Turnaround hopes help Hatsun and Heritage stocks surge

CHENNAI: Dairy firms Hatsun Agro Products and Heritage Foods have gained a third in a month, outperforming the broader market, as investors bet on their turnaround and global funds such as Carlyle set new valuation benchmarks in the sector.

The entry of French company Groupe Danone in this lucrative market and expansion of Swiss food giant Nestle are also driving investors to buy these listed companies. The Chennai-based Hatsun, sellers of Arogya milk and Arun ice-creams, surged nearly 20% to Rs 231.70 on Wednesday.

The shares have nearly doubled so far this year, outperforming the Sensex which is down 4% and FMCG Index which is almost flat. Heritage Foods, promoted by former Andhra Pradesh chief minister N Chandrababu Naidu, has jumped 35% since February.

“We have devoted our time in building our dairy ingredient business,” said RG Chandramogan, chairman and managing director of Hatsun Agro Product, the largest private dairy in India.

“We have transformed ourselves as a branded player in this space from a commodity player where volatility is more.” Hatsun has an annual production capacity of 20,000 metric tonne of milk powders, and 11,000 metric tonne of milk fat. Milk prices have doubled in many states across the country in the past five years as rising incomes have boosted consumption. The RBI blames rising milk prices, among others, as a cause of higher food inflation.

Ratings agency Crisil forecasts that the demand for milk and value-added dairy products has been growing at over 6-8 % a year. However, milk production growth would continue to lag at around 4-5% in the next five years.