Shares of Milky Mist Dairy Food are listed at Rs 165, which has been giving the company a valuation premium compared with it’s IPO level.
Following the listing, the company’s management has outlined it’s growth strategy, margin outlook, product expansion plans and the utilisation of it’s new capacities.
“We are a company of a differentiated dairy players. We are not in pouch milk and we do only the value-added products,” K Rathnam said.
Milky Mist growth outlook: 30-33% growth expected
Milky Mist reported revenue growth of more than 30 per cent CAGR over FY24-FY26, while EBITDA margins expanded from 12.2 per cent to around 13.9 per cent.
The management expects the company to maintain a similar growth trajectory going forward.
“We will be growing in the range of whatever we have given in the estimation of 30-33 per cent in the last three years. We expect a similar growth going forward also,” K Rathnam said.
The company expects value-added products such as ice creams and yoghurt to support margin expansion. According to the CEO, Milky Mist has significant headroom in terms of available capacity, market expansion and consumer demand.
Paneer remains a major growth opportunity
Paneer remains one of Milky Mist’s key products, with the company holding around 19 per cent share of the organised packaged paneer market, according to the management.
Rathnam also highlighted the large opportunity available as a significant portion of India’s paneer market remains unorganised.
“90 per cent of the paneer that is produced in India is handled by an unorganised sector,” he said.
He added that the estimated value of paneer sold in India is around Rs 1 lakh crore, while the organised segment accounts for only around 10 per cent.
Cheese, yoghurt and ice cream to drive growth
The company expects multiple product categories to contribute to it’s growth. According to K Rathnam, India’s value-added dairy industry is growing at around 14-15 per cent, while Milky Mist has been growing at more than 30 per cent.
“When it comes to cheese and ice creams, the sector is growing in the range of 15 to 18 per cent and we have been growing in terms of volume around 25-28 per cent,” K Rathnam said.
Milky Mist’s IPO proceeds include around Rs 470 crore towards portfolio and build capacities for products including whey protein concentrate.
Rathnam said the new plants are expected to begin operations over the next 12-15 months.
“With all the new products what we have put into our IPO proceeds, like building the capacity for the protein range of products like whey protein concentrate and putting up the VC coolers and all those things will definitely regenerate additional revenue,” he said.
The company also expects its existing product portfolio to continue growing, with volumes increasing at around 22 per cent and value growth at around 30 per cent CAGR in recent years.
Milky Mist distribution expansion: 3.75 lakh retail touch points
Milky Mist currently has more than 3.7 lakh retail touch points and over 4,000 distributors.
According to him, around 70 per cent of the company’s revenue comes from South India, while 30 per cent comes from non-South markets.
The company has expanded its distributor network from around 2,000 to 4,000 and increased retail touch points from around 2.75 lakh to 3.75 lakh.
The company plans to continue expanding its retail network by around 20-25 per cent.
25,000-30,000 VC coolers to be added every year
Milky Mist has allocated around Rs 135 crore for market-building infrastructure over the next three years.
The company plans to add around 25,000-30,000 VC coolers every year, according to the management.
“Our retail expansion will continue to happen in the range of 20-25 per cent addition of the retailers into the fold,” Rathnam said.
Rs 497 crore debt repayment from IPO proceeds
Milky Mist plans to use around Rs 497 crore of IPO proceeds for debt repayment.
After the repayment, the company will have around Rs 800 crore of remaining debt, according to the management. A portion of this loan carries an interest subvention from the Government of India.
K Rathnam said the lower debt burden will help reduce the company’s interest outgo and principal repayment obligations.
“That gives us a lot of saving on the interest outgo and also a lot of savings on the principal amount outgo,” he said.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
