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KKR India set to invest Rs 600 crore in Kwality

Livemint:  June 06, 2016

Mumbai: KKR India is set to invest about Rs.600 crore in Kwality Ltd, the largest dairy firm in India outside government control, according to two people close to the development.

KKR India, the local arm of the New York-based buyout firm, will invest through a structured debt transaction, one of the two people said, declining to be identified.

The funds will help the Delhi-based Kwality, which gets more than 70% of its revenue by selling its products to companies such as Hindustan Unilever Ltd, ITC Ltd and Britannia Industries Ltd, strengthen its own brand and expand its more profitable retail business.

“The company will refinance its existing loans and use it as a growth capital for future expansion, especially for the transformation to a B2C (business to consumer) company,” said the second person.

To bolster its brand, Kwality had hired actor Akshay Kumar as its brand ambassador.

Emails sent to a KKR India spokesperson and several text messages and emails sent to a Kwality spokesperson on Friday remained unanswered.

Investors have backed several dairy firms in India, the world’s biggest consumer of milk and milk products, because of rising demand. Demand for milk in the country is expected to grow at an annual average rate of 5% to 200 million tonnes in 2022, according to National Dairy Development Board.

“Strong demand prospects in this segment will keep up investor interest in the coming years,” said Shiva Mudgil, a dairy analyst and vice-president at Food & Agribusiness Research & Advisory, Rabobank. “Besides large companies, PE (private equity) investors will be interested in small regional companies with a focus on value-added products. These firms will also be seeking capital to fuel their aggressive expansion plans.”

Kwality, formerly Kwality Dairy Ltd, produces a range of products, including ghee, flavoured milk, yogurts, butter, cheese and curd. In 1994, the former owners of Kwality sold the ice-cream brand to Hindustan Unilever.

The company that was set up to supply milk to Kwality Ice Creams India Ltd was acquired by the Dhingra family in 2002.

Sanjay Dhingra, the managing director of Kwality, owned 65% in the company as of 9 April, according to BSE data.

Kwality reported consolidated net sales of Rs.6,416 crore in the year ended 31 March. The company is in the process of introducing flavoured milk, tetra pack milk, cheese in numerous variants and table butter, the company had said after announcing its latest earnings.

Kwality owns six milk processing units in Uttar Pradesh, Haryana and Rajasthan, and retails products under its Dairy Best brand. Kwality also supplies to Mother Dairy, Cadbury’s and ice -cream makers Vadilal Enterprises Ltd and Cream Bell.

Attracted by growth opportunities in India, KKR so far has disbursed more than $3 billion to about 60 companies, including GMR Holdings Pvt.Ltd, Avantha Group and Apollo Hospitals Enterprise Ltd.

The buyout firm is in the process of raising its second credit fund worth Rs.1,500 crore. The alternative investment fund will raise money from wealthy individuals and family offices in India, Mint reported in September.

In August last year, KKR India invested $150 million in JBF Industries Ltd, a manufacturer of polyester value-chain products.

In April 2015, KKR funded the promoters’ buyback of 27% stake held by private equity firm Warburg Pincus Llc in Metropolis Healthcare Ltd.

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