Hatsun Agro ₹1,000 Crore Capex Plan: Targets ₹12,000 Crore Revenue with Production Expansion

What Happened ?

Hatsun Agro Product informed the exchanges about a BusinessLine interview in which Chairman R.G. Chandramogan outlined the company’s FY27 expansion strategy.

The company plans to invest around ₹1,000 crore in expanding milk procurement, strengthening its distribution network, modernising production facilities, and increasing marketing efforts.

The investment forms part of Hatsun’s broader strategy to significantly increase product volumes and retail reach while sustaining strong revenue growth despite rising input costs across the dairy industry. 

key details

Expansion Highlights:

• Planned FY27 capital expenditure of approximately ₹1,000 crore.
• Investment will be directed towards:
  • Expanding milk procurement.
  • Strengthening distribution infrastructure.
  • Modernising production facilities.
  • Increasing marketing initiatives.
• Daily product sales targeted to increase from 1.84 crore packs to 2.4 crore packs over the next two years.
• Management expects FY27 revenue to approach ₹12,000 crore if current growth momentum continues.
• FY26 revenue stood at ₹9,959 crore, representing 14.5% growth over FY25. 

Business & Product Developments:

• The company plans to launch protein-rich beverages within the next one to two months.
• Additional product launches are planned across:
  • Ice cream.
  • Chocolate products.
• Hatsun currently operates:
  • Around 4,100 HAP Daily outlets.
  • 220 Ibaco premium ice cream stores.
• The company plans to increase its HAP Daily network to over 5,000 outlets by the end of FY27. 

Note:

• Management stated that milk procurement prices have increased 13% year-on-year due to adverse weather conditions, higher cattle feed costs, and increased milk fat prices.
• Instead of implementing frequent price hikes, Hatsun delayed passing on higher procurement costs to customers until input prices stabilised.
• The company also highlighted that its direct procurement and distribution model, without intermediaries, supports relatively stronger margins compared with peers.

Risk Analysis

Summary:

• The planned capex supports Hatsun’s long-term growth strategy, but higher milk procurement costs and execution of expansion projects remain important factors that could influence profitability.

Key Risks:

• Rising milk procurement prices continue to pressure margins.
• Weather-related disruptions may affect milk availability.
• Expansion projects require timely execution.
• Delayed consumer price increases may temporarily compress profitability.

Worst Case:

• If raw milk inflation remains elevated and consumer demand weakens, margin expansion and returns on the planned ₹1,000 crore investment could take longer than expected.

Risk Level: Medium

Company Commentary

• R.G. Chandramogan, Chairman, said the planned ₹1,000 crore investment will support expansion of procurement, distribution, manufacturing, and marketing capabilities.
• Management stated that the company has already achieved 19% growth in Q1 FY27 and believes sustaining this momentum could help revenue approach ₹12,000 crore during FY27.
• The chairman also highlighted that Hatsun’s direct procurement and distribution model, combined with strong brand leadership, has enabled the company to maintain comparatively better margins despite rising input costs.