Barbarians at the barn 2


Claudia Stürzinger und Silva Lieberherr work at Breat for all in the area of agriculture.

The milkman - how investments can lead to bankruptcy

Doodhwala – milkman – was the name of a start-up that developed a digital subscription system for dairy products in three major Indian cities. The company was founded in 2015 and by the year 2018, it delivered 30,000 litres of milk daily sourced from local producers. By 2021, Doodhwala wanted to reach 10 million milk subscriptions. To achieve this goal, they went looking for investors.

The milkman received USD 2.2 million from the private equity fund “Omnivore Partners”. Among the investors in this fund were several development banks, including SIFEM (Swiss Investment Fund for Emerging Markets), which contributed USD 7 million to Omnivore’s “India Fund II”. At SIFEM, the state-owned development bank that invests in private companies in emerging markets via Obviam, private equity investments account for well over half (63 %) of all investments, as can be seen in last year’s SIFEM annual report.


What exactly happened after Omnivore invested remains uncertain. It is certain, however, that Doodhwala went bankrupt in 2019 and the two founders disappeared from the scene. What remained were outstanding obligations to more than a hundred employees, 35 milk suppliers, several customers and lawsuits in court, according to a report by GRAIN, a partner organisation of Bread for All. Manjunatha Krishnamurthy of Erden Creamery, one of the major milk suppliers for Doodhwala, chooses clear words: “Neither the investor, Omnivore, nor the proprietors of Doodhwala took any responsibility. … With the easy money invested by Omnivore, there was no oversight and no review processes were followed to check the leakages in the system and delivery business of Doodhwala,” he says angrily on the phone. Erden Creamery and two other milk suppliers lost a total of almost USD 250,000.

Why Doodhwala went bankrupt and the role played by Omnivore Partners is still not clear. But Krishnamurthy says: “the investor, the Omnivore director, deserted the sinking ship (Doodhwala’s board of directors: editor’s note) a month before its closure, leaving us in the lurch”. Well – he could do that with confidence. After all, private equity deals allow fund managers to extract management fees plus remuneration and often hidden profit-sharing from the company – whether or not the company eventually goes bankrupt. “Doodhwala story is not about investment, but it was a fraud … with us, the bulk milk suppliers,” Manjunatha Krishnamurthy adds.

Dilution of responsibility

The twin principles of transparency and responsibility are sought but mostly in vain in the business of private equity investments. Obviam, managing SIFEM, sees the story differently. When asked, they say that the failure of Doodhwala was caused by larger players in the region, some of whom had made aggressive takeovers. The majority of the staff had found new employment, the customers had not been harmed and there were no more outstanding bills owed to the suppliers. At least the latter is evidently not true, as the bills owed to Krishnamurthy are still unpaid. SIFEM also stresses that the investments were indirect and that the responsibility for the investment activity lies with the fund manager.

This illustrates the problem of development banks investing in such projects via private equity funds, because according to the GRAIN report, the investors in the Omnivore Fund received a 25% return on their investments. But nobody bears responsibility for the sustainable development of the company and

those who depend on it. The state-owned development bank SIFEM, for instance, says such risks are part of its government mandate. Moreover, the Omnivore Fund’s stake in Doodhwala was very small, at only five percent. For SIFEM, too, it was a small part of its investment, and the risk of failure was taken into account. But not everyone gets off as lightly in such cases – some, like Manjunatha Krishnamurthy and his company Erden Creamery, end up at the brink of ruin