US-based private equity firm KKR has committed to invest INR520 crore in India’s dairy company Kwality to support is growth plans.
Kwality will utilise the funds for capital expenditure purposes to further strengthen its milk procurement infrastructure.
The company plans to invest solely in infrastructure for high-margin value-added product categories including cheese, paneer, table butters, tetra-Packs, flavoured milk and yoghurt among others.
Kwality MD Sanjay Dhingra said: “It gives us immense confidence that KKR has believed in our growth story and is backing our expansion plans.
“We are in a critical stage of growth where we are shifting our business model from B2B to B2C, which encompasses revamp of all business functions across the value chain including procurement, product mix shift to cater to evolving needs of customers ensuring high quality, brand building, extensive distribution network to ensure product availability and boost retail presence, robust IT infrastructure for process integration and strong managerial competencies.”
Besides, Kwality will deploy the funds for partial repayment of its debt to improve cash flows and increase brand building activities.
ICICI Securities is acting as the financial advisor in the transaction.
A person familiar with the development told The Economic Times that the investment from KKR will be for a six-year period and the firm will receive a protected minimum interest rate.
The person said: “In addition, it will also get bonus at certain hurdle rate depending upon the growth in the company's market capitalisation over this period.”
Incorporated in 1992, Kwality currently has six milk processing units in Uttar Pradesh, Haryana, Uttarakhand, and Rajasthan, has milk processing capacity of over 3.2 Mn litres/day.
It sells a range of dairy products under various brands which include Dairy Best, KDIL’s Kwality, Good-Health, Wake Up, and Kream-Kountry.
Dhingra said: “This investment would support a giant leap in this direction enabling faster growth and achieving high profitability. Further, I believe KKR’s strong pedigree and rich experience combined with our management capabilities is going to unlock significant value and will benefit all stakeholders.”