Actis move to exit Nilgiris set to be delayed

Mandate to HSBC to find a buyer lapses

The long-winding path of Actis Private Equity of finding a buyer for its close to 70% stake in Bangalore-based iconic century old retailer Nilgiris, is understood to take longer than expected.

Actis’ mandate to HSBC which was given out during mid of 2012, expired recently and the same has not been renewed, according to investment banking sources.

Actis had acquired majority stake in Nilgiris Dairy Farm during September  2006 for Rs 300 crore and was looking at an exit by end of 2012 at an enterprise valuation of $120 million. It is understood that Actis has had discussions with both strategic and global private equity players including Temasek and Advent among others to offload its stake in Nilgiris but things did not progress over various issues.

“It is an attractive buy, but given the flux in the market over how the FDI in multi-brand retail will be rolled out, the stake sale is stuck. People are waiting for further clarity on this. The valuations, though, are reasonable,” another investment banker told Business Standard. Actis India spokesperson offered not to comment. “We have never said that we have mandated HSBC, nor have said we are planning an exit from Nilgiris,” he said.

Nilgiris Dairy operates through the franchisee model of running its 100-odd retail stores. Actis had invested in the back-end Nilgiris Dairy which supplies into the franchisees. On an average, Nilgiris stores turns over goods worth close to Rs 700 crore annually and is understood to be inching towards being black, operationally.

One of the key differentiators which Nilgiris offers is its extensive range of private label goods across the spectrum and which is in good demand. As much as close to 20% of the sales come through the private label segment, which is being targeted to move up to 30%.

Post the Actis’ investment in Nilgiris, there was strained relations between the promoters of Nilgiris and Actis over Rights Issue and also how the expansion of the stores should be carried out. However, things were straightened out and both of them have been working in tandem to fuel the growth.

Nilgiris started in 1905 by Muthuswamy Mudaliar as a dairy products supplier, later morphed into India’s first organised retailer. The company has been focussing on South India and has strong presence in Bangalore and Tamil Nadu.