Whalesbook
Milkfood Limited has agreed to sell its property in Village Agwanpur, Moradabad, Uttar Pradesh, for ₹130 Crore. This updated deal is aimed at cutting the company's debt and funding expansion into new dairy products.
The property contributed ₹74.92 Crore to Milkfood's revenue in FY 2024-25, accounting for 16.73% of its total turnover. M/s Bareilly Dairies Limited and other individual parties are the buyers in a transaction confirmed to be arm's length. The sale is expected to be completed by April 15, 2026.
This divestment is a significant step for Milkfood, which has faced financial challenges, including past high debt levels and low interest coverage ratios. The ₹130 Crore infusion will be used to pay down existing borrowings, easing the company's financial strain. The proceeds will also support planned business development.
This includes expanding into growing dairy segments like ice cream, cheese, and butter, targeting higher-margin products to drive future revenue and improve financial stability. Milkfood, a dairy producer since 1973, has navigated considerable financial pressures. Reports have highlighted consecutive quarterly losses and high debt-to-EBITDA ratios.
The sale is anticipated to result in a cleaner balance sheet with reduced debt obligations. This should lower interest expenses, potentially boosting profitability. The capital infusion will enable investment in high-growth dairy areas, supporting a strategic shift towards products with better margins.
However, risks remain for the company. Milkfood faces substantial contingent liabilities, including ₹1,896 lakhs in GST demands and ₹4,364 lakhs in other contingent liabilities. The success of its expansion plans and market reception to new product lines will be critical.
Milkfood's strategic adjustments occur as competitors like Dodla Dairy focus on capital efficiency, Heritage Foods maintain a balanced profile, and Hatsun Agro pursue scale with significant debt. Milkfood's pivot aims to strengthen its financial position and enhance competitiveness.
Investors will be watching the sale's completion by the April 15, 2026 deadline. Key areas to monitor include actual debt reduction, market penetration in its new dairy segments, progress on scaling up its Patiala plant to a projected ₹750 Crore turnover by FY 2026-27, and management's ability to improve EBITDA margins towards a target of 7%.