Companies

Biyani buys Nilgiris for ₹300 crore

Our Bureau Mumbai | Updated on March 12, 2018 Published on November 21, 2014

A Nilgiris store at Radhakrishna Salai, Chennai. - Bijoy Ghosh

A view of Nilgiris Super Market in Chennai.

Kishore Biyani, founder, Future Group

Future Group acquires 98% stake, gets a broader footprint in the South

It seems to be a season for mergers and acquisitions, with each day bringing news of a new deal in one sector or another. On Friday, Future Consumer Enterprise, a part of Kishore Biyani’s Future Group, announced that it had acquired iconic southern supermarket chain Nilgiris.

The company informed the BSE that it has bought a 97.97 per cent in the retail chain. It did not disclose the amount but the deal is estimated to be worth around ₹300 crore.

Future Consumer Enterprise is understood to have acquired a 65 per cent stake in Nilgiris from PE fund Actis Capital and the balance from the company’s promoters, the Mudaliar family.

The Nilgiri Dairy Farm, the retailer’s operating company, will now become a subsidiary of Future Consumer Enterprise.

Actis bought its stake in the southern retail chain in 2006, when it had about 30 stores. The buyout of Nilgiris, with its franchise-operated convenience stores, will help Future Consumer Enterprise expand its footprint in Kerala, Karnataka, Andhra Pradesh, Telangana and Tamil Nadu, where it lacks a broad presence.

Patience pays off

Biyani, CEO of the Future Group, had been waiting for Actis to offload its majority stake in Nilgiris from the time it became clear that the PE outfit wanted to make an exit, in 2012.

“The acquisition of Nilgiris is synergistic as it enables strengthening and expanding of our convenience stores through franchises … and also brings in new manufacturing capabilities and brands,” he said.

Future Consumer Enterprise already has convenience store formats such as Big Apple (acquired in 2012), KB’s FairPrice and Aadhar. The retail formats will cross-sell each other’s products and they will also be sold through the Future Group’s retail outlets such as Big Bazaar, Central and Foodhall.

Future Group officials say Future Consumer Enterprise has enough reserves for acquisitions as it is sitting on almost ₹250 crore after selling its stakes and investments in smaller companies.

Nilgiris, founded in 1905, is a household name in the South, with stores in all the five states. The company sells a wide range of products, including an assortment of dairy and bakery products churned out by its manufacturing facilities in Bangalore.

Poor pick

In November 2006, Actis invested $65 million (then worth about ₹300 crore) for a 65 per cent stake in Nilgiris.

The PE firm had said that the money would be used to strengthen Nilgiris’ dairy, bakery and food manufacturing operations and assist in expansion of its franchise network.

The original promoter’s family had welcomed Actis, saying it had found a partner that understood the food business and appreciated the virtues of a heritage brand.

However, problems soon arose between the promoter family and the PE outfit over many issues, including a move to get into large-format stores (2,000-3,000 sq ft).

Actis had even proposed a rights issue, which the promoter’s family opposed, filing a petition in the Company Law Board. At one point, the promoter’s family even contemplated buying back the Actis stake, but the partners eventually patched up. Friday’s deal brings an end to that saga.

Future Consumer Enterprise shares were up a little over 9 per cent on the BSE and closed at ₹11.34 on Friday.

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Published on November 21, 2014
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