Dinshaw's dairy back on the block; HUL, Carlyle, Lotte keen on a scoop

The promoters of ice cream and dairy products firm Dinshaw's Dairy Foods, have revived their plan to sell a majority stake, four individuals familiar with the negotiations told Moneycontrol. The Gujarat-based, privately-held firm has appointed Big 4 advisory firm Deloitte to negotiate with potential bidders, the sources said.

"Differences amongst the promoters could be a possible trigger for this move. Depending on valuations offered in the proposed transaction, they may also consider a complete exit," said one of the sources cited above. The Dinshaw’s family owns 50% stake in the company while the remaining 50% is held by the Bapuna group which came on board as an equal stakeholder in 2002.

The promoters had been looking for a buyer till three years back, when they had decided to shelve the plan.

Dinshaws was established in 1932 by brothers Dinshaw & Erachshaw Rana. Other than the ice-cream segment, the company is present in categories like toned milk, curd, ghee, cottage cheese and bread. "Discussions are at an early stage and the initial response has been strong,” said another source.

“Top private equity funds, key FMCG companies & overseas players including the likes of Carlyle, HUL & South Korea's Lotte Confectionery have shown interest," the source said.

In November 2017, Lotte Confectionery had acquired Ahmedabad-based Havmor Ice Cream for Rs 1,020 crore in an all-cash deal. The deal was valued at two and a half times Havmor's Rs 400 crore turnover, raising expectations of better valuations for regional ice-cream companies.

"Dinshaws is a well-established brand, the promoters enjoy a good reputation and there is lot of headroom for growth as the company hasn't had the quantum of investments as yet for a full -fledged pan India play," said a third source familiar with the transaction.

According to a Crisil report dated January 18, 2018, Dinshaw’s registered annual revenues of Rs 496 crores in 2016, which rose marginally to Rs 502 crores in 2017. PAT slipped from Rs 25 crores to Rs 4 crores in the same period. Dinshaws has 700 ice-cream parlours in India, with around 100 located in Nagpur, the report added.

Dinshaw's products are mainly distributed in Central India and the firm is present in Maharashtra, Madhya Pradesh, Chhattisgarh, Orissa, Andhra Pradesh ,Karnataka, Goa, Uttar Pradesh, Jharkhand, Delhi and Haryana according to its website. Some of Dinshaw's key peers include GCMMF, Kwality Walls, Vadilal, Mother Dairy, Hatsun and Cream Bell.

The Bapuna Group is an alcohol manufacturer with businesses split between Nagpur, Maharashtra and Gwalior, Madhya Pradesh. Apart from its own brands, the group bottles popular brands for some of the world’s largest liquor conglomerates including Pernod Ricard and United Spirits.

In response to an email query from Moneycontrol, a Deloitte spokesperson said, "We are bound by confidentiality obligations and are unable to comment on client specific matters" while Carlyle declined to comment. An HUL company spokesperson said ,” As a policy, we do not comment on market speculation.” Moneycontrol is awaiting an email response from Dinshaws Dairy Foods, the Bapuna Group and Lotte Confectionery and will update this article as soon as it gets them.

A report released by the IMARC group on the ice cream market in India ranks Maharashtra as the state with the largest market share, followed by Uttar Pradesh and Gujarat and expects the market to reach a value of Rs 375.8 billion by 2024. According to the 2017-2018 annual report of the National Dairy Development Board, milk production in the country grew at 6.7 per cent to 176.4 million tonnes in 2017-18 as against 165.4 million tonnes in 2016-17, which was more than double the growth of world milk production.