In Ranchi, a mini white revolution

Raya Dairy plans to expand into allied segments but securing a bigger share in the dairy space remains a challenge

Jharkhand is seeing the outbreak of a small but significant white revolution. Raya Dairy, a unit of HR Food Processing Pvt Ltd and the force behind a new wave of milk distribution in Ranchi, has recorded break-even within six months of starting operations.

Next on the agenda is a dairy-processing unit. "The dairy plant is being commissioned and we hope to commercially launch products by August 15 this year. In 2014-15, we want to record revenue of Rs 30 crore," says co-founder and marketing head Harsh Thakkar, betting highly on the processing unit.

Rakesh Sharma, chief financial officer, says, "We aspire to become one of the highest valued companies of the country in the dairy segment and, in the process, develop the sector in our home state."

The beginning
Earlier, chartered accountants Abhinav Shah, Abhishek Raj and Sharma, the venture's other co-founders, had stints at multinational companies, while Thakkar handled sales and distribution for major brands.

In April 2012, the four came together to set up a farm for the dairy, on an acre. The venture saw a rough start. The animals, brought from Punjab, contracted a disease; 12 died. "The financial impact was severe but the loss of animals and their enormous suffering was heartbreaking. Somehow, we kept our belief. We recapitalised and started afresh," recalls Thakkar.

Funding
The business was started through a cumulative investment by the founders; this was followed by debt from a bank.

Now, early-stage investor Aavishkaar has agreed to pump in Rs 15 crore. Ajay Maniar, principal, Aavishkaar Venture Management Services, says: Our investment in HR Food reflects our faith in the promoter team and its vision of building and scaling a dairy venture in the milk-deficient state of Jharkhand, the sector's growth prospects and the significant impact the company's milk-procurement operations will have in Bihar and Jharkhand. The investment will be in phases, through 12-18 months.

"India's dairy sector is expected to double through the next five years, aided by rising income levels, changing dietary habits and low per capita consumption. That, coupled with the fact that 75-80 per cent of the milk sector is accounted for by the unorganised segment, makes the investment case attractive."

The model
A total of 100 cows are attended to by 12 workers; 75 farmers supplement the dairy's output by pooling the produce of their cows. The distribution of milk is done by a team of six and coordinated by the four founders and a mentor-cum-consulting technologist.

Of the 1,500 litres of milk collected and distributed to about 300 houses daily, about 850 litres are procured at the dairy, while the rest comes from farmers outside.

Other than production and delivery costs, feeding and keeping the cows healthy requires substantial expenditure. Now, the company is growing fodder on an acre and this is helping cut costs.

Apart from its core activity of milk distribution, the venture intends to expand into related services - training, preparing project reports, designing farm layouts and sheds, procuring livestock and transportation.

Raj, head (plant, operations), says, "It is exciting to think we will be part of everyone's meals everyday, while achieving inclusive growth with our farmer network."

The road ahead
Sustenance and expansion are vital. With Aavishkaar agreeing to invest in the venture, Raya Dairy seems confident on the expenditure front. Chief Executive Shah says, "We have developed competencies by working on the ground; we have built a strong team, are adequately funded to meet capital expenditure and working capital requirements and are working hard to implement the many ideas we have. We are living a dream."

However, carving a bigger space in the dairy segment remains a challenge. Currently, the dairy sells milk loose alone. Once the processing plant is set up, it will also sell dahi, paneer, lassi and peda. The company might also consider introducing a range of ice creams.

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EXPERT TAKE

  Of late, awareness about the benefits of milk has increased nationwide. This has resulted in a huge demand-supply gap. Many of our states, including, Jharkhand, have not been able to do much to augment the cause of dairy development. Raya Dairy, set up by a group of young entrepreneurs is, therefore, a step in the right direction. For the success of any venture, passion is a prerequisite. In this project, all the promoters are passionate about their work. Another advantage is their experience and exposure to the corporate world in the streams concerned, such as cattle-keeping/milk-collection, finance, plant operations and marketing. Also, they have seasoned dairy professionals to guide them, which will go a long way in making the venture successful. I think because of all these factors, financers have come forward to support the venture.

An important aspect is the long gestation period in developing the brand. The founders are prepared to overcome the rigours of the gestation period, both psychologically and financially. The promoters' plan, broken into short, mid and long terms, is praiseworthy.

Dairy farming by the masses has been a successful model for the rural economy. There are many tribal belts where this model is working successfully.

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B S Manubansh, the author is a dairy consultant & ex-managing director, Barauni Dairy