Kwality Dairy is in talks with private equity funds including Saif Partners, Rabo PE and New Silk Route to sell up to a 20% stake in the company.
The company, which sells dairy products under brands like Dairy Best Pure Ghee and LivLite is looking at raising around R600 crore through the stake sale, industry sources said. Kwality competes with Mother Dairy and Amul in the dairy products market.
The company, which has roped in Bollywood actor Bipasha Basu to endorse its LivLite brand, is a major player in branded ghee. In the fiscal ended March 31, 2011, Kwality’s revenue rose more than 52% to R1,607.53 crore from the previous fiscal, while net profit more than doubled to R47.38 crore.
The company?s managing director Sanjay Dhingra was unavailable for comment. A query emailed to Sidhant Gupta, director, remained unanswered till the time of going to the press.
Kwality Dairy has four milk processing units in Palwal, Saharanpur, Dibai and Agra, with a capacity to process 1.7 million litres of milk every day.
With rising health consciousness and increasing middle-class incomes, the country?s dairy sector is growing fast. Demand for milk in India, the world?s largest producer, is set to exceed the expected production of 115 million tonne in the current fiscal, according to an industry estimate.
The country needs to raise milk output by at least 5 million tonne a year to meet growing demand, compared with an average annual increase of 3.2 million tonne in the last 15 years, according to an official estimate. Milk prices have risen around 30% in the past one year, fuelling higher product prices.
The country?s food service sector attracted more than $100 million (over Rs 450 crore) from private equity investors in the first half of the calendar year 2011, according to a report by Franchise India and Ficci.
Many dairy companies in India are looking to raise money or sell out, but PE funds are not too eager to invest in what they consider a poorly managed and low-returns sector.
On Wednesday, Kwality Dairy shares closed up 0.3% at Rs 167 on the Bombay Stock Exchange, under-performing a 1.5% rise in the benchmark Sensex.