 "Creamline Dairy plans to raise up to Rs 250 crore")
The promoters of Creamline Dairy Products, a leading manufacturer of milk and milk products in South India, aims to raise up to Rs 250 crore by selling a part of their stake to a foreign strategic partner, people familiar with the development said.
The money will be used to expand the company's manufacturing capacity and augment its product suite. "Creamline is looking for a strategic partner that will help it in growing its value-added product basket. The promoters are open to induct a foreign partner in the company and are willing to divest stake anywhere between 26 and 51%," said a person requesting anonymity.
Four families currently hold 74% stake in Creamline. The remaining 26% is Godrej Agrovet, the largest animal feed manufacturing company in the country. According to sources, Godrej Agrovet is also open to sell a part of its stake in the company to give the foreign partner a greater control over the functioning of Creamline.
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"Godrej Agrovet has been a partner in Creamline since 2005. Whether they will pare stake is a matter of discussion and will depend on the contours of the agreement. But all possible options are currently being explored," said another person aware of the development.
Sources said HDFC Bank has been given the mandate to manage the transaction. This will be the private lender's second M&A (merger and acquisition) transaction.
"There is a high degree of interest among multinational corporations to invest in the Indian dairy sector, which has a reported CAGR (compound annual growth rate) of 15% in value terms for the last four years. Some of the leading global players have shown interest in investing in Creamline and the deal is likely to be closed by the end of this financial year," one of the persons quoted above said.
Industry players said total milk production in the country has topped 130 million metric tonne in 2012-13 making India the world's largest milk producer. They estimate the country's milk production to reach 175 million metric tonne by 2020.
While Uttar Pradesh was India's biggest market for milk production accounting for 17% of the total milk production in 2012-13, the three southern states – Andhra Pradesh, Karnataka and Tamil Nadu – together had 20% share in the country's total milk production during the year. Creamline, based in Andhra Pradesh, has significant presence in these three states.
The total size of the dairy market is estimated to be around Rs 3.5 lakh crore in 2012.