Milky Mist eyes growth without fresh debt; targets Tier 1, 2 and 3 cities

Milky Mist, whose ₹1,553-crore initial public offering (IPO) is currently on tap, plans to expand into West and North India for which funding would come from “internal accruals” rather than fresh borrowings., according to its CEO and Whole-time Director Dr. K Rathnam

The company, which positions itself as a packaged foods company, is preparing its next phase of expansion, including a new manufacturing facility in Maharashtra as it eyes Tier 1, 2 and 3 cities.

Of the proceeds from the IPO, the company, which has seen its topline grow at 30%, would use about ₹500 crore to repay debt, on top of ₹300 crore already repaid using funds from a pre-IPO placement. The Erode-based company’s net debt stood at ₹1,671.85 crore in the latest fiscal year.

Ahead of the IPO’s opening (on August 11), Milky Mist allotted 3.32 million equity shares to 19 anchor investors, raising approximately ₹465.29 crore at the upper price band of ₹140 per share.

“The remaining part will be for capital expenses, which we have identified already. And part will be market-building activities and part will be for internal expenses,” Rathnam said during an interaction.

Elaborating on Maharashtra project, he said the company has acquired 50 acres of land from the Maharashtra Industrial Development Corporation (MIDC) in Baramati, though no government approvals have been secured so far and it is still working out project timelines.

Citing transportation costs and proximity to consumers as key considerations for the proposed investment; he said “the Western market is growing, evolving very fast. As per our data, in 2030, our visibility will be ₹1,500 crores. Revenue will come from that area,” Mr. Rathnam said.

Asked why Milky Mist’s price-to-earnings ratio (about 85 times its earnings-per-share) appeared higher than the industry average, he said the company focusses on value-added products, making it fundamentally different from milk-led businesses. He added that the company should be benchmarked against packaged food and FMCG businesses.

Ruling out plans to plans to enter the milk business; he said existing players already cater to that market, while Milky Mist intends to focus on specialised, value-added products, particularly protein-based offerings.

Asked about its maket share target, Rathnam said “rather look at the 1.4 billion population. I am touching only 1 crore population (consumers). I want to touch 5 to 10 crores going forward.”

Sathishkumar T, Chairman and Managing Director, said the company’s strategy “is to focus on Tier 1, 2 and 3 cities and middle class and upper middle class” consumers rather than rural areas.”