Heritage Foods Q1 FY27: Record Revenue, Faster VAP Shift, and a Tough Milk Cost Cycle

Heritage Foods started FY27 with a familiar dairy trade-off. The company delivered its highest ever quarterly revenue, but profitability was squeezed by elevated milk procurement costs and other input pressures.

In Q1 FY27, consolidated revenue from operations rose 18% year-on-year to INR 13,381 million (INR 1,338.1 crore). EBITDA fell to INR 619 million (INR 61.9 crore), and EBITDA margin declined to 4.6% from 6.5% in Q1 FY26. Profit after tax was INR 250 million (INR 25.0 crore), down 38% year-on-year, with PAT margin of 1.9%.

Management framed the quarter as one of disciplined execution in a tight milk supply environment. Procurement prices increased 7% year-on-year to INR 46.61 per litre, while procurement volumes increased 2% year-on-year to 1.81 million litres per day. On the demand side, milk sales volumes were broadly stable at 1.16 million litres per day, and the average selling price improved 4% year-on-year to INR 58.68 per litre.

The main story: Breaking the commodity trap through VAP

The clearest strategic signal from both the investor presentation and the concall was the accelerating shift toward value-added products (VAP). VAP revenue grew 40% year-on-year to INR 5,636 million (INR 563.6 crore) in Q1 FY27. VAP contribution to consolidated revenue expanded to 43.6% from 36.1% in Q1 FY26.

Management also highlighted a broader definition of VAP by including consumer packs of ghee and butter. On that basis, VAP revenue reached INR 6,322 million (INR 632.2 crore), up 39% year-on-year, contributing 49% of total revenue versus 40.6% a year earlier.

The quality of this growth was another important takeaway. Management said VAP growth was largely volume-driven, with about 5% coming from pricing and the rest from volumes. They shared category volume growth trends: paneer grew 33% year-on-year, curd 26%, ice cream 25%, buttermilk 60%, and lassi 98%. Curd remains a large part of VAP, but management said its share has been declining over time, reaching about 68.9% of VAP in Q1 FY27.

Financial summary (consolidated)

Why margins fell: Procurement, mix, and other inputs

Despite the improving revenue mix, profitability remained tied to raw milk and related inputs. On the concall, management explained why the reported average procurement price did not fully reflect cost pressure. While the blended procurement price was nearly flat versus Q4 FY26, cow milk costs increased, and buffalo milk costs increased sharply. At the same time, buffalo milk volumes declined materially, pushing the mix toward cow milk. That mix shift influenced both cost and gross margin outcomes.

Management also cited higher consumption of skimmed milk powder (SMP) at higher prices as another factor affecting gross margin in the quarter. Packaging material inflation was called out as well.

From a segment profitability angle, the company shared that Q1 FY27 milk EBITDA margin was about 3.03%, while VAP EBITDA margin was about 8.06%. Ice cream was described as typically the highest margin product within VAP.

Ice cream: Capacity is in place, now scale-up is the goal

Heritage continued to invest behind ice cream as a growth engine. The investor presentation highlighted the new ice cream facility at Shamirpet, Hyderabad, describing it as a state-of-the-art manufacturing plant with 31 million litres annual capacity and commercial production started.

The deck also presented an ice cream revenue trajectory: INR 106 crore in FY26, INR 56 crore in Q1 FY27, and a stated ambition of 500+ crore by FY30.

On the concall, management said the newly commissioned facility ramped up well in the quarter and reached around 40% capacity utilization. The plant manufactures both AlpenVive and Get-A-Way portfolios from a common platform, which management expects to support faster absorption, improve operating leverage, and provide headroom for future growth.

Portfolio and brand actions: Packaging, new launches, and acquisitions

Several brand and portfolio initiatives were visible in the presentation:

• A curd portfolio packaging refresh that adds on-pack claims and introduces a QR code based purity report to support transparency and trust.
• Launch of premium creamy shakes in Badam and Mango variants in a glass bottle format, supported by a QR-based gamified promotion.

On strategic investments, the company reported two moves:

• Heritage Novandie Foods Limited became a wholly owned subsidiary.
• Heritage increased its shareholding in Peanutbutter and Jelly Limited to 71%.

Management positioned these as long-term growth platforms that expand the companys presence in premium dairy and nutrition-led categories.

Heritage Nutrivet (Nuvitvet): Growth continues despite input inflation

The presentation showcased Heritage Nuvitvet (Nutrivet) as a livestock nutrition platform with presence across nine states. FY26 revenue was INR 2,454 million (INR 245.4 crore) with PBT of INR 206 million (INR 20.6 crore).

On the concall, management reported Q1 FY27 revenue of INR 728 million (INR 72.8 crore), up 37% year-on-year, and PBT of INR 20 million. The Nutrivet CEO also highlighted broad based cost inflation in feed ingredients, packaging cost pressures, and constraints in raw material availability.

Capital allocation and near-term priorities

Management indicated FY27 capex of about INR 250 crore. It includes ongoing projects in paneer and ghee, along with smaller investments linked to raw milk procurement.

The tone on procurement and pricing was cautious. Management emphasized that milk is cyclical and heavily weather-dependent and indicated pricing actions are being taken in phases across markets.

Takeaways

Heritage Foods delivered strong top-line growth and a sharp improvement in the contribution of value-added products in Q1 FY27. The quarter also showed that even with a rising VAP mix, raw milk and input cycles can dominate near-term profitability.

What stood out was the pace of VAP growth, the operational ramp-up in ice cream capacity, and the continued build-out of premium and adjacent platforms. The next few quarters are likely to hinge on how procurement costs behave and how effectively the company continues to translate mix improvement into normalized high single-digit EBITDA performance over the cycle.