May 5, 2017

The $2 billion Rise Fund, a global impact investment fund managed by TPG Growth – the growth equity and middle market buyout fund of alternative asset firm TPG – announced it has invested $50 million in India’s Dodla Dairy Limited. This investment represents not only the fund’s first investment in the food and agriculture sector, but also its first investment in the country of India since its establishment in December.

Founded in Hyderabad in 1995 by D. Sesha Reddy and D. Sunil Reddy, Dodla is a producer of fresh dairy products. In addition to its core product – fresh packaged liquid milk – the company also offers curd, butter, and ghee; selling 900,000 liters of milk and six tons of dairy products per day, according to the company website.

TPG Growth has approximately $72 billion in assets under management, and established The Rise Fund with the mission of targeting investments that would achieve positive social and ecological benchmarks while also generating positive returns in seven sectors: food and agriculture, education, energy, financial services, growth infrastructure, healthcare, technology, media, and telecommunications. Each sector has a dedicated lead who works closely with each sector’s investment team. The agriculture and food sector is being led by Joy Basu.

Social Impact

Due to the perishable nature of dairy products combined with India’s climate and challenges with infrastructure along the supply chain, Dodla sources its raw milk from more than 250,000 smallholder farmers across 7,000 villages every year. It is through this business structure that The Rise Fund sees a window to effect social change.

Our procurement strategy—working closely with thousands of local farmers to bring our product to market—has helped us not only reach our leading position in the marketplace, but also positively impacts our local communities,” said Sunil Reddy, founder of Dodla. “We feel proud and fortunate to put forward a high-quality product that also helps our suppliers thrive. We are excited to partner with The Rise Fund to extend our reach and accelerate our growth.”

“The idea of delivering change, coupled with the mission of driving the business successfully, resonates with entrepreneurs. We are seeing even more inbound interest in The Rise Fund from entrepreneurs than we had expected,” Bill McGlashan, TPG Growth founder and managing partner and co-founder and CEO of The Rise Fund told the Economic Times.

Dodla has created a farmer engagement program that assists many of its farmer-suppliers get key inputs, and through its work with regional banks, has helped more than 2,300 farmers secure financing for operating capital. The Rise Fund’s goal is to support Dodla in the fair, transparent and efficient operation and management of its procurement network.

“India has more dairy farmers than any other country, and is the world’s largest and fastest-growing producer of milk,” said McGlashan in a company statement. “Yet many of the small farmers who produce that milk do not have access to the basic tools and networks necessary to sustainably and reliably generate profits. As a result, most of India’s smallholders are only earning a few dollars a day, surviving on the brink of poverty.”

The Promise in Indian Dairy

Demand for milk in India is expected to grow to 200 million tons by 2022, according to the National Dairy Development Board. Meanwhile, the organized dairy sector in India has been growing at a CAGR of 22 percent for the past five fiscal years according to a report issued by CRISIL Ratings according to Dairy Reporter. However, the report states that the industry is expected to see even more significant growth over the next three years, with the value-added category seeing growth of between 22 percent and 24 percent over that time. Of all value-added dairy products, ice cream, cheese and yogurt are expected to post the highest growth rates.

“The value added segment is the major driver of this growth…,” Ashok Sharma, president and chief executive, agri and allied services, Mahindra and Mahindra, which itself entered the retail dairy segment with the launch of its Saboro brand, told business Standard.

This growth, driven by demand from an increasingly urban, health conscious, and wealthy population is expected to draw between Rs 9,000 cr and Rs 10,000 cr (US$1.35 billion – US$1.5 billion) over the next five years according to Shiva Mudgil, vice president senior dairy analyst, food and agribusiness research and advisory at Rabobank.

TPG agrees. “India’s dairy consumption has been experiencing robust growth, fueled by urbanization, increasing incomes, and health consciousness among consumers,” said Vish Narain, partner at TPG Growth. “Dodla is well-positioned to capitalize on these growth trends. It has a strong management team, an established presence in local markets, and an expanding selection of products. We look forward to working with Dodla to enhance its brand and grow its platform.”

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.