Tirumala Milk's Naidu back in business with new firm Vallabha Milk Products

HYDERABAD: Bolla Brahma Naidu, co-founder of South India’s second largest dairy firm Tirumala Milk Products, is set for a major comeback four years after selling his firm to French giant Lactalis early 2014 for Rs 1,750 crore and after a non-compete deadline.

Naidu, an active dairy farmer-turned-entrepreneur who wasn’t keen on exiting Tirumala Milk but had to accede to the decision of majority of his partners, has been waiting for the non-compete agreement entered into with Lactalis to end.

“Now that the non-compete period with Lactalis got over recently, I am going to venture into dairy business again. This time around, several former senior executives of Tirumala Milk Products with whom I had a long association are joining me as co-promoters,” Naidu told ET.

While Brahma Naidu will hold majority stake of over 55%, his former colleagues will together hold over 40% in the new company, Vallabha Milk Products.

Naidu is acting as the chairman of new company with three other directors on the board including Edara Nageswar Rao, former executive director at Tirumala Milk, Veeravalli Subbaiah and Ramineni Srinivasa Rao.

The fresh round of dairy business under Vallabha Milk will take off soon with four milk processing facilities spread across two Telugu speaking states of Andhra
Pradesh and Telangana, said Naidu.

“To begin with, we will have a processing capacity of around 8 lakh litres a day with processing units at Kanipakam, Vinukonda and Rajahmundry in Andhra Pradesh and Hyderabad in Telangana with an initial investment of over Rs 100 crore,” said Naidu, adding that the company hopes to begin commercial operations shortly.

He said the Kanipakam plant will primarily cater to the needs of Chennai and Bengaluru markets, while the other three units will serve Andhra Pradesh and Telangana markets.

“The focus this time around will be on the value-added products that ensure high margins,” said director Edara Nageswar Rao, adding that the product portfolio will include curd, ghee, lassi, butter milk and ice cream, among others.

Rao said the Kanipakam unit involved higher investments owing to condensation plant and other equipment for products, which will subsequently have milk powder facility as well. “Given the high costs involved in real estate and machinery owing to GST, we have decided to primarily focus on high margin value-added products.”

India, the world’s largest milk producer, had reported an annual output of around 150 million tonnes, which is nearly 1.5 times of the US and three times that of
China. Attracted by around 16% compound annual growth rate (CAGR), the Indian dairy industry reported for five years ending 2016 with promising outlook, as several global dairy firms entered the market through acquisitions and partnerships. The market also saw many private dairy firms tapping the capital market with initial public offerings and private equity firms picking up stakes, helping private diaries expand capacities and go for value-added products.

According to a report by CARE Ratings, the Indian dairy sector is estimated to maintain 14-15% CAGR till 2021 with the growth primarily driven by value-added milk products that were expected to grow at 19-20%, while liquid milk would maintain growth of 3-5%.

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