RG Chandramogan remembers 1996 vividly. It was the year Hatsun Agro, the company he built from scratch, went public. “It was a disaster,” he remarks. “We overestimated things. Everybody congratulated us, nobody invested in us.” But a passionate badminton player who runs HAP Badminton Centre of Excellence in Virudhunagar, Tamil Nadu, Chandramogan has a habit of making a comeback in business too. The Tamil Nadu-based company’s market cap today stands at Rs.96.53 billion compared with Rs.186.25 million when it listed.
India’s largest private sector dairy player, Hatsun handles 30 million litres of milk each day, which it directly procures from about 400,000 farmers. With a portfolio of well-established brands like Arun, Arokya, Hatsun and Ibaco, it is now a Rs.43 billion company (see: Watered-down profit).
Litre by litre
Chandramogan, who started off as an entrepreneur in 1970, used to initially sell ice creams on a pushcart. Ice cream was then reserved for the small-scale sector with investments curtailed to a mere Rs.30 million. With a factory in Chennai he continued the Arun Icecreams business for 23 years before he entered the larger dairy segment. “We came to a saturation point by 1990,” remembers Chandramogan. So in 1991 he decided to start another ice cream factory in the then milk belt, Salem. Lesser logistical distance to the markets and lower real estate costs was an added advantage. The two factories were now taking care of distribution across a wider area with the Chennai factory catering to Chennai, Chengalpattu, Kumbakonam and Tanjore while the Salem unit took care of the rest of Tamil Nadu (south and west), Kerala and Karnataka.
In 1992, the dairy sector was opened for private players and in 1993 Chandramogan was there. “The government formalities, in fact, forced us to get into the sector,” Chandramogan says candidly. “To have a better control over procurement we were procuring milk from the farmers for our ice cream factory. In 1992 when the sector opened up we had an established network of farmers. So we decided to get into the dairy business.