Ranchi-based HR Food Processing Private Limited (HR Food), which manufactures and markets dairy products under the brand ‘Osam’ has raised Rs 45 crores ($6.7mn) in Series B funding. This round of funding was led by Lok Capital advised Growth Catalyst Partners (GCP) – the third fund from the India focused VC firm along with co-investment from existing investor, Aavishkaar India II Company Ltd. The funds will be utilised by the company to expand its production capacity and further its distribution outreach into neighbouring districts in Jharkhand and Bihar.

Following the commercial launch in 2015, Osam has established itself as a leading private dairy brand in Jharkhand, with a procurement network reaching more than 10,000 dairy farmers, processing around 40,000 litres per day and selling products through a network of 3,000 plus retailers across Jharkhand. Leveraging this fundraise, HR Food has already acquired another dairy plant in Jharkhand and is looking at other acquisitions to capture a significant share of Eastern India’s dairy market.

India is the largest consumer of dairy products and the consumption of milk alone constitutes to 400 million litres per day. The dairy market is expected to grow at 16% CAGR and reach $155 bn by FY 2020. However, the per capita consumption of dairy in East India is almost 50% lower than the national average, indicating huge potential for companies like HR Food to create strong consumer brands and build large dairy businesses.

Founded by Abhinav Shah, Rakesh Sharma, Abhishek Raj and Harsh Thakkar, HR Food identified a large demand-supply gap in the states of Bihar and Jharkhand that have low penetration of organized dairy players and focused on building a seamless dairy supply chain in these underserved areas. The company positively impacts the livelihoods of dairy farmers by training and enabling them with modern practices in dairy farming, procurement of livestock, design of farms, milk procurement, processing, packaging and delivery. HR Food’s integrated model, procures milk directly from farmers in Bihar, processes it at its facility in Jharkhand and sells its products like milk, curd, lassi, and paneer to retailers.

Talking about the latest round of funding, Abhinav Shah, Co-founder and CEO of HR Food, said, “We are very excited to partner with Lok Capital for this critical fundraise and thankful for Aavishkaar’s ongoing support, which has been indispensable in building the Osam story. With this round of fundraise, Osam is well poised to deepen its outreach into key target markets in East India, with an expanded production capacity enabling our growth, and emerge as the leading dairy brand in Eastern India.”

Agri-diary is one of the important investment themes for Lok’s third fund as it offers good growth potential and the right blend of socio-economic impact and brand creation. The fund will support businesses that create value for small and marginal farmers along with generating good commercial returns. Lok believes that there is tremendous scope for agri-dairy enterprises to innovate, scale-up and address the challenges faced by the Indian agri and dairy sectors.The funding in Osam marks Lok’s first investment in dairy and second investment in the agri-diary space, following earlier investment in a Pune-based company, SV Agri Processing from its fund II – Sarva Capital.

Announcing the latest investment, Rajesh Babu, Director, Lok, said, “Given the large opportunity present in the dairy industry and the significant scope for high-quality private sector players to operate in the space, Lok is keen on backing integrated business models that make dairy and agriculture more sustainable for farmers. Osam is transforming the dairy sector in Jharkhand and Bihar through high quality customer offerings and improving farmer livelihoods by providing transparency on price, quantity and quality to over 10,000 farmers.”

Ajay Maniar, Partner, Aavishkaar said “We are extremely encouraged by the growth and build-out of Osam. We have invested in the company since the ideation stage and are delighted by the company’s progress and the validation of our investment thesis. We look forward to the founding team to continue and build on the momentum as they establish Osam as the dominant player in Jharkhand and Eastern India.

Unitus Capital was the exclusive investment banking advisor. Richa Natarajan, Vice President, Unitus Capital (UC) said, “Dairy has always been a critical part of UC’s mission given its potential to transform the lives of millions of farmers. We are very proud to have played a role in Osam’s successful fund raise and look forward to helping them scale over the coming years!”

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