Milk Mantra scale remains flat in FY21, turns profitable

India has seen a clutch of new-age dairy startups in the past decade. While Gurugram-based Country Delight emerged as one of the notable startups in the direct-to-consumer (D2C) dairy space, legacy companies such as Milky Mist and Milk Mantra have been scaling up at a decent pace.

Bhubaneswar-based Milk Mantra has managed to cross Rs 235 crore in revenue, as per its annual financial statements filed with the RoC. Importantly, the thirteen-year-old company posted a profit of Rs 23.25 crore in FY21.

Milk Mantra, under its flagship brand Milky Moo, offers a variety of products out of which pasteurized milk remained the largest revenue driver and formed 67.5% of its total operating revenue. The company has churned Rs 159.4 crore alone from pasteurized milk during FY21 as compared to Rs 157.8 crore in FY20.

Milk Mantra has a strong presence in Odisha and expanded into West Bengal through a contract manufacturing unit in Kolkata.

Apart from milk, curd and cottage cheese were the next two verticals (revenue-wise) in FY21 which grew 30.5% and 11.9% to Rs 41.1 crore and Rs 23.31 crore, respectively. It also made Rs 12.27 crore from the sale of buttermilk and cattle feed pushing the total operating revenue to Rs 236 crore in FY21.

When we compare Milk Mantra’s scale with its peers, Country Delight's collection surpassed Rs 320 crore while 30-year-old MilkyMist recorded Rs 928 crore topline in FY21. MilkyMist has not raised any equity round, however, Country Delight raised $147 million since its inception including a $108 million Series D round in May.

Milk Mantra has also raised nearly $40 million from the likes of Aavishkaar Venture Capital, Fidelity Growth Partners, Neev Fund, Eight Roads Ventures and US-based DFC.

Milk Mantra engaged in the manufacturing and selling of dairy products and the cost of materials stood as the largest cost center of the company, forming 77% of the overall expenses in FY21. This cost shrank 8.4% to Rs 171.13 crore in FY21 from Rs 186.82 crore in the preceding fiscal year (FY20).

Employee benefit expenses were the second largest expense for the company which grew 18.7% to Rs 16.98 crore in FY21.

Meanwhile, Milk Mantra managed to control its cost for transportation and contract labour by 20.3% and 4.7% to Rs 10.57 crore and Rs 3.28 crore in FY21. The company spent another Rs 1.15 crore for advertisement and promotion pushing the total expenditure to Rs 222.1 crore in FY21 which stood at Rs 239.8 crore in FY20.

While the company’s scale remained flat during FY21, Milk Mantra controlled overall expenditure and posted a profit of Rs 23.25 crore in FY21 against Rs 10.7 crore loss in FY20. The profit also led to improved ROCE and EBITDA margin for the company. Milk Mantra recorded a positive cash flow of Rs 17.46 crore from operating activities in FY21. On a unit level,  it spent Rs 0.94  to earn a single unit of operating revenue.

Milk Mantra is yet to file its FY22 figures but the company is targeting Rs 1,000 crore in revenue in the next five years. As of October 2021, the firm had a network of 75,000 farmers and it was looking to strengthen the supply chain and grow the farmer base by 50% in the next couple of years.

The entry of risk capital in the form of venture funding into what is essentially the milk business has certainly turbocharged growth among startups. While investors have bet on the sheer size of the sector to open up opportunities, with milk being the key driver of revenues for almost all of them, margins remain a challenge. Milk is highly commoditised with margins in single digits for even the profitable players. 

Importantly, the dependence on liquid milk limits geographical reach too, as perishability plays a role in limiting their area of operations. One reason why we continue to see regional champions rather than national firms in the sector, other than legacy incumbents that have made massive investments into distribution infra. In a competitive and price-sensitive market for value-added products, it will take a crisis, or a whole new large opportunity, for enough firms to break away from the pack and justify the investor bet on this sector.