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Acumen invests in Madhya Pradesh dairy start-up

Business Standard:  September, 2015

New Delhi: Acumen, a not-for-profit global venture fund, has invested Rs 11 crore ($1.8 million) in Sahayog Dairy, an integrated entity in the segment, based at Harda district in Madhya Pradesh. The dairy sources milk from centres across five adjoining districts.

“Sahayog has a strong procurement network, good chilling and processing plant, and operates in an extremely large milk market. It’s one of the best dairy brands coming out of central India,” said Siddharth Tata, associate portfolio director at Acumen. Business potential is not the only consideration.

Sahayog has trained about 11,000 in dairy farming and will train 33,000 more under a programme of the National Skill Development Corporation, for which it has received a soft loan of Rs 7 crore. ‘‘It is committed to improving the livelihoods of central India’s smallholder farmers,” stated Acumen.

Sahayog provides a set of services that aims at improving a farmer’s business by at least a fifth over 12-24 months. The company offers programmes and initiatives, from training to para-veterinary services, employing advanced technology at every step. “By bringing milk directly from its source, Sahayog creates a fair and transparent marketplace for rural farmers,” said Ajit Mahadevan, Acumen’s India director. “Its focus on farmers and enabling them to grow and expand their business is important to creating a successful, sustainable agricultural sector.”

Dairy is an important and quickly growing part of the agricultural sector, with the country standing as the world’s largest producer of milk. Nearly half of all rural households own a cow or a buffalo, making dairy farming the second most prevalent occupation, while the country’s flourishing urban population has made India the largest consumer of dairy products in the world. Dairy farming, however, remains highly fragmented, and relies on smallholder farmers who take up dairy production as a supplementary source of income. “India’s fast growing dairy industry offers a tremendous opportunity for building inclusive businesses that improve productivity and provide market access for smallholders,” said Siddharth Tata. “Investing in such enterprises in the dairy industry is core to our investment strategy.”

Nearly 18 per cent of Acumen's money is in agricultural enterprises that boost the incomes of small farmers. Since 2001, Acumen has invested $83 mn (Rs 550 crore) in 24 enterprises in India, impacting 16.5 mn people. Starting in 2013, Sahayog has grown to work with 23,000 farmers from a little more than 300 villages across five districts. It also operates 350 milk collection centres, where it is tested and evaluated, and smallholder farmers receive an instant receipt for the quality and quantity delivered. It has set up a modern milk chilling and processing plant in Dewas, Madhya Pradesh.

Sahayog procures 30,000 l a day, selling 10,000 litres directly under its own brand and the rest in upcountry markets in Harda, Hoshangabad and Khandwa. It competes with Sanchi (Madhya Pradesh State Cooperative Dairy Federation), which enjoys an 80 per cent market share in the area, and Amul.

Sahayog plans to use the investment proceeds to strengthen its back-end, set up more collection centres and raise daily milk procurement to 100,000 litres, from the current 30,000 litres, Anand Patidar, founder and chief executive, told Business Standard.

The company says it takes pride in its transparent milk procurement system, where, as mentioned, the quality and quantity is measured and the farmer immediately gets a receipt. Sahayog also pays slightly more than Sanchi. “We are delighted to be partnering with Acumen in this next stage of our growth. Acumen’s rich expertise in the agricultural sector, as well as its deep commitment to social impact, made it a natural partner for us,” said Patidar.

Private equity ventures have backed several entities, including Parag Milk, Prabhat Dairy and Tirumala Milk Products, which was bought 18 months earlier by French dairy firm Le Groupe Lactalis for $275 mn.