KKR India has invested 5.2 billion rupees ($77 million; €69 million) into Indian dairy Kwality, to fuel aggressive expansion into value-added dairy and shift the company’s business model further into retail.
The capital will expand the company’s milk procurement infrastructure for value-added products, helping it build new product lines in areas like cheese, paneer, butter, specially packaged milk, flavoured milk and yoghurt. The funding will also help Kwality repay some of its debt and improve cashflows.
Kwality is India’s largest and fastest-growing private dairy.
Kwality managing director Sanjay Dhingra said the business was shifting rapidly. “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.”
India’s value-added dairy sector is viewed by investors potentially risky, but a major growth opportunity. The industry is growing between 20 and 25 percent per year and companies are expanding aggressively into small and medium sized cities, according to Rabobank. The value-added industry is also easier for private investment to access than the bulk milk industry, where co-operatives already have controlling market shares, a partner at Indian agricultural fund Aspada said.
KKR did not comment on the acquisition in time for press.
However, KKR India chief executive Sanjay Nayar said last year in a blog post that KKR saw “substantive investment opportunities” in India across asset classes.
“…We think that earnings growth could be stronger than many market observers anticipate because rising confidence will encourage both consumers and businesses to spend more,” he wrote.
KKR Indian portfolio companies include Coffee Day Resorts, which itself has a majority stake in India’s largest food and drink retailer, the Amalgamated Bean Coffee Trading Company.