Actis' plan to sell Nilgiris to retail biggies fails

Actis was in talks with Lawsons, 7-Eleven and Tesco and was looking at a valuation of Rs 820 cr for its stake in Nilgiris

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Talks between private equity (PE) fund Actis Capital and foreign retail companies to sell the former’s 70 per cent in south Indian retail firm Nilgiris Dairy Farm have failed over valuation issues and lack of clarity on whether Karnataka and Tamil Nadu would allow foreign players in multi-brand retail.

Actis was in talks with Lawsons, 7-Eleven and Tesco and was looking at a valuation of Rs 820 crore for its stake in Nilgiris. A banking source said the talks broke down as the foreign firms were looking for more clarity from south Indian states on FDI in retail. Besides, the valuation was also an issue, the source said.

Though foreign direct investment in multi-brand retail has got approval from both the houses of Parliament, the Union government has let the state governments decide whether they should allow foreign chains in their states or not. Karnataka, a Bharatiya Janata Party-ruled state, has already said no to FDI in retail.

When contacted, an Actis official said the company did not want to comment on market speculation. The plan B of Actis now is to sell the stake to any other private equity firm, which may be interested in the retail sector, the source said. Apart from Actis, the government of Singapore owns a 23 per cent stake in Nilgiris, while the rest is owned by its founders, the Mudaliar family. HSBC is advising Actis on the sale.

Founded in 1905, Nilgiris Dairy operates 120 neighbourhood convenience retail outlets through a franchisee network. Half of those are in Bangalore and the rest in various cities of south India.

Actis acquired about 51 per cent stake in Nilgiris for $65 million (Rs 355 crore today) in September 2006. It later increased the stake to 70 per cent. PE players such as Advent International and Temasek Holdings had in the past envisaged interest to buy into the retailer, but the talks were not successful.

Actis is one of the earliest PE players in India and globally has over $4.5 billion funds under management. In India, the PE player has raised three country-focussed funds and is now raising the fourth. In 2008, the PE firm reached a final close of $500 million for Actis India Fund III after 10 months in the market. California Public Employees’ Retirement System, CDC Group and University of Texas Investment Management Co are among its limited partners.