The Indian dairy sector – Private Equity Investments driving growth and facilitating consolidation


Snapshot of the dairy-sector sector in India

The total dairy market in India is estimated to be INR 3,000 bn (USD 60 bn) comprising nearly 40% of the total Food & Beverages market. Of this, the organized dairy segment is just 20% or INR 600 mn.



  1. AC Neilson and India Food Guide, Edelweiss, February 2012
  2. For 2012. Report on Asia Pacific Canned Food Market by Marketline Sept 2013, Canned Food Market in India to 2014 by Datamonitor, APEDA Agri Exchange
  3. Alcoholic Drinks in India, October 2013, Marketline

The total dairy market is projected to grow by a CAGR of 10-11% to nearly INR 5,000 bn (USD 82 bn) by 20161.  The organized dairy market in India is dominated by the co-operatives which have a 55-60% share of the market. The Amul Group (including Gujarat Cooperative Milk Marketing Federation) had a turnover of INR 191 mn (USD 3.2 mn) in FY 2013 and holds nearly one-third share of the market.

While basic milk and ghee are indeed the dominant products contributing to almost 70% of the market, growth is driven by a significantly higher escalation in value-added products like cheese, paneer, flavoured drinks etc.


Dairy Market Segmentation by Products


Source: AC Neilson and India Food Guide, Edelweiss, February 2012


There is significant interest from foreign investors as well as global dairy majors, to participate in the high-growth Indian dairy industry.

The organized dairy sector in India is expected to grow at 15% for nearly a decade more.  Given the size and scale of the Indian dairy industry, as well as the headroom for growth, there has been a significant interest from private equity investors and recently global dairy companies to invest in the dairy sector in India. See the table below for private equity investments in the sector.

 Sino-US Dairy Seminar 2011 282_1

Private Equity Investments in the Dairy Sector in India

Date Target Investor Deal Value (USD mn)
Aug-13 Prabhat Dairy IAF (Rabo PE), Proparco 22.0
May-13 Parag Milk Foods IFC 17.0
Mar-13 Milk Mantra Dairy Aavishkar India 1.2
Nov-12 Neo Milk Products Ambit Pragma Fund II 3.7
Nov-12 Dodla Dairy Cargill Ventures 20.5
Oct-12 Heritage Premji Invest 3.8
Sep-12 Parag Milk Foods IDFC PE 28.9
Sep-12 Prabhat Dairy India Agri Business Fund 25.3
Jan-11 Milk Mantra Dairy Aavishkar India, Mumbai Angels 5.0
May-10 Tirumala Milk Carlyle Asia Growth 11.9
Jul-08 Modern Dairies IFC 6.4
May-08 Parag Milk Foods India Business Excellence Fund 14.0


In the last 5 years, USD 150 mn has been invested by private equity investors in the Indian dairy industry, of which USD 125 mn has come in the last 15 months alone !!

The capital raised has largely been invested in backward and forward integration of the companies.

  • For instance, Carlyle invested USD 12 mn in Tirumala Milk Products in 2010.
  • In the last three years, Tirumala has strengthened its supply chain by adding over  100 chilling stations, expanded geographical distribution to Gujarat, Maharashtra and Rajasthan, apart from its traditional stronghold in southern states like Tamil Nadu, Karnataka and Andhra Pradesh. The company’s revenues have nearly tripled in the last three years from INR 5.8 bn ( USD 95 mn)  in FY10 to INR 14.2 bn ( USD 23 mn) in FY 13.

As the market matures, we will see the share of low value-added products dropping significantly in favour of value-added products

Lactalis Group Revenue Breakup in CY12

In India, low value-added products like milk and ghee contribute nearly 70% of the dairy market. In contrast, value-added products form a substantial portion of the market in the developed world. For instance, Lactalis, the world’s largest dairy company, has only 25% of revenues coming from milk, while the remaining 75% is from value-added products. See graph.

Private equity investors are encouraging and assisting Indian companies to move up the value chain as the margins are higher. In the last few years, Indian dairy companies are seen expanding their product basket by launching products like favoured milk, various varieties of cheese, flavoured yogurt, etc.

The market will mature over several phases of growth. But the action has begun. Overall, the dairy industry is undergoing a metamorphosis. The industry is still at its early stages and would need several phases of growth, coupled with consolidation to develop into a more mature market.

The current phase has seen several private equity investments for growth capital (refer to table above), with the industry simultaneously undergoing consolidation. For instance, Hatsun Agro products acquired Jyothi Dairy in October 2013 as part of the strategy to strengthen its distribution in Andhra Pradesh; Lactalis Group announced acquisition of Tirumala Milk products.

We believe that the high growth in the dairy sector, as projected in the medium and long term, is sustainable.

As the market evolves and matures over time, we think there will be further opportunities for investment of growth capital as well as Mergers & Acquisitions in the sector.


Nitin Jain Aurum Equity Partners LLP – Click here to view profile


January, 2014


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