Paneer to ice-cream maker Milky Mist may tap the public markets for an initial public offering (IPO), as it looks to expand its dairy brand portfolio and take on larger rival Amul, at least four people familiar with the development said.
Many of India’s marquee investment and merchant banks have been pitching to the company in the last year, seeking a mandate to the take the company public, they said.
While the WestBridge round last year valued the Tamil Nadu-based company at around Rs 6,000 crore, the IPO could happen at a Rs 20,000 crore ballpark valuation, as it looks to rapidly expand its newer offerings such as chocolates and ice creams and enter new markets.
Path to IPO
Started as a milk trading company in 1985, Milky Mist took off when it started producing paneer (cottage cheese) in 1994, expanding over the years to value-added products such as curd, butter, cheese, yogurt and ice cream, tapping into an upwardly mobile consumer base in India.
Based in Erode, Milky Mist is run by Kumar, his wife Anitha Sathish Kumar and chief executive officer (CEO) K Rathnam, who was previously the managing director at Amul Dairy.
Rathnam confirmed to Moneycontrol that Milky Mist does not intend to raise money from private market investors and will instead go the IPO way. The company has been engaging with investment and merchant bankers such as Kotak, HDFC, Nuvama, 360 One and Axis to test the waters and eventually go public, he said. WestBridge did not respond to Moneycontrol’s queries.
Milky Mist’s funding chokes
Milky Mist has come close to raising private capital at least thrice in the last decade, according to a source who has worked with the company in the past. It was advised by Spark Capital on the first two occasions and by Veda in the latest round.
“There is no diligence issue and Sathish is happy to open his books to investors but it is like the South African cricket team that chokes at the very last moment,” this person said, citing the promoter’s reluctance to give up control to outside investors.
While investors such as Peak XV Partners, formerly Sequoia Capital India, and Multiples had engaged with the firm, WestBridge was involved in the funding discussions in 2023.
“The company is IPO-ready from a product portfolio and revenue perspective but I don’t know if they are ready from a management perspective. Sathish has felt in the past that he is selling his business too cheap to investors and preferred to opt out of the discussions,” the person added.
Banking on debt
While talks with private market investors did not progress, Milky Mist still needed money to fund its expansion plans. “The company instead took out a bank loan of around Rs 450 core from a consortium of banks including Bank of Maharashtra, Indian Overseas Bank, Union Bank, RBL and others,” a second person told Moneycontrol.
“Milky Mist even got an interest subvention of around 3 percent which meant a 9 percent rate of interest effectively worked out at an interest rate of 6 percent which is much better than an equity fundraise.”
Interest subvention is when the government gives a tax relief up to a certain limit. In Milky Mist’s case, the Centre’s department of animal husbandry and dairying provided the subvention.
Dairy Delight
In FY23, Milky Mist clocked a revenue of Rs 1,437 crore, a 42 percent jump from Rs 1,015 crore in FY22. Milky Mist also reported a profit of Rs 28 crore in FY23, a fall of 13 percent from the previous year, data from Tracxn, a private markets data provider, showed.
It closed FY24 with a top line of around Rs 1,950 crore and generated a profit of Rs 50 crore.
To assess its value, Milky Mist will look at a peer like Hatsun Agro, the BSE-listed company which sells Arokya milk and ice cream under the brands Ibaco and Arun.
Hatsun Agro trades at a 3-4X multiple on sales and has a market capitalisation of around Rs 25,000 crore. “Milky Mist will not want to be far away, and aim for the Rs 20,000-25,000 crore range too. And an IPO no later than 2026,” a third person told Moneycontrol.
“Milky Mist’s competitor is not Heritage Foods, it’s going after the market that Amul caters to,” they added.
With an expanding product portfolio, Milky Mist will now further grow presence into the north, west and other regions, giving Amul, a dominant player in the space, a run for its money. A public market listing will also help boost its presence and visibility as it looks to tap newer markets.
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