TVS Capital picks up 7.57% stake in Prabhat Dairy for Rs 85 crore

Fund says investment at an attractive valuation

TVS Capital Funds has picked up a 7.57% stake in Prabhat Dairy Ltd for Rs 85 crore. The fund said it made the investment at an attractive valuation commensurate with the industry players which is expected to yield good returns on exit, said TVS Capital.

The money was invested by TVS Shriram Growth Fund Scheme 1B (TSGF 1B).

Gopal Srinivasan, chairman and Managing Director TVS Capital Funds said Prabhat Dairy has unique model, with deep integration into direct sourcing from farmers, for nearly 79% of their current needs. Exceptional process quality, coupled with this procurement capability, permits them to be the supplier of choice to speciality companies in the nutritional as well as dietetic application space. Examples are the likes of antibiotic free milk, for one.

He added, three key things which attracted him in Prabhat are unique business model, exceptionally driven and talented promoters, with ability to build strong partnering relationships.

"...inspire (promoters) investor confidence. Their belief that the listing is the listing of 75,000 diary farmers personifies their socially sustainable, long-term, thought leadership. As does their unhesitatingly dynamically adapting and offering a very fair price to investors, to reflect prevailing macro market realities. This demonstrates their desire to win long term relationships in all spheres," said Srinivasan, adding that the company is growing over 20%.

On challenges, he said, the company need to continue their initiative to widen the consumer business in the immediate horizon. A stretch case challenge for them would be to build a liquid milk B2C business, on the lines of a Hatsun or Chitale dairy. Going into future horizons, a new catchment in the East or Northeast could be a breakthrough in a three to five year horizon.

Founded in 1998 by the Nirmal Family, Prabhat is headed by Sarangdhar Nirma, who is the Chairman and Managing Director and his son Vivek Nirmal, who is the joint MD.

Maharashtra-based integrated milk and dairy Prabhat's products include milk powder, sweetened condensed milk, curd which primarily cater to institutional segment and products like liquid milk, ghee, flavoured milk, ultra-heat treatment (UHT) milk which cater to retail.

The company currently procures about nine lakh liters a day and service both institutional and retail segments.

The company has an aggregate milk processing capacity of 1.5 million liters per day. The company has 350 distributors across the country and the focus has been in Jammu and Kashmir, North East and West India.

Prabhat's products are sold under the brand names 'Prabhat', Flava and Milk Magic.

Reports stated that Prabhat Dairy recently had offered 36.4 million equity shares to raise up to Rs 300 crore through a fresh issue besides an offer for sale of up to 147 million equity shares.

Rabo India PE and French development financial institution Proparco paart exited, more than doubling their investment value in the process.