Nilgiri’s Dairy Farm is planning to sell some of its prime real estate assets in south India in order to raise funds to expand its retail chain.
Three of the company’s high street properties—on Brigade Road in Bangalore, on Radha Krishna Salai in Chennai and on Avinashi Road in Coimbatore—are on the block. The total amount raised from the three properties could be upwards of Rs 300 crore; some think it could go up to about Rs 500 crore.
Private equity major Actis, who picked up a 65% stake in Nilgiri’s from the founding Mudaliar family in 2006 for a sum of Rs 300 crore, is said to be looking for buyers for these properties. Some of the Mudaliar family members who continue to hold stakes in the company are objecting to the move. But Actis is expected to have its way.
The UK-based fund wants to exit from Nilgiri’s non-core businesses of real estate and hotels, and give momentum to the core business of franchised retail.
Each of the properties has Nilgiri’s Supermarket, as also a hotel and cafe. Actis is likely to want to lease back part of the properties from the buyers to continue running the supermarket.
The Mudaliar family started the Brigade Road facility in 1939, and the Chennai facility some 30 years ago. This long association probably accounts for the family’s reluctance to part with the properties.
If the deals go through, then the amount raised would be pumped in to expand the network of Nilgiri’s outlets from 100 stores to 400 stores in the next two years. Actis is also looking at building a backward integration platform by setting up supply chain centres of over 1 lakh sqft in Bangalore and Chennai. Nilgiri’s Blue Oven outlets, which offer premium bakery products and patisserie, and Nilgiri’s Masala Bread, a cafe chain, too are in the process of being expanded.
The amount raised would be pumped in to increase Nilgiri’s outlets from 100 to 400 stores.
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