IPO Deep Dive: Milky Mist Dairy Analysis

Milky Mist Dairy Food Ltd., a Tamil Nadu-based dairy company, has filed its DRHP with SEBI. The company aims to raise Rs 2,035 crore through an IPO, comprising a Rs 1,785 crore fresh issue and an offer for sale of Rs 250 crore.

Finology Research Desk has analysed the company this week, providing a clear verdict on its IPO. Find out in this article.

What makes the Indian dairy industry special?

The Indian dairy industry was valued at Rs. 10.80 lakh crore in FY25, and is projected to grow at a CAGR of 10.3% reaching Rs 17.70 lakh crore by FY30. This growth is driven by rapid urbanisation, changing consumer preferences for packaged dairy food and advancements in the dairy supply chain infrastructure.

 

Source: DRHP

As the world’s largest milk producer, India accounted for approximately 25% of global milk production in 2024, with Uttar Pradesh, Rajasthan, Madhya Pradesh, Gujarat, and Maharashtra being the major milk-producing states.

 

Source: Brickwork Ratings

The Indian raw milk market is divided into two segments: marketable surplus and self-consumption. Marketable surplus accounts for 65% of the total raw milk production, while self-consumption, where farmers retain milk for their personal use, accounts for the remaining 35%.

 

Source: DRHP

The marketable surplus is further divided into organised and unorganised sectors. 

1. The organised sector represents about 38% of this marketable surplus.

• Within it, cooperatives like Amul (Market leader in the organised segment), Nandini, and Mother Dairy hold 45% to 50% share. 
• While private dairies such as Milky Mist and Hatsun account for the remaining 50% to 55%.

2. The unorganised sector, on the other hand, is dominated by traditional milkmen, which accounts for about 62% of the marketable surplus.

 

Source: DRHP

Traditionally, the Indian dairy industry was largely unorganised (64%), made up of local and small-scale dairies. However, several factors are driving a shift towards a more structured and organised sector, such as rising disposable incomes, urbanisation, increased demand for packaged products, and growing consumer preference for value-added items like cheese, paneer, and curd. Amul remains the longstanding market leader in the dairy industry with a market share of 75% share in milk, 85% in butter and 66% in cheese, backed by deep trust, loyalty, and a consistent taste.

Moreover, larger companies are rapidly acquiring regional brands to utilise their established procurement and distribution networks to enter new regions and scale faster. For example, Hatsun Agro acquired Jyothi Dairy and Milk Mantra to deepen its southern and eastern presence. Heritage Foods expanded in North India by acquiring Reliance Retail’s dairy business. Global firms like Lactalis have also entered aggressively by taking over established local dairies.

Source: DRHP

In terms of product segmentation, liquid milk accounts for approximately 49% of the Indian dairy market, while value-added dairy products (VADPs) such as cheese, paneer, and curd contribute around 51%. The Indian VADP market is currently valued at approximately Rs 5.50 lakh crore in FY25 and is projected to grow at a CAGR of 12.5%, reaching Rs 9.90 lakh crore by FY30, driven by rising disposable incomes, greater health awareness and increasing demand for premium and packaged dairy products. Furthermore, busy urban lifestyles have led to a decline in home preparation of traditional dairy products like paneer, curd, and ghee, boosting demand for ready-to-consume packaged alternatives.

Business model of Milky Mist:

Founded in 1997 by T. Sathish Kumar, Milky Mist is engaged in the business of manufacturing and selling dairy products such as paneer, cheese, curd, butter, ghee, yoghurt, ice cream, as well as frozen ready-to-eat, ready-to-cook food and chocolates. The company does not sell regular liquid milk, except for lactose-free milk and UHT (Ultra High Temperature) milk varieties. It operates through an integrated farm-to-retail model, sourcing the majority of its raw milk directly from farmers across Tamil Nadu, Andhra Pradesh, and Karnataka.

 

Source: DRHP

Raw milk supplied by farmers is transported to the company’s two manufacturing facilities: the Perundurai Manufacturing Facility in Tamil Nadu, which is dedicated to producing value-added dairy products like paneer, ghee, and cheese, and the Bengaluru Manufacturing Facility, which focuses on frozen foods such as ready-to-eat and ready-to-cook items.

Finished products are distributed based on shelf life and storage needs. Perishable goods like cheese, curd and butter are transported in refrigerated (reefer) trucks, while products like ghee and milk powder are sent in non-refrigerated (ambient) trucks. These are then stored at regional warehouses (clearing & forwarding depots) before being dispatched to distributors and retail outlets.

Revenue mix of Milky Mist:

 

 

Source: DRHP

Milky Mist reported revenue of Rs 2,349 crore in FY25, with 96% coming from the Indian market and just 4% from exports, reflecting a limited international presence.

In India, South India remains the primary source, contributing 71% of the total revenue. Whereas West India contributed 17.78%, North and Central India together made up 4.96%, and East India contributed the remaining 2.49%. While South India remains Milky Mist’s core market, the company is gradually expanding its presence across other regions of India and into international markets.

 

Source: DRHP

From a product perspective, value-added dairy products continue to be the primary drivers of the business. Paneer accounted for the largest share of revenue at 29.52%, followed by cheese with 17.36% and curd with 15.75%. Together, these three categories made up about 62.63% of the total revenue. Ice cream contributed 5.86%, while others (including ready-to-eat items, ghee, buttermade up the remaining 31.51%.

Unit economics of Milky Mist:

 

 

Source: DRHP, Finology Research Desk

Cost of goods sold (COGS), a major component of Milky Mist’s expenses, rose 24% to Rs 1,553 crore in FY25 from Rs 1,253 crore in FY24. However, as a share of total income, it fell from 69% to 66%, indicating improved operational efficiency, likely due to economies of scale or lower input costs.

Employee benefit expenses grew 45% from Rs 116 crore in FY24 to Rs 145 crore in FY25. But as a share of total income, these costs have remained stable at around 6% over the past three years, indicating that the increase has kept pace with the overall revenue growth.

Finance costs rose from Rs 72 crore in FY24 to Rs 86 crore in FY25, marking a 19% increase. The rise was mainly driven by higher borrowings during the year. This indicates a greater reliance on debt, possibly to support expansion in both scale and capacity.

Depreciation and amortisation expenses rose from Rs 107 crore in FY24 to Rs 136 crore in FY25. However, as a percentage of total income, they remained stable at around 6%. The increase in absolute terms likely reflects the impact of higher capital expenditure during the year.

Other expenses rose from Rs 236 crore in FY24 to Rs 346 crore in FY25. These include logistics, marketing, repair, and maintenance etc, and increased both in absolute terms and as a share of revenue, from 13% in FY24 to 15% in FY25.

Tax expenses rose from Rs 23 crore in FY24 to Rs 41 crore in FY25, primarily due to an increase in deferred tax, which grew from Rs 14 crore to Rs 25 crore in FY25.

Despite strong revenue growth, the company’s net profit margin has remained flat at 2% over the past three years. While gross margins improved, the gains were offset by a rise in operating and fixed costs, particularly other expenses and finance costs, keeping overall profitability unchanged.

Porter’s five forces analysis of Milky Mist:

 

 

Source: Finology Research Desk

High bargaining power of buyers: Buyers hold significant bargaining power in the dairy industry because of the availability of many alternatives from other major brands such as Amul, Parag Milk Food, Dairy, Hatsun Agro Products etc. Price sensitivity is high in this segment even a small price difference can cause consumers to switch brands.

Moderate bargaining power of suppliers: Suppliers in the dairy industry are primarily small farmers supplying raw milk. Milky Mist sources directly from over 67,000 farmers across Tamil Nadu, Andhra Pradesh, and Karnataka, without involving middlemen. To build loyalty and reduce shifts of farmers to competitors, it offers veterinary support, training on cattle nutrition, and inputs like cattle feed and fodder seeds. These efforts help deepen relationships and improve milk quality, though procurement costs can still vary due to weather conditions or rising feed costs. For other raw materials like sugar, stabilisers, additives and packaging, the company does not have long-term supplier agreements, which exposes it to price and supply fluctuations.

High competition in the industry: Competition in the Indian dairy industry is intense, with many national and regional players aggressively competing on price, product innovation, and distribution, with Amul being the undisputed market leader. Milky Mist must invest in newer product categories, including plant-based dairy alternatives like soy milk, almond milk etc, along with effective distribution and branding efforts to compete effectively in the market..

Moderate threat of substitutes: There is a growing threat from substitutes in this industry, particularly from plant-based milk and dairy alternatives, as health consciousness rises among urban consumers. Although dairy remains integral to Indian cuisine and culture, this trend could lead to a shift in demand over time. To stay relevant as consumer preferences evolve, Milky Mist needs to keep innovating and growing its product range to protect its market share.

Moderate threat of new entrants: Entering the Indian dairy market at the scale of Milky Mist presents significant barriers, including large capital investments in processing, distribution, and branding. While smaller brands can emerge, scaling up to compete with established players remains challenging. The sector faces tight structural constraints, with milk procurement costs fluctuating due to weather and feed price variations, making cost control difficult. Though value-added products like cheese and yoghurt offer better margins and more stable pricing, the market is still largely dominated by liquid milk, with a market share of 49%, a low-margin product subject to strict price regulation and intense consumer price sensitivity. Additionally, its short shelf life demands tight logistics and reliable cold storage, further increasing operational pressures. All these factors make entering and scaling in the Indian dairy industry very challenging.

Key Strengths and Weaknesses of Milky Mist:

Strengths:

1. Dominant private player in certain categories: Milky Mist holds a leadership position in the organised packaged paneer segment with a 17% market share in FY25, the highest among private players. It is also ranked among the top three private brands in packaged cheese and yoghurt, with market shares of around 5% and 7% respectively, reflecting its strong brand presence across key value-added dairy categories.
    
2. Strong procurement network: Milky Mist has built a strong, direct procurement network with over 67,000 farmers across Tamil Nadu, Andhra Pradesh, and Karnataka. By cutting out middlemen, it gains better control over milk quality. Its support initiatives like veterinary care, cattle nutrition training, and farm inputs help build farmer loyalty and ensure a steady, reliable supply.

Weaknesses: 

1. High debt burden: The company’s debt has surged 1.7 times, rising from Rs 798 crore in FY23 to Rs 1,376 crore in FY25. With a debt-to-equity ratio of 4.20 and an interest coverage ratio of 2.02, the financial position appears highly vulnerable. Even a small decline in earnings could impact its ability to meet debt obligations, putting significant pressure on cash flows. This raises serious concerns about the company’s ability to sustain operations and maintain financial stability in the long term.
    
2. Concentration risk: Milky Mist faces high concentration risk as its value-added products, which derives the majority of its revenue, are solely manufactured at its Perundurai facility in Tamil Nadu. This dependence makes it vulnerable to regional disruptions, whether from natural events, regulatory changes etc which could impact the company's operations significantly.

The Bottom Line

Milky Mist has built a strong presence within the private segment of the organised dairy market, especially in paneer, where it leads the category. Its direct sourcing from over 67,000 farmers across southern India allows better control over quality and supply. The brand is well established in South India and is gradually expanding into other regions and product categories. However, the business faces challenges, including high debt, rising finance costs, and flat margins despite growing revenue. With its IPO around the corner, what do you think lies ahead for Milky Mist as it enters this new phase?