Calcutta, Sept. 13: Singapore-based private equity firm Mandala Capital is infusing $25 million (Rs 170 crore) into Calcutta-based Keventer Agro in one of the largest foreign direct investments in the agri-food sector in Bengal.
Mandala, backed by US pension funds, will pick up around 15 per cent in the company that proposes to use the money to expand its dairy business in the state with a potential investment of nearly Rs 500 crore in the next two years.
The PE deal comes within a fortnight of Keventer, owned by the Jalan family, buying out the Bengal government's stake in Metro Dairy, one of the largest pouch milk seller in Calcutta and its adjoining areas.
Keventer, which already had a 53 per cent stake in Metro, picked up the rest from the state for Rs 85.5 crore, turning it into a 100 per cent subsidiary.
Mandala's investment would entirely flow into the dairy business which is projected to grow at least three-fold by 2022. Before the acquisition by the Jalans, Metro clocked a turnover of Rs 350 crore in the last fiscal.
Mayank Jalan, managing director of Keventer Agro, confirmed the development but declined to share details.
Uday Garg, founder of Mandala Capital, said the PE was looking at multi year growth in the dairy sector. "The eastern region of India, by the size of the population and demography, looks a lot like Indonesia. There are now established dairy companies in that country operating at a much larger scale. Therefore, we believe the potential is huge," he added.
Mandala manages around $350 million investment in companies such as Jain Irrigation, Gati Kausar and SAFL. Last year, it had invested $10 million in Barasat-based Efrac, one of the largest integrated food testing and research laboratories in India.
Metro Dairy has been steadily losing market share - its sales fell from 3.5 lakh litres per day to 2.2 lakh litres per day - to Amul, a relatively new entrant in the Calcutta and Bengal markets, despite having an installed capacity of 4 lakh litres.
Industry sources said Metro Dairy may diversify into other product categories such as tetra-packed milk, curds, flavoured yogurt and milkshakes. It is also planning to expand the geographical reach of its business by setting up milk processing units in Asansol, Malda and Siliguri. At present, it sells ice cream in Calcutta.
The milk market in the east - Jharkhand, Bihar, Bengal, Sikkim and the north eastern states - is estimated to be Rs 20,000 crore where Amul is the clear market leader. Pouched milk constitutes 90 per cent of the market while the value added items (curd, yogurt, lassi, milkshakes) contribute the rest.