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