Heritage Foods Limited (HERITGFOOD) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and a very warm welcome to the Heritage Foods Q4 and FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sonam Raghuvanshi from Dickenson World. Thank you, and over to you, Sonam.

Thank you. Thank you so much. Thank you, and good evening, everyone. I welcome you all to the earnings call of Heritage Foods Limited for Q4 and financial year 2022. Today, we have with us the management represented by Ms. N. Brahmani, Executive Director; Dr. M. Sambasiva Rao, President; Mr. A Prabhakara Naidu, Chief Financial Officer; M. Srideep Kesavan, Chief Executive Officer; Mr. J. Samba Murthy, Chief Operating Officer; and Umakanta Barik, Company Secretary and Compliance Officer. Before we start, I would like to remind you that the remarks today might include forward-looking statements and actual results may differ materially from those contemplated by the forward-looking statements. Any statement we make on this call today is based on our assumptions as on the date and we have no obligation to update these statements as a result of new information or future events. I would now like to invite Dr. N. Sambasiva Rao from Heritage Foods to make his opening remarks. Over to you, sir.

Thank you, Sonam. A very good afternoon to everyone joining us today on this call. We welcome you all to this earnings call of Heritage Foods to discuss the financial and operating performance for quarter 4 and the financial year 2022. With so many of us faced with the mounting pressures of navigating the pandemic while keeping up with a fast-paced lifestyle, consuming the right nutritious food has never been so important. Whilst we can't always ease up the pleasures of life, we can look up to the nature to help improve our general vigor and good health. After all, the secret to a healthy lifestyle starts with consuming the right food. Financial year 2022 has been the year of Heritage brand's continuing journey to make this easier by bringing the fun back into a variety of dairy value-added products in innovative formats. I would like to draw the attention of all the participants and a especial event of Heritage Foods. By end of this week, we'll be completing glorious 30 years of Heritage. 3 decades are done. Our journey was so good. We never stepped away from our stated vision and mission. We have been in the forefront for supporting the farmers, always procured all the milk they have given without any milk holidays in the last 30 years. A farmer who joined Heritage Foods is assured of 100% power linkage marketing their milk, whatever may be the quantity even in the flush periods. And we have maintained a record of making payments on pay day. The punctuality is one of our hallmarks in our journey. The fairness and transparency with which we procure milk, we assess the milk of the farmer basing on the quality and quantity is another unique proposition offered and we achieved it. So on this proud occasion of 30 years, we'll be celebrating internally with all the stakeholders soon by end of this week and entering an exciting fourth decade from next Monday. Now let me give you an overview of the financial operational highlights for quarter 4 and FY '22. While the company performed considerably well on the top line front, it faced several headwinds that proved challenging on the EBITDA and profitability front during the year. This is evident from the financial results published, already you must have seen in our website and stock exchanges. The consolidated revenue for quarter 4 grew by 12.4% year-on-year at INR 6,959 million. This was supported by very strong growth across our categories, including milk and value-added products. Clearly, our products are well appreciated in the marketplace, and our market share continues to grow nationally. On the contribution front, our EBITDA for quarter 4 stood at INR 298 million compared to INR 443 million in the quarter 4 of previous year, down by 33% year-on-year. Our EBITDA margin stood at 4.3% as against 7.2% in quarter 4 of previous year. Looking at our bottom line, our PAT for Q4 stood at INR 126 million compared to INR 242 million during last year's quarter 4. This is also down by 48% year-on-year. Now coming to the financial year '21/'22's performance. Our consolidated revenue for FY '22 grew by 8.4% year-on-year at [ INR 26,814 ] million. For the same period, our EBITDA came in at INR 1,848 million as compared to INR 2,647 million during the previous financial year, down by 30% year-on-year. While our EBITDA margin stood at 6.9% during financial year '22, the full year's PAT stood at INR 965 million compared to INR 15,039 million during the previous year, down by 37% year-on-year. This year's performance, including quarter 4, was primarily impacted by higher milk procurement prices. Margins were also further hit by the flare of an all-time high prices of ingredients and input costs, especially the petroleum, petroleum-based products like plastic packing materials, et cetera. The company has taken several steps to recover its margins and profitability with value creation initiatives across its wide procurement network, improving its manufacturing efficiencies and aggressively scaling more profitable value-added portfolio in advantaged markets. Coming to Heritage Nutrivet, our wholly-owned subsidiary, sales of -- sales revenue stood at INR 946 million as against INR 1,215 million during the previous financial year while the EBITDA came in at INR 48 million for the same period against INR 135 million during the previous year. Our PBT dropped sharply during the year and stood at INR 11 million vis-a-vis INR 72 million during the previous year. Moving on to the performance of our business segments. The revenue from various segments topped at INR 26,413 million compared to INR 24,065 million in 2021 financial year, up by 10% year-on-year. Under our expansion strategy, I'm pleased to inform you that we have acquired Suguna Dairy business in financial 2022, which gives us access to profitable and geographically adjacent markets of interest to us. Now moving on to the performance on the procurement side. The milk procurement during the financial year increased by 2.77% and stood at 1.3 million liters per day. Our average milk sales during financial year rose by 5.8%. That leads to 10.16 lakh liters per day compared to 9.6 lakh liters per day during the previous year. Curd sales during this year reached 286 metric tons per day compared to 244 metric tons per day during FY '21, registered a growth of 17.2% year-on-year. Our Renewable Energy segment also recorded decent growth. Its revenue came in at INR 90 million during financial year '22 compared to INR 68.8 million during the previous year, up by 31% year-on-year. More significantly, our VAP revenue surged by 19.45% year-on-year to INR 6,958 million during FY '22 compared to INR 5,825 million during FY '21. The VAP contribution in dairy revenue came at 26.3% during the financial year '22 compared to 24.2% during FY '21. Heritage is fast becoming a brand that speaks the language of wellness. Our branded portfolio of highly purposed range of value-added products include several innovative food options that provide nutrition and well-being with convenience and taste. These include harnessing immunity from nature, proliferating microbiome wellness through our yogurt, the power of freshness through superior packaging, logistics and digital engagement through Heritage touch and protein-rich value-added foods such as paneer and milk shakes. During financial year '22, the company launched several new products like tikka paneer, malai paneer, shrikhand, amarkhand, premium badam milk with nuts, A2 fresh milk, strengthening the value-added product portfolio manifold. Widespread consumer appreciation of our innovative food options is reflected in growing sales numbers. The company's plan for expanding geographic footprint into Maharashtra and North India is also growing from strength to strength. With a positive track record, a solid portfolio and strong positioning, we are confident of promising growth in the coming years. The company has a strong balance sheet with debt-free status and a cash and bank balance of INR 356 million as of March 31, 2022. As a result, your company continues to have sufficient headroom to raise capital as and when required to meet up with its strategies. At this point, I would also highlight the decision of the Board of Directors to recommend a 100% dividend during the current financial year 2022, like in the previous year. We believe in constantly rewarding our shareholders and overall, our medium- to long-term growth opportunities look promising. The various cost efficiency initiatives instituted over the last year places well to deliver enhanced value for our stakeholders. As a leader in the science of dairy-based products, we are unlocking nutrition to nourish those who need extra care, fill nutrition gaps and provide innovative products to enable Indians to live their healthiest lives. In this process, we intend to become an iconic brand synonymous with wellbeing. Now we'll open the floor for question-and-answer session. If you have any queries or feedback post this earnings call, you may connect us our Dickenson World, our Investor Relations agency. Thank you very much for your time and attention.

[Operator Instructionsl] The first question is from the line of Ankit Shah from JHP Securities.

I have a couple of questions. My first question is, based on our channel check, we have noted that there is a healthy stocking of value-added products in the current quarter 1 financial year '23. What are your observations on the same? Hello?

Can you repeat the question? There was some disturbance?

Yes. Based on our current channel check, we have noticed that there is a healthy stocking of value-added products, so in the current quarter, quarter 1 financial year '23. So what are your observations on the same?

Are you talking of stocking or portfolio width; something is not clear to us.

Am I audible?

You are audible, but there is some clarity issue. Can you clearly repeat, please?

Based on our channel check, we have noticed that there is a healthy stocking of value-added products in the current quarter financial year '23. So any observation on the same?

The stocks in the market?

Yes, yes.

Observation, the products' availability is greater in the markets in the summer. That's what I understand from him. Now the COVID regulations have gone, COVID impact is almost negligible, markets are open. And this year, the summer is a bit long and also temperatures are quite high. The sales outside the home have come back to pre-COVID period like whatever we had seen in 2019 summer, something like that is available now. The products availability is great, placement is good and sales are picking up in the summer much better than last 2 summers, which have gone in the COVID. So the out-of-home product availability, accessibility, visibility is definitely higher. And we have been pumping stocks into market. I hope I have answered the question.

Yes. And what is the volume growth in value-added products in the quarter 4 financial '22?

See, if you're asking about the current ongoing quarter, we will not be sharing. I think he is asking last year.

On quarter 4 of last year.

Quarter 4 of last year.

We -- and as my team accept the volume numbers, as we mentioned earlier, the revenue contribution had increased quarter 4 year-on-year from 26.55% to 27.18%, which was quite high. So to context to your previous question, I think one of the things that has also happened for us is the fact that we have built our sales force, our distribution network, et cetera, to show growth in Q4 itself of the last financial year because of which you are probably seeing more visibility of our value-added products in the market, aside from external factors also looking quite positive this year like a normal summer, normal non-COVID period et cetera. I will pass it on to my team now.

Specific answer to your question, Mr. Ankit, is that we are growing 16% in value-added products in quarter 4. And as we had mentioned earlier, the growth of our value-added products portfolio, specifically the products that we are focusing on such as curd, paneer and all of that have been growing from strength to strength. In fact, quarter-on-quarter, the growth is only increasing in these product categories that we are focusing on.

[Operator Instructions] The next question is from the line of Keshav from CCIPL.

Sir, I wanted to draw your attention to Note #7 of consolidated results, wherein it states that a provision of INR 9.1 crores was made on account of disputed liability, mainly due to GST classification. So basically, I want to understand that this additional liability of INR 9 crore, was this included in the other expenses or did it have any impact on our margins for this quarter?

This is Prabhakara, the CFO, INR 9.14 crores, which we have provided in the month of September that is when we are announcing the Q2 results, that is related to classification of flavored milk, GST related to that, GST from 5% to 12% kind of thing we have provided, but still we are disputing it. Then that is not included in the other expenses. So in this quarter...

It's got nothing to do with fourth quarter numbers?

No, no. In the fourth quarter, one more thing is, the fourth quarter other expenses includes the provision for doubtful debt. It is related to some -- whatever the juice with FR, Future Retail because the [indiscernible]. Based on that, actually, we have provided, the only doubtful still we are pursuing it around INR 6 crores, INR 5.88 crores has been provided in the other expenses in Q4.

Yes, that could impact the margin. That's the question. Yes. it's impacted margin.

But it is one time.

Also that the Future Retail because of the closure of the business and insolvency process again, we provided for it as doubtful debts, which had impacted margins, not the INR 9 crores, which was in quarter 2.

Sure, sure. Sir, also, our operating profit has come down from around INR 64 crores, which we did in Q2 of last year to around INR 35 crores, if you exclude the INR 6 crores, onetime bad debts. Basically, it has halved. So for -- basically on a steady-state basis going forward on a quarterly basis, what kind of EBITDA can we expect going forward?

It should come back as soon as prices -- farm gate prices cool off. This year, summer -- the last few months, prices have gone beyond normal levels. As the monsoon started and starting now, the procurement flush season begins in 2 months, 3 months' time, the procurement prices will cool up. That is what will improve the operating profits. That's what impacted us as I explained in the introductory talk.

So basically, we are not trying to take any price hike and we are just waiting for the inputs to go down?

Some amount of price hike was taken. The entire price increase was not passed on. With the almost...

So by how much did we increase our prices in Q4 broadly?

Numbers?

Yes. I mean just broadly like 1%, 2%? I mean, across the portfolio on an average basis?

It's been passed on in a staggered way in different markets at different points in time. Full benefit of the price hike and the benefit of the procurement price drop, they will accrue during the current year at different points in time.

Sure. And sir, how much did we pay to acquire this Suguna Dairy?

Suguna Diary?

Cost of acquisition.

Cost of acquisition is INR 2.32 crores.

Okay. Okay. So this basically doesn't seem very significant. And sir lastly, just wanted to share, I mean, that the company can maybe consider a share buyback because our stock price is at the level at where it was in 2015, whereas our net worth has tripled during this period, and now we are debt-free. So instead of expanding outside like putting new plants, I mean, there is so much capacity, I mean, inside the company itself. And if this was available at a throw-away price of less than INR 1,400 crores on a debt-free balance sheet, so it makes more sense to just buy back the own shares of the company and extinguish them. So your thoughts on the same?

Brahmani here. Thank you for the suggestion. We will propose the same to the Board and discuss the same. Basically, it really depends on a couple of different things as you are probably aware. One is the growth prospects of the company and the amount required for OpEx and CapEx funding for the growth of company. And now as we become more and more consumer-centric, the extra moneys we will have to spend on marketing, et cetera. Having said that, this is a proposal that we will put forward to the Board and come back to you later. I just wanted to introduce one of the previous points you mentioned, Mr. Keshav, which is the net realization increased as we've seen for the quarter compared to last year; in milk was about 3.9%, the price increases that we've seen. And that is in other significant product, which is curd at 3.6%. So the overall increase in procurement costs could not fully be passed on to the market, as my colleague had mentioned, it was in a staggered manner in different markets. This is a general average.

Okay. And this was taken during Q4 or during the last full year?

Q4. Q4 versus Q4 of the previous year, FY '21.

The next question is from the line of Pranjal Garg from ICICI Securities.

I have just a few bookkeeping questions. You disclosed your average realization of per liter milk and average milk procurement prices.

Sorry, your voice is not so audible. Could you please repeat that a little more clearly?

Is it clear now? Is it clear now?

Better.

Yes, it is better.

Yes. Can you help me with the average realization of per liter milk and average milk procurement price during the quarter?

So during the quarter Q4, the average milk realization per liter was INR 48.07 versus INR 46.27 Q4 of FY '21. In terms of cost, I would request to ask...

It is INR 38.46 per liter. Previously, it was INR 37.25 of FY '21 Q4. There's an increase of procurement side price 3.25%.

The next question is from the line of Rupen Masalia from R N Associates.

I have a couple of questions. Sir, in your opening remarks, you said that company is increasing its market share nationally. So just wanted to know like what is the market share? Or what sort of increase you witnessed during FY '22? And within that, within your home markets, Southern AP, Telangana, have we been able to maintain or improve upon our market share? That's question number one.

Okay. So should I answer this particular question at this point of time?

Yes, that's better.

Okay. Yes. So yes, we have been able to increase our market share in the specific region markets that we are playing in. So that reference in the opening statement was with regards to the markets in which we compete. And as far as our markets are concerned, different markets are at different levels of market share. For example, Hyderabad city is the market where we enjoy the highest market share. And probably Mumbai is a market where we enjoy the lowest market share. But across these market segments, we have been able to increase market share in the range of 0.5% to 1% in relation to the competition in these specific markets. So that does not mean market share gain in terms of overall dairy portfolio in the country. I hope I'm clear.

Yes, okay. That's helpful. Second question is with the increase in the overall proportion of value-added dairy products in the dairy mix, so ideally margin, what sort of margin trajectory can one expect going forward in the medium term, maybe not on a quarterly basis over a single year, but over next 3 to 5 years, because I think we ended FY '22 with around 26.5% kind of proportion of value-added dairy products, which probably ended with double the liquid milk EBITDA. And on the one hand, the company is planning to increase the proportion of value-added product substantively. On the other hand, to penetrate it during the growth phase, you will have to commit more towards marketing and ad spend. So what sort of margin trajectory can one expect in the medium term?

Okay. So this is Srideep here, the CEO. And if I can just give you, first of all, in very broad strokes how the business operates, the EBITDA that we have been having averages in the range of 7% to 8%, and this is what we have always guided in terms of long term. That's a function of make and value-added products at a particular ratio. And this historically was in the range of 22% to 25%. And as you would know, the margins that we enjoy in value-added products is roughly around double that of milk. Now this is what the current scenario is. Whatever is the value-added products, whatever margins that we make on milk, it's probably half of what we make in value-added products. So naturally, it goes without saying that with more and more ratio shifting towards value-added products, the weighted average should continue to increase. Now that said, it's a function of a lot of things. We are in 18 categories, starting from -- so even in value-added products, we are in from curd to butter milk to the flavored milk to milk shakes to cold coffee to ghee to butter to cream to ice cream, so the variety or the range of our product portfolio is quite large. And the competitive intensity and the complexity is quite high as well, because of which and with different growth trajectories and different margin structures in each of these categories, it's very difficult to predict. But overall, I can say that with more and more percentage share of business shifting towards value-added products, the average -- weighted average margins in the business will continue to strengthen. Currently, [indiscernible], this year, we closed to 26.5%, and it's our ambition to take this closer to 40% in the next 3 years' time. And every quarter and every year, you will see us significantly progressing towards this more.

The next question is from the line of Sameer Gupta from India Infoline.

Sir, we have seen a gross margin contraction of around 300 bps. I understand you mentioned about input prices or procurement prices going up. But when I compare this with the likes of your competitors, namely Dodla and Hatsun, they have seen a flat gross margin this quarter. And I assume that the input cost situation in terms of milk procurement would largely be similar. So have we lagged in terms of price hikes versus competition? If so, why? And going forward also, we seem to be relying more on procurement prices coming down rather than looking at any kind of confidence of taking price hikes. So what exactly are our thoughts here regarding our brand positioning and going forward pricing actions?

Please go ahead, finished?

Yes, yes.

Okay, Sameer. Srideep will take it.

Yes. So Sameer, actually, you'll have to desegregate the margins that you mentioned about our competitors and you will see that if we look at the milk procurement prices, their costs have increased in similar fashion as well. With that said, different companies have different strategies in procurement, their procurement footprints are different. Our procurement footprint is different from that of the competitors that you might have in mind. There is a different phasing of buffalo and cow milk plush and each one moves at a different pace, and our footprint and our ratios of buffalo milk and cow milk gives us a unique trajectory as far as the prices are concern. Now that said, at this point in time, the milk procurement prices are at unprecedented high, it is one of the highest that the industry has ever seen. And this is also evident from many of the statements released by many of the national and local dairy -- regional dairy cooperatives as well. Your second question alluded to a fact that we are waiting in hope that the procurement prices will come down. No, we did not say that. I would like to clarify very clearly that in the opening statement thereof by our President, we mentioned that we are proactively taking several initiatives. Number one, in terms of smart procurement initiatives across our wide network in reducing the cost of procurement and by managing the mix of cow and buffalo milk, number one. Number two, in terms of several initiatives that we have taken in enhancing the operational and production efficiencies, which increases our margins in operation. Third, in terms of aggressively growing our value-added products portfolio. I'm not at liberty to say how it's progressing at this point in time, but when I make the statement, you can probably hear my confidence in our strategy's succeeding. As far as price -- passing on the price to the consumer is concerned, we have already increased our prices in parity with all our peer groups. In fact, we have actually passed on prices in many markets where even peer group has not increased the prices. So our growth outlook is aggressive, and our actions commensurate to that.

This is very helpful. Second question is just a bookkeeping one. So can you help me with our current geographical mix of our revenues in terms of AP plus Telangana, rest of South and rest of India?

We'll give you separately, Sameer.

The next question is from the line of Siddharth Bhattacharya from Anvil Wealth.

I have a couple of questions. Firstly, in the presentation, Q4 presentation, Q4 FY '22, I read that the curd sales mentioned is around 286.34 metric tons per day. And the comparable number last year was 244.28 as mentioned in the presentation. But when I look at your Q4 FY '21 presentation, the number seems to be different. So am I reading it right or?

What other number is there?

So last year's Q4 FY '21, the number given was 278.6 metric tons per day.

278 versus 242 now?

244.23, yes. That's what is mentioned in the presentation.

No, I think there's some error in reading. The correct number is 303.

303 Q4 curd metric tons, 303.4 metric tons.

In the presentation. He is referring to presentation. Yes, we have to check the presentation.

We'll have to check and come back. The curd is one of categories we have actually grown strongly. We'll recheck and confirm.

The next question is with regards to your newly launched products, which you've launched in the last couple of quarters. I'm referring to specifically the paneer variant -- paneer and its variants and also the products that we've launched under Novandie. So how are they faring as of now? Could you help us understand their performance as of now?

Srideep, I will take the question on paneer.

Yes, I'll take the question on paneer and I'll leave the question on Novandie to Brahmani. As far as paneer is concerned, we have launched a couple of variants. One is the paneer tikka, which is our heat-and-eat variant. We've had -- we received a good consumer feedback. At the same time, we are looking at -- we have done certain product modifications based on the consumer feedback, and we are looking at relaunch or rescale up of the same across all metros in the coming months. So it's actually looking good for us. But I don't think that it has achieved the kind of scale it deserves. We'll be giving that push in the coming months.

Yes. Moving on to our JVs with Novandie, Heritage Novandie Foods Private Limited, our mix of -- our product mix is looking very encouraging. In fact, as you know, we launched our products during a struggle period between the second and third wave of COVID in markets which were most affected, Mumbai, et cetera. But I'm happy to say that the products have been well accepted, both curd as well as drinkable yogurt in those markets. And that has, in fact, encouraged us to launch these products in other markets as well in the last couple of quarters, including Hyderabad and most recently in Bangalore. We've also, in fact, launched newer SKUs as well, such as natural plain yogurt under the same JV. And of course, we could have done better. External factors were kind of a challenge for us. But I think operationally also, we've seen an improvement in our business. We've strongly come back in terms of gross margins, which are north of 24% in Q4 itself, which is a significant increase compared to before. Now that external factors are back to normal and summer was pretty strong and continues to be strong in our areas of operation, and given the fact that Mumbai and all other cities are back to normal, this quarter -- the first quarter was looking exciting.

Yes. Sure. Sure. So a follow-on question on the same thing. So basically, I wanted to understand how does the management and how does the company think about new products? And how do they evaluate their success? So I mean, would that be a turnover number? Would it be -- how do you look at it? I mean INR 50 crores from a certain product is good for you for, let's say, paneer or how do you look at it when you launch products?

So if I can take that question, thank you. It's actually a very interesting question, Siddharth. Because we play across different categories, the success metric in each case is slightly different. For example, as far as ice cream is concerned, we're a very regional player. And the strategy that we have in ice cream would be very different from, let's say, the kind of strategies that we'll adopt in curd, where we have ambitions to be a national #1 player. So the success metric for every -- for renovations in each of these product categories will be different. In certain cases, it will be market share. In certain cases, it would be revenue and top line. In certain cases, it could be hitting a certain level of planned productivity. But in all these cases, it's all part of the long-range plan that we have got approved internally. And that gives us a very clear road map for our growth trajectory for the next 3 years. So the innovations that we have talked about are many of the things that will be coming in is all part of that plan that -- that we have planned.

Okay. If I may add one more question. So basically, I also wanted to understand what's happening on the Nutrivet front. How do we see the road map ahead and the scalability ahead from these levels?

Yes. I request Mr. Upendra Pandey, who recently joined us here to respond to this.

Thank you, Siddharth. Thanks for asking the question. So on Heritage Nutrivet, I'm sure you are aware that we have 2 state-of-the-art plants in [indiscernible] region we have a co-packing unit in Maharashtra also. So that gives us a lot of [indiscernible] in terms of having the right product portfolio in the market. Now the aspiration that we have is that we want to be around INR 500 crore plus company by '26 with a healthy profit PBT target around 4% to 5%.

Okay. Sorry, I missed that. What did you say in terms of revenues? What are we looking at?

INR 500 crores plus.

INR 500 crores, okay. And what timelines?

'26, 4 years' timeline.

4 years, okay. Got it.

The next question is from the line of Ram from R Consultants.

Sir, I want to know, can you share the key contributors in value-added products?

The biggest contribution is from curd, which delivers about 75 percentage of our value-added products. After that, we have several products which are almost equal in size. They comprise paneer, ice creams. In drinkables, we are very strong in flavored milk, we have lassis and buttermilk. The other contributors to value-added product portfolio would be sweets. In sweets, we have strong presence in certain regional markets with our fruit cakes and milk cakes as well as many of the new products that we have introduced are also growing so rapidly that they will become a major contributor in the near term. For example, cold coffee is one product, even though in volume terms it is small, we are hoping that in the next 3 years, it will be a major contributor in terms of revenue.

The next question is from the line of Neha Sharma from [ Pearl Global Investments ].

Am I audible, sir?

Yes, go ahead.

Sir, can you share the road map for the future? And also the kind of revenue guidance for FY '23 and '24?

Revenue '23, '24?

Yes.

We expect to grow about 20% year-on-year for the next 2 years and gearing up for the required expansions in the backend wherever required and frontend, providing the infrastructure and outlets to achieve that.

Okay. Okay. And sir, one more. How do you see the export business potential? Can you explain how your R&D strength has been doing in your export?

We are not looking at exports as a vertical to grow. We are trying to cover the domestic requirements only. And we don't see much -- there's so many of phytosanitary requirements are there in terms of dairy products to go to Western markets. So we are currently focusing on domestic only. R&D efforts are also aimed at adding more and more new products to our portfolio and improve the existing products wherever required.

This Brahmani here. If I may just add a point over here. We're here to actually build a strong B2C business, not a B2B business, and that's even more the reason that we should be focusing on domestic markets, where we are more visible and available to the consumer. We're building experiences to the consumer, et cetera. And hence, the huge focus on consumer-centric approach. So it's highly domestic at this point in time because, essentially because we want to build a B2C business.

If I may also add, actually, this was important to understand from the perspective. India is the largest dairy and dairy products market. It's the largest. And on top of it, India has the fastest growth among all large markets. It's growing at, as in the country, itself is expected to grow at 6.5 percentage year-on-year over the next 5 years. And the organized sector is expected to grow at 14% to 15% CAGR. I think that if we are able to take meaningful share of this growth, I think our business would be double its size in 3 years' time itself. We are actually busy with all of this at this point in time. So exports are actually not very attractive for us from that point of view. I hope it's very clear. And we have made this strategic priority and this choice is actually coming from our strategic priority.

The next question is from the line of Disha Sheth, an Individual Investor.

I wanted to check what is the percentage of value added for the quarter Q4 FY '22, because if we see the whole year number, FY '22, which is given in the presentation, which is INR 695 crores. And then the value-added comes to around 30% this quarter. So where is the difference, if you may correct me if I'm wrong, somewhere.

The value-added products contributed 27% to quarter 4 in revenue within diary, not talking about consolidated, within dairy. And for the full year, it was 26.4%. So quarter 4, like I mentioned earlier, quarter-on-quarter, we are growing in our value-added product portfolio. So you will see that -- remember this number in next quarter's earnings call, it will keep growing.

Okay. Okay. And also, how much of the price hike taken in the current quarter, like in April, May, if you have taken any price hike -- or March?

April, May, we won't be able to come out now. We will see in the...

I think your question is about -- is it about last quarter or current running quarters?

In last quarter, we 2 quarterly price hikes in January, which you mentioned in the con call.

Current running quarter, we are unable to share.

Okay. Okay, sir. And sir, we stick to our guidance of INR 6,000 crores in the coming 4 years?

That's what I mentioned just now. If we just stay focused on what we are doing right now, we could double our business in 3 years' time. So that's what we are focused on. And even on a conservative level, we think that we should be able to grow at 20% year-on-year.

And sir, just last question. I missed 1 point, that curd contribute how much percentage of value-added 75, you mentioned?

Right.

We will take the last question from the line of Ramesh Tota, an individual investor.

And first of all, congratulations for completing 30 years to our team.

Thank you very much.

Actually, I have a couple of questions. What I heard from [indiscernible] this procurement is looking favorable currently. What is your outlook for the current year FY '23?

Okay. I'll just recap and actually, I'll hand over to President sir to confirm. If I can say procurement at this point in time, is in extremely different phase. And it's not just for us, for all players across the country, including the cooperatives because it's the whole country is going through an unprecedented shortage of milk and high prices. That said, the rains have started, as you may know that in many parts of the countries, they are having early monsoons and because of which we are seeing cooling off and [ carving ] as well as milk coming into our market, reducing the prices and softening the prices. We are hopeful that this trend continues and the prices cool off practically over the next 2 or 3 months. But beyond that, it is very difficult to make predictions because it's such a large industry. So we are hopeful that the prices will come down over the next few months. But that said, I'll repeat again that we are not sitting and waiting that the prices will come down. We are working on our plans of continuing with our innovation, continuing the scaling up of our business aggressively, expanding our geographical footprints, growing our business, growing our value-added product portfolio, expanding the margins by driving efficiencies in operations and looking for procurement efficiencies by going to the lowest price market. So we are doing our work, but the market will be what it is. I'll hand over to President for his comments.

It is a cyclical business. Every year, milk prices will -- milk availability decides the milk prices, availability is greater in the winter months and the prices cool off. In summer, milk scarcity will set and prices go up. It happens every year. And once in 5 years, that becomes extreme, either availability will be so high and milk will be so much in the market or scarcity will be so high, and there will be so much of shortage. If you take 15, 20 years of Indian diary, there were years where exporters were incentivized by government to push the stocks out of the country. There were years where imports were made duty free to bring milk powder and butter oil at affordable prices to domestic markets. So it keeps fluctuating. It's not a stable industry. The production cycles depend on the monsoons and the prices depend on the production. So every year, we have to watch and see which way the production is moving, prices are moving. Quarter-to-quarter, situation will alter, year-on-year, situation will alter. There are certain export import policies that influence the milk prices and margins. There are domestic state-level policies that also influence the local conditions, et cetera. So it's not unidirectional way like FMCG products go.

And in the FY '21 and FY '22, what is an average procurement cost of your milk?

'21 and '22 are subject to a lot of vagaries of COVID that you can't take it as any reference, in which it went to as low as INR 34, INR 33 in FY '20; '21, it went to INR 34, now it went to INR 40, INR 38. There is a INR 4, INR 5 fluctuation year-on-year. And last 2 years were highly influenced by the COVID situation, where the out-of-home demand crashed, only the home consumption was there. Now only from the March, April, we are seeing some semblance of normalcy in terms of demand.

Okay. And one other thing is where we procure the most means, is it -- since our base is in Hyderabad, will we procure more in Telangana and AP or we rely on any other states?

Our procurement operations are today spread over 9 states like Tamil Nadu, Karnataka, Andhra, Telangana, Maharashtra, Punjab, Rajasthan, Haryana. These are the 9 states where we have operations of procurement, depending on the market conditions.

And how much percentage of our revenue is constituted by milk and dairy business, sir?

Milk revenue will be around 65% [indiscernible]

And I also heard that we are acquiring Suguna Diary -- we acquired Suguna Diary in FY '22. And how much percentage of our capacity it has increased? And what effect it had on our operations?

It is very insignificant. It's about 15,000, 20,000 liters per day.

Okay. And one interesting thing I heard from [indiscernible], it was regarding this BM-CM mix. Can I know in a little bit what is BM-CM mix?

Again, that fluctuates. The buffalo milk, much season starts in October. At that time, buffalo milk ratio will be higher. And in summer, buffalo milk goes down and cow milk increases and it depends on the areas of operation. It's not a stable number, and it's not fixed also. It keeps fluctuating and changing from season to season year-to-year.

Okay, sir. And one last thing. I tasted our heritage ice cream, and it was so good actually. How much percentage this ice cream contributes to our revenue?

As Srideep explained, 75% comes from curd. The remaining 25% is contributed by all these categories, ice cream, paneer, lassis, flavored milks, butter milks. So it will be smaller in that 25% within the value-added products. Thank you for appreciating the ice cream.

That was the last question in queue. I now hand the conference over to Dr. M. Sambasiva Rao, for closing comments.

Thank you very much for all the participants in spite of a busy day today with a large number of companies announcing results you could participate in our call and show your interest. And we'll be happy to clarify a couple of questions we left unanswered, will be subsequently doing with those two individuals, Siddharth and Sameer, and thanks a lot once again.

Thank you. Ladies and gentlemen, on behalf of Heritage Foods Limited, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.