Mumbai: US-based private equity fund Bain Capital is engaged in talks to buy out ice cream company Dinshaw’s Dairy Foods Pvt. Ltd in a deal that may value the Nagpur-based firm at about ₹800-900 crore, said two people aware of the development, requesting anonymity.
The company, promoted by the Rana and the Bapuna families, makes ice cream and dairy products such as pasteurized milk, curd, and butter.
“Both families have been trying to sell the business for the past four years now over succession issues. They were also in talks with Hindustan Unilever Ltd (Ltd). The promoters may sell a controlling stake or exit the company fully, depending on the offer," said one of the persons mentioned above.
In September, Business Standard reported that HUL was in talks to buy the ice cream maker.
The process is being advised by Deloitte India, the second person cited above said.
“We do not comment on speculations and rumours," said Jimmy Rana, managing director at Dinshaw. Bain Capital refused to comment on the development. An email sent to Deloitte remained unanswered.
The company, established in 1932, is held equally between the Rana and Bapuna families. The latter bought a 50% stake in the firm in 2002 when Sam and Jimmy Rana, the sons of the founder-brothers Dinshaw and Erachshaw Rana, merged the company with the Nagpur-based distillery group Bapuna.
The company markets its products under the Dinshaw’s brand and has a significant market position in the ice cream and packaged milk segments in Maharashtra. It has two manufacturing plants, one for ice cream and the other for milk and other dairy products, on the outskirts of Nagpur.
As of fiscal year ending 31 March 2018, the firm’s sales stood at ₹579 crore and losses at ₹2 crore, according to a 27 December 2018 note by rating agency Crisil. The rating agency, however, noted that the company has modest operating capacity and limited geographical reach.
“The scale of operations remain average with revenue of ₹480-580 crore in the last three fiscals through 2018. Further, with limited scope to expand geographic reach, the bulk of the revenue comes from within Maharashtra. Ice cream capacity of 230,000 litre per day is also average as against other established players," the rating company said.
The value of the ice cream and frozen desserts segment in India grew 20% in 2016 to reach ₹10,200 crore in sales and is forecast to see a constant value compound annual growth rate of 11% over 2016-21, leading to sales of ₹17,000 crore, according to a December 2016 report by market researcher Euromonitor International.
Gujarat Cooperative Milk Marketing Federation Ltd, which sells under the Amul brand, is the leading firm in the ice cream and frozen desserts segment, while HUL is the second-largest, according to the Euromonitor report.
In the past two years, the ice-cream businesses in the country have seen significant interest from domestic and foreign strategic firms.
In November 2017, South Korea’s Lotte Confectionery Co. Ltd acquired Ahmedabad-based ice-cream maker Havmor Ice Cream Ltd for ₹1,020 crore (approximately $157 million).