The Rs 350-crore Nilgiri's Dairy Farm has exited from the hospitality business. The Bangalore-headquartered South India-focused retail chain has sold its three prime properties in Bangalore, Chennai and Coimbatore to Chennai-based Shabari Hotels for around Rs 100 crore. Shabari Hotels has a franchise agreement with Quality Inn chain and is also a franchisee for Nilgiri's Dairy.

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Nilgiri's Dairy, a century-old retail chain, is majority owned by UK-based private equity player Actis. The private equity player acquired 65 per cent stake in the firm in 2006-end for around $65 million. This move by Nilgiri's to exit the hospitality business is part of its strategy to exit non-core business.

Nilgiri's hotels in the three cities are located on Brigade Road in Bangalore, Radha Krishna Salai in Chennai and on Avinashi Road in Coimbatore. These properties house Nilgiri's Supermarket in addition to a hotel and cafe.

In addition to this, it is understood that a few more real estate assets owned by the company are on the block. Prabhu Ramachandran, director, Nilgiri's Dairy, did confirm that the sale of the hospitality business has been agreed upon. However, he declined to comment on the value of the deal or the buyer and said the deal was expected to be finalised by the year-end.

Nilgiri's has a chain of franchisee convenience stores with wide reach in Bangalore and key cities of Tamil Nadu. As a heritage brand established in 1905, Nilgiri's is known for fresh, quality bakery and dairy products. Nilgiri's own label sales are nearly 40 per cent in its key stores. The company plans to expand its retail network to 500 stores by 2011, including 180 specialised bakery stores. This company is also a major supplier of Britannia's dairy products.

The company acquired Bangalore-based Valdel Retail's 15 stores in Bangalore and Mysore last year.

"Actis is understood to be toying with either completely exiting the investment or hand over the management to family members while being a passive investor," sources noted. However, Ramachandran denied any such move.

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