Hyderabad-based Dodla Dairy Ltd has filed a draft red herring prospectus for the initial public offering (IPO) with the capital market regulator Sebi. The public issue comprises a fresh issue of equity shares worth up to Rs 50 crore and an offer for sale (OFS) of up to 1 crore equity shares by promoters and an investor. The OFS consists of 83 lakh equity shares by TPG Dodla Dairy Holdings Pte Ltd and up to 4.16 lakh equity shares by Dodla Sunil Reddy and up to 10.41 lakh equity shares by Dodla Family Trust and up to 3.27 equity shares by Dodla Deepa Reddy.
The company plans to utilise the net proceeds of the fresh issue towards repayment and/ or prepayment, in full or part, of certain borrowings availed by the company; funding capital expenditure requirements, and general corporate purposes. The company will join listed peers such as Hatsun Agro Products, Heritage Foods and Parag Milk Foods. Hatsun Agro Products has a price to earnings (P/E) ratio of 102.3 x while Parag Milk Foods has a P/E of 9.7x. ICICI Securities Ltd and Axis Capital Ltd are the book running lead managers to the issue, while KFin Technologies Private Ltd is the registrar.
For the six months ended on September 30, 2020, Dodla Dairy posted a profit of 74.7 crore while in the financial year, its profit stood at Rs 49.8 crore. India is the largest milk producer globally and milk production is growing at a healthy rate. Per capita availability (PCA) of milk in India has grown at 5.2% CAGR over FY15-19. According to the DRHP, even before a nation-wide lockdown was announced on March 24, 2020, many urban cities had ordered a closure of restaurants and public eateries to contain the spread of COVID-19. This created supply chain disruption temporarily up to June 2020.
The strengthening of the co-operatives model has aided the growth of the milk processing segment. a subsidy of Rs.4-5 per litre of milk supplied to the farmer by the co-operative dairies, has also encouraged new farmers to enter milk production, enabling co-operative organizations to establish a strong foothold of their brands. To counter this, private players like Nestle and Britannia are investing in differentiated products like high-quality tetra pack ultra-high-temperature processed milk (UHT) and flavored milk. These products sell at a 50-60% premium compared with milk sold in pouches and cater mainly to very health-conscious consumers.