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Prabhat Dairy raises fresh funds from Proparco, may raise more next year 

The firm was earlier in talks with Abraaj Capital for funding but went ahead with the French financial institution.
BY  Diksha Dutta

Ahmednagar-based Prabhat Dairy Pvt Ltd has received fresh private equity funding from Proparco, a French development financial institution. This is part of a larger funding of around Rs 140 crore which included infusion from Rabo Equity’s India Agribusiness Fund.

The firm did not officially disclose how the overall quantum is split between the investors but a top company executive said Proparco has now put in Rs 60 crore (around $10 million when the deal was closed a few weeks ago). Last year in September, India Agribusiness Fund, a private equity fund sponsored by Rabobank, had invested Rs 80 crore in the company. Other investors in India Agribusiness Fund include IFC besides a string of European development financial institutions such as DEG, FMO and CDC.

Rabo Equity’s chief executive Rajesh Srivastava said, “We had put the first tranche of Rs 80 crore in the company last year. Rabo and Proparco had together committed to put money in the company. The stake held by Rabo is a significant minority one in Prabhat Dairy—i.e, between 20 and 30 per cent.”

Earlier a separate PE investor Abraaj Capital was close to investing in Prabhat Dairy along with Rabo’s fund, but the deal fell through and eventually Abraaj did not invest in Prabhat, confirmed sources.

“The company intends to use the investment to set up a new manufacturing facility at Vashi for milk, yogurt and ice cream; expand its facilities in Shrirampur to include products such as cheese and UHT milk; and increase existing capacities for sweetened condensed milk, milk powder, dairy whitener and concentrated butter,” said a spokesperson from Prabhat Dairy.

Ravi Raj, head of finance at Prabhat Dairy, said, “The total investment in this manufacturing facility in Vashi will cross Rs 100 crore. We invested in this facility last year when Rabo infused capital in the company. We will be using the overall Rs 140 crore funding by March 2014. Next year, we may look for another round of funding.”

He said the company clocked revenues of Rs 660 crore for the year ended March 2013 against Rs 480 crore in the previous financial year.

Prabhat Dairy products include toned and raw chilled milk, sterilised condensed milk, milk powder, lassi, butter and ghee. The company is promoted by Sarangdhar R Nirmal, currently the chairman and managing director. It also supplies dairy based food ingredients to multinationals and Indian food and beverage companies. Prabhat Dairy also markets a wide range of value added dairy products under Prabhat, Flava and Milk Magic brands.

World milk production in 2012 was estimated at around 750 million tonnes with India, the world's largest milk producing country, churning out around 127 million tonnes, according to United Nations’ body FAO. The highly fragmented market is expected to double in size in 10 years.

The industry has also attracted interest from various private equity players over the past three years. Last year, IDFC Alternatives invested Rs 155 crore in Manchar-based Parag Milk Foods, which is also backed

by Motilal Oswal Private Equity. Previously Carlyle had invested in Tirumala Milk Products. There are other players like Kwality Dairy and Creamline Dairy which are looking for private equity funding.

(Edited by Joby Puthuparampil Johnson)

Prabhat Dairy Ltd. is engaged in manufacturing dairy products. Its products include pasteurized milk, sterilized flavored milk, traditional sweets, packaged drinking water, ultra-heat treatmented milk and desi ghee. The firm also offers milk-based specialty ingredient products, such as partially skimmed milk, skimmed milk powder, skimmed milk preparations, full cream milk powder, and specialty milk powder used in the production of other milk and food products. The company was founded in 1998 and is based in Pune, Maharashtra with an additional office in Ahmednagar.

Proparco SA is a private equity arm of Agence Francaise de Developpement. It provides growth capital to companies in emerging and developing countries. The firm offers loans, equity, guarantees and financial engineering to financial, infrastructure and productive sectors. It also offers advisory services which are complementary to its range of financial instruments. The company was founded in 1977 and is based in France.

Abraaj Capital Ltd. is a private equity and venture capital investment firm with over $7.5 billion under management. It provides finance for buyout and growth capital transactions to companies operating in the Middle East, North Africa and South Asia regions. It seeks to invest in healthcare, fertilizers, manufacturing, media, pharmaceutical, aviation, oil and gas services, financial services, retail, logistics, real estate, infrastructure, education and power sectors. It invests through its country-specific Funds across 3 primary strategies (i) Private Equity where majority and significant minority investments greater than $50 million; (ii) Small and Mid-Cap private equity investment, targeting influential minority investments of less than $50 million; and (iii) Private Equity Real Estate primarily yield-generating real estate investments. The company was founded in the year 2002 and is based in Dubai, United Arab Emirates.