With a milk processing capacity of about 45 lakh litres a day and with plans to further expand the capacities to strengthen its markets, Hatsun Agro Product is looking at the next phase of growth. The ₹4,300-crore company, with liquid milk brand Arokya, a wide range of dairy products under Hatsun brand, and Arun and Ibaco ice-creams, tided over 2017-18 though the overall market conditions had turned tough for the dairy sector. RG Chandramogan, Chairman and Managing Director, shares with BusinessLine some insights on the developments. Excerpts.

It has been a tough year for the dairy sector overall, how has it been for Hatsun Agro?

In 2017-18, we invested heavily in projects, and piled up debt of over ₹1,200 crore as of March-end. But the recent rights issue, which was oversubscribed, strengthened our balance-sheet and reduced debt. Our debt equity is close to 1:1.

We have invested in wind mills and in a packaging film unit which have started giving results. There are some more projects in the pipeline which will start delivering results in four-five months. For instance, there is a 2-MW solar power project and a new dairy unit coming up at Dharapuram, near Palani, in southern Tamil Nadu.

Where does that put Hatsun Agro in the overall scenario?

As of now, we have a milk handling capacity of about 45 lakh litres per day, most of our capex in the South is done, at least for the next 18 months, except for some balancing equipment. But beyond that, in ice-cream, curd and milk we have adequate capacities, including the unit coming up at Dharapuram.

On the expansion planned in Maharashtra…

We have decided to set up a ₹100-crore, greenfield dairy unit in Solapur. Land acquisition will be finalised in less than a month. It will have a daily production capacity of about 2 lakh litres of milk and 1 lakh litres of curd. This will enable us to fully cater to the demand which we are now meeting from our units in north Karnataka and Telangana.

Are there any product diversifications and new lines that you are looking at?

Linked to our ice-creams business, we have decided to enter the premium brands of chocolates using our exclusive chain of Ibaco ice-cream outlets. We have invested about ₹18 crore in a chocolate-making unit using Italian technology. Production can go up to 125,000 pieces a day. Display and chilling equipment are being set up in 145 Ibaco outlets and the product will be placed fully by mid-August. This is a new category of premium chocolates targeting the gifting segment.

This complements our ice-cream cake range, which accounts for about 25 per cent, or about ₹25 crore, of business in this segment.

What has been the overall impact of the milk glut?

It is due to the oversupply situation that we were hesitant to chase new geographies last year for milk. This would have been a loss-making proposition, and, as mentioned, we ourselves were loaded with debt and heavy interest. Hatsun Agro focussed on branded products where we have better control on costs. In commodities, margins are not in our control. But there has to be an element of commodity business and that will range from 3 per cent to 8 per cent.

Farmers’ income cannot be increased by simply increasing output. We have to ensure their operations are efficient, cost-effective and products are globally competitive. Hatsun Agro works with Tamil Nadu Agriculture University where it has established a chair for solutions in dairy farming.

A glut when not managed properly will be followed by shortage as dairy farmers who have suffered will cut back. The next three-four months will be crucial for the sector as the government has lately stepped in to support co-operatives.

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