Home Food Heritage Foods plans Rs 120 cr annual capex

Heritage Foods plans Rs 120 cr annual capex


Heritage Foods Limited (HFL), a leading dairy company owned by Andhra Pradesh Chief Minister N. Chandrababu Naidu’s family, will make a capital expenditure of Rs 100-Rs 120 crore every year to achieve its revenue target of Rs 6,000 crore by 2022.

Heritage Foods plans Rs 120 cr annual capex
HFL currently has a 10-12 percent market share in the dairy business in the country

The capex will be in the back-end processing as well as front-end like freezers and chillers over the next four years, said Nara Brahmani, executive director of HFL on Wednesday.

She told reporters that the company registered a 30 per cent growth as of Q3 of the current financial year and was on course to achieve its Rs 6,000 crore target. The company had close to Rs 2,700 crore revenues in 2016-17.

“This is quite encouraging. We have grown organically and inorganically by acquiring Reliance’s dairy business,” she said while launching a new premium range of ice-creams under the brand name Heritage ‘Alpenvie’.

Brahmani, who is also the daughter-in-law of Chandrababu Naidu, said initially these products will be available in key metros in the South and West and will eventually expand nationally. The company plans to invest Rs 80 crore over the next four years in the ice-cream business.

Brahmani said that for ice-cream they had a processing facility in Hyderabad with 20,000 litres per day capacity. “We need to be selling 50,000 litres per day by 2022. For that we have to look at one or two more processing facilities,” she said.

The revenue from the ice-cream business is expected to be Rs 230 crore by 2022.

HFL achieved 14 percent growth in terms of revenues till 2017 but it is looking at 25 percent growth over the next four years. Brahmani believes this is achievable as the company divested its retail business and is now focusing only on the dairy business.

“Our vision has changed. We want to focus more on value-added dairy products. We are looking at partnerships and acquisition, if possible. We have the advantage of direct milk sourcing which is the biggest challenge in the Indian dairy market which is growing at 15 per cent year-on-year whereas milk production is growing at four-five per cent,” she said.

The company significantly rationalised Reliance’s dairy business, which it recently acquired. It also acquired a new plant in Ludhiana with an investment of around Rs 20 crore to be able to cater to the Punjab, Himachal Pradesh, Chandigarh markets.

“We have three third party processing facilities that have turned into own facilities. We are looking at doubling volumes in that market in next one year,” she said.

HFL, which signed a joint venture with a French dairy company Novandie, plans to launch flavoured yoghurt by the end of 2018.

The company is currently processing 15 lakh litres of milk and milk products per day. It has set a target to increase this to 28 lakh litres by 2022.

HFL currently has a 10-12 percent market share in the dairy business in the country. It has 16 processing plants and is operating in 15 states. In 2017-18 it acquired two plants and expanded one plant.

The company is focusing on value-added products, which are expected to contribute to 40 percent in the revenues by 2022. This was 24 percent last year. Curd will contribute 70 percent of this revenue. The company claims to be the number one private sector player in curd and is planning to have a presence in the northern markets.

Brahmani clarified that the 2022 revenue target currently does not include any acquisitions. “However, if we come across any interesting ones, we will look at that,” she said adding that they will look at companies which will not cannibalise HFL’s existing business.