Prabhat Dairy To Sell 98% Of Its Business To French Firm In Slump Sale
The management has cited that it will strengthen its balance sheet from the sale of business.
Prabhat Dairy Ltd. will sell its milk processing business, which generates nearly all its sales, to France’s Groupe Lactalis for Rs 1,700 crore as it looks to pivot into an animal feed and genetics company.
Lactalis’ India arm Tirumala Milk Products agreed to buy Prabhat Dairy’s milk business as well as its step-down subsidiary Sunfresh Agro Industries through a share-purchase agreement, the seller said in a statement. Milk-processing contributed up of 98.24 percent of Prabhat Dairy’s consolidated revenue. The deal is expected to be completed by June.
The transaction will be done in two parts. Prabhat Dairy will receive Rs 1,227 crore for sale of its stake in Sunfresh Agro, while it will receive Rs 473 crore for the dairy business.
Shares of the company opened more than 20 percent higher as the announcement came before trading began in Mumbai. But the stock erased gains and tumbled more than 30 percent from the day’s high. It closed about 15 percent lower. Prabhat Dairy has lost nearly 63 percent from its all-time high of 2017 and is trading below its issue price. The company competes with the likes of Gujarat Cooperative Milk Marketing Federation, the owner of Amul; Parag Milk Food Ltd., the maker Go-branded products; and several regional players.
The company, which had a debt of Rs 320 crore as of September, will use part of the proceeds to “strengthen its balance sheet” and also share a “substantial portion” with shareholders, it said. The promoters will continue to be associated with the business for the next two years as per the agreement.