New York-based Brahma Management, an India-focused private equity, is in advanced talks to pick up 50% stake in Cobra Beer India for a consideration of $7.5 million.
Lord Karan Billimoria-owned Cobra Beer had appointed Grant Thornton London to rope in an investor for its Indian operations. Last year, Billimoria, faced with mounting debt, divested 50% stake in Cobra’s mainstay UK operations to North American brewing giant Molson Coors. Brahma Investments had earlier picked up stake in DLF- the realty developer along with Merrill Lynch.
The London-headquartered Cobra Beer’s India unit was not part the earlier transaction and was demerged into a standalone entity subsequently. A Cobra India spokesperson could not be reached for immediate comments.
A source directly familiar with the situation said, an initial agreement was already in place, and a formal deal announcement could happen later this month. Brahma’s investment will be through a combination of fresh equity and convertible instruments. Both the original promoter and Brahma will have equal board representation and equal management rights.
Former Shaw Wallace and United Breweries honcho, Ravi Kaza, will continue spearheading the management as Managing Director. Cobra Beer India reportedly sells just under two million cases (of 7.8 litre each). It owns one brewery in Patna and has multiple contract brewing tie-ups across India.
This is one of the rare instances of private equity deals in the Indian alcoholic beverage space, which is heavily consolidated. Beer-to-airline billionaire Vijay Mallya-led UB Group controls dominant market share in the domestic beer and spirits market.
The latest development comes at a time when India’s beer consumption continued to vault at over 12% in FY10. Overall beer volumes touched 200 million cases, up from 176 million cases in FY09.
A heavily consolidated industry with one player having strong distribution clout makes it tough for smaller brewing entities as well as MNCs entering India. But long-time industry observers suggest that robust consumption story throws up opportunities to carve out profitable niches, which is of particular relevance to brands like Cobra.
Riding high on the affluent Indian consumer story, the few PE deals in the alchoholic beverage space include New Vernon Private Equity picking up stake in Indage Vintners Ltd and GEM India Advisors picking up stake in Nashik Vintners Pvt Ltd, the maker of Sula Wines, which also received second round of infusion of about $12.5 million from Indivision India Partners.
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