The Hindu Business Line : Sangam Dairy to strengthen byproducts biz

Hyderabad March 14 Sangam Dairy is infusing a soft loan of Rs 7 crore from the National Dairy Development Board (NDDB) towards meeting its working capital demands.

The dairy, based in Vadlamudi in Guntur district of Andhra Pradesh, with 470 lakh litre milk collection this year, also plans to strengthen its by-products business, according to Dr N. Jagan Mohan Rao, Managing Director.

The NDDB loan will be for a short term with a 5.5 per cent interest rate, which we will get next month and repay by end-June. The dairy has achieved considerable mechanisation and automation and wants to consolidate in the face of the increasing number of private players, he told Business Line.

The dairy, which has eight by-products made from milk (sweet lassi, flavoured milk, basundhi etc) is expanding beyond Guntur. It hopes to close the year with a turnover of Rs 130 crore, up from Rs 117 crorelast fiscal, Dr Rao said.

Sangam Dairy enjoys a market share of over 50 per cent in the district, despite the entry of 27 private players in the past decade. It has a network of about 600 milk societies, which form the supply chain for its milk collection.

Dr Rao said the period 2002 to 2005 saw a dip in milk collection across the State, essentially due to scarcity of water and raw material, especially fodder. This resulted in a drastic fall in collection for the company also from a record 761 litres to around 450 litres during the period.

Andhra Pradesh, which was a net exporter of milk, has as a result, become an importer, purchasing from neighbouring Karnataka, Tamil Nadu and Maharashtra. The demand for milk itself has gone up considerably, he added.

The skimmed milk powder business has been lucrative for the dairy, which has very huge capacities built in. "We are doing contract work for players from Karnataka and Maharashtra and the market seems to be good," Dr Rao said.

A major challenge for the dairy remains the large workforce. By 2011, up to 300 employees, out the existing 740, are expected to retire. The VRS package offered has not elicited good response. "We are making efforts to make optimum utilisation of the people expertise now," he said.

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