Hindustan Unilever emerges front-runner for Dinshaw's Dairy Foods

Hindustan Unilever (HUL), the country’s largest consumer goods company, is leading the race to pick up Nagpur-based Dinshaw’s Dairy Foods, which has been on the block since April.

HUL is negotiating an all-cash deal at Rs 1,000 crore with the promoters of Dinshaw’s, one of India’s oldest ice cream makers, valuing the company at two times its estimated FY19 sales of Rs 450 crore, people in the know have told Business Standard.

Some of the other contenders that HUL might have edged out are private equity firms Carlyle and Blackstone, and South Korea’s Lotte Confectionery.

HUL said it could not comment on market speculation. Jimmy Rana, managing director of Dinshaw's Dairy, said the news was speculative. “We are in the process of evaluating various options for funding future growth of the company,” he said in response to an email on the matter.  

Informed sources, however, said the deal with HUL was almost done, and that an announcement was expected soon. Deloitte was tasked with finding buyers for the business, they said, which is co-owned by the Ranas and Bapunas, both Parsis from Nagpur.

The two families own 50 per cent each in Dinshaw’s Dairy and had sounded out potential buyers in 2015 as well, but did not go ahead with the sale. Sources said management differences between the promoters and succession issues were reasons for the sale.

For HUL, the acquisition of Dinshaw’s, if it happens, will be its second transaction in ice creams in a year. Last August, the company had picked up the ‘Adityaa Milk’ ice creams and frozen desserts brand from Karnataka-based Vijaykant Dairy and Food Products for an undisclosed amount.

The aim was to get a larger slice of the Rs 6,000-crore organised ice cream market in India, sector experts said. HUL, which already sells ice creams and frozen desserts under the Kwality Wall’s, Magnum and Cornetto brands, competes with rivals Gujarat Co-operative Milk Marketing Federation (GCMMF), which makes the Amul brand of ice creams, and Mother Dairy at the national level.

At the regional level, a brands such as Cream Bell, Heritage, Vadilal and Havmor, acquired by Lotte in 2017, compete with each other and national players. “MNCs are keen on buying local brands and businesses as a pre-emptive measure to wrest greater market share of the ice cream market,” said Deepak Jasani, head of retail research at HDFC Securities.

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