Future Group acquires supermarket chain Nilgiris

Mumbai: The Kishore Biyani-led Future Consumer Enterprise (FCE) has bought a 97.97 per cent stake in Nilgiris, the Bengaluru-based supermarket chain, from Actis, a private equity firm in the UK. The deal is valued at an estimated Rs 300 crore.

Nilgiri Dairy Farm, operating company of the grocery chain, has become a subsidiary of FCE. Set up in 1905, Nilgiris is majority owned by Actis. Promoted by the Mudaliar family, Nigiris entered Actis' portfolio when the latter bought a 65 per cent stake in 2006 for $65 million and subsequently increased its stake. Actis has been looking to exit the investment since 2012.

Kishore Biyani, group chief executive officer, Future Group, said, "This acquisition is synergistic as it enables strengthening and expanding convenience stores through franchises in an asset-light model as well as brings new manufacturing capabilities and brands within the company."

The acquisition was expected to help the Future Group to strengthen its presence in south India, consultants said. The Future Group has operations predominantly in west and north India. Nilgiris runs 140 stores in Karnataka, Kerala, Tamil Nadu and Andhra Pradesh. "With this acquisition, the company expects to expand geographically by increasing its footprint of convenience stores in south India," FCE said on Friday.

Nilgiri Dairy Farm also handles the back-end operations, including procurement, logistics and information technology infrastructure, for the stores and has eight distribution centres with its own fleet of vehicles.

Besides, the deal is also expected to help the Future Group to fend off competition from retailers such as Aditya Birla's More, which has a formidable presence in south India.

FCE said it would channel its private labels, including Sunkist, Tasty Treat, Golden Harvest, Premium Harvest, Sach Ektaa, CleanMate and CareMate, through the Nilgiris store network. Nilgiris branded bakery and dairy products would be sold across the Future Group's outlets, including Big Bazaar, Foodhall and Aadhaar, and extended to other modern retailers.

The Future Group is expected to apply Nilgiris' knowhow in operation of its convenience store chain, which has outlets in Mumbai, Delhi and other cities.

Arvind Singhal, chairman of Technopak Advisors, said: "It is a good fit for the Future Group. Nilgiris is present in three states and has a good supply chain in areas such as dairy products. It will help the Future Group's chains like Big Bazaar in terms of sourcing."

Analysts said the acquisition of Nilgiris was in continuation of Biyani's ambitious plans in the foods segment. Biyani wants to take revenue from the food business to Rs 20,000 crore by 2020 from Rs 1,000 crore now.

FCE recently launched the group's first mega food park in the country and has signed two more properties for similar projects in Madhya Pradesh and West Bengal. FCE is also in ventures with overseas companies to produce different products.

In 2012, the company had acquired the Delhi-based Express Retail, which operates the Big Apple chain of supermarkets, for an undisclosed amount.

FCE also has rural retail outlets called Aadhaar and Aadhaar Wholesale, which come under its joint venture with Godrej Agrovet.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.