A host of private equity biggies have shown interest to invest as much as $100 million to buy a stake in Pune-based dairy products firm Parag Milk & Milk Products, atleast three sources briefed with the matter told VCCircle.
Top bracket PE firms Bain Capital, TPG and KKR have emerged as frontrunners to invest in the range of $75 million to $100 million in the privately held company, sources added. Touted as a 'hot deal' in the investment circles, this could possibly be one of the first big deals as the new year sets in.
This will be the second round of capital infusion for the company. In 2008, India Business Excellence Fund, a fund managed by Motilal Oswal Private Equity Advisors Pvt. Ltd (MOPEAL), invested $13.98 million for 11 per cent stake in the company. This deal valued Parag at $127 million.
The proposed deal will be a mix of primary capital infusion and also see some secondary stake sale by Motilal Oswal Private Equity.
An email sent to Rakesh Sony, Director, MOPEAL for a comment did not elicit any response till the time of writing this article. A spokesperson for Bain Capital said, "we have no comments to offer," in an emailed response. KKR also did not respond to an email query while TPG spokesperson could not be immediately contacted.
Founded in 1992, Parag Milk Products which sells its products under the brand name ‘Gowardhan’ is one of India's largest private dairies with a capacity of 1,000,000 litres per day. With a turnover of about Rs 650 crore, Parag Milk Foods has been selling milk and ghee in Pune and Mumbai since the mid-90s. But in the last couple of years, the company expanded to more value added products like cheese and flavoured yogurt. It has invested Rs 110 crore to build what it claims is Asia's largest cheese plant (with a capacity to process 40 tonnes of raw cheddar daily).
It currently claims a 40 per cent share in Mumbai modern retail outlets for packaged cheese.
The company has also built its capabilities for selling in the international markets and exports milk powder, butter and butter oil, anhydrous milk fats and ghee to 27 countries in the Middle East, South East Asia and Africa. Its clientelle includes Yakult (for its skimmed milk powder) and BEL rocco-based manufacturer of cheese).
But Parag like other dairy firms also faces huge competition- Besides national biggies Amul and Mother Dairy, it faces multinationals such as Nestle, Kraft (which recently acquired Cadbury globally, thereby getting a passage into India) and Groupe Danone.
The dairy business has seen other deals as investors bet on Indian consumption story. Earlier, Carlyle had invested in Guntur-based Tirumala Milk Products Private Limited which is setting up the country's largest integrated dairy with an investment of over Rs 5,000 crore in the next three to four years.
According to a research by Technopak Advisors, a strategy consulting firm, Liquid Dairy Products (LDP) represent almost one-fifth of all beverages sold worldwide. Emerging countries like India, Pakistan, China and the Middle East are expected to continue to drive LDP consumption worldwide over the next three years. The total LDP consumption is forecast to rise at a 2.2 per cent CAGR globally to 281 billion litres.