M&A Critique
Prabhat Dairy, Private Equity Investors

Prabhat Dairy IPO – On a Firm Footing

Initial Public Offer (IPO) is a landmark activity for any company, as it can pave the way for tremendous success in the future. It requires extensive planning like structuring, capital reorganisation, management reorganisation, and business restructuring, which goes on for years.  To give our reader briefing about how a company restructures itself for getting ready for an IPO, we are starting with new section “Getting Ready for an IPO”. For this issue, we have chosen “Prabhat Dairy Limited”.


The company was incorporated as Prabhat Dairy Private Limited on November 25, 1998. It is an integrated milk and dairy products company based in Ahmednagar (Maharashtra) catering to institutional as well as retail customers. The company produces fresh, dry, frozen, cultured and fermented dairy products, including pasteurized milk, flavored milk, sweetened condensed milk, ultra-pasteurised or ultra-high temperature (UHT) milk, yoghurt, dairy whitener, clarified butter (ghee), milk powder, ingredients for baby foods, lassi and chaas. As of March 2015, the company has an aggregate milk processing capacity of 1.5 million liters per day.

The company had worked on its IPO for four years, which yielded tangible results for the private equity investors.


Prabhat Dairy came up with IPO in August- September 2015. The IPO managed to sail through despite weakness in the secondary market. The company has successfully concluded the IPO comprising of a fresh issue aggregating up to INR 300 crore and an offer for sale (OFS) of up to 14,706,000 equity shares.

On the final day of the original issue closure period, the IPO was extended by three days and the company lowered the price band to INR 115-126, from INR 140-147 as the issue failed to generate interest among investors on its final day of offering.

Money raised from the IPO will be utilised towards following objects:-

  • Part pre-payment of loans availed by the company and its wholly owned subsidiary
  • To meet capital expenditure; and
  • General corporate purposes


Prabhat Dairy started its IPO planning from the mid of 2012 by doing internal and external restructuring and inviting private equity investors.

Organisation Restructuring

The Board of Directors at their meeting on August 10, 2012, decided to transfer the cheese manufacturing project which was planned to be executed in the Company to be executed in its wholly own subsidiary Sunfresh Agro Industries Pvt. Ltd (SAIPL) to meet the investment criteria of Rs 2,500 million for availing the status of Mega Project under the Package Scheme of Incentives, 2007 framed by the Government of Maharashtra.  The part of the above sale consideration was paid by SAIPL to the bankers of Prabhat for loan taken by the company for above project and balance was converted into long term unsecured loans to SAIPL.

In 2013, the company consolidated their operations by amalgamating its wholly own subsidiary Prabhat Agri Projects Development Private Limited (PAPDPL) and its step down subsidiary (WoS of PAPCPL) Prabhat Nutritious & Frozen Food Industries Private Limited (PNFFIPL) into itself.

In September 2012 the company appointed Vivek Sarangdhar Nirmal as Managing Director. In the same year, PE investors IABF, Real, Proparco invested in Prabhat, after which the company appointed some directors representing PE investors. The money received from the private equity investors was used to set up a new manufacturing plant with a capacity of processing 300,000 liters of milk per day at Navi Mumbai. In 2015, the company commenced a trial run off for manufacturing cheese with a capacity of 20 metric tons at its existing manufacturing plant at Shrirampur.

Following directors were appointed in the company

Year Name Type
2012 Rajesh Kumar Shrivastava Nominee
2012 Sumeet Gupta Nominee
2012 Rahul Rai Alternate
2013 Sebastien Marc Fleury, resigned in 2014


2015 Raphael Gabriel Roger Plihon



In 2015, Seemantinee Khot and Ashok Sinha were appointed as independent director and  Omprakash Bundellu was appointed as additional director. It also appointed a new chief financial officer.

Capital Restructuring

Firstly, they streamlined their shareholding pattern by transferring shares held by various shareholders into a trust. In April 2012, 20 shareholders of the company transferred their all/part of the equity shares equating to 740,000 shares to Nirmal Family Trust by the way of gift.

Further, in the same month after transferring shares to the family trust, 2,62,60,000 equity shares were allotted to Nirmal Family Trust and 7,50,000 equity shares were allotted to  Vivek Sarangdhar Nirmal (new shareholder)on a preferential basis for a consideration of INR 11.10 each share.

On March 16, 2012, the company redeemed all 6020, 2% Redeemable non-cumulative preference shares.

In the year 2012 and 2013, three PE investors IABF, Real and Proparco invested in the company by subscribing 0.01% compulsorily convertible preference shares for INR 58 each (face value INR 10 each). Also, 1,37,44,828 preference shares were allotted to IABF and 48,276 preference shares were allotted to REAL; both amounted to INR 80 crore and 1,03,44,828 preference shares were allotted to Proparco amounted to INR 60 crore. Those preference shares were converted into equity in the ratio of 788 equity shares per 1,000 preference shares for IABF and Real and 653 equity shares per 100 preference shares for Proparco.

Summarised equity share capital changes in the last 3 years

Date No. of     equity shares allotted Reason Cumulative paid up equity shares Cumulative security Premium
September 28, 2011 The company reduced its capital by reducing 100 equity shares of INR 100 each to 100 equity shares of INR 1 each
April 27, 2012 2,70,10,000 Preferential Allotment @ premium of INR 10.10 each to promotors 3,00,00,000 27,28,01,000
March 9, 2015 1,76,19,147 Conversion of 2, 41, 37,932 convertible preference shares held by IABF, REAL, Proparco in the ratio mentioned above 4,76,19,147 165,51,81,885
March 9, 2015 Consolidation of 10 equity shares of INR 1 into one equity shares of INR 10 each. 4761914
March 12, 2015 6,66,66,796 14:1 Bonus issue 71,42,87,100 98,85,13,925

Cost per equity share to PE investors works out to be

Particulars No. of convertible Preference shares Total cost

In Rs crore

Equity shares (After conversion) No. of shares considering consolidation and bonus issue Effective cost per equity share
IABF 1,37,44,828 79.72 1,08,25,932 1,62,38,895 49.10
Real 48,276 0.28 38,024 57,030 49.10
Preparco 1,03,44,828 60 67,55,191 1,01,32,785 59.21

One of the rights to the PE investors mentioned in shareholders’ agreement between the company and three PE investors were put option right upon the occurrence of an Exit Event (as defined in the SHA) or in the event the company fails to complete an IPO prior to March 31, 2016. Exercising the above right, PE investors took the part exit from Prabhat by selling their shares at the time of IPO.

Particulars During IPO Post IPO
No. of shares sold during IPO Amount realised+

In Rs crore

CAGR on shares sold during IPO No. of shares Market Value

In Rs crore

Total Gain
IABF 65,80,000 75.67 ~32.80% 96,58,895 135 ~131
Real 23,000 0.26 ~32.80% 34,030 0.47 ~0.45
Proparco 49,52,000 56.95 ~39.35% 51,80,785 73 ~70

 Exit price of INR 115 at the time of IPO.

PE investors realised most of their capital invested in the company during sell off shares in the course of IPO. Current holding of IABF, Real, and Proparco in the company is 9.89%, 0.03% and 5.30%, respectively.

Pre-issue promoter’s holding

Particulars Pre- IPO
No. of shares Cost

In crore

Effective cost

per share

Total Pre-Issue Holding 4,27,50,000 40.67 ~9.52

During IPO, Nirmal Family Trust sold 10,53,317 equity shares at INR 115 amounting to INR 12 crore. Current promoter’s holding in the company is 43.84%.


Prabhat Dairy worked on the IPO for four years and took various strategic, operational and capital restructuring steps which resulted in creating substantial value for all concerned. All the three private equity investors got a comfortable exit route and recovered the entire amount invested. Now, the company is ready for expansion and growth including those of its subsidiary where it wants to implement the mega project with substantial state government incentives. At the same time, the company plans to deleverage its balance sheet using the IPO proceeds. Only time will tell how Prabhat Dairy will able to capitalise its IPO.


Alana Shah