Heritage Foods Ltd Management Discussions

GLOBAL ECONOMY

In FY25, the global economy exhibited considerable resilience, achieving an approximate growth rate of approximately 3.2%. The growth within advanced economies is projected at 1.7% for FY25, with robust economic activity in the United States compensating for slower growth in other regions. Conversely, the Eurozone presents a less favourable outlook, with moderate growth anticipated to be only 0.8% in FY25. Meanwhile, China s economy experienced a growth rate of 4.8% in FY25, despite a decelerating growth trajectory.

Commodity price trends for FY25 portray a mixed outlook. An ample supply coupled with sluggish demand has resulted in relatively stable commodity prices during the latter half of the year. Oil prices have encountered persistent pressure in FY25, primarily due to a lacklustre forecast for global demand and an overabundance of supply.

Global inflation rates are decreasing more rapidly than previously anticipated across most regions, reaching a rate of 5.8% in FY25. This decline can be attributed to the resolution of supply- side issues and the implementation of restrictive monetary policies. In advanced economies, inflation rates have decreased to approximately 2%, aligning with targets established by central banks. This reduction has empowered significant central banks, and the European Central Bank, to adopt more accommodative monetary policies, thereby promoting sustained economic growth. Global trade, an essential driver of economic activity, is projected to grow 3.3% in FY25. Trade growth within advanced economies is expected to be modest at 2.1%, whereas emerging markets and developing economies (EMDEs) are predicted to expand at a more robust rate of 5.0%. This slowdown reflects challenges such as the rise in protectionism, trade distortions and the ramifications of geopolitical conflicts, which have disrupted supply chains and increased costs.

Financial markets continue to be dynamic, with US equities benefiting from business- friendly policies, while emerging markets are adapting to changing capital flows. The strengthening of the dollar persists in influencing global trade and investment patterns.

Although geopolitical and trade shifts present challenges, they simultaneously create opportunities for innovation and resilience, underscoring the necessity for forward- thinking strategies in an ever- evolving global landscape.

Regional Growth(%)	2025 **	2024	2023
World output	3.3	3.2	3.1
Advanced economies	1.9	1.7	1.69
Emerging and developing economies	4.2	4.2	4.1

** Projected

(Sources: IMF, World Bank)

Outlook

It is anticipated that global output will exhibit steady growth in 2025 and 2026, maintaining the same rate observed in FY25. The United States is expected to sustain significant economies will demonstrate substantial potential. In contrast, advanced economies, particularly those in Europe, are projected to experience moderate growth.

Forecasts indicate that global headline inflation will decrease to 4.4% in FY25 and further to 3.5% in FY26, with advanced economies achieving target levels of 2.1% by FY26. Correspondingly, crude oil prices are likely to experience a more pronounced decline in 2025.

Nevertheless, non-fuel commodity prices are anticipated to rise by 2.5%, thereby bolstering growth in key resource-driven sectors.

Changes in economic policy and evolving trade dynamics are expected to compel businesses to adapt, innovate and compete within a rapidly transforming global market. The International Monetary Fund (IMF) emphasises the necessity of proactive policymaking to facilitate a smooth disinflation market confidence. These factors cultivate a environment, promoting strategic planning and resilience across various industries.

INDIAN ECONOMY

Once again, India has shown remarkable resilience. Defying global economic trends, the countrys economy achieved a growth rate of 6.5% in FY25, following a substantial 9.2% increase in the prior fiscal year. Positive consumption patterns, a resurgence in rural demand, service expansion and a rising proportion of high-value manufacturing in exports drove this growth. theFederalReserve In FY25, annual inflation moderated to 4.7%, down from 5.4% the previous year. This decline was supported by favourable weather conditions, stable commodity prices, an improved supply chain and a significant drop in vegetable prices. As a pressure, the Reserve Bank of India lowered the repo rate by 25 basis points, from 6.5% to 6.25%, marking the first cut infiveyears.

Additionally, the urban unemployment rate remained unchanged until the third quarter of FY25.

In FY25, the agriculture sector experienced a growth of 3.8%, the industry sector expanded by 6.2% and the service sector increased by 7.2%. By January 2025, the core sector had grown by 4.6%.

The HSBC India Manufacturing Purchasing Managers Index (PMI) surged to 58.1 in March 2025, surpassing Februarys figure of 56 representing the highest point since July 2024. New orders and output witnessed their most significant increase while purchasing levels reached a seven-month peak.

Nevertheless, the fast-moving consumer goods (FMCG) sector encountered demand challenges while the rural market provided crucial support. The net Goods and Services Tax (GST) collections rose by 8.6% to 19.56 trillion in the fiscal year 2025, reflecting an increase in economic activity despite global economic challenges. Rising Foreign Direct Investment (FDI) and record foreign exchange reserves also bolstered Indias overall economic performance; however, the depreciation of the rupee against the dollar has led to increased import costs and inflation. The Reserve Bank of India

(RBI) has strengthened gold reserves as a hedge against global uncertainties, while corporate earnings have contributed to the resilience of stock markets. Nonetheless, global trade tensions and external risks have resulted in significant market conclusion of the fiscal year 2025.

	Q1	Q2	Q3	Q4
	FY24-25	FY24-25	FY24-25 **	FY24-25
Real GDP growth(%)	6.7	5.4	6.2	6.5

IMF data showed that Indias GDP was 1.8 lakh crore (US$2.1 trillion) in 2015 (at current prices) and is expected to reach 3.6 lakh crore (US$4.27 trillion) by 2025-end a 100 per cent growth over the past 10 years!

Outlook

In the fiscal year 2026, the Indian economy is anticipated to exhibit moderate growth relative to the preceding financial year, with an anticipated real GDP growth ranging from 6.3% to 6.8%. However, this is from a significantly high baseline. Consequently, India is positioned to reinforce its status as one of the fastest-growing major economies, thereby substantially contributing to global GDP growth. Nevertheless, external risks such as a global economic slowdown, geopolitical tensions and protectionist policies that lead to trade economic prospects.disruptionscouldadversely affect

Furthermore, a deceleration in urban consumption, an increase in food inflation and sluggish growth in capital formation are also likely to impact the growth trajectory.

Global dairy industry

Dairy products, including milk and other products, represent a timeless foundation of nutrition and delight globally, effectively merging tradition with contemporary preferences to enhance the quality of life daily. From the sheer simplicity of milk to the creamy attraction of cheese, the invigorating tang of yogurt and the opulent richness of butter, dairy provides a harmonious array of flavours and nutritional benefits that resonate through generations.

The global dairy food market comprises a diverse array of products, including milk, butter, cheese, dried and evaporated goods, as well as frozen desserts, all of which are widely regarded as essential staples. The distribution channels extend from traditional supermarkets to online platforms, thereby enabling dairy companies to broaden their reach and improve consumer access to their products.

An overview for 2024: In 2024, the global dairy industry saw uneven growth, with lower demand in mature markets (EU, U.S.) but steady gains in Asia and Africa. Supply chain disruptions (weather, trade barriers) and volatile prices squeezed margins, while sustainability pressures and alternative dairy products reshaped competition.

The European Union led the global dairy market with a 36% share, followed by Oceania at 27%, illustrating their prominence in dairy trade. New Zealand and India remained key exporters, though trade policies and geopolitical risks impacted flows. Innovation in functional dairy and precision fermentation emerged as long-term growth drivers amid shifting consumer preferences.

Off-trade channels accounted for 92% of the market in 2024, including supermarkets and online platforms, largely due to the influence of organised retail chains in China, India and Japan. Supermarkets and hypermarkets play a crucial role in this segment, enhancing product availability.

Evolving consumer preferences, urbanisation and technological advancements drove the global dairy market growth in 2024.

Increasing health consciousness and demand for dairy-based snacks have shaped industry trends, while innovations in functional dairy products, fortified beverages and plant-based alternatives have diversified offerings. Supportive in supply chain infrastructure have further strengthened the sector. Estimates for the future: The global dairy market attained a valuation of US$ 991.5 billion in 2024 and is projected to experience a 4.75%

CAGR, reaching an estimated US$ 1,505.8 billion by 2033. The primary factors contributing to this growth include rapid urbanisation, heightened health consciousness, technological advancements, increasing demand for dairy-based snacks, evolving dietary preferences and supportive government policies.

The Asia-Pacific dairy market is anticipated to grow from US$ 202.8 billion in 2025 to US$ 256.9 billion by 2030, propelled by a CAGR of 4.84% and a transition towards off-trade distribution channels.

Trends expected in 2025: Global dairy fundamentals are anticipated to remain largely balanced as we approach 2025. An increase in the production of milk and dairy products is expected, accompanied by an improvement in demand for these products in the year 2025. Farmgate milk prices are on the rise, while stable feed costs and favourable availability have bolstered the margins of dairy farms, thereby creating conditions conducive to further industry expansion in 2025. Nonetheless, geopolitics, tariff disputes, disease outbreaks and weather conditions may impact trade and production.

Indian dairy industry

India, with 80 million+ smallholder farmers and over 300 million cattle, is leading the global milk production and it is transitioning from a volume-driven model to a more technology-integrated and value-focused ecosystem.

In India, dairy is more than an industry - its a cherished legacy, fuelling households and cultures with its wholesome promise. As todays consumers seek health, sustainability and convenience, the Indian dairy industry rises to meet these demands, marrying age-old craftsmanship with cutting-edge innovation. This is a journey of passion and precision, where every product reflects a commitment to excellence, ensuring that each sip, bite and dollop brings satisfaction and trust to the table.

India produced more than 239 million metric tons of milk in the fiscal year 2024. The dairy sector has experienced an impressive 15% CAGR over the past 15 years. There are abundant investment opportunities in dairy farming, driven by innovation and expansion.

Liquid milk continues to dominate the market due to its essential role in daily nutrition. In contrast, A2 milk represents the fastest-growing category, propelled by consumer preference for its perceived superior digestibility and health benefits compared to standard milk. The dairy industry in India is undergoing significant increasing emphasis on enhancing health benefits by incorporating high-quality proteins, probiotics and prebiotics. These advancements support digestive health, immune function and cognitive well-being, encompassing mood, stress management and mental clarity.

According to the USDA Foreign Agricultural Service (FAS), fluid milk consumption is forecasted to reach 91 MMT in 2025, up from 89 MMT in 2024. Uttar Pradesh remains the leading milk-producing state, followed by Rajasthan, Madhya Pradesh, Gujarat and Andhra Pradesh.

During the fiscal year 2023-24, dairy exports totalled 63,738.47 metric tonnes, generating an income of US$ 272.64 million. The key markets included the UAE, Saudi Arabia, the USA, Singapore and Bhutan.

The Indian dairy market is valued at 18,975 billion in 2024 and it governmentpoliciesandinvestments is projected to reach 57,001.8 billion by 2033, growing at a CAGR of 12.35%. This sector is a crucial driver of Indias economy, contributing 5% to the gross domestic product (GDP) and providing livelihoods to over eight crore farmers.

(Sources:The Bullvine, Statista,The Dairy Site, MARC, Indianxpress, Indusfood, Indian Investment Grid, Straits Research)

(https://www.thebullvine.com/tag/dairy-industry-india/)

(https://www.statista.com/topics/5347/dairy-industry-in-india/#topicOverview) (https://www.thedairysite.com/news/indias-milk-consumption-expected-to-rise-in-2025) (https://indianexpress.com/article/cities/delhi/indias-milk-production-goes-up-report-9691307/?utm_source=chatgpt.com) (https://indusfood.co.in/article/indias-dairy-market/) (https://indiainvestmentgrid.gov.in/sectors/food-processing-and-agriculture/dairy-farming#:~:text=The%20dairy%20sector%20has%20 exhibited,driven%20by%20innovation%20and%20growth) (https://www.imarcgroup.com/dairy-industry-in-india) (https://indusfood.co.in/article/indias-dairy-market/) (https://www.instagram.com/straits_research/p/DD6c1ktoT4V/)

DEMAND CATALYSTS FOR THE INDIAN DAIRY INDUSTRY Rising Consumption: With a growing population of 1.44 billion, demand for dairy products continues to rise, driven by a large consumer base. Increasing incomes enable greater spending on nutritious foods, reinforcing dairys role as a staple in Indian diets.

Growing health consciousness: Consumers are increasingly seeking dairy products for essential nutrients like protein, vitamins and minerals. This growing demand extends beyond traditional dairy, including value-added products such as flavouredyoghurts, fortified milk and probiotic drinks.

Large Vegetarian Community: India has a large vegetarian demography that depends on milk as a key protein source. This group consistently fuels the demand for milk and its products in different forms.

Evolving distribution network: New dairy startups are revolutionising the industry with subscription models, home delivery and digital supply chains, ensuring fresh and high-quality products. Focusing on premium and organic offerings.

New technologies in dairy processing: Technological advancements are reshaping Indias dairy industry and improving farm management, milk processing, packaging and logistics. Automation enhances efficiency, product quality and safety, drive productivity and sustainability. Cold chain technologies ensure freshness and nutritional integrity during storage and transport.

Focus on value-added dairy products: The dairy industry is shifting towards value-added products like cheese, yoghurt, flavoured milk and probiotic drinks. These offerings provide higher profit margins while meeting consumer health, convenience and variety demands.

Growing e-commerce & quick commerce: The rise of e-commerce and quick commerce is driving new trends, shipping challenges and food safety considerations. The Direct-to-Consumer (D2C) model is gaining traction, enabling dairy manufacturers to connect directly with consumers.

KEY FOCUS SEGMENTS WITHIN THE INDIAN DAIRY INDUSTRY

Liquid milk

India produced more than 239 million metric tons of milk in the FY25. A considerable national herd and advancements in production methodologies primarily propel this market growth. India has established an ambitious goal to notably enhance its milk production capacity over the forthcoming five years.

The United States Department of Agriculture (USDA) Foreign Agricultural Service has anticipated moderate growth within Indias dairy sector for 2025, with the population of milking cows expected to reach 62 million. This expansion is supported by government interventions, elevated milk prices, favourable climatic conditions, consistent fodder availability and the absence of significantdisease outbreaks.

The dairy sector is benefitting from an increasing herd size, the adoption of superior breeds, technological innovations and sustainable practices, with substantial support from government initiatives. As the demand for dairy products rises with a burgeoning population and a transforming economy, competition drives innovation, enhancing quality and variety. This evolution shapes a robust industry prepared to fulfil domestic requirements and to redefine its role in the global market.

UHT milk

The market for UHT (ultra-high temperature) milk in India is experiencing consistent growth, propelled by an increasing health awareness among the urban populace. With a shelf life ranging from six to nine months, UHT milk provides exceptional convenience while preserving high quality and nutritional value. A heightened consciousness regarding healthy dietary practices, in conjunction with a burgeoning population and rising income levels, further stimulates the demand within this market.

In 2024, the UHT milk market in India achieved a volume of 1,306.6 million litres. It is projected to expand to 3,927.4 million litres by 2033, demonstrating a CAGR of 12.36% from 2025 to 2033. The increasing demand for convenient, long-shelf-life dairy products contributes to UHT milks rising favourability.

A2 milk

The A2 milk market is anticipated to expand from USD 15.4 billion in 2024 to USD 50.9 billion by 2033, reflecting a CAGR of 14.21% during the forecast period. The increasing prevalence of lactose intolerance and a heightened awareness of health and wellness are propelling the demand for A2 milk on a global scale. The numerous advantages associated with A2 milk, such as enhanced bone and dental health, improved muscle strength, regulation of blood pressure, promotion of tissue and cell growth and increased nutrient absorption, further contribute to the markets growth.

Skimmed milk powder

Indias market for skimmed milk powder attained a value of 162.0 billion in 2024 and it is projected to expand at a CAGR of 9.1%, while better farm practices ultimately reaching 355.0 billion by the year 2033. A heightened awareness of health issues propels the growth of the market, an increasing preference for nutritious dietary options and the broadening adoption of e-commerce platforms.

Furthermore, the extensive utilisation of skimmed milk powder in various bakery products, dairy items and beverages- including but not limited to bread, cakes, chocolates, ice cream, cheese, yoghurt, soups and shakes- serves to bolster demand, particularly within restaurants and commercial food establishments.

Organic milk

Organic dairy farming in India is experiencing a significant in popularity as health-conscious consumers transition away from conventional milk due to various health-related concerns. The organic milk market in India was valued at 12,914.2 million in 2024 and is projected to reach 1,02,842.0 million by 2033, reflecting a CAGR of 24.63%.

The expansion of the organic milk market is attributed to a growing consumer preference for healthier alternatives, coinciding with the rising prevalence of diabetes, hypertension, cardiovascular diseases and obesity. Organic milk, devoid of antibiotics and chemicals, provides enhanced nutritional benefits, rich in omega-3 fatty acids and antioxidants, thus rendering it a preferred option among consumers.

GOVERNMENT INITIATIVES RASHTRIYA GOKUL MISSION

The Rashtriya Gokul Mission (RGM) is designed to develop and conserve indigenous bovine breeds to augment milk production and farmers income. It operates under the Rashtriya Pashudhan Vikas

Yojna for the period spanning from 2021 to 2026, supported by a budget allocation of 2400 crore. The RGM is set to enhance the productivity of all cattle and buffaloes, thereby particularly benefiting small and marginal farmers. Furthermore, the Union Cabinet has sanctioned the Revised RGM to further strengthen the livestock sector, with an additional financial commitment of 1,000 crore.

NATIONAL PROGRAMME FOR DAIRY DEVELOPMENT (NPDD)

The National Programme for Dairy Development (NPDD), which was launched in February 2014, aims to enhance the infrastructure for the production, procurement, processing and marketing of high-quality milk through State Implementing Agencies or State Cooperative Dairy Federations. Recently, the Union Cabinet approved the Revised NPDD with an additional budget allocation of 1,000 crore.

DAIRY ENTREPRENEURSHIP DEVELOPMENT SCHEME (DEDS)

The Dairy Entrepreneurship Development Scheme (DEDS), overseen by the Department of Animal Husbandry, Dairying and

Fisheries, is designed to foster self-employment within the dairy sector. Administered by the National Bank for Agriculture and Rural Development (NABARD), this scheme supports milk production, processing and marketing through back-ended capital subsidies for viable projects.

NATIONAL LIVESTOCK MISSION

The National Livestock Mission provides assistance to states and union territories in the organisation of training sessions, workshops and capacity-building initiatives for livestock farmers and breeding groups. It enhances awareness of animal husbandry through social media campaigns and demonstration projects, while fostering the adoption of advanced technologies, including artificial intelligence insemination.

LIVESTOCK HEALTH AND DISEASE CONTROL (LH&DC) SCHEME

The scheme comprises three components: the National Animal Disease Control Programme (NADCP), Livestock Health & Disease Control (LH&DC) and Pashu Aushadhi. The LH&DC further encompasses three sub-components: the Critical Animal Disease

Control Programme (CADCP), the Establishment and Strengthening of Veterinary Hospitals and Dispensaries - Mobile Veterinary

Unit (ESVHD-MVU) and Assistance to States for Control of Animal Diseases (ASCAD). Notably, Pashu Aushadhi has been recently introduced. The anticipated total outlay amounts to Rs. 3,880 crore for the fiscal years 2024-25 and 2025-26, which includes 75 crore allocated for affordable generic veterinary medicine and for incentivising the sales of Pashu Aushadhi.

THE DEPARTMENT OF ANIMAL HUSBANDRY AND DAIRYINGincrease FUND (AHIDF)

The Department of Animal Husbandry and Dairying is in the process of implementing a fund amounting to 15,000 crore to enhance investments in dairy processing, meat processing, feed production, vaccine production, animal waste management and breed improvement.

For the fiscal year 2025-26, the Department of Animal Husbandry and Dairying, Government of India, is scheduled to receive an allocation of 4,840.40 crore. This allocation signifies a 26.08% increase from the revised estimated expenditure of 3,839.25 crore.

VALUE-ADDED PRODUCTS Curd

Curd, also referred to as Dahi, constitutes an essential element of a balanced diet and is appropriate for individuals with lactose intolerance. Abundant in calcium, vitamin D, proteins and phosphorus, curd enhances bone health and aids in digestion. The

Indian curd market reached 1,778.9 billion in 2024, influenced by various growth factors. Population growth, increasing disposable incomes, heightened health awareness and the products affordability are significant contributors to this positive trajectory. projected to achieve 5,421.9 billion by 2033, with a strong CAGR of 12.52% from 2025 to 2033.

Paneer

Paneer is a versatile type of Indian cottage cheese that is abundant in protein and calcium and is utilised in a variety of culinary dishes.

Its soft texture allows it to absorb flavours effectively, contributing to its popularity. Paneer is rich in essential nutrients that aid in the development of robust bones and teeth and promote cardiovascular and neurological health. The demand for paneer has been on the rise due to an increase in calcium deficiency and associated bone disorders. In 2024, the market for paneer in India was valued at 648.1 billion. Fueled by strong demand and shifting consumer preferences, the market is anticipated to expand to 2,030.7 billion by 2033, demonstrating a notable compound annual growth rate (CAGR) of 12.85% from 2025 to 2033.

Cheese

Indias cheese market is currently experiencing significant growth. The increasing influence of Western cuisines, coupled with rising disposable incomes, is facilitating a transition in consumer preferences from paneer to cheese, thereby elevating its demand across the nation. Furthermore, manufacturers are introducing a diverse array of flavoured cheese products to meet the evolving tastes and preferences of consumers. The market was valued at 107 billion in 2023 and is projected to attain a value of 593.5 billion by 2033, exhibiting a compound annual growth rate (CAGR) of 19.86%.

This upward trajectory illustrates the escalating demand for both natural and processed cheese, thereby contributing to the markets burgeoning value and volume.

Buttermilk

Buttermilk, alternatively known as chaach, is produced through the churning of milk. It is characterised by its thicker consistency and sour taste compared to milk. Furthermore, it is a cost-effective option, convenient to obtain and is known to facilitate digestion, reduce blood pressure and enhance immune function. In 2024, the buttermilk market in India was valued at 193.3 billion and is projected to reach 933.5 billion by 2033, reflecting a compound annual growth rate (CAGR) of 18.16% from 2025 to 2033.This growth is attributed to the increasing demand for healthy, natural beverages, their extensive availability through various distribution channels and a rising awareness among consumers regarding health matters.

Flavoured milk

Flavoured milk represents a widely consumed dairy beverage prepared by combining milk with sugar and flavours such as vanilla, chocolate and mango. It offers a palatable and healthier alternative to carbonated soft drinks, appealing to children and working adults. Furthermore, an increase in disposable incomes, a growing population and expanding distribution channels, including supermarkets and online platforms, contribute to the rising demand for flavoured milk in India. The pronounced growth of the market is fuelled by increasing health consciousness among consumers inclined to select dairy-based products. In 2024, the flavoured milk market in India was valued at 63.3 billion, experiencing a robust growth of 20.73% CAGR from 2025 to 2033, with projections indicating it will reach Rs. 374.1 billion by 2033.

Milkshake

A milkshake is a cold, blended dairy-based beverage available in various flavours with a multitude of toppings and additions, enhancing its attraction. The Indian milkshake market reached Rs. 7.6 billion in 2024 and it is poised to grow Rs. 34.2 billion by 2033, with a CAGR of 17.47% from 2025 to 2033. Key growth drivers include rising disposable incomes, shifting consumer preferences for convenient and indulgent beverages and growing demand among the youth demographic.

Lassi

Lassi enhances energy through its nutrient composition, which includes carbohydrates, proteins, vitamins and minerals. It also facilitates rapid hydration in elevated temperatures, thus rendering it a favoured beverage, particularly during the summer months.

Its probiotic content supports the proliferation of beneficial gut bacteria, improving digestion and mitigating gastrointestinal issues. In conjunction with its refreshing characteristics, these advantages have catalysed an increase in demand and market development within India. The Indian lassi market is projected to attain a valuation of 56.0 billion in 2024, with a CAGR of 16.96% anticipated from 2025 to 2033. It is forecasted to reach 245.7 billion by 2033.

Ice-cream

The ice cream market in India is undergoing significant propelled by emerging startups that are introducing innovative flavours to accommodate the evolving preferences of consumers.

There is a discernible increase in the demand for premium and artisanal ice creams crafted from high-quality, natural ingredients devoid of preservatives, particularly among Gen Z consumers who are in pursuit of distinctive experiences, as well as the upper middle class who display a readiness to invest more in premium products. As of 2024, the valuation of Indias ice cream market stood at 268.0 billion. Projections indicate that the market is anticipated to escalate to 1,078.0 billion by the year 2033, reflecting a CAGR of 16.7% from 2025 to 2033. The escalation in investor interest, coupled with the advancement of comprehensive cold chain systems featuring temperature-regulated storage facilities, is further contributing to the markets sustainable growth.

Fat products

Ghee, a concentrated form of clarified butter, is not only a culinary staple but also essential in traditional healing practices and spiritual ceremonies. Ghee is recognised as the second most popular dairy product subsequent to milk.

There is an escalating preference for organic ghee, driven by heightened health awareness and a demand for natural, additive-free products. Furthermore, the rapid proliferation of e-commerce platforms is augmenting market accessibility, providing consumers with an extensive array of ghee options, including premium and organic varieties. Additionally, the increasing consumption and cultural significance of ghee within Indian households further bolsters the markets sustained growth. The ghee market in India is projected to expand at a CAGR of 8.4% from 2025 to 2033, ultimately reaching 7,179.0 billion by 2033, up from 3,482.0 billion in 2024.

Butter India is emerging as a strong contender in the global butter trade, indicating a potential shift in international dairy dynamics. The expansion of Indias organised dairy sector and increased farm-gate procurement are enhancing its appeal as a butter supplier to Middle Eastern, Asian and African markets. Competitive pricing, lower shipping costs and a growing focus on quality certifications are further boosting Indias export prospects.

Butter is rich in niacin, calcium, phosphorus, riboflavin, and vitamins A, E, B12 and K. When consumed in moderation, it enhances immune function, promotes cardiovascular health and safeguards cellular integrity while supporting bone development and warding off osteoporosis. The butter market in India is driven by increasing disposable incomes, evolving dietary trends towards Western cuisine and heightened awareness of its health advantages. The market is anticipated to experience a compound annual growth rate (CAGR) of 16.01% from 2025 to 2033. In 2024, the market was valued at 90.4 billion and is expected to reach 366.9 billion by 2033.

Company Overview

Heritage Foods Limited (HFL) stands as a prominent entity within Indias dairy sector, specialising in the production of milk and value-added dairy products. With over three decades of extensive experience, the Company offers a diverse range of products, which include curd, paneer, ghee, butter, fresh cream, UHT milk, lassi, milkshakes, flavoured milk, buttermilk, ice creams and frozen desserts.

To enhance its operations, HFL has established 18 state-of-the-art milk processing facilities, thereby ensuring a robust presence across 17 states.

HFLs extensive product portfolio, strong focus on innovation and systematic growth strategies have positioned the Company at the forefront of the fast-moving consumer goods (FMCG) sector.

This success is further supported by a comprehensive distributiontransformation, network and a multi-channel market approach. Additionally, HFL has forged long-term relationships with over 300,000 dairy farmers, ensuring a steady and reliable supply of milk. These strategic initiatives have reinforced its status as a leader in the industry.

OPERATIONAL REVIEW

During FY25, the Company demonstrated strong performance across regions and product lines, achieving market share growth and enhanced operating margins compared to the previous year.

( Rs. in million)

Financial year	Revenue from operation	EBITDA*	PAT
2025	40,805	3,117	1,681
2024	37,343	1,989	910
2023	32,087	1,350	659
2022	26,429	1,781	1,015
2021	24,070	2,497	1,452

*Before exceptional items and other income.

Dairy Vertical

The dairy vertical is Heritage Foods flagship business unit, accounting for 99.98% of the Companys total revenue. The five-year revenue trajectory for this segment is outlined below.

Dairy Revenue

FY2025	FY2024	FY2023	FY2022	FY2021
40,799	37,335	32,080	26,413	24,065

Renewable energy vertical

Heritage Foods Limited has initiated a clean energy mission aimed at achieving a more sustainable environmental footprint through investments in renewable energy projects for captive consumption. The Company has strategically installed solar and wind power facilities across 25 locations, generating a total of 12.14 MW of renewable energy, comprising 6.30 MW from three wind power plants and 5.84 MW from twentytwo solar plants. This initiative emphasises the Companys dedication to environmental sustainability and operational efficiency.

In FY2025, revenue from operations amounted to Rs. 87.70 million, a decrease from Rs. 90.29 million in the preceding year, reflecting a (2.88)% year-on-year decline. Profit before tax (PBT) was 19.86 million, in contrast to Rs. 26.09 million in the prior year. Profit after tax (PAT) was 24.05 million a decrease from 32.41 million last year. EBITDA declined by 3.31% year-on-year to Rs. 60.58 million in FY2025, compared to 62.66 million in FY2024.

Heritage Nutrivet Limited

Heritage Nutrivet Limited (HNL), a wholly-owned subsidiary of Heritage Foods Limited, is committed to advancing animal nutrition through a comprehensive range of livestock feeds and supplements. The Company aims to enhance milk production and reproductive efficiency in dairy animals by promoting their overall health and strengthening their immunity.

HNLs product portfolio is meticulously crafted to address the diverse nutritionalneeds offering high-quality variousanimals.Inadditionto nutritional solutions, HNL provides technical support and knowledge-sharing initiatives to dairy farmers, intending to boost milk yields and improve economic outcomes. Through the provision of cost-effectiveand sustainable options, HNL is dedicated to supporting the agricultural community and fostering the well-being of dairy animals.

Heritage Novandie Foods Private Limited

Heritage Foods Limited has established a 50:50 joint venture with Novandie, France, forming Heritage Novandie Foods Private Limited (HNFPL). This partnership is focused on producing and marketing a wide range of premium yoghurt variants in India. HNFPL began its commercial operations in February 2021, strategically targeting health-conscious Indian consumers who prioritise nutritious food choices. A standout feature of HNFPL is its introduction of the first French yoghurt in India, supported by state-of-the-art manufacturing facilities and rigorous quality control measures for both ingredients and processes.

Financial Overview Net worth

The Net worth for the last five years is as follows

Rs. in Mn

FY2025	FY2024	FY2023	FY2022	FY2021
9,471	8,035	7,367	6,605	5,938

Dividend

The dividend % declared in last five years.

FY2025	FY2024	FY2023	FY2022	FY2021
50%	50%	50%	100%	100%

Earnings per share

Earnings per share (EPS) for FY 2024-25 is Rs. 18.11/- .

Key financial highlights for FY 2024-25

Particulars	2024 - 25		2023 - 24		FY2025 vs FY2024
	In Millions	% of Revenue	In Millions	% of Revenue	% of Growth
Net Sales	40,783.23	99.95	37,324.48	99.95	9.27
Other operating income	21.58	0.05	18.97	0.05	13.76
Total Revenue	40,804.81	100.00	37,343.45	100.00	9.27
Less: Total Expenditure	37,687.49	92.36	35,354.89	94.67	6.60
Add: Other Income	272.84	0.67	119.29	0.32	128.72
Profit before Interest, Depreciation and Tax	3,390.16	8.31	2,107.85	5.64	60.83
Less: Finance costs	150.23	0.37	81.64	0.22	84.02
Depreciation & Amortisation	671.57	1.65	584.32	1.56	14.93
Profit before tax and exceptional items	2,568.36	6.29	1,441.89	3.86	78.12
Less: Exceptional items	(234.85)	(0.58)	(167.95)	(0.45)	39.83
Profit before tax	2,333.51	5.72	1,273.94	3.41	83.17
Less: Provision for current taxation(Including taxation of earlier year)	625.11		356.68		75.26
Less: Provision for deferred taxation	27.58		6.88		300.87
Profit / (Loss) after tax	1,680.82	4.12	910.38	2.44	84.63

Standalone Segment results

Particulars	2024 - 25		2023 - 24		FY2025 vs FY2024
	In Millions	% of Revenue	In Millions	% of Revenue	% of Growth
1. Total Revenue
a. Dairy	40,798.66		37,334.99		9.28
b. Renewable energy	87.70		90.29		(2.87)
Total (a+b)	40,886.36		37,425.28		9.25
2. Inter-segment Revenue
a. Dairy	-		-
b. Renewable energy	81.55		81.83		(0.34)
Total (a+b)	81.55		81.83		(0.34)
3. External Revenue
(Incl other operating income)
a. Dairy	40,798.66		37,334.99		9.28
b. Renewable energy	6.15		8.46		(27.31)
Total (a+b)	40,804.81		37,343.45		9.27
4. Segment Results (Profit (+) / (Loss) (-) before tax and finance costs)
a. Dairy	2,551.54	6.25	1,481.28	3.97	72.25
b. Renewable energy	24.03	27.40	29.00	32.12	-17.14
Total (a+b)	2,575.57	6.31	1,510.28	4.04	70.54
Less: Finance Cost	150.23		81.64		84.02
Unallocable expenses	261.84		199.37		31.33
Add: Interest income	4.79		3.56		34.55
Unallocable income	165.22		41.11		301.90
Total Profit before Tax	2,333.51	5.72	1,273.94	3.41	83.17

Segmentwise Revenue Break-up

Particulars	2024 25	2023 - 24
Dairy
Finished goods sold
Milk	23,281.55	22,190.44
Value Added Products	13,012.90	11,011.20
Fat Products	3,180.91	3,045.85
Skimmed Milk Powder	7.96	7.28
Total	39,483.32	36,254.77
Traded goods
Feed & Others	1,247.88	986.40
Value Added Products	22.07	51.42
Other tradable goods	6.92	1.83
Total	1,276.87	1,039.64
Sale of Service	16.89	23.87
Other operating income	21.58	16.71
Total Dairy Revenue	40,798.66	37,334.99
Renewable Energy
Finished goods sold	6.15	6.21
Other operating income	-	2.25
Total Renewable Energy Revenue	6.15	8.46
Total Revenue	40,804.81	37,343.45

CASH FLOW

1) Cash Inflows

Rs. ( in Millions)

Particulars	2024 - 25	%	2023 - 24	%
Operating Cash flow	3,156.96	81.25	2,031.48	40.29
Change in working capital (net)	-	-	2,086.15	41.37
Interest and dividend received	5.11	0.13	3.30	0.07
Rent Received	19.93	0.51	13.68	0.27
Proceeds from Long Term Borrowings	703.45	18.11	908.00	18.00
Total	3,885.45	100.00	5,042.61	100.00

2) Cash Outflows

Particulars	2024 - 25	%	2023 - 24	%
Repayment of Long Term Borrowings	247.57	6.14	25.39	0.57
Change in Working capital (net)	533.14	13.22	-	0.00
Taxes paid	621.91	15.42	367.89	8.31
Payment for purchase of property, plant and equipment(net)	1,664.47	41.27	1,228.25	27.76
Net Investments	488.44	12.11	1,192.03	26.94
Repayment of Short Term Borrowings	-	-	1,243.58	28.10
Movement in other bank balances, net	50.91	1.26	20.63	0.47
Interest Paid	141.23	3.50	81.02	1.83
Rent Paid	53.52	1.33	34.51	0.78
Dividend paid	231.99	5.75	231.99	5.24
Total	4,033.18	100.00	4,425.29	100.00
Net increase /(decrease) in cash and cash equivalents	(147.73)		617.32
Add: Opening Cash and Cash Equivalents	780.52		163.20
Cash and cash equivalents at the end of the period	632.79		780.52
Cash and cash equivalents include :
Cash on hand	1.41		1.46
Balances with banks in current accounts	631.38		779.06

Key ratios

Particulars	FY25	FY24
Current ratio	1.78	1.70
Debt equity ratio	0.18	0.16
Debt Service coverage ratio	5.49	11.04
Return on equity ratio / return on investment ratio	19.20	11.82
Inventory turnover ratio	10.47	9.70
Trade receivables turnover ratio	123.28	131.98
Trade payables turnover ratio	20.63	28.47
Net capital turnover ratio	14.24	18.10
Net Profit Margin (%)	4.12%	2.44%
Return on capital employed	23.13	15.79

Internal control system and adequacy:

The Company implements internal control procedures suitable for its size, ensuring asset protection and processes. Its control and risk management system aligns with the corporate governance code, embedded in the organisational structure.

Teams coordinate for effective responsibility execution. The Board of Directors offers and management, aided by monitoring and advisory committees.

GROWTH DRIVERS

• Sustained revenue growth is achieved by smart pricing and expanding into new markets to reach more consumers.

• Increased VAP contribution boosts revenue by selling high-margin premium products with better profitability.

• Rapid market penetration in 17 states expands the customer base and boosts brand visibility.

• Cost optimisation and supply chain EBITDA margins.

• Launching high-margin premium dairy products targets growing consumer demand for high-quality items, boosting profitability by selling at higher prices.

• A stronger digital and omnichannel strategy uses offline platforms to engage customers better, providing seamless shopping experience and increasing brand loyalty.

• Using renewable energy lowers operational costs and reduces environmental impact, making operations more cost-efficient.

HUMAN RESOURCES

Heritage Foods regards its human and intellectual capital as pivotal to its success, recognising employee satisfaction as a fundamental element. The organisation empowers its workforce, understanding that their development contributes significantlyto organisational excellence. It cultivates a diverse and inclusive culture that nurtures personal growth and well-being. Its proficiency in talent has been essential to its growth trajectory. Collaboration and professional growth are integral to the Companys ethos. It invests in training and skill development to facilitate employee advancement. By promoting transparent communication, the organisation ensures an open dialogue between staff and leadership. These practices not attract but also retain a talented workforce. As of 31st March 2025, the Compnay has 3,364 employees.

QUALITY, HEALTH AND SAFETY MEASURES

At Heritage, quality isnt just critical its non-negotiable for long-term success. By prioritising quality, Heritage Foods ensures the safety and health of its consumers, as dairy products are highly perishable and directly impact well-being. By delivering consistent, high-quality products, the Company has built its reputation and brand loyalty, enabling it to gain a competitive edge in a crowded market. Furthermore, maintaining rigorous quality standards ensures compliance with regulatory requirements, safeguarding the Companys reputation and future growth. The organisation places significant emphasis on milk quality and possesses certifications in Safety and Health Management (ISO 45001:2018) and Environmental Management (ISO 14001:2015). Ensuring personnel safetystandardised remains a primary objective. Factory managers supervise safety initiatives and undertake regular evaluations to uphold elevated occupational health and safety standards. Dedicated teams at each location promptly identify and rectify safety concerns. The organisation rigorously adheres to health and safety protocols and implements wellness programs to promote the mental well-being of employees.

RISK MANAGEMENT

A robust risk-management framework enables us to monitor risks arising from internal and external factors. This approach allows us to navigate industry challenges effectively, ensuring sustainable value creation for our stakeholders.

The Company operates within an organised framework with clear communication to prevent department conflicts.To ensure continuity, most departments have backups for functional heads. Efficient maintain stable inventory management ensures the availability of raw materials, consumables, spares and tools, minimising production delays. The Company employs continuous cost optimisation strategies, adapting to market changes to maintain efficiencyand and This approach enhances effectiveness, reduces disruptions and a supports growth.

Our risk management process

• Identification and assessment approach

• Prevention and control strategy

• Monitoring and surveillance

• Review and reporting

• F orecasting and assessing the probability of occurrence, magnitude, category and rating of the risk

• Devising a plan of action to prevent risk and reduce the aftermath, developing and retaining while ensuring activation of the right strategy to capture potential upsides

• Gauging the potency of controls to improve risk identification, monitoring and surveillance

• Overseeing the risk process at regular intervals, especially spearheaded by the Board Risk Management Committee

Our risk mitigation plan

The Board takes the following steps as a part of its risk management and mitigation plan:

• Defines the roles and responsibilities of the Board Risk

Management Committee

• Participates in major decisions affecting the organisations risk profile

• Integrates risk-management reporting with the Boards overall reporting framework

POTENTIAL RISKS & MITIGATION MEASURES

1) RAW MATERIAL RISK

Fluctuations in the cost and availability of raw materials could negatively impact the dairy products business.

Mitigation measures: The Companys milk processing facilities are strategically located in proximity to significant regions. The Company upholds strategic inventory buffers and optimises distribution routes across a network of 7,300+ distributors and agents. It has cultivated a proficient network comprising over 300,000+ farmers, ensuring a consistent and timely supply of high-quality raw materials. Furthermore, the Company employs dynamic pricing strategies to sustain competitiveness. It ensures stable pricing by procuring raw materials locally and minimising transportation costs.

2) CUSTOMER CONCENTRATION RISK

The revenue concentration from a specific customer base can affect margins.

Mitigation measures: The Company has diversified its geographical presence by expanding into new markets and introducing innovative products, thereby enhancing customer relationships.

3) COMPETITION RISK

As competition increases, companies often lower prices to maintain their market position, which can impact profit margins . and lead to adecline in overall profitability

Mitigation measures: To mitigate against risks associated with competition, the Company concentrates on product differentiation and developing high-margin Value-Added Products (VAPs) to enhance profitability. Additionally, geographic expansion and digital transformation broaden the customer base, while strategic partnerships improve market penetration. Continuous innovation facilitated by research and development (R&D) ensures that the Company remains responsive to evolving consumer preferences.

4) SUPPLY-CHAIN RISK

A robust and resilient supply is critical to reach raw milk to the factory and the dairy products to consuming markets with speed.

Mitigation measures: The Company ensures supply-chain resilience by diversifying milk sources, strengthening cold chain and transport systems, maintaining buffer stocks and using digital tracking of vehicles. Heritage CLapp is a free Android app developed by the company designed to streamline sales operations for Heritage customers and sales teams in real-time. We also develop alternate routes and conduct regular risk assessments to minimize disruptions and ensure timely delivery

5) TECHNOLOGY RISK

Increasing digital and e-commerce presence exposes the Company to cybersecurity threats and data privacy concerns. Mitigation measures: The Company has made substantial investments in advanced cybersecurity systems and data protection measures, concurrently updating digital platforms and applications to ensure the safeguarding of customer data. Furthermore, it conducts comprehensive employee training programs on cybersecurity to foster a secure digital environment.

6) REGULATORY RISK

Changes in regulations create a risk that can influence business operations.

Mitigation measures: The Company consistently revises its compliance protocols, performs internal audits and enforces waste minimisation and recycling initiatives, all while guaranteeing complete adherence to pollution control and emission regulations.

7) BRAND REPUTATION RISK

Negative publicity from product failures, unethical practices, socialmedia backlash, or supplier misconduct can erode customer trust and market share.

Mitigation measures: The Company has set strict quality checking measures to protect its brand reputation and monitor milk-producing social media in real time for rapid response to issues

8) PEOPLE ATTRITION RISK

Loss of critical talent increases recruitment costs, disrupts projects and weakens institutional memory.

Mitigation measures: The Company encourages its employees through continuouslearning programmes and flexiblework options to keep employees updated and maintain a work-life balance.

9) FUNDING RISK

Inability to refinance debt may stall operations and growth. Mitigation measures: The Company has a low debt-equity ratio of 0.18 as on March 31, 2025. Moreover, a strong cash flow and prudent fund allocation strategy allow the Company to optimise debt and fund capital investments to strengthen business growth.

10) CARBON FOOTPRINT RISK

Rising carbon taxes, stricter emissiondisclosure mandates and customer preference for low-carbon brands could inflate and erode market share if greenhousegas (GHG) intensity is not reduced.

Mitigation measures: The Company is committed to minimising its environmental impact while advocating for sustainable practices. With a renewable energy capacity of 12.14 MW designated for in-house consumption, the Company demonstrates a steadfast dedication to resource efficiency.

OUR SUSTAINABLE MODEL

The Company is unequivocally committed to minimising its environmental impact while advocating for sustainable practices. It places a high priority on energy conservation through the implementation of efficient energy utilisation strategies. With a renewable energy capacity of 12.14 MW designated for in-house consumption, the Company demonstrates a steadfast dedication to resource efficiency. Acknowledged for its exemplary sustainability initiatives, it was awarded the CII National Energy Conservation Awards in 2021 and 2023. Additionally, the Company holds certification under ISO 14001:2015, affirming its robust environmental management systems.

Packaging and plastic waste management: Plastic is crucial in safeguarding product safety and preventing leaks. As a responsible organisation, the Company acknowledges its environmental impact and is dedicated to promoting a more sustainable future by actively participating in plastic recycling initiatives and employing sustainable practices.

OUTLOOK

Heritage Foods is broadening its market presence by utilising its extensive distribution network and expanding its product range. The

Company is gaining traction in metropolitan and Tier-1 and Tier-2 cities while solidifying its position through strategic brand development and focused customer engagement.

CAUTIONARY STATEMENT

THE STATEMENTS IN THE MANAGEMENT DISCUSSION AND ANALYSIS REGARDING THE COMPANYS OBJECTIVES, PROJECTIONS, ESTIMATES, AND EXPECTATIONS MAY

CONSTITUTE "FORWARD-LOOKING STATEMENTS" UNDER

APPLICABLE SECURITIES LAWS AND REGULATIONS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED DUE TO VARIOUS FACTORS, INCLUDING ECONOMIC CONDITIONS

IMPACTING DEMAND-SUPPLY DYNAMICS AND PRICING IN THE COMPANYS MARKETS, CHANGES IN GOVERNMENT

REGULATIONS, TAX LAWS, AND OTHER RELEVANT STATUTES, AS WELL AS OTHER UNFORESEEN FACTORS.