Dodla Dairy IPO: Information analysis

Incorporated in 1995, Dodla Dairy is an integrated dairy company based primarily in south India. The company is the third largest in terms of milk procurement per day, with an average procurement of more than 1.03 million litres of raw milk per day. It is also the second largest in terms of market presence, with operations expanding to the states of Andhra Pradesh, Telangana, Karnataka, Tamil Nadu and Maharashtra. The company is engaged in the business of selling fresh milk, which accounts for more than 75 per cent of its revenue and the rest comes from other dairy-based value-added products such as curd, ghee, butter, flavoured milk and ice cream amongst others. The company's operations are carried out in 13 processing plants which have an aggregate installed capacity of 1.70 million litres per day. Dodla dairy procures its milk from more than 1 lakh farmers through 6,771 village level collection centres, 232 dairy and third-party suppliers. The company products are mainly marketed under the brand name of 'Dodla', 'Dodla Dairy' and 'KC+' Strengths The company generates majority of its revenues from selling processed milk, which helps it generate high return of capital employed (ROCE), as compared to value-added products. Value-added products require high capital investment, thus generating lower ROCE However, these products generally have higher margins as compared to milk. Milk, on the other hand, has low shelf life, which allows quick realisation for its sales. Dodla Dairy has a strong distribution and marketing channel. Its products are distributed through 40 sales offices, 3,285 distribution agents, 861 milk distributors and 544 milk product distributors. The company also operates franchise-model based 'Dodla Retail Parlours' for selling its products. The company has delivered strong financial performance, increasing its topline at a rate of 14.1 per cent annually from FY17 to FY20. The company focuses on long-term relationships with its farmers through various initiatives. It provides in-house manufactured cattle feed to its farmers. Risks India is the largest producer of milk in the world with a ve