ECONOMYNEXT – Singapore-based fund manager Duxton Asset Management has tied up with Watawala Plantations to set up a Sri Lankan dairy farm with an investment of 11.5 million US dollars, aiming to improve local yields and replace imported milk products.
Vish Govindasamy, Group Managing Director of Sunshine Holdings, the parent firm of Watawala, said he expects a return on investment of about 17 percent, with the farm using imported cows and expertise on an estate where tea cultivation is no longer profitable.
The two companies will invest total equity of over six million US dollars in almost equal proportions and raise the remaining funds as debt.
The farm, on Lonach Estate, Ginigathhena, will import about 1,000 milking cows and produce about 30,000 litres of milk when running by the end of year, up from 1,500 litres of milk a day now.
“We have to build the farm and import the cows and get them acclimatized to the climate,” he told a news conference.
“Lonach Estate has a lot of workers and because tea is not doing well now, we unable to give them work,” he said. “With the farm coming, we can grow different types of feed stock which means more people will be employed.”
Desmond Sheehy, co-founder and Chief Investment Officer of Duxton Asset Management, said the fund mainly invests in the agricultural field, being the largest investor in dairy in Australia and having also invested in tea in India.
A subsidiary, Watawala Dairy Ltd., will run the dairy farm and will use imported, very efficient cows, and farming expertise to improve local farm practices, he said.
Duxton manages assets of 690 million dollars of which 460 million dollars in agricultural investments
“The dairy operation is expected to further diversity and strengthen the revenue streams of Watawala Plantations, which has benefitted from strategic diversification into palm oil,” a statement said.
“Once in full operation Watawala Dairy will expand its herd to 1,000 dairy cows and is forecast to generate over a billion rupees in revenue from the fourth year of operation” with significant potential for further expansion, it said.