Motilal Oswal Private Equity-managed India Business Excellence Fund has invested Rs.110 crore ($16.4 million) in Bengaluru-based Dairy Classic Ice Creams Pvt. Ltd, which is engaged in the business of manufacturing and selling of ice creams and frozen desserts, for a minority stake, as per a press release.
This is the first round of private equity investment for the company, the ice-cream maker said. The funds would be utilized for capacity expansion in Tamil Nadu and Karnataka, deepening the distribution network and brand building.
Founded in 2003, Dairy Day has a strong presence in Karnataka and Tamil Nadu and operates through a very strong supply chain network, with more than 15,000 retailers in these regions. The company has a centralized, state-of-the-art manufacturing facility near Bengaluru and offers a complete product basket of ice creams and frozen desserts.
“The company is well positioned to benefit from increasing acceptance of ice cream as dessert, heightened brand awareness, higher spending capabilities and improving refrigeration infrastructure,” Managing director and CEO at Motilal Oswal PE, Vishal Tulsyan said in a press release.
EY (Ernst & Young) acted as an exclusive financial advisor to Dairy Classic for this transaction.
Earlier, the PE firm had invested in Parag Milk in 2008. It recently exited the company when the dairy company went public.
The private equity arm of Motilal Oswal Financial Services Ltd is looking to raise $250-300 million for its third fund to invest in small to mid-sized companies.
The second fund had invested in companies such as Arinna Lifesciences, GR Infraprojects Ltd, Glass Wall Systems India, India Energy Exchange and Intec Capital. The first fund had backed firms such as Au Financiers, Kurlon, Power Mech Projects and Shubham Housing Development Finance Company.
Dairy Classic competes with a host of branded homegrown and international players such as Amul, Kwality Walls, Mother Dairy, Vadilal, Cream Bell and Baskin-Robbins. While Häagen-Dazs, Baskin-Robbins, London Dairy, New Zealand Naturals and Hokey Pokey cater to the high-end market, the likes of Amul, Vadilal, Cream Bell and Mother Dairy sell products at wide-ranging price points.
According to consultancy firm Technopak Advisors, the ice-cream category has been growing at 10-15% annually. The segment has high growth potential considering India’s annual per capita consumption of ice cream, around 300 millilitres, is a tenth of China’s.