Dindigul Farm Product Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Food Processing |
| Sub-class | Dairy Ingredients |
| Location | Dindigul, Tamil Nadu |
| Establishment Year | 2010 |
Management
| Managing Director | R Rajasekaran |
| Educational Qualifications | Master of Science in Chemistry from Annamalai University |
| Experience | 20 years of experience in the dairy processing industry |
| Annual Salary | ₹ 24 Lakhs |
| Total Number of Employees | 101 |
About
Dindigul Farm Product Limited (DFPL), specializes in processing whole and skimmed milk to produce various dairy ingredients. The company’s processing facility in Dindigul spans 15 acres and adheres to stringent quality standards such as FSSC 22000. DFPL also complies with regulations from FSSAI, Halal, Kosher, and other relevant authorities.
Products and Services:
DFPL offers a diverse range of dairy ingredients catering to various industries. Their product portfolio includes:
- Products for New Age Nutrition, Protein Fortification, Functional, Taste, and Texture Enhancing Applications:
Milk protein concentrates are designed for enhanced bioavailability and superior protein quality. - Products for FAT and SNF Standardization:
Skimmed milk powder and dairy whitener are used to adjust fat and solids-not-fat content in dairy products. - Products for Baking and SMP Replacement Applications:
Whey powder, BakeTex (a mineral-rich acid whey powder), and milk whey powder are used in baking and as skimmed milk powder replacements. - Products for Legacy Nutrition Applications:
Acid Casein is a protein source used in various food applications. - Products for Infant Nutrition:
Fat-filled powders and microencapsulated powders are designed to resemble human milk and improve nutrient delivery. - Butter:
Sold under the brand name EnNutrica Butter.
Clients:
Dindigul Farm Product Limited caters to a diverse clientele across various industries, including:
- Nutrition Industry
- Dairy Industry
- Ice Cream Industry
- Baking Industry
- Food Ingredients Industry
Dindigul Farm Product Limited also aims to reach end consumers directly through its B2C brand, Activday, which offers customized nutritional solutions for various age groups. Sources and related content
Raw Materials and Suppliers:
The primary raw materials used by DFPL are:
- Whole Milk: Procured directly from a network of over 4,000 farmers and 50 dairy farms, as well as from third-party suppliers.
- Skimmed Milk: Sourced mainly from a group company, A R Dairy Food Private Limited, and also from the open market.
Dindigul Farm Product Limited procures approximately 50,000 litres of milk daily directly from farmers and an additional 30,000-100,000 litres from the open market or third-party suppliers.
Marketing:
Dindigul Farm Product Limited markets its products under the brands ENNUTRICA and Activday, supplying diverse industries across more than 15 states in India and three countries internationally. The company aims to expand its international presence, particularly in ASEAN and European markets. Its products cater to the dairy, food ingredients, nutrition, ice cream, and baking industries.
Other Key Aspects:
Quality Control:
Dindigul Farm Product Limited emphasizes quality control and assurance throughout its operations. Milk undergoes testing at village collection centres and chilling centres. Key products are regularly tested by NABL-approved labs to meet the standards of certifying authorities. The company has a well-defined quality system and standard operating procedures (SOPs) to ensure product safety and customer satisfaction.
Export:
Export sales mostly to Sri Lanka contributed 1.5% of the total revenue of the company for the period ending December 2023.
Manufacturing Process Flowchart
Revenue – Region
Audit and Legal
Auditor’s Remarks:
The auditors stated in their report that they did not find any qualifications or adjustments necessary in the company’s restated financial information.
Non-Compliances and Other Issues:
Contingent Liabilities:
As of December 23, 2023, Dindigul Farm Product Limited has contingent liabilities amounting to ₹1.50 lakhs.
Legal Cases:
Group company, A.R. Dairy Food Private Limited, is involved in several legal cases and tax notices that could indirectly impact Dindigul Farm Product Limited.
Tax Proceedings against the Company:
Income Tax (e-proceedings): Two cases with the amount involved listed as “unascertainable.” These likely pertain to ongoing proceedings related to income tax assessments.
TDS (Tax Deducted at Source): One case with ₹4.16 Lakhs involved. This likely relates to a discrepancy or dispute regarding the tax deducted at source from payments made by the company.
SWOT Analysis
Strengths
| Diverse Product Basket: Dindigul Farm Product Limited offers a wide range of dairy ingredients catering to various industries, allowing them to meet diverse customer needs and tap into multiple markets. |
| Established Milk Procurement Process: The company has a well-developed network for procuring whole milk directly from farmers and skimmed milk from reliable sources, ensuring a consistent supply of raw materials. |
| State-of-the-Art Infrastructure: DFPL’s processing facility is equipped with modern machinery and technology, enabling efficient production and adherence to quality standards. |
Weaknesses
| Past Financial Performance: Dindigul Farm Product Limited incurred losses and had a negative net worth in recent years, raising concerns about its financial stability and ability to generate consistent profits. |
| Dependence on Key Customers and Suppliers: A significant portion of the company’s revenue comes from a few key customers, and it relies heavily on a group company for skimmed milk supply, creating concentration risks. |
| Limited International Presence: While expanding internationally, DFPL’s current international sales are relatively small compared to its domestic market. |
Opportunities
| Growing Dairy Industry: The Indian dairy industry is experiencing substantial growth, offering significant opportunities for Dindigul Farm Product Limited to expand its market share and product offerings. |
| Increasing Demand for Value-Added Dairy Products: The rising demand for value-added dairy products, particularly in the nutrition and health segments, presents a favourable market for DFPL’s specialized ingredients. |
| Expanding International Markets: The company’s focus on entering new international markets, especially in ASEAN and Europe, provides avenues for revenue growth and diversification. |
| Direct Consumer Reach: The launch of the B2C brand Activday allows Dindigul Farm Product Limited to tap into the growing consumer market for customized nutritional solutions. |
Threats
| Intense Competition: The dairy industry is highly competitive, with both organized and unorganized players vying for market share. Dindigul Farm Product Limited needs to continuously innovate and maintain cost competitiveness to stay ahead. |
| Fluctuating Raw Material Prices: The prices of whole milk and skimmed milk, the primary raw materials, are subject to fluctuations due to seasonal and other factors, impacting DFPL’s profitability. |
Porter’s Five Forces1
| Threat of New Entrants | HIGH |
| The dairy industry in India, particularly the dairy ingredients segment, has low barriers to entry. |
| Bargaining Power of Suppliers | LOW – MODERATE |
| The company relies on a network of farmers and third-party suppliers for its raw materials. While it has established relationships with over 4,000 farmers and 50 dairy farms, the absence of formal supply contracts could lead to price fluctuations and supply disruptions, giving suppliers some bargaining power. |
| Bargaining Power of Buyers | MODERATE – HIGH |
| DFPL’s customer base is somewhat concentrated, with a significant portion of revenue coming from a few key clients. This could give those buyers leverage in negotiating prices and terms. |
| Threat of Substitute Products or Services | LOW |
| While plant-based alternatives are gaining popularity, dairy ingredients still hold a strong position in various industries due to their functional properties, taste, and nutritional value. |
| Rivalry Among Existing Competitors | MODERATE – HIGH |
| The dairy industry in India is highly competitive, with numerous players, including both organized and unorganized entities. The industry is fragmented and faces challenges related to quality, reliability, pricing, and goodwill. |
Peer Comparison
The company’s performance on various financial and operational metrics compared to its peers for FY 2024 is as follows:
| Key Performance Indicators FY 2024 | Dindigul Farm Products Limited | Dodla Dairy Limited | Parag Milk Foods Limited | Modern Dairies Limited |
| Revenue from Operations (₹ in Crores) | 85.53 | 3,125 | 3,139 | 362 |
| Operating Profit Margin (%) | 15.14 | 9 | 6 | 6 |
| Return on Equity (ROE) (%) | 15.5 | 10.6 | NA | |
| Return on Capital Employed (ROCE) (%) | 58.7 | 22.1 | 11.0 | NA |
| Debt to Equity Ratio | 1.84 | 0.04 | 0.71 | NA |
Green Box
IPO Funds:
Funding Capital Expenditure:
The company plans to invest a portion of the net proceeds ₹1212 Lakhs in capital expenditure. This includes procuring new machinery and equipment to expand its production capabilities and introduce new product lines, such as a butter-making line and a sodium caseinate line.
Meeting Working Capital Requirements:
Dindigul Farm Product Limited intends to allocate the remaining net proceeds towards fulfilling its working capital needs. This will enable the company to manage its day-to-day operations, procure raw materials, and maintain adequate inventory levels to meet growing demand.
New Production Lines:
Butter Making Line: DFPL intends to set up a new production line dedicated to butter manufacturing.
Sodium Caseinate Line: The company plans to establish a multi-product line capable of producing sodium caseinate and other products at varying capacities.
Retail Packing Line: A new retail packing line is planned to facilitate the increased distribution of products through retail chains.
Modification of Existing Capabilities:
Infant Milk Retail Packing Prep Line: DFPL aims to modify its existing facilities to include an infant milk retail packing preparation line, capitalizing on its acquired knowledge and experience in infant milk powder production.
Technological Upgrades:
Electro Dialysis Machine: The company plans to install an electro-dialysis machine for whey powder processing. This will enhance product compatibility with various industries, including chocolate, dairy, and nutrition, and enable the production of specialized ingredients like flavoured cheese powders and customized infant milk formula batches.
Expanding geographical presence and diversifying the customer base:
The company plans to enter new domestic and international markets, enhance its sales and marketing team, and offer white-label infant milk formulas and customized solutions under its B2C brand Activday.
Direct Milk Procurement:
DFPL’s extensive network of village collection centres enables them to procure a significant portion of their whole milk directly from farmers. This direct sourcing model potentially offers advantages in terms of quality control, cost efficiency, and a stable supply of raw materials.
Focus on Quality and Standards:
The company places a strong emphasis on quality control and assurance, adhering to international standards like FSSC 22000 and obtaining certifications from various regulatory bodies. This commitment to quality enhances its brand reputation and instils customer confidence.
High-Profit Margins: Dindigul Farm Product Limited recently has demonstrated strong profitability margins, with its EBITDA and PAT margins exceeding those of its listed peers. This indicates efficient cost management and a potentially lucrative business model.
Industry Outlook:
The overall dairy market in India, valued at approximately Rs. 13.17 lakh crore in 2021, is anticipated to expand to Rs. 30.84 lakh crore by 2027, reflecting a compound annual growth rate (CAGR) of about 15%.
The market for liquid milk is projected to grow at around 16% annually over the next 5-6 years. Products like cheese, flavoured milk, lassi, buttermilk, whey, and organic milk are expected to witness a growth rate exceeding 20% per annum. Meanwhile, traditional dairy products such as paneer, ghee, ice cream, khoa, and curd are estimated to grow at a rate between 11% and 20% annually.
Amber Box
Compliance with Food Safety and Quality Standards:
Dindigul Farm Product Limited operates in a highly regulated industry with stringent food safety and quality standards. The company must adhere to various regulations, including the Food Safety and Standards Act, 2006, and obtain necessary certifications like FSSC 22000. Failure to comply with these regulations or maintain certifications could lead to penalties, product recalls, or even suspension of operations, impacting the company’s reputation and financial standing.
Limited International Presence: While actively pursuing international expansion, DFPL’s current international sales are relatively small, limiting its global market reach and diversification compared to peers with a more established international footprint.
Red Box
Net Losses and Negative Net Worth:
The company incurred net losses in fiscal years 2021 and 2022 and had a negative net worth during those years as well as in the fiscal year ending March 31, 2023.
Industry-Specific Risks:
The dairy industry is subject to inherent risks, such as seasonal fluctuations in milk production, potential product contamination, and evolving consumer preferences. These risks could disrupt DFPL’s operations and affect its financial performance.
Working Capital Dependence:
Dindigul Farm Product Limited relies on significant working capital for its operations, and its working capital requirements are projected to increase in the future. This dependence on external financing and the potential for increased working capital needs could strain the company’s financial flexibility.
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- The force value of “LOW” is considered good Click Porter’s Five Forces article for more information. ↩︎
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