Hatsun Agro Product Limited Acquires Milk Mantra
Hatsun Agro Product Limited (HAP), a prominent manufacturer of dairy products, has revealed its acquisition of the entire share capital of Milk Mantra for an investment of Rs 233 crore (approximately $27.5 million). This strategic move is intended to enhance HAP’s influence in the Eastern Indian dairy market, particularly in Odisha, where Milk Mantra’s brand, Milky Moo, has secured a strong market position, as stated in a stock exchange filing.
The acquisition process will be formalised through a series of Share Purchase Agreements (SPAs) alongside other necessary transaction documents with Milk Mantra’s current promoters and shareholders. Following the completion of this acquisition, Milk Mantra will operate as a wholly-owned subsidiary of HAP.
About Milk Mantra
Since its inception in 2009, Milk Mantra has diversified its offerings to include:
- Milk
- Curd
- Cottage cheese
- Buttermilk
- Cattle feed
Throughout its journey, the company has successfully attracted nearly $35 million in investments from notable investors such as Aavishkaar Venture Capital, Fidelity Growth Partners, Neev Fund, Eight Roads Ventures, and the US-based DFC.
Financial Overview
This acquisition appears to qualify as a slump sale since Milk Mantra reported an operating revenue of Rs 276.42 crore in FY24, while the acquisition cost stands at Rs 233 crore. The company from Bhubaneswar also achieved a profit of Rs 9.78 crore during the previous fiscal year; however, its revenue growth has nearly plateaued over the past three fiscal years.
Market Position and Competition
In the D2C dairy sector, Milk Mantra faces significant competition from established players like Milky Mist, which reported revenue of Rs 1,907.21 crore in FY24. Milky Mist is reportedly planning an initial public offering (IPO) this year to raise around Rs 2,000 crore through the listing.
Furthermore, Milk Mantra contends with newer companies such as Country Delight, Akshayakalpa, and Sid’s Farm.
Challenges and Outlook
The phrase “grow or die” seems to encapsulate Milk Mantra’s plight, as its failure to innovate resulted in a sale at a valuation below 1x sales, despite turning a profit. This situation reflects the company’s heavy reliance on liquid milk, which yields slim margins unless innovative alternatives, like A2 milk, are successfully introduced. For Hatsun, based in Chennai, the acquisition of Milk Mantra seems to be a strategically sound addition to its portfolio, significantly broadening its market presence at a reasonable cost. This rationale may explain the minor fluctuations in their stock price following the announcement.