Kishore Biyani eyes future scale in snapping up Nilgiris for Rs 300 cr

Future Consumer Enterprises (FCEL), the food and FMCG (fast-moving consumer goods) arm of the Kishore Biyani-led Future Group, has acquired Nilgiris, which runs a chain of convenience stores in South India, the company said in a statement on Thursday.

The Future Group acquired a 98% stake in Nilgiris from private equity firm Actis, which had invested in the company in 2006 and held the majority stake; and the Mudaliar family, the original promoters of the chain who held a minority stake. The deal was fully settled in cash.

Though the Future Group didn’t disclose the consideration that it had paid for Nilgiris, a person familiar with the development said that the deal was valued at around R300 crore.

Actis had been looking to exit its investment in Nilgiris for the last two years, and it had been reported earlier that the Future Group may be interested.

Click here for graph

Bangalore-based Nilgiris is an iconic brand that enjoys wide household recall in the southern states of Karnataka, Tamil Nadu, Andhra Pradesh and Kerala. The brand that was established in 1905 also has its own products portfolio comprising dairy products, baked goods, chocolates and staples.

Nilgiris was founded when Muthuswamy Mudaliar, a mail runner for the British in colonial India, bought a butter business from an Englishman and set up the Nilgiri Dairy Farm to cater to the needs of the British who resided in the hill station of Tamil Nadu. The company then went on to become a leading supermarket chain in South India.

Future Group chairman Kishore Biyani told a television news channel on Friday that Nilgiris’ franchisee retail business had a turnover of around R800 crore and the food brands it owned had a turnover of around R200 crore.

The acquisition will boost FCEL’s revenues exponentially as the Future Group firm’s own revenues were at Rs 343 crore for FY14. The company reported a net profit of Rs 30.41 crore for the same fiscal.

“This acquisition by FCEL will lead to geographical expansion of the convenience store network in Southern India, as currently FCEL’s existing footprint is primarily concentrated in North and West India,” the company said in its statement.

FCEL will also promote Nilgiris’ product through the Future Group’s various retail channels such as Big Bazaar, Foodhall and its wholesale market, Aadhaar. Similarly, with Nilgiris, FCEL will get a retail channel in South India to promote some of its own food and FMCG brands like Sunkist, Tasty Treat, CleanMate and CareMate.

FCEL runs its own chain of neighbourhood convenience stores under brand name of KB’s Fairprice.

“Additionally, Nilgiris’ expertise in running a successful franchise network will be leveraged to expand the existing footprint of convenience stores via a franchisee model,” FCEL’s statement said.

Though a much smaller company than the Future Group’s flagship company Future Retail (through which the retailers operates formats like Big Bazaar and e-zone), FCEL has been on an expansion spree.

Before announcing this deal, the company announced the setting up of a 110-acre food park near Bangalore. The project, which was inaugurated by Prime Minister Narendra Modi, envisages an investment of around Rs 1,000 crore in three to five years.