New Delhi, Aug 12 (IANS) Temasek-backed dairy products maker Milky Mist Dairy Food Ltd has warned that its heavy dependence on milk procurement from Tamil Nadu, concentration of sales in South India and reliance on a handful of product categories are among the key risks to its business, according to its red herring prospectus (RHP) filed for its initial public offering.
The company which opened its public issue for subscription between August 11 and August 13 has highlighted that 94.5 per cent of its raw milk procurement in fiscal 2026 came from Tamil Nadu, making it vulnerable to disruptions including adverse weather, disease outbreaks among cattle, farmer protests, policy changes and supply shortages in the state.
In addition, any significant disruption in Tamil Nadu could affect its ability to procure adequate quantities of quality milk, its primary raw material, and hurt production, sales and profitability, Milky Mist said.
Apart from that, the company is also exposed to geographic concentration risk with South India contributing 69.2 per cent of revenue from operations in fiscal 2026.
Any economic slowdown, competitive pressures, shifts in consumer preferences, regulatory changes or natural disasters in the region could have a disproportionate impact on its business, it said.
In terms of dependence, the company further flagged that paneer, cheese and curd together contributed 59.1 per cent of revenue in fiscal 2026.
Moreover, the company disclosed contingent liabilities of about Rs 229 crore as of March 31, 2026, comprising export obligation-related liabilities under the Export Promotion Capital Goods (EPCG) scheme, disputed statutory liabilities and bank guarantees.
Of the total contingent liabilities, EPCG-related obligations accounted for Rs 195 crore.
Failure to meet export obligations under the scheme could require it to repay duty benefits along with applicable interest and penalties, according to Milky Mist.
The company is also contesting multiple GST demands. It said it received tax demands relating to input tax credit claims, classification disputes and other issues, and has challenged some of the orders before judicial and appellate authorities.
Milky Mist also highlighted its leverage, reporting outstanding fund-based borrowings of ₹13.91 billion as of May 31, 2026. Total borrowings stood at ₹16.72 billion as of March 31, 2026, the prospectus showed.
The company said higher debt levels increase financial leverage and interest costs, while failure to comply with lender covenants could result in acceleration of repayments, foreclosure on assets or restrictions on business operations.
Another major risk stems from operational concentration. Milky Mist's primary manufacturing facility is located in Perundurai in Tamil Nadu, and disruptions caused by equipment breakdowns, industrial accidents, extreme weather or natural disasters could affect production and business continuity.
The company also warned of risks related to volatile prices of packaging materials, sugar, cultures and other inputs, which accounted for nearly 18% of revenue in fiscal 2026. Most of these materials are sourced without long-term contracts, exposing the company to supply and pricing fluctuations.
Additionally, Temasek-backed Jongsong Investments Pte. Ltd. invested in Milky Mist through a pre-IPO placement and select secondary share transactions, according to the company.
The Rs 1,553-crore IPO comprises a fresh issue of Rs 1,428 crore and an offer for sale of Rs 125 crore. The price band has been set at Rs 133-140 per share.
--IANS
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