Rs.1,300-crore co picks investment banker Rothschild to scout for buyers
The promoters of Delhi-based dairy products maker Sterling Agro ? Laxmi Narain Kesarwani and Kuldeep Saluja ? have put the company on the block, two people with direct knowledge of the development said.
?We are growing old and we have an intention to sell the company to create wealth for our children,? said Sterling Agro Industries chairman Kesarwani, 63, who owns equal stake with Saluja, 61, in the R1,300-crore company. ?Our children are interested in other businesses.? The group runs a real estate development business in Delhi.
The company, which posted revenues of R1.91 crore in 1991, had grown to R1,300 crore, with a R45 crore profit. It has no debt and has a cash balance of R300 crore. Sterling supplies milk and milk products to both Indian and multinational dairy product makers like Britannia, Nestle and Cadbury and to Indian retail chains Big Bazaar, Metro Cash & Carry and FairPrice, under the Nova brand.
The company has appointed investment banker Rothschild to scout for buyers. ?We have appointed Rothschild and some buyers have made enquiries,? Vimal Agrawal, Sterling Agro chief financial officer, said. ?We cannot share information with as we have signed a non-disclosure agreement with the banker. The discussions are at a preliminary stage.?
?We may see consolidation as multinational companies are showing interest in the world?s largest dairy consuming market,? said Krishna Sharma, lead analyst at International Market Analysis, Research and Consulting (IMARC) Group. ?One example is Danone, which is expanding its business in India.?
The market for milk products in India will cross $163 billion in 2017 from $75 million now, a study IMARC released on June 25 said.
Sterling had adopted 3,000 villages and built 10 collection centres, owns a plant in Malanpur in Madhya Pradesh and Kasganj in Uttar Pradesh. The company, which launched its dairy products in Haryana in 1997, now exports to Southeast Asia, Africa and West Asia. The exports revenues stood at R301.82 crore in 2008-09, the company said on its website.
There are two key challenges for dairy products makers, said Sharma. ?One, the low productivity and two, lack of infrastructure,? Sharma said. Milk productivity in India is 980 kg a year, roughly eight times lower than that of the US at 8,000 kg a year.
But if infrastructure bottlenecks like cold chains are not built and productivity increased, India will have to import milk soon from being a milk exporter now as the gap between consumption and production widens despite having the world?s largest cattle population.
?The production growth of anywhere between 3% and 4% is unable to catch up with the consumption at anywhere between 4% and 6% as companies launch value-added products and sales rise for organised players,? Sharma said.
