Dodla Dairy files with SEBI to Raise Rs 800 crores via IPO Route

Hyderabad-based dairy firm Dodla Dairy received SEBI approval to launch an IPO offer to raise Rs 800 crore from the market. The issue will hit the market sometime in May, but the details are not released yet. For the record, it is the second attempt from the dairy firm to float IPO. It filed with SEBI in 2018 for Rs 500 crores. According to close sources, the Dodla Dairy IPO will contain nearly one crore equities in an offer for sale IPO from existing promoters and investors. And only Rs 50 crores will be in fresh issues, which the company proposes to use towards debt repayment and general capital expenditure.

About The Company

Dodla Dairy has a strong presence in south India, catering to five southern states, AP, Telangana, Karnataka, Tamilnadu, and Maharastra. The company has thirteen integrated processing plants with a total installed capacity of 1.07 million litres per day.

As of December 2020, Dodla Dairy was the third largest private player in India in terms of market presence, with an average daily procurement of 1.02 million litres of raw milk per day. It also ranked second in market occupancy.

The integrated dairy firm derives its revenue from selling packaged milk and dairy-based VAPs, including curd, ghee, ultra-high temperature processed milk, flavoured milk, and more.

Company Strength

• The company has a long performance record and a strong brand presence
• Large installed milk procurement and processing capacity
• An experienced management and promoters’ team
• State-of-the-art processing plants and a well-diverse product portfolio
• FSSAI certification for their products
• It operates on an integrated business model with a well-defined procurement, processing, and distribution channel

Company Financials

The company reported growth in revenue and profit (profit after tax) in the last FY20. It derives its profit primarily from selling packaged milk and dairy-based VAPs. In FY20, Dodla Dairy reported a profit of Rs 49.8 crore. Its revenue from operation increased at a CAGR of 15.98 percent from FY18 to FY20, and EBITDA increased by 11.81 percent CAGR during the same period. The company has also recorded a growth in product sale.

With India being the largest milk producer globally, the industry is poised to grow at a healthy rate. In fact, during FY15-19, the per capita availability of milk grew at a CAGR of 5.2 percent.

Pros And Cons Of The Offer

The IPO will open next month when Dodla Dairy IPO price will be announced. To understand if it is a good IPO to invest, read the RHP document carefully.

Below is a list of pros and cons associated with the offer.

Pros

• Consumer-focused operation model and well-integrated structure
• Well-diverse product portfolio under Dodla Dairy and Dodla brand
• Experienced management
• Robust market presence
• The healthy projected growth of the industry

Cons

• The company listed COVID-19 to cause serious supply chain disruption
• It proposes to utilise the fund primarily for repayment and prepayment of borrowing
• The risk of spoilage can impact the company’s profitability
• Dependency on key management personnel is another risk that can mar the future performance

Conclusion

Dodla Dairy has plans to improve brand visibility and strengthen brand presence in the market, focusing on improving procurement and processing operation.

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