According to insiders, a deal to buy a minority position in the dairy products company Milky Mist, based in Tamil Nadu, is about to be finalized by India-focused investment vehicle WestBridge Capital, which supports both private and public market enterprises. The WestBridge Group is close to investing Rs 800 crore in Milky Mist at a valuation of nearly Rs 7,000 crore.
These individuals spoke on the condition of anonymity and estimated that the investment will likely total around Rs 800 crore and value Milky Mist Dairy Food at around Rs 7,000 crore.
“The negotiations, which had been ongoing since last year, are now complete, and WestBridge is nearing completion of all remaining legalities. It has exclusive rights to the transaction, and the financing will become formal in a few more weeks, according to one of the people.
Milky Mist has previously been in discussions with venture capital and private equity firms to seek money. These discussions, however, were unsuccessful.
The business has never previously raised money from institutions.
Stage-one bet for WestBridge
K. Rathnam, Milky Mist’s CEO, said, “We are exploring fundraising and are in talks with several companies, but we have not yet finalized any particular suitor.” As of the time of publication on Sunday, Sandeep Singhal, managing director of WestBridge Capital, had not responded to an email.
If the deal goes through, WestBridge—which has backed businesses like Dr. Lal Pathlabs, Five Star Finance, and Fogg deodorant manufacturer Vini Cosmetics—will be placing a growth-stage wager. The fund, which oversees assets worth about $8 billion, recently increased its position in Indigo Airlines to more than 3.3% by purchasing an extra 1.5% of the airline. Over the past few years, the company also returned to private tech investing and became one of the most active there. Among the firms that WestBridge has invested in are the mobility company Rapido, the edtech companies PhysicsWallah, Lead School, and Vedantu, and the SaaS company LeadSquared.
The Business of Milky Mist
T. Sathish Kumar created Milky Mist, a big institutional player providing services to hotels, restaurants, and caterers, more than three decades ago, and it is now based close to Erode, Tamil Nadu. Along with other items, the company sells cottage cheese, yoghurt, butter, and cheese. It also buys roughly 600,000 liters of milk every day from 60,000 dairy farmers.
Rising transportation and calf feed expenses over the previous two years have compelled dairy companies to raise the price at which milk is purchased in order to support farmers. This coincided with increased labor and packaging costs, which further hurt players’ cost structures and raised concerns throughout the entire industry.
According to the company, Milky Mist reported sales of over Rs 1,450 crore for the year ending March 31, 2023, an increase of more than 42% from the prior year. In its filings with the Registrar of Companies (RoC), the company claimed sales of Rs 1,012 crore with a net profit of Rs 32 crore for FY22. It still hasn’t submitted FY23 results to the RoC.
Due to Milky Mist‘s operating profitability of roughly 15% during the previous three fiscal years, according to industry analysts, its debt protection risk profile is anticipated to continue favorable over the medium term.
