FMCG giant Nestle India Pvt Ltd has entered into agreement for acquiring 26 per cent minority stake in Indocon Agro and Allied Activities Pvt Ltd, a company engaged in milk collection business in Western India.
The acquisition is subject to the parties fulfilling their respective obligations, the company said in a statement to the Bombay Stock Exchange (BSE) said.
Apart from milk and yogurt, Nestle sells popular products like Maggi noodles, Nescafe and KitKat chocolates in India.
Shares of Nestle India closed at Rs 4,749 on the BSE, up 0.63 per cent from their previous close.
The dairy industry has attracted interest from private equity players over the past three years. In the largest deal in Indian dairy space, IDFC Private Equity Fund III invested Rs 155 crore ($29 million) in Pune-based Parag Milk Foods Pvt Ltd in September 2012.
The total milk collected in India is 127 million MTPA worth Rs 3,50,000 crore and it is expected to increase to 7,00,000 crore by 2022, according to IDFC.
Most of this market is still dominated by unorganised players, with larger co-operatives like Amul accounting for only for three per cent of the Indian market.
VCCircle had recently reported that IFC and Cargill Ventures are in talks to invest in Dodla Dairy. Carlyle’s Asia Growth Fund is also investing Rs 110 crore in Guntur-based Tirumala Milk Products and IFC is backing Modern Dairies. There are other players like Kwality Dairy, Creamline Dairy and Prabhat Dairy, all looking for private equity funding.
In November last year, Nestle had invested Rs 287 crore (50 million Swiss Francs) in a research and development (R&D) centre at Manesar in Haryana. This is the company’s first investment in an R&D centre in India and is a part of Nestle’s global plan to focus on emerging markets.
In 2011, Nestle had a global turnover of 85 billion Swiss francs, out of which India contributed 1.5 billion Swiss francs, which is less than 2 per cent. The company at present gets 40 per cent of its business from emerging markets like India and China. Nestle India has eight manufacturing facilities in India.
(Edited by Prem Udayabhanu)