October 2, 2015

Nagpur-based Dinshaw’s Dairy Foods Ltd. one of the country’s leading milk and dairy product manufacturers, plans to raise between $100 million and $120 million in private equity capital through a dilution of between 25% and 30%.

“We keep evaluating various fund raising options, including debt and equity, from time to time to support our growth plans,” says Jimmy Rana, managing director, Dinshaw’s Dairy Foods.

The company, which may be valued between $300 million to $350 million through the proposed fund raising, is currently in the process of identifying and appointing an investment bank, and is reported in discussions with Moelis & Co.

Launched as a small dairy business in 1933 by brothers, Dinshaw and Erachshaw Rana, the company expanded into ice cream that same year. Over the years the company continued to grow, and between 2002 and 2010 the business expanded into other products including paneer, ghee, curd, and milk powder. Today, the company has a handling capacity of 500,000 liters per day and has a presence in Maharashtra, Gujarat, Goa, Andhra, Pradesh, Uttar Pradesh, and regions of Karnataka, Rajastan, Chhattisgarh, Orissa and Jharkhand.

As is the story with many segments of India’s agriculture and food industries, the country’s dairy sector is seeing a significant surge in consumption driven by the maturation of the market from commodity and loose products to branded and packaged products on the back of increased incomes and a more organized retail market according to Rabobank.

“Private regional players aspiring to become semi-national/national will require capital to integrate the business, expand the product portfolio and scale up across different geographies. This is where the role of private equity as well as strategic investors will remain critical for the industry in the future,” said Shiva Mudgil, senior dairy analyst and assistant vice president, food & agribusiness research and advisory at Rabobank.

Demand for milk in India is forecast to increase at a compounded annual growth rate of 5% between 2014 and 2020, from 138 million tons to 200 million tons. This growth and the macro trends driving it have attracted foreign investment and several private equity investors to the sector.

Since 2012, India’s dairy sector has seen 14 successful private equity and venture capital deals worth $127 million to date according to VCCedge.

In 2014, the world’s largest diary company, Lactalis acquired a 100% stake in Hyderabad-based Tirumala Milk Products Pvt Ltd from its founders and The Carlyle Group for $270 million, resulting in Carlyle gaining a nearly 300% return on its investment. Other notable deals in the sector include IDFC Alternatives’ investment of $28.8 million in Parag Milk Food Pvt Ltd in 2012, a joint investment of $25 million in Prabhat Dairy Ltd by Rabobank’s India Agribusiness Fund and France’s Proparco in 2013, and Cargill’s $20.3 million investment in Dodla Dairy Ltd.