Dinshaw’s Dairy plans to raise $100 million from PE funds

Company plans to dilute about 25-30% equity and is in the process of appointing an investment banker

Mumbai: Dinshaw’s Dairy Foods Ltd, a leading milk and dairy products manufacturer with a pan-India presence, plans to raise $100-120 million in private equity capital, said two persons familiar with the development.

The Nagpur-based company plans to dilute about 25-30% equity, said the first person quoted above, adding that the company is in the process of appointing an investment banker and is in discussions with Moelis & Co. for the mandate.

“We keep evaluating various fund raising options, including debt and equity, from time to time to support our growth plans. As a company policy, we do not respond to market speculation," said Jimmy Rana, managing director, Dinshaw’s Dairy Foods Ltd. A spokesperson at Moelis refused to comment on the matter.

The company may be valued at $300-350 million ( 2,000-2,300 crore) as part of the proposed fund raising, said the second person.

Dinshaw’s was established by brothers Dinshaw and Erachshaw Rana as a small dairy business in Gittikhadan, on the outskirts of Nagpur in 1933. In the same year, the company entered the ice cream business. The company entered a new phase of growth when the family’s second generation (Sam Rana and Jimmy Rana) joined the business in the 1970s. Between 2002 and 2010, the business was expanded into other products such as paneer, ghee, curd and milk powder. The company now has a large dairy business with a handling capacity of 500,000 litres per day. It has a presence in Maharashtra, Gujarat, Goa, Andhra Pradesh, UP, and parts of Karnataka, Rajastan, MP, Chhattisgarh, Orissa, and Jharkhand.

According to Shiva Mudgil, senior dairy analyst and assistant vice-president, food & agribusiness research and advisory at Rabobank, the Indian dairy sector is experiencing a strong growth in consumption largely driven by formalisation of the market from loose to packaged products and growth of the value-added dairy segment. “Private regional players aspiring to become semi-national/national will require capital to integrate the business, expand the product portfolio and scale up across different geographies. This is where the role of private equity as well as strategic investors will remain critical for the industry in the future," Mudgil said.

According to the National Dairy Development Board, demand for milk is expected to increase at a compounded annual growth rate of 5% from 138 million tonnes in 2014 to 200 million tonnes in 2022.

Growth in the sector is being driven by increased consumer awareness towards the need for higher protein diets, improved affordability due to growing disposable incomes, and the availability of standardised products through organised retail.

The potential for growth in the dairy sector in India has attracted several private equity investors and international firms.

Last year, the world’s largest dairy company Groupe Lactalis SA acquired 100% stake in Hyderabad-based Tirumala Milk Products Pvt. Ltd from its founders and private equity firm The Carlyle Group. As part of the $270 million deal between Lactalis and Tirumala, Carlyle, which had invested about $22 million, exited with nearly three times return on investment.

Private equity deals in the sector include IDFC Alternatives’ $28.8 million investment in Parag Milk Foods Pvt. Ltd in 2012; a $25-million investment in Prabhat Dairy Ltd by Rabobank’s India Agribusiness Fund and French development finance institution Proparco in 2013; and Cargill Ventures’ $20.3 million investment in Dodla Dairy Ltd. Since 2012, the Indian dairy sector has witnessed 14 private equity and venture capital deals worth $127 million till date, according to data from VCCedge.

In March, Mint had reported that Japan’s Meiji Co. Ltd was scouting for dairy assets in the country. Meiji, whose main business includes manufacturing and sale of confectionery, milk and dairy products, had reviewed some assets in India but hasn’t finalized a deal, Mint reported.

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