HR Food Processing Pvt. Ltd, which manufactures and markets dairy products under the brand name Osam, has raised Rs 45 crore (around $6.7 million) in its Series B round of funding, it said in a statement.
The round was led by Lok Capital-advised Growth Catalyst Partners. The Ranchi-based company will use the funds to expand its production capacity and enhance its distribution outreach into neighbouring districts in Jharkhand and Bihar.
HR Foodâs existing investor Aavishkaar also participated in this round.
âWith this round of fundraise, Osam is well poised to deepen its outreach into key target markets in East India, with an expanded production capacity enabling our growth,â said Abhinav Shah, co-founder and CEO of HR Food Processing.
Shah said the capital will also help the firm grow inorganically. The dairy firm, which has already acquired another dairy plant in Jharkhand, is looking at other acquisitions to capture a significant share of Eastern Indiaâs dairy market
Established in 2015 by Shah, Abhinav Shah, Rakesh Sharma, Abhishek Raj and Harsh Thakkar, the company procures milk directly from farmers in Bihar, processes it at its facility in Jharkhand and sells its dairy products such as milk, curd, lassi, and paneer to retailers.
HR Food claims to be nurturing more than 10,000 dairy farmers and processing around 40,000 litres of milk a day. It is selling its products through a network of more than 3,000 retailers across Jharkhand.
âOsam is transforming the dairy sector in Jharkhand and Bihar through high quality customer offerings and improving farmer livelihoods by providing transparency on price, quantity and quality to over 10,000 farmers,â said Rajesh Babu, director, Lok Capital.
The funding in Osam marks Lok Capitalâs
first investment in dairy and second investment in the agri-diary space, following an earlier investment in a Pune-based company, SV Agri Processing from its fund II â Sarva Capital.
Aavishkaar, which had put in money in the company in 2013, had earlier also backed Odisha-based dairy startup Milk Mantra.
Indian dairy market
India is the worldâs largest producer of milk but the countryâs dairy market is highly fragmented and is dominated by local milkmen, regional brands and milk cooperative Amul. The sector has attracted several investors in the recent years, and has also seen consolidation moves.
In July, India's largest private dairy firm by revenues Kwality Ltd raised Rs 520 crore ($77.4 million) from alternative investment giant Kohlberg Kravis Roberts & Co Ltd (KKR) in a structured finance transaction to boost its consumer facing business.
French giant Groupe Lactalis SA recently bought the milk products business of Mumbai-listed Anik Industries Ltd for Rs 470 crore ($70 million) in its second acquisition in India in as many years. The deal helped Lactalis go neck and neck with India's top private dairy firm Hatsun Agro Product Ltd in terms of revenue.
Lactalis had also acquired India's second-largest private dairy firm Tirumala Milk Products Pvt. Ltd two years ago from private equity firm Carlyle and its promoters in a big-ticket deal.
Milk production and consumption are growing at a fast clip in India, making the country an attractive market for not just global dairy firms but other investors as well. Dairy companies such as Prabhat Dairy, Parag Milk and Dodla Dairy have raised private equity funding. Prabhat Dairy made its debut on bourses last year and Parag Milk went public this year, although their initial share sales struggled to attract investors.
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