approximately 32% year-on-year, and these products accounted for around 35.4% of total revenue. This category can include products such as curd, paneer, flavoured dairy products and other processed dairy offerings.

A growing contribution from value-added products can support product differentiation and improve the company’s revenue mix. However, the actual margin benefit depends on product-level economics, production costs, distribution expenses and the ability to maintain consumer demand.

The company’s Nourish+ high-protein product range also showed encouraging traction. The company reported that these products contributed more than 15% of paneer sales during the quarter. This development points to an opportunity to address consumer interest in protein-rich foods and differentiated dairy products.

Heritage Foods’ performance must also be viewed in the context of the wider dairy industry. Procurement prices can fluctuate with milk availability, animal-feed costs, seasonal supply patterns and competition for raw milk. At the same time, consumers may become more price-sensitive when dairy companies increase retail prices.

For the company, balancing the interests of farmers, consumers and shareholders remains an important operating challenge. Paying competitive procurement prices helps maintain milk supply, while retail pricing needs to remain attractive enough to protect volumes and customer loyalty.

The company’s distribution network and established dairy presence provide a foundation for reaching consumers across its markets. Revenue growth suggests that the business continues to generate demand, but the next stage will depend on improving operating efficiency and protecting margins as the business expands.

The value-added product portfolio is particularly important to watch. Continued growth in paneer, curd and other differentiated offerings could help reduce reliance on lower-margin liquid milk. The extent of the benefit will depend on whether the company can scale these products without a disproportionate increase in manufacturing, marketing and distribution costs.

Investors should also monitor whether procurement prices stabilise or continue to rise. If raw milk costs remain elevated, the company may need to rely on further price adjustments, product-mix improvements and cost efficiencies to protect profitability. If procurement pressure eases, margins could benefit, although the timing and scale of any improvement are uncertain.

Another important consideration is the relationship between revenue growth and earnings growth. The latest quarter shows that sales can increase meaningfully even when profits decline. Sustainable performance will require Heritage Foods to translate demand growth into stronger operating cash generation and more consistent earnings.

For the next few quarters, relevant indicators include revenue growth, milk procurement prices, milk sales volumes, average realisation, EBITDA margin, value-added product contribution and net profit. Commentary on capacity utilisation, distribution expansion, new products and cost management may also help investors assess the direction of the business.

Overall, Heritage Foods delivered robust revenue growth in Q2 FY27, supported by demand across its dairy business and strong growth in value-added products. However, higher milk procurement costs and operating-margin pressure weighed on profitability. The key question going forward is whether the company can sustain sales growth while improving its ability to manage input costs and convert revenue into earnings.

This article is for informational and educational purposes only. It is not investment advice or a recommendation to buy, sell or hold any security.

Highlights in Short

• Consolidated revenue: Approximately ₹1,319.6 crore, up 19% YoY.
• Consolidated net profit: Approximately ₹30.9 crore, down 38.5% YoY.
• EBITDA: Down approximately 4% YoY.
• EBITDA margin: Approximately 5.6%.
• Value-added products revenue: Up 32% YoY.
• Value-added products contribution: 35.4% of total revenue.
• Milk procurement price: ₹47.73 per litre, up 11% YoY.
• Milk sales volume: Up approximately 2.5% YoY.
• Average milk realisation: ₹60.34 per litre, up 6% YoY.
• Nourish+ high-protein products: Contributed more than 15% of paneer sales.
• Key challenge: Rising raw milk costs and pressure on operating margins.
• Key opportunity: Expanding higher-value dairy products and improving product mix.
• Important metrics to watch: Procurement prices, revenue growth, EBITDA margin, sales volumes and profitability.

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