May 23, 2016

Proterra Investment Partners, formerly Black River Asset Management, is reported to be conducting talks with private equity firms regarding the sale of its 23% stake in India’s Dodla Dairy Ltd. reports Live Mint.

Headquartered in Hyderabad, Dodla Dairy is a Rs 1,000 cr (US$150 million) company producing fresh milk, butter, ghee, paneer, curd, flavored milk, ice cream, and milk powder. The company encompasses nine production plants, 30 chilling centers, 20 bulk milk chillers, 23 associated chilling centers, 16 sales offices, and a wide-ranging distribution network across the country according to the company website.

Sources revealed to Live Mint that Proterra is seeking between Rs 250 cr and Rs 300 cr (US$37.5 million – US$45 million) for the stake Black River Capital Partners (Food) Fund acquired in 2012 for Rs 100 cr (US$16.5 million).

As is the story with many segments of India’s agriculture and food industries, GAI News has reported that 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.

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Lynda Kiernan