July 13, 2018
As the demand grows, the market grows. When market grows the economy grows. This rise in demand for value-added products, the dairy sector in India is likely to see Rs. 130-140 billion of investment in the next three years.
To strengthen the procurement and processing infrastructure, companies in the organized sector have invested a similar amount in the past three years.
Companies with a focus on value-added products are set to do well but those with focus on bulk liquid milk selling would remain sluggish, due to oversupply of liquid milk as a commodity.
The new investments are expected to be funded with moderate dependence on borrowing, including soft loans from the government’s Dairy Processing & Infrastructure Development Fund, beside public and private equity.
Amul brand of dairy products, has announced Rs. 50 billion of investment to be completed by 2022 on processing capacity and distribution. Increasing demand at home and from Indians abroad has helped its turnover reach Rs. 295 billion for FY18.
After acquisition of Reliance Dairy to boost geographical reach, Heritage Foods plans a big expansion in North India. Heritage has also acquired Shah Motilal Foods, based in Telangana, and Vaman Milk Foods, based in Punjab, for Rs. 120 million and Rs. 200 million, respectively. It now has a big capital expenditure (capex) plan, with expansion planned in segments such as curd, cheese and yogurt.
Parag Milk Foods’ profit is estimated to rise 49 per cent over FY17-20, due to a focus on value-added products, with established brands and capex already undertaken.
India’s milk production is estimated at 165.5 mt for 2017-18, an increase of 3.8 per cent from the previous year.