Actis takes 65 pc stake in Nilgiris
The UK-based private equity firm Actis has bought out about 65 per cent stake in the family-run Nilgiris Dairy Farm. The members of the family hold the balance stake.
The value of the deal is estimated at $65 million (approximately Rs 300 crore). GIC Special investments Ltd from Singapore has joined Actis in making this investment.
Actis has formed a new management team for Nilgiris, headed by Mr N.C. Venugopal, who was till earlier this year the Managing Director of Lotte India Corporation Ltd (formerly Parrys Confectionery). Mr Venugopal has taken up his new position as the Managing Director of Nilgiris. Mr Raja Chellayan, a member of the Nilgiri’s family, is the new Chairman of the company.
The few stores that Nilgiris owned were spun-off as franchisees well before Actis took a stake in Nilgiris Dairy, as FDI in retail is not permitted.
The Nilgiri’s group has been in operation for the last 100 years and is among the best known food brands in South India. Apart from its own dairy, it has dairy and bakery products, chocolates and a variety of other local foods and snacks. It operates on a franchise model and its network has a strong foothold in Bangalore and Chennai, as well as in the Coimbatore and Erode markets. The chain has over 30 stores operating at present.
The funding provided by Actis will be used to expand the company’s South Indian franchise network and strengthen its supply chain and distribution capacity as well as expand the group’s food manufacturing operations.
According to sources, the idea is to scale up quickly over the next three years using the franchisee model only. The stores could be smaller format stores, all modelled on the convenience store format.
Centralised purchase
Of the Rs 300-crore deal, sources say that Rs 60 crore will be invested to set up logistics, distribution and IT systems. The company will now have a centralised procurement and distribution system in place.
Today, only 20 per cent of products stocked in Nilgiris are own brands, the bulk 80 per cent are FMCG brands, all approved by Nilgiris, which each franchisee buys separately from distributors. With a centralised purchasing system, Nilgiris can achieve economies of scale and better prices for its franchisees, say sources.
The plan is also to increase the Nilgiris’ private label presence to at least 40 per cent of shelf space in all the stores to earn better margins. At present, Nilgiris Dairy Farm has a sales turnover of Rs 125 crore on sales of its own brand to its franchisees as well as direct distribution of bakery products and milk.
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