If Amul comes with an IPO…

Amul’s tagline ‘The Taste of India’ can not be doubted under any source of imagination. The story of Amul (Anand Milk Union Limited) started in 1946 with 247 litres of milk to do away with the exploitation of middlemen in milk collection and give the villagers maximum returns. From then, Amul operating under Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF) is today jointly owned by 25 lakh milk producers in Gujarat, with 11,962 village level milk collection centers.

In 2005-2006, Amul has an average daily milk collection of 63 lakhs litres with a handling capacity of 99 lakh litres. The striking truth is that being a cooperative, it had Rs. 3,774 crore turnover and planning actively to take it up to the 10,000 crore mark. This is what makes Amul a unique, Rs 2,200 crore enterprise.

Out of the entire milk procured, approximately 40 per cent is sold as liquid milk and 60 per cent is converted to value added products. Amul has taken on multinationals head on, HLL in ice-creams, Cadbury in chocolates, Nestle in dairy powder, and commands a staggering 86 per cent market share in butter. Recently, Amul even did not show interest in Hershey’s proposal of a tieup.

Amul advantages stems from the following facts – it has a cost-effective production, it has diversified in value-added products under the ‘Amul’ umbrella, it has loyal customers, a strong brand recall and a strong distribution network.

If Amul were to come up with an IPO (though being a co-operative and free from clutches of being in public domain, it is a highly unlikely scenario), it would generate as much interest as has never been witnessed in the Indian stock market history, probably much more than the Reliance Industries maiden issue. This is because, every India irrespective of social status, caste, religion and region, has been a staunch Amul eater right from his childhood across its product categories.

Even an investor not having invested in the market at all before, would be tempted to invest in its IPO, the retail participation would be unprecedented and HNIs, FIIs, MFs, FIs would be latching up to get a pie of Amul’s holding. Since Amul’s financials are in private domain, we are not in a position to comment on the capital requirements and valuation of the company. One thing is for sure, if Amul ever becomes public, MNC would be ready to pay a hefty premium to get a controlling stake in it, as the company’s business model, scale of operations and management are something which could qualify among the world’s finest and has excellence written all over it.

Never miss the classiest of ads in Indian corporate world, the weekly Amul hoarding, exhibiting in every city’s skyline, with the Amul Butter Girl, conveying a satire from a current event. To see the current and past topicals, click here.

Update: For 2006-2007, Amul has become a $1 billion entity with turnover of Rs. 4300 crores and that too backed by a shoestring budget of 1% on marketing. The value of a brand cannot be justified more than this illustration.