Heritage Foods Ltd Management Discussions

Global Economy

The global economy continues to navigate a complex and uncertain environment, marked by elevated macroeconomic volatility, evolving trade frameworks and persistent fiscal challenges. Despite ongoing geopolitical tensions and financial headwinds, global economic growth remained steady at 3.3% in 2025.

Performance of Major Economies

Growth in advanced economies stood at 1.7% in 2025, with high-tech investment providing a partial offset. The US economys economic activity faced headwinds from trade barriers but gradually improved, supported by expansionary fiscal policy, resilient consumer spending and a strong labour market.

The European Union showed resilience with a steady 1.4% growth in 2025, primarily driven by stable consumer spending and stable labour markets. However, higher tariffs and heightened geopolitical tension weighed on export performance.

On the other side, China demonstrated positive performance with 5.0% growth in 2025, supported by strong policy measures that bolstered domestic demand and robust exports to non-US markets despite some temporary tariff pressures.

Global Industrial Output

Strong demand for goods produced in emerging markets has supported steady growth in industrial output during the year. Factory production in these economies increased by 3.1%, reflecting a notable improvement. In contrast, industrial output in advanced economies grew by 1.3%. As in recent years, emerging markets remained the key contributors to global industrial growth.

Global Inflation Trends and Commodity Markets

Global headline inflation is expected to decline from an estimated 4.1% in 2025 to 3.8% in 2026, with advanced economies reaching target levels.

Commodity prices showed divergent trends because of ample supply and sluggish demand. Global oil prices remained stable throughout the year, primarily driven by improved production levels and easing supply-side constraints.

Global Trade Dynamics and Tariff Developments

In 2025, a sharp increase in tariffs by the United States triggered trade frictions across global markets, raising trade costs, restricting market access and creating uncertainty across global supply chains. Despite these challenges, global trade demonstrated resilience as economies steadily adjusted to evolving trade patterns and policy changes.

This period of adjustment encouraged businesses and governments to realign supply chains and explore new trade partnerships, creating opportunities for more sustainable and inclusive growth. As a result, global trade expanded by 3.8%, supported by robust merchandise trade and the front-loading of shipments ahead of anticipated tariff changes.

Advanced economies are expected to witness modest output growth of 1.4%, in contrast to stronger growth of 3.7% in emerging markets and developing economies (EMDEs).

Global Financial Markets and Capital Flows

Global financial markets and cross-border capital flows remained vulnerable during the year, with equity markets showing fluctuations across regions and valuations appearing stretched in some economies. At the same time, global debt reached a record high by the end of 2025, due to persistent fiscal deficits in major economies. The US dollar is steadily appreciating, solidifying its leadership in the global financial landscape.

Outlook of Global Economy 2027

The global economic outlook demonstrates resilience and opportunity. Global output is anticipated to grow steadily by 3.3% in 2026 and 2027, with the US maintaining strong momentum and emerging economies exhibiting significant growth potential. Advanced economies, particularly in Europe, are expected to experience moderate growth.

Economic policy shifts are likely to drive businesses to adapt, innovate and compete in a rapidly changing global market. Together, these factors will shape a dynamic business environment, strategic planning and resilience across industries.

(Sources: IMF, World Bank)

Indian Economy Overview

India continues to demonstrate strong economic momentum and it is expected to remain the fastest-growing major economy over the next two years, supported by resilient consumption, improving rural demand, expanding services and a growing share of high-value manufacturing in exports, with GDP growth reached 6.2% in FY2026 following 6.5% in FY2025.

Indian Economy -Inflation and Monetary Policy

In FY26, annual inflation declined to 1.7%, compared with 4.7% in the previous year. This moderation was supported by favourable weather conditions, stable commodity prices, improved supply chains and a sharp fall in vegetable prices.

Amid easing inflationary pressures, the Reserve Bank of India reduced the repo rate by 25 basis points to 6.25% in April, marking the first rate cut of 2025, followed by a further reduction to 5.50% in June. Alongside this, urban unemployment showed signs of improvement in FY2026, reflecting gradual strengthening in the labour market. Together, these factors are supporting consumption growth, driven by improved liquidity and rising disposable incomes.

These developments, combined with rising disposable incomes and increasing urbanisation, are supporting consumption-led growth. Changing consumption patterns—particularly the shift toward branded, value-added and convenience-driven products—are further strengthening demand across sectors, including FMCG and dairy.

Industry Dynamics

In FY2026, the agriculture sector experienced a growth of 3.5% in Q2, the industry sector expanded by 7% in H1 and the service sector is anticipated to grow by 9.1%. The core sector had grown by 2.6% from April to December in 2025. India Manufacturing Purchasing Managers Index (PMI) surged to 56.90 in February 2026. This marked a four- month high and signals a notable improvement in operating conditions.

The net Goods and Services Tax (GST) collections rose by 7.1% to T19.34 lakh crores in the fiscal year 2026, reflecting an increase in economic activity despite global economic challenges.

Outlook of Indian Economy

In FY2027, the Indian economy is expected to witness stronger growth compared to the previous year, with real GDP projected to expand between 7% and 7.4%, supported by robust private consumption.

While global uncertainties such as economic slowdown and rising protectionist measures could pose risks to growth, Indias ongoing trade engagements are expected to provide a counterbalance. Trade agreements with key partners such as the United Kingdom, the United States and the European Union are likely to strengthen bilateral trade by improving market access for goods and services.

These agreements emphasise labour-intensive sectors, support the “Make in India” initiative, enhance export competitiveness and facilitate greater mobility for Indian professionals through simplified access for service providers, business visitors and independent professionals.

(Sources: PIB, IBEF, PRS India, Indie Briefing, Economics Times, Reuters, USembassy, weforum)

Global Economy Point	Effect on Heritage Foods	Type	Business Area Affected
EMDE growth at 4.2-4.4%	Rising incomes in core markets drive demand and premiumisation across value- added dairy products.	Opportunity	Dairy Sales and Value-Added Products As household incomes rise in Heritages heartland markets, consumers trade up from plain milk to curd, paneer, flavoured milk and premium ice cream. Heritages 418+ SKU portfolio and parlour network are directly positioned to capture this upgrade cycle, supporting both revenue growth and higher-margin product mix.
Global inflation easing from 4.1% to 3.8%	Softening input cost pressures on feed, packaging and logistics. Real consumer incomes rise, supporting spending on premium dairy.	Opportunity	Margins and Consumer Demand Lower inflation directly reduces Heritages two largest variable costs — cattle feed and packaging materials. At the same time, real disposable income gains among consumers reduce price sensitivity, giving Heritage room to hold or improve pricing on premium lines like cheese, ghee and UHT milk without losing volume.
Industrial output in EMDEs up 3.1%	Broader rural economic activity boosts farmer incomes, strengthening Heritages milk procurement network of 200,000+ dairy farmers.	Opportunity	Milk Procurement and Animal Feed Heritages supply chain relies on a vast network of smallholder dairy farmers. Rising rural incomes support better herd health and productivity, improving milk yield and quality. This also drives demand for animal feed and veterinary products, creating an additional revenue stream.
Global trade expanding 3.8%; supply chain realignment	New export corridors open for Indian dairy as global supply chains shift post-tariff disruptions — particularly toward Southeast Asia, Middle East and Africa.	Opportunity	Export Business Heritage exports dairy products and is expanding its processing capacity. As global trade shifts create new opportunities, Indian dairy is becoming more attractive in markets such as the Gulf, ASEAN and Africa. Heritage can leverage its 2.78 millions litres per day capacity to scale exports of dairy whitener, milk powder and ghee.
Stable global oil prices	Lower transportation and logistics costs across Heritages extensive procurement and distribution network spanning thousands of villages and multiple states.	Opportunity	Logistics and EBITDA Margins Heritage runs one of South Indias most extensive cold-chain and milk collection networks, with daily procurement routes across rural Andhra Pradesh, Telangana and Karnataka. Fuel costs are a significant operational expense. Stable oil prices hold down fleet operating costs, refrigeration energy and outbound distribution — directly flowing through to EBITDA without requiring any pricing action.
Resilient consumer spending globally	Aligns with Heritages Vision 2030 premiumisation strategy — acquisition of Get-A-Way and new 24mn litre ice cream facility benefit from health- focused consumer trends.	Opportunity	Premium and Health Segment Heritages acquisition of Get-A-Way and its new 24 millions litre ice cream facility align with the growing demand for health-conscious indulgence. With resilient consumer spending in such categories, its expanding health-focused portfolio is well positioned to capture this trend.
US tariff escalation; financial market volatility	Global risk-off sentiment reduces foreign portfolio investor appetite for Indian mid-caps. Heritages market cap has already declined 25% over the past year.	Risk	Stock Valuation and Investor Sentiment Heritage Foods, a BSE/NSE-listed mid-cap with strong institutional participation, may face valuation pressure during global financial stress as foreign investors reduce exposure to emerging markets. This can increase the cost of equity and potentially impact expansion and acquisition plans.
US dollar appreciating	Imported inputs — specialised packaging, feed additives, dairy processing equipment — become more expensive in rupee terms.	Risk	Input Costs and Capital Expenditure While Heritage is primarily domestic, certain inputs such as packaging materials, specialised machinery and feed supplements are linked to the US dollar. A stronger dollar increases these costs in rupee terms. During ongoing capex, higher import costs may stretch project budgets and impact returns.
Global supply chain disruptions from tariff wars	Potential disruption to availability and pricing of specific inputs — packaging, specialty feed ingredients and components for Heritages solar and wind energy operations.	Risk	Input Supply and Renewable Energy Heritage operates solar and wind power plants to reduce energy costs and support margins. Howe.ver, key components for renewable energy and certain inputs like feed additives and packaging materials depend on global supply chains. Disruptions may increase costs, delay expansions, or raise working capital requirements.

Global Dairy Industry

Dairy products represent a resilient and structurally essential segment of the global food industry, underpinned by consistent consumption, strong nutritional relevance and enduring consumer trust. Anchored by milk and supported by a diversified portfolio of value-added products, the dairy sector continues to balance heritage with innovation, adapting to evolving dietary preferences while maintaining its role as a daily staple across demographics.

Operating Landscape in 2025

The global FMCG sector maintained steady growth, driven by population expansion and increasing demand for premium products. Within this environment, the dairy industry experienced stable demand in mature markets such as the EU and the U.S., alongside continued growth across Asia and Africa.

The European Union led the global dairy market with a 41% share, followed by Oceania at 25%, reflecting strong export positions. New Zealand, the EU and India remained key global exporters.

Off-trade channels accounted for 92.27% of total sales, supported by the expansion of organised retail and e-commerce across markets such as China, India and Japan.

Consumer preferences continued to evolve, driven by rising health awareness and urbanisation. Demand for dairy-based snacks, functional products, fortified beverages and plant-based alternatives contributed to portfolio diversification.

Growth Projections

The global dairy market was valued at US$ 1,038.6 billions in 2025 and is projected to grow at a CAGR of 4.38%, reaching US$ 1,545.4 billions by 2034. Growth is supported by urbanisation, health consciousness, technological advancements and favourable policy support.

The Asia-Pacific market is expected to grow from US$ 189.83 billions in 2025 to US$ 249.80 billions by 2031 at a CAGR of 4.81%, driven by rising consumption and a shift toward higher-quality dairy products.

Global Dairy Market Trade Value Distribution by Region (2025)

Indian Dairy Industry

Indias dairy sector is more than just an industry—it is a way of life. Deeply rooted in tradition, it carries immense cultural and nutritional significance while simultaneously fuelling the countrys economy. Today, as consumer preferences evolve towards health, sustainability and convenience, the Indian dairy industry is embracing a unique blend of age-old expertise and modern innovation, driving a transformation that touches every corner of the value chain.

Market Dynamics

The Indian dairy market is valued at ?21,318.45 billions in 2025 and it is expected to reach ?58,034.06 billions by 2034, growing at a CAGR of 11.77%. This sector is a crucial driver of Indias economy, contributing 5% to the gross domestic product (GDP) and providing livelihoods to over eight crores farmers.

The FY2025 dairy industry faced intermittent supply challenges due to unseasonal rainfall disrupting milk production cycles. Concurrently, strong festive demand tightened market availability, resulting in limited surplus toward year-end.

Despite these disruptions, overall milk production remained robust. India produced 247.87 millions metric tonnes of milk in FY2025, marking a 3.58% increase from the previous year, highlighting the sectors structural resilience.

Supply constraints, steady demand and inflation in key inputs such as cattle feed, fodder, energy and logistics increased regional milk procurement costs. However, product prices stayed mostly stable after GST revisions, with only selective regional hikes, which pressured margins across the value chain.

India retains the worlds largest dairy base with 303.8 millions bovines, solidifying its global milk production leadership. Liquid milk dominated the market at 65.3% in 2025, with Uttar Pradesh contributing the largest share at 18.7%.

Looking forward, fluid milk consumption is projected to rise to 91 MMT in 2025 from 89 MMT in 2024, driven by steady demand growth. Dairy exports reached 113,350 metric tonnes in FY2025, generating US$ 492.86 millions, with key markets including the UAE, Saudi Arabia, the USA, Singapore and Bhutan.

The industry is transitioning from volume-led growth to a technology- driven, value-added ecosystem focusing on efficiency, quality and product diversification.

Government Initiatives for the Sector

National Programme for Dairy Development (NPDD)

Launched in 2014, NPDD focuses on strengthening infrastructure for milk production, procurement, processing and marketing through state agencies and cooperatives. The Union Cabinet has approved ?2,790 crores to support the sectors development.

National Livestock Mission

Supports states in conducting training, workshops and capacity- building programmes to enhance awareness and efficiency in animal husbandry practices.

Bharat Pashudhan Initiative

Introduced by NDDB under the National Digital Livestock Mission, this initiative includes the 12-digit Pashu Aadhaar, which provides a unique digital identity for livestock to improve traceability, disease control and farmers access to benefits.

Rashtriya Gokul Mission (RGM)

Aims to conserve and develop indigenous bovine breeds to enhance milk production and farmer incomes. Implemented under Rashtriya Pashudhan Vikas Yojana (2021-2026) with an outlay of ?2,400 crores. Dairy Entrepreneurship Development Scheme (DEDS)

Promotes self-employment in the dairy sector by providing capital subsidies for dairy-related projects through NABARD.

Information Network for Animal Productivity and Health (INAPH)

A digital platform capturing real-time data on breeding, feeding and veterinary services to support monitoring and productivity improvements.

Livestock Health and Disease Control (LH&DC) Scheme

Includes NADCP, LH&DC and Pashu Aushadhi components, with a total outlay of ?3,880 crores (FY2025-26), aimed at disease control and affordable veterinary care.

Animal Husbandry Infrastructure Development Fund (AHIDF)

A ?15,000 crores fund to boost investments in dairy processing, feed, vaccines and allied infrastructure. The FY2026 budget allocation for the department stands at ?4,840.40 crores.

Future Prospects: The dairy industry is shifting from volume-driven growth to a greater focus on quality, traceability and value addition. Faster growth in factory-use consumption compared to household demand is strengthening the organised, branded and processed segment. This trend is driving investments in advanced processing, cold-chain infrastructure and brand differentiation.

While domestic demand remains strong and product diversification accelerates alongside digital adoption, the sector continues to face headwinds from constrained milk supply, rising input costs and ongoing quality control pressures.

Continued enhancements in export quality standards and expansion of processing and logistics infrastructure could enable the industry to convert its domestic production leadership into a significant global market share.

Key Demand Drivers Rising Health Awareness

Consumers are turning to dairy not just for taste, but for nutrition— seeking essential proteins, vitamins and minerals. This shift is driving demand for value-added offerings.

Consumption Growth

Indias population of ~1.44 billions is driving strong demand for dairy, as a large consumer base increasingly prioritises nutritious foods. Rising incomes are enabling higher spending on wholesome diets, reinforcing dairys central role in everyday nutrition.

Vegetarian Consumer Segment

In India, milk is more than a beverage; it is a vital source of protein for the countrys large vegetarian population. This community plays a key role in sustaining steady demand for milk and a wide variety of dairy products.

Diversified Dairy Portfolio

The dairy industry is moving beyond basic milk, with products like cheese, yoghurt, flavoured milk and probiotic drinks gaining ground— offering better margins while meeting consumers demands.

Digital and Fast-Commerce Growth

The growth of e-commerce and quick commerce is reshaping the dairy landscape, bringing new trends, logistics opportunities and food safety considerations.

Major Segments in the Indian Dairy Sector Liquid Milk

Indias liquid milk consumption reached 91 MMT in 2025, up from 89 MMT in 2024, supported by its growing population and ongoing improvements in production practices. These factors continue to drive growth in the sector, while the country has set an ambitious target to significantly increase milk output over the next five years.

According to the United States Department of Agriculture (USDA) Foreign Agricultural Service, Indias dairy sector is expected to witness moderate growth in 2026, with the population of milking cows estimated at around 62 millions.

UHT Milk

The market for UHT (ultra-high-temperature) milk in India is experiencing steady growth, driven by rising health awareness among urban consumers. In 2025, the UHT milk market in India reached a volume of 1,468.0 millions litres and it is poised to grow to 4,148.0 millions litres es by 2034, with a CAGR of 11.87 % over the period.

The increasing preference for convenient, long-shelf-life dairy products underpins UHT milks growing popularity among consumers. With a shelf life of six to nine months, UHT milk offers exceptional convenience while retaining its nutritional quality and taste.

A2 Milk

Rising incidences of lactose intolerance, coupled with increasing health and wellness awareness, are driving global demand for A2 milk. The A2 milk market is expected to grow from US$17.6 billions in 2025 to US$59.5 billions by 2034, at a CAGR of 13.77 % during the forecast period. Its numerous health benefits—including support for bone and dental health, enhanced muscle strength, blood pressure regulation, promotion of tissue and cell growth and improved nutrient absorption— further driving the market growth.

Skimmed Milk Powder

Skimmed milk powder is used in many products like bakery items, dairy foods and drinks—including bread, cakes, chocolates, ice cream, cheese, yoghurt, soups and shakes—which increases its demand, especially in restaurants and commercial food businesses.

Indias skimmed milk powder market reached a value of ?176.7 billions in 2025 and it is expected to grow at a CAGR of 8.7%, reaching ?386 billions by 2034. Rising health awareness, an increasing preference for nutritious diets and the growing adoption of e-commerce channels are key drivers of this expansion.

Organic Milk

Organic dairy farming in India is witnessing rapid growth as more health-conscious consumers move away from conventional milk due to health concerns. The organic milk market in India was valued at ?16,095.2 millions in 2025 and it is expected to reach ?1,14,714.7 millions by 2034, with a growing CAGR of 23.65%.

The market expansion is driven by increasing consumer preference for healthier and safer alternatives, alongside the rising incidence of lifestyle-related conditions such as diabetes, hypertension, cardiovascular diseases and obesity.

(Sources: PIB, Statista, The Bullvine, IMARC)

Value-Added Products

The value-added dairy segment—including curd, cheese, whey- based beverages and other processed products—is emerging as a key growth driver in Indias dairy sector. Expanding distribution networks are enabling wider market reach for these products, while stronger organised procurement systems are improving milk collection efficiency and encouraging better farm-level practices. Rising disposable incomes in FY2026 are also a major contributor to support demand for premium dairy products.

Curd

Curd, commonly known as Dahi, is a staple of a balanced diet and suitable for individuals with lactose intolerance. Rich in calcium, vitamin D, protein and phosphorus, curd supports bone health and aids digestion. The Indian curd market was valued at ?2,001.6 billions in 2025, driven by factors such as population growth, increased health awareness and the products affordability. The market is anticipated to reach ?5,730.8 billions by 2034, at a CAGR of 12.03% between 2025 and 2034.

Paneer

A staple in Indian cuisine, paneer is a nutrient-rich cottage cheese abundant in protein and calcium, widely used across a variety of dishes. Its soft texture allows it to absorb flavours well, adding to its popularity. Paneer provides essential nutrients that support strong bones and teeth, as well as cardiovascular and neurological health.

In 2025, the Indian paneer market was valued at ?731.4 billions. Driven by growing consumer demand and evolving dietary preferences, the market is expected to reach ?2149.6 billions by 2034, with a CAGR of 12.34% over the period.

Cheese

The demand for cheese in India is expanding rapidly, fuelled by the growing influence of Western cuisines. To cater to evolving tastes, manufacturers are introducing a wide range of flavoured cheese products for diverse consumer segments.

The market was valued at ?128.89 billions in 2025 and it is poised to reach ?619.88 billions by 2034, registering a CAGR of 19.07%. This growth highlights the increasing consumption of both natural and processed cheeses, driving significant gains in market value and volume.

(https://www.imarcgroup.com/cheese-market-in-india)

Buttermilk

A popular and traditional dairy beverage, buttermilk, also known as chaach, it is made by churning milk. It is thicker and slightly tangier compared to regular milk. In addition to being affordable and widely available, buttermilk is valued for aiding digestion, helping regulate blood pressure and supporting immune health.

In 2025, the Indian buttermilk market was valued at ?228.4 billions and is expected to reach ?1,011.8 billions by 2034, with a growing CAGR of 17.44% from 2025 to 2034. This growth is driven by increasing consumer preference for natural and healthy beverages, broad availability through diverse distribution channels and heightened health awareness.

Flavoured Milk

A favourite among children and working adults, flavoured milk is a dairy beverage made by mixing milk with sugar and popular flavours such as vanilla, chocolate and mango. It serves as a tasty and healthier alternative to carbonated soft drinks. A growing population and wider availability through supermarkets and online platforms are contributing to the increasing demand for flavoured milk in India.

In 2025, the Indian flavoured milk market was valued at ?76.4 billions and it is expected to grow at a CAGR of 19.11% from 2025 to 2034. The market is poised to reach ?385.5 billions by 2034. The markets robust growth is also supported by heightened health awareness and rising popularity for dairy-based beverages.

Milkshake

Popular for its rich taste and versatility, a milkshake is a chilled, blended dairy beverage available in numerous flavours, often enhanced with toppings and mix-ins. The Indian milkshake market was valued at ?8.9 billions in 2025 and it is expected to reach ?35.6 billions by 2034, with a growing CAGR of 16.10% from 2025 to 2034. Growth is driven by changing consumer preferences and strong demand from the youth demographic.

Lassi

Renowned for its refreshing and nutritious qualities, lassi is a beverage rich in carbohydrates, proteins, vitamins and minerals, offering an energy boost and aiding quick hydration during hot weather, making it especially popular in summer. The Indian lassi market is expected to reach ?65.5 billions in 2025, with a CAGR of 16.29% from 2025 to 2034 and to grow to ?264.9 billions by 2034.

Its probiotic content supports the growth of beneficial gut bacteria, improving digestion and helping alleviate gastrointestinal issues. These health benefits have driven increased consumer demand and market growth in India.

Ice-cream/Frozen Dessert

Ice cream in India is undergoing a remarkable transformation, fuelled by emerging startups introducing innovative flavours to meet evolving consumer preferences. The demand for premium and artisanal ice creams made from high-quality, natural ingredients without preservatives is rising, particularly among Gen Z consumers seeking unique experiences and the upper-middle-class segment willing to invest in premium offerings.

In 2025, the Indian ice cream market was valued at ?312.76 billions and it is projected to reach ?1,192.40 billions by 2034, growing at a CAGR of 16.03% from 2025 to 2034. Growing investor interest, along with the development of advanced cold chain infrastructure featuring temperature-controlled storage, is further supporting the markets sustainable growth.

(Sources: IMARC)

Fat Products

Ghee, a purified form of butter, holds a significant place in Indian cuisine and is widely used in traditional medicine and religious rituals. After milk, it remains one of the most widely consumed dairy products in the country. The Indian ghee market is expected to grow at a CAGR of 7.70% between 2026 and 2034, poised to reach from ?3,774.5 billions in 2025 to ?7,532.7 billions by 2034.

Growing health consciousness among consumers is driving demand for organic and naturally produced ghee, as people increasingly prefer products free of additives and preservatives. At the same time, the rapid expansion of e-commerce platforms has improved product availability, allowing consumers to access a wide range of ghee offerings, including premium and organic variants.

Butter, in India, is gradually strengthening its position in the global butter trade, signalling a potential shift in international dairy dynamics. The steady expansion of the countrys organised dairy sector, along with higher farm-gate milk procurement, is improving Indias capacity to supply butter to international markets, particularly in the Middle East, Asia and Africa. Competitive pricing, relatively lower logistics costs and increasing adoption of quality certifications are further enhancing Indias prospects as a reliable butter exporter. In 2025, India churned over 7.4 millions metric tons of butter, making it the top butter- producing country of the year.

Butter is a nutrient-rich dairy product containing niacin, calcium, phosphorus, riboflavin, antioxidants and vitamins A, E, B12 and K. When consumed in moderation, it can contribute to stronger immunity, improved cardiovascular function, cellular protection and healthy bone development, while also helping reduce the risk of osteoporosis.

The Indian butter market is being supported by rising disposable incomes, shifting food preferences towards Western-style cuisine and greater awareness of its nutritional benefits. Reflecting these trends, the market was valued at ?104.8 billions in 2025, and it is expected to grow at a CAGR of 15.37% between 2026 and 2034, reaching approximately ?393.9 billions by 2034.

(Source: IMARC)

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, fresh cream, UHT milk, lassi, milkshakes, ice creams/ frozen desserts, other dairy drinkables and sweets.

To enhance its operations, the Company has established 18 state-of- the-art milk processing facilities, ensuring a robust presence across 13 states.

The Company 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 distribution network and a multi-channel market approach.

Operational Review

During FY2026, the Company demonstrated strong performance across regions and product lines, achieving market share growth and enhanced operating margins compared to the previous year.

(? in millions)

	Revenue from operation	EBITDA	PAT
2026	44,151	2,456	1,397
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

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

(? in millions)

	FY2025	FY2024	FY2023	FY2022
44,143	40,799	37,335	32,080	26,413

Renewable Energy Vertical

Heritage Foods Limited has launched a clean energy initiative to enhance its environmental sustainability through investments in renewable energy for captive use. The Company has strategically deployed solar and wind power installations across 31 locations, generating a total of 14.37 MW of renewable energy-comprising 6.30 MW from wind power plants and 8.07 MW from solar plants.

In FY2026, revenue from operations stood at ?99.6 million as against ?87.7 million in the previous year, registering a year-on-year growth of 13.57%. EBITDA witnessed a healthy growth of 14.36% year-on-year and stood at ?69.3 million as compared to ?60.6 million in FY2025. Profit Before Tax (PBT) increased significantly to ?46.8 million from ?19.9 million in FY2025, reflecting a robust growth of 135.2% over the previous year.

Heritage Nutrivet Limited

Heritage Nutrivet Limited (HNL), a wholly-owned subsidiary of Heritage Foods Limited, continued to strengthen its presence in the animal nutrition segment during FY 2025-26. The Company remains focused on enhancing livestock productivity through a comprehensive range of cattle feed and nutritional supplements aimed at improving milk production, reproductive efficiency, animal health and immunity.

During the year under review, HNL recorded revenue of ?2,454.45 million as against ?1,849.27 million in the previous year, registering a growth of 33% year-on-year. Profit Before Tax (PBT) stood at ?206.61 million compared to ?170.74 million in FY 2024-25, reflecting a growth of 21%. Profit After Tax (PAT) for the year increased to ?156.96 million from ?123.51 million in the previous year, registering a growth of 27.08%.

The Companys diversified product portfolio is designed to address the evolving nutritional requirements of livestock and support dairy farmers in improving productivity and profitability. Alongside delivering quality nutritional solutions, HNL continued its efforts towards farmer engagement through technical support, awareness programmes and knowledge-sharing initiatives aimed at promoting better livestock management practices and sustainable dairy farming outcomes.

Heritage Novandie Foods Limited

Heritage Novandie Foods Limited (HNFL) was incorporated as a 50:50 joint venture between Heritage Foods Limited and Novandie, France, for manufacturing and marketing premium yoghurt products in India. The Company commenced commercial operations in February 2021 and introduced Indias first French yoghurt, supported by advanced manufacturing facilities and stringent quality standards.

During FY 2025-26, Heritage Foods Limited acquired an additional 44.40% stake in the share capital of HNFL, consequent to which the Company became a subsidiary of Heritage Foods Limited. At present, the Company is engaged in the manufacturing of flavoured milk and yoghurt products under the brand name “Livo” for the holding company.

Peanutbutter and Jelly Limited

During FY 2025-26, Heritage Foods Limited acquired a 51% stake in Peanutbutter and Jelly Limited for a consideration of ?9 crore, consequent to which the Company became a subsidiary of Heritage Foods Limited. The acquisition is expected to strengthen the Companys presence in the high value ice-cream segment by leveraging Heritage Foods manufacturing capabilities, pan-India distribution network and institutional governance framework, while continuing to drive innovation and brand development.

The Company operates under the brand name “Get-A-Way”, reflecting its evolution into a premium dessert brand with an expanded product portfolio and refreshed brand identity. The Company continues to strengthen its presence across quick commerce, e-commerce and direct-to-consumer platforms, while focusing on innovation and new product development to support future growth.

Financial Overview Net worth

The Net worth for the last five years is as follows.

in Million

	FY2025	FY2024	FY2023	FY2022
10,638	9,471	8,035	7,367	6,605

Dividend

The dividend % declared in the last five years.

FY2026	FY2025	FY2024	FY2023	FY2022
50%	50%	50%	50%	100%

Earnings Per Share

Earnings per share (EPS) for FY 2025-26 if ?15.05

Key Financial Highlights for FY2025-26

Particulars	2025-26			2024 - 25		FY2026 Vs FY2025
	Rs. in millions	% of Revenue		f in millions	% of Revenue	% of Growth
Net Sales	44127.03		99.95	40783.23	99.95	8.20
Other operating income	23.62		0.05	21.58	0.05	9.45
Total Revenue	44150.65		100.00	40804.81	100.00	8.20
Less: Total Expenditure	41694.78		94.44	37687.49	92.36	10.63
Add: Other Income	236.90		0.54	272.84	0.67	(13.17)
Profit before Interest, Depreciation and Tax	2692.77		6.10	3390.16	8.31	(20.57)
Less: Finance costs	165.89		0.38	150.23	0.37	10.42
Depreciation & Amortisation	764.93		1.73	671.57	1.65	13.90
Profit before tax and exceptional items	1761.95		3.99	2568.36	6.29	(31.40)
Add: Exceptional items	95.98		0.22	(234.85)	(0.58)	0.00
Profit before tax Less: Provision for current taxation(Including	1857.93		4.21	2333.51	5.72	(20.38)
taxation of earlier years)	372.17			625.11		(40.46)
Less: Provision for deferred taxation	88.75			27.58		221.79
Profit / (Loss) after tax	1397.01		3.16	1680.82	4.12	(16.89)
Standalone Segment results

 

Particulars	2025 - 26		2024 - 25		FY 2026 vs 2025
	In Millions	% of Revenue	In Millions	% of Revenue	% of Growth
1. Total Revenue
a. Dairy	44143.19		40798.66		8.20
b. Renewable energy	99.64		87.70		13.61
Total (a+b)	44242.83		40886.36		8.21
2. Inter-segment Revenue
a. Dairy	-		-
b. Renewable energy	92.18		81.55		13.03
Total (a+b)	92.18		81.55		13.03
3. External Revenue
(Incl other operating income)
a. Dairy	44143.19		40798.66		8.20
b. Renewable energy	7.46		6.15		21.38
Total (a+b)	44150.65		40804.81		8.20
4. Segment Results
(Profit (+) / (Loss) (-) before tax and finance costs)
a. Dairy	1862.91	4.22	2551.54	6.25	(26.99)
b. Renewable energy	49.33	49.51	24.03	27.40	105.29
Total (a+b)	1912.24	4.33	2575.57	6.31	(25.75)
Less: Finance Cost	165.90		150.23
Unallocable expenses	34.36		261.84
Add: Interest income	9.21		4.79
Unallocable income	136.74		165.22
Total Profit before Tax	1857.93	4.21	2333.51	5.72	(20.38)

Segment wise Revenue Break-up

(T in millions)

	2025 - 26	2024 - 25
Dairy:
Finished goods sold
Milk	24660.63	23281.55
Value Added Products	14546.64	13012.90
Fat Products	3225.70	3180.91
Skimmed Milk Powder	153.01	7.96
Total	42585.97	39483.32
Traded goods
Feed & Others	1366.51	1247.88
Value Added Products	131.77	22.07
Other tradable goods	22.42	6.92
Total	1520.71	1276.87
Sale of Service	12.90	16.89
Other operating income	23.62	21.58
Total Dairy Revenue	44143.19	40798.66
Renewable Energy:
Finished goods sold	7.46	6.15
Total Renewable Energy Revenue	7.46	6.15
Total Revenue	44150.65	40804.81

CASH FLOW

1) Cash Inflows (T in millions)

Particulars	2025 - 26		2024 - 25	%
Operating Cash flow	2604.41	52.85	3156.96	81.25
Net Investments	82.85	1.68	-	-
Government grant received	37.23	0.76	-	-
Interest and dividend received	8.40	0.17	5.11	0.13
Movement in other bank balances, net	7.78	0.16	-	-
Rent Received	21.41	0.43	19.93	0.51
Proceeds from Short Term Borrowings	524.36	10.64	-	-
Proceeds from Long Term Borrowings	1641.64	33.31	703.45	18.11
Total	4928.08	100.00	3885.45	100.00

2) Cash Outflows

(T in millions)

Particulars	2025 - 26	%	2024 - 25	%
Repayment of Long Term Borrowings	256.04	5.14	247.57	6.14
Change in Working capital (net) loans	31.25	0.63	533.14	13.22
Taxes paid	386.66	7.76	621.91	15.42
Payment for purchase of property, plant and equipment(net)	3816.55	76.60	1664.47	41.27
Net Investments	-	-	488.44	12.11
Movement in other bank balances, net	-	-	50.91	1.26
Interest Paid	193.43	3.88	141.23	3.50
Rent Paid	66.69	1.34	53.52	1.33
Dividend paid	231.99	4.66	231.99	5.75
Total	4982.61	100.00	4033.18	100.00
Net increase /(decrease) in cash and cash equivalents	(54.53)		(147.73)
Add: Opening Cash and Cash Equivalents	632.79		780.52
Cash and cash equivalents at the end of the period	578.26		632.79
Cash and cash equivalents include :
Cash on hand	0.45		1.41
Balances with banks in current accounts	577.81		631.38

Key Financial Ratios

Particulars	31 March 2026	31 March 2025
Current Ratio	1.35	1.78
Debt Equity Ratio	0.34	0.18
Debt Service coverage ratio	4.77	5.49
Return on Net Worth (RONW)	13.89	19.20
Inventory Turnover Ratio (on Cost of Goods Sold)	10.63	10.47
Trade Receivables Turnover Ratio	86.29	123.28
Trade payables turnover ratio	19.98	20.63
Net capital turnover ratio	27.13	14.24
Net Profit Margin (%)	3.16%	4.12%
Return on capital employed	13.23	23.13

Internal Control System and Adequacy

The Company has implemented internal control systems commensurate with its size, ensuring the safeguarding of assets and operational efficiency through standardised processes. Its control and risk management framework is aligned with the corporate governance and is embedded within the organisational structure. Clear role definitions and cross-functional coordination enable effective execution of responsibilities. The Board of Directors provides strategic guidance and oversight to Executive Directors and management, supported by dedicated monitoring and advisory committees.

Business Accelerators

• Consistent top-line growth is supported by calibrated pricing strategies and expansion into new geographies to tap a wider consumer base.

• A growing share of Value-Added Products (VAP) strengthens revenue streams through premium offerings that deliver superior margins.

• Accelerated footprint expansion across 13 states enhances market presence and drives deeper customer outreach.

• Operational efficiencies and disciplined cost management help sustain healthy EBITDA margins.

• Introduction of premium dairy offerings with higher value realisation caters to evolving consumer preferences for superior- quality products while improving margin profile.

• An integrated digital and omnichannel approach leverages both online and physical touchpoints to enhance consumer interaction, deliver seamless purchasing experiences and reinforce brand engagement.

• Deployment of renewable energy solutions improves operational efficiency while lowering environmental impact and energy expenses.

Human Resources

Heritage Foods regards its human and intellectual capital as one of its most valuable assets and a key driver of its long-term growth and sustainability. The Company firmly believes that employee satisfaction and engagement play a crucial role in achieving sustained organisational performance. By empowering its workforce and nurturing their capabilities, the Company recognises that the professional growth and commitment of its employees are fundamental to driving operational excellence and innovation. Heritage Foods actively promotes a diverse, inclusive and supportive workplace that encourages individual development, collaboration and the overall well-being of its employees. The Companys ability to attract, develop and retain skilled professionals has been instrumental in supporting its expansion and strengthening its operational capabilities. A strong culture of teamwork, continuous learning and knowledge enhancement forms the foundation of the organisation. Heritage Foods places significant emphasis on career development and regularly invests in structured training programmes, leadership development initiatives and capability-building efforts to enhance employee competencies and enable long-term professional growth.

As at the end of the financial year 2025-26, the Companys workforce comprised 3,327 permanent employees on roll and 3,140 workers.

The industrial relations environment during the year remained cordial and harmonious. The Company continues to maintain a positive and collaborative work culture, ensuring employee well-being, job satisfaction and a healthy work-life balance, thereby fostering a motivated and productive workforce.

By fostering transparent communication and encouraging constructive interaction between employees and leadership, the Company maintains a culture of openness and mutual trust. These efforts not only enhance employee engagement but also help in building and sustaining a capable and committed workforce.

Risks & concerns:

Apart from the above a dairy company like Heritage Foods, at the present time operates in a very dynamic and challenging business environment and is exposed to several inherent industry-related concerns. These include volatility in milk procurement and cattle feed prices, seasonal fluctuations in milk supply and the impact of livestock helath. The perishable nature of dairy products necessitates a robust cold chain and efficient logistics; any disruption, including increase in transportation costs due to rising fuel prices, may adversely impact distribution efficiency and margins. The business is also governed by stringent regulatory requirements, where any non-compliance could affect operations and reputation. Further, intense competition from established, along with evolving consumer preferences, may influence market share and pricing dynamics. Additionally, climatic variations affecting fodder availability, supply chain disruptions, credit-related issues with distributors and potential operational or technological challenges further add to the overall business environment. These collectively represent the typical concerns faced by a dairy company and necessitate continuous monitoring and effective management focus.

Risk Management

A robust and comprehensive risk management framework enables the Company to systematically identify, assess and continuously monitor risks arising from both internal operations and external business environments. This structured approach ensures proactive risk mitigation and supports informed decision-making across all levels of the organisation.

The Company operates within a well-defined organisational structure that fosters clear communication, accountability and seamless coordination across departments, thereby minimising operational inefficiencies and potential conflicts. Additionally, the adoption of efficient inventory management practices ensures the timely availability of raw materials, consumables, spares and tools, significantly reducing the risk of production disruptions and enhancing overall operational reliability.

The Company has implemented a comprehensive Enterprise Risk Management (ERM) framework designed to identify, analyse, evaluate and mitigate risks through appropriate and timely measures. This framework ensures that all identified risks are effectively managed and maintained within the tolerance limits defined under the Companys risk management policy. The Risk Management Policy is holistic in nature, encompassing all business operations and providing clear guidelines for risk identification, assessment, mitigation and reporting. Furthermore, the Company remains focused on continuous cost optimisation, improving operational efficiencies and enhancing competitiveness. These ongoing initiatives enable the organisation to respond effectively to evolving market dynamics, ensuring sustainable growth and long-term value creation.

Our Risk Management Process Key Risks and Mitigation Strategies

Risk	Mitigation Measures
1 Raw Material Risk Variations in raw material prices and supply availability could adversely influence the Companys dairy operations.	The Company follows a defined approval matrix for price revisions with continuous monitoring of market trends. It enhances efficiency through optimization of chilling centres and procurement routes, supported by logistics and vehicle utilization tracking. Regular reviews of transportation costs, benchmarking and monitoring of procurement agents against LPD standards further aid cost control, while high-cost and delay-prone routes are periodically streamlined to ensure supply chain efficiency.
2 Customer Concentration Risk Significant reliance on a particular customer segment may affect profitability margins.	The Company is focused on diversifying its customer base by increasing sales through household, D2C, e-commerce and quick-commerce channels, thereby reducing dependence on institutional customers. It has defined channel-wise strategies and regional targets to strengthen presence across parlours, Happiness Points and emerging channels. Additionally, with operations spread across multiple states, the Company continuously leverages market intelligence to identify and expand into new geographies, reducing regional concentration risk.
3 Competition Risk Rising competitive intensity can lead to price reductions aimed at protecting market position, which may adversely affect margins and profitability.	The Company focuses on product differentiation and high-margin Value-Added Products (VAPs), supported by geographic expansion, digital transformation, strategic collaborations and continuous R&D-driven innovation to meet evolving consumer preferences. It leverages insights from consumer behaviour and digital channel performance to refine its product portfolio and channel strategy, while ensuring consistent SKU availability and a platform- specific digital mix. Operational efficiency and brand reputation are maintained through continuous monitoring and timely issue resolution, alongside a strong focus on margin protection through SKU optimisation, channel-wise performance tracking and alignment of pricing and commercial terms with platform dynamic
4 Supply-Chain Risk A strong and reliable supply network is essential to ensure the timely movement of raw milk to processing facilities and dairy products to consumer markets.	Supply chain resilience is strengthened through expanded milk procurement, upgraded cold-chain infrastructure, buffer inventories and digital vehicle tracking. The Heritage CLapp App enhances real-time sales management and operational efficiency.
5 Regulatory Risk Evolving regulatory requirements may affect the Companys operational framework and business performance.	The Company maintains a robust compliance framework through periodic audits, system- based monitoring and strict adherence to pollution control norms and emission standards. It ensures FSSAI compliance through valid licensing, timely renewals and end-to-end traceability supported by automated controls, documentation and regular quality checks, along with continuous employee training.
	Statutory and labour compliances are managed through centralized tracking, regular reviews of PF/ESI and contractor obligations and adherence to applicable laws. Defined HR policies, training programs and standardized SOPs for third-party engagements further strengthen compliance and governance across operations.
6 Brand Reputation Risk Adverse publicity arising from product defects, unethical conduct, or social media criticism may weaken customer confidence and affect market share.	Robust quality assurance and hygiene protocols are implemented to safeguard brand integrity, including comprehensive SOPs for finished product testing, calibrated equipment, batch-wise sampling and pre-dispatch quality clearance. The Company leverages a digital QMS for real-time tracking, supported by defined escalation mechanisms, root cause analysis and third-party validations to ensure consistent quality. Continuous monitoring of operational hygiene, risk-based sampling and strict reprocessing controls further strengthen product safety, while proactive review of customer feedback and market signals enables timely resolution of issues and protection of brand reputation.
7 People Attrition Risk Loss of key talent may result in higher replacement costs, project delays and reduced organisational knowledge continuity.	The Company has identified critical roles, It focuses on upskilling personnel through structured training, certifications and regular on-site sessions covering testing, hygiene and compliance. Standardised SOPs are maintained across locations, supported by digital tracking of quality tests and personnel availability to enable timely escalation of gaps. Additionally, updated training records and role clarity facilitate seamless transitions, while future resource needs and regulatory requirements are considered during annual planning.
8 Information Technology/ Cyber security Cyber security threats may lead to data breaches, operational disruptions, regulatory non-compliance, reputational damage and business continuity risks.	The Company has implemented key cyber security and data protection measures including critical IT policies, cyber insurance coverage, periodic Vulnerability Assessment (VA) and Penetration Testing (PT) by third parties, employee awareness programs, non-disclosure arrangements with vendors and data archival practices. Business continuity measures such as laptop enablement for critical personnel and backup systems for SAP and servers are also in place. The Company continues to strengthen monitoring, access controls, documentation practices and follow-up mechanisms to enhance cyber resilience and business continuity preparedness.
9 Weather & Seasonal Variations Adverse weather conditions and seasonal variations may impact milk procurement and demand for seasonal products, affecting sales and revenue.	Seasonal and weather-related demand fluctuations are mitigated through targeted campaigns and promotional schemes, expansion of the distribution network and focused sales through parlors, retail outlets and direct-to-consumer channels. Measures are also being taken to strengthen weather-linked demand forecasting, optimize production through smaller and more frequent batches and prioritize stock movement to regions less affected by adverse weather conditions.

Our Sustainable Approach

The Company is firmly committed to reduce its environmental impact while promoting sustainable practices across its operations. It prioritises energy conservation through the adoption of efficient energy management initiatives. With a renewable energy capacity of 14.37 MW allocated for captive consumption, the Company demonstrates a strong commitment to resource efficiency. The Company has plan to optimise the utilisation of renewable energy for all operation subject to statutory and regulatory approval.

Plastic plays an important role in ensuring product safety and preventing leakage. As a responsible organisation, the Company recognises its environmental impact and remains committed to building a more sustainable future by actively supporting plastic recycling initiatives and adopting environmentally responsible practices.

Outlook

The Company operates in a resilient and steadily growing Indian dairy sector, supported by rising consumption, increasing health awareness and a shift towards branded and value-added products. As highlighted by the management, the next phase of growth is expected to be driven by premiumisation, innovation and deeper consumer engagement across urban and emerging markets.

In line with this vision, the Company is strategically expanding its market footprint by leveraging its robust distribution network and diversifying its product portfolio to cater to evolving consumer preferences. It continues to strengthen its presence across metropolitan, Tier-1 and Tier-2 cities through focused market penetration, supported by strong brand-building initiatives and targeted customer engagement. Growth across modern trade, e-commerce and direct-to-consumer channels remains a key priority.

The Company is also focused on strengthening its procurement ecosystem by expanding its farmer network, enhancing village-level procurement infrastructure and increasing chilling and collection capacities across existing and new geographies. Procurement capabilities are being further augmented through activation of additional collection centres and strategic partnerships, including collaborations with producer organisations. Distribution expansion is being driven through a cluster-based approach, supported by the appointment of field distributors and expansion of the retail network to enable deeper market penetration.

In addition, the Company is strengthening its position in the ice cream segment through a combination of organic and inorganic growth initiatives, including capacity expansion and strategic acquisition of a majority stake in “Get-a-Way” Ice Cream, thereby enhancing its presence in the ice cream and frozen desserts market.

While the industry continues to face challenges such as volatility in milk procurement prices and input cost pressures, the Company remains focused on improving operational efficiencies, strengthening procurement and maintaining cost discipline.

Looking ahead, the Company remains committed to sustained growth through continuous operational expansion, strategic acquisitions and exploration of new business opportunities, with a continued focus on long-term value creation and strengthening its market leadership.

CAUTIONARY STATEMENT

THE STATEMENTS CONTAINED IN THE MANAGEMENT DISCUSSION AND ANALYSIS DESCRIBING THE COMPANYS OBJECTIVES, PROJECTIONS, ESTIMATES, AND EXPECTATIONS MAY CONSTITUTE “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF APPLICABLE SECURITIES LAWS AND REGULATIONS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN SUCH STATEMENTS DUE TO VARIOUS FACTORS, INCLUDING, BUT NOT LIMITED TO, CHANGES IN ECONOMIC CONDITIONS AFFECTING DEMAND-SUPPLY DYNAMICS AND PRICING IN THE COMPANYS MARKETS; AMENDMENTS IN GOVERNMENT POLICIES, REGULATIONS, AND TAX LAWS; AND OTHER UNFORESEEN OR UNPREDICTABLE FACTORS BEYOND THE COMPANYS CONTROL.