Actis, an emerging markets-focused private equity (PE) fund with $5 billion (Rs 29,510 crore on Thursday) under management, has zeroed in on a New York-based PE fund to offload its stake in Nilgiri Dairy Farm for $110 million, according to sources.
Actis had acquired a 65 per cent stake for $65 million in Nilgiri during early 2006, and has been trying to exit the firm since late last year. It had mandated HSBC to scout for a buyer, which lapsed early this financial year. Actis on its part has said it is not looking for a buyer for the Nilgiri Dairy stake.
Bangalore-based Nilgiri, founded in 1905, currently has around 110 retail stores through the franchise route with total store sales standing at around Rs 700 crore.
Volatile relation with promoters
While 80 per cent of the sales at Nilgiri's retail stores account for branded products from various fast-moving consumer goods companies, the back-end operations supply its own range of cereals, pulses, bakery and dairy products to the front-end operations, on which it gets better margins. Nilgiri has been historically known for its private label goods and post the Actis' deal, the share of these sales had dropped. The company is looking to shore up sales of its private label products to 30 per cent over a period of time.
Besides this blip, the relationship between Actis and a section of promoter's family had been volatile over various aspects, including a rights issue and expansion of the stores. However, things were straightened out and both of them have now been working in tandem to fuel growth.
Actis is understood to have had discussions with several funds, including Advent International, for exiting the retailer, which has high brand recall in South India. Actis has so far committed $1 billion in various companies and sectors, including infrastructure, health care and consumer segments.
