Acquisition Strengthens Hatsun Agro’s Presence in Eastern India Dairy Market
Hatsun Agro Product Limited (HAP), one of India’s leading dairy manufacturers, has announced the acquisition of 100% shareholding in Milk Mantra, a dairy brand backed by Eight Roads Ventures, for Rs 233 crore ($27.5 million). This acquisition marks a strategic move for Hatsun to boost its presence in the growing dairy markets of Eastern India, especially in Odisha, where Milk Mantra’s brand, ‘Milky Moo,’ enjoys strong consumer recognition.
Through a series of Share Purchase Agreements (SPAs), HAP will now own Milk Mantra outright, making it a wholly-owned subsidiary. This deal further consolidates HAP’s position in the competitive dairy sector, allowing the company to tap into new markets and expand its customer base.
Milk Mantra’s Struggles and Acquisition Pricing
Milk Mantra, which was established in 2009, has struggled to maintain significant growth despite having a solid product portfolio that includes milk, curd, cottage cheese, buttermilk, and cattle feed. The company reported a modest operating revenue of Rs 276.42 crore in FY24 and a profit of Rs 9.78 crore for the fiscal year. However, the company’s revenue has been largely stagnant for the past three years, prompting its acquisition by Hatsun at a relatively low valuation of less than 1x sales.
The company’s earlier target to reach Rs 1,000 crore in revenue within five years by 2021 now appears far-fetched based on its current trajectory. Milk Mantra’s limited market expansion and reliance on products like liquid milk, which typically carry lower margins, likely contributed to its stagnation. Additionally, competition from newer age dairy companies such as Country Delight, Akshayakalpa, and Sid’s Farm has made it difficult for Milk Mantra to maintain its competitive edge.
Hatsun’s Strategic Expansion Plans
For Hatsun Agro, the acquisition presents an opportunity to bolster its market position and tap into the rapidly growing dairy market in Eastern India. Milk Mantra’s established presence in Odisha will help Hatsun expand its reach in this region, allowing it to increase its footprint in a key market for dairy products.
Furthermore, this acquisition may offer Hatsun new product avenues and allow it to diversify its portfolio. While Milk Mantra’s revenue growth has slowed in recent years, its brand recognition in Odisha remains strong, providing Hatsun with a solid foundation to leverage for future growth. Given that Hatsun Agro is already an established name in the dairy industry, the integration of Milk Mantra could serve to complement its existing product offerings and strengthen its overall market position.
The Competitive Landscape in the Dairy Sector
Hatsun Agro’s competitors, such as Milky Mist, have continued to outperform in terms of revenue. Milky Mist, for instance, reported Rs 1,907.21 crore in revenue for FY24, positioning itself as one of the top players in the direct-to-consumer dairy market. Milky Mist also announced plans to launch an initial public offering (IPO) in 2025, aiming to raise approximately Rs 2,000 crore. This signals the growing competition within the dairy sector, particularly in the premium and direct-to-consumer space.
Despite Milk Mantra’s challenges, the acquisition presents an interesting opportunity for Hatsun, especially at a time when newer companies like Country Delight and Akshayakalpa are disrupting the traditional dairy market. While Milk Mantra’s revenue growth may have stagnated, its sale represents a reasonable move for Hatsun to extend its reach into Odisha at a relatively low cost, especially considering the company’s profitability.
Implications for the Dairy Sector
This acquisition reflects the broader trends within the dairy industry, where companies are consolidating, seeking expansion opportunities, and diversifying their product lines to maintain relevance in a competitive market. For Hatsun, the purchase of Milk Mantra could become a stepping stone in expanding its market share while positioning itself strategically against other emerging players in the dairy sector.
The deal also suggests that market consolidation is a key strategy for companies looking to grow in the face of rising competition and market saturation. Milk Mantra’s sale could mark the beginning of similar transactions in the coming years as companies focus on regional growth and scalability in India’s rapidly evolving dairy industry.
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