Hyderabad-based Dodla Dairy to hit market with Rs 500 crore IPO

Dodla Dairy has been founded by first generation entrepreneur Mr Sunil Reddy in 1998
Disks Dairy, a leading dairy company in South India, plans to hit the primary market with a Rs 500-crore initial public offering.

Dodla, which will be valued at Rs 3,000 crore, has hired investment banks Edelweiss and ICICI Securities to run the process, said people aware of the development. Through this IPO, existing investor Rise Fund, managed by US-based PE fund TPG Growth, will make a partial exit. At present, Rise Fund holds an about 25 per cent stake in Dodla.

Dodla Dairy, founded by first generation entrepreneur Sunil Reddy in 1998, sells about 11 lakh litres of milk and 6 tonnes of milk products a day. In 2016-17, it posted revenue of Rs 1,413 crore.

The preliminary draft red herring prospectus for the IPO is likely to be filed in a couple of months, said one of the people. “Rise Fund plans to dilute as much as a 10-12 per cent stake.”

A part of the issue will be in new shares and the Hyderabad-headquartered company plans to utilise the proceeds to set up more units and for global expansions. It is aiming for opportunities in global markets like Europe and Africa through multiple buyouts, he added.

Dodla managing director Sunil Reddy didn’t respond until press time Sunday to an email seeking comment. A TPG spokesperson declined to comment.

In South India, Dodla competes with dairies such as Hatsun Agro, Tirumala Milk Products, Vijaya, Jersey, Mother Dairy, Heritage, Creamline Dairy and Nandini Milk, which is part of the Karnataka Cooperative Milk Producers’ Federation.

The company carries out procurement, processing and packaging of milk and milk products in four states and sells those in nine states. At present, it has 11 milk processing and packaging plants in Telangana, Andhra Pradesh and Karnataka.

In May last year, Rise Fund acquired the 25 per cent stake it holds in Dodla from US-based investment firm Proterra Investment Partners for $50 million. This was the first investment in India by the TPG Growth-backed fund which counts Elevar Equity and the Bridgespan Group as its other investors.

Private equity funds have been tapping the growth potential in dairy business in India through multiple investments.

“Strong demand prospects in Indian dairy, driven by formalisation from loose to packaged dairy products and the growth of the value-added dairy products, is expected to continue for the next five years,” said Shiva Mudgil, senior dairy analyst, research-food & agribusiness at Rabobank.

India, the world’s largest producer of milk, had an output of 165 million tonnes in 2016-17. According to the National Dairy Development Board, demand for milk is expected to grow to 200 million tonnes in 2022 from 138 million tonnes in 2014, at a compound annual growth rate of 5 per cent.