Prabhat Dairy to exit dairy business, stock soars

Prabhat Dairy’ board of directors approved the sale of Sunfresh Agro Industries Private Limited, wholly-owned, step-down subsidiary to Tirumala Milk Products Private Limited for an overall consideration of around Rs. 1,700 crore.

Of the total consideration of Rs, 1,700 crore, around Rs. 1,227 crore will be for sale of entire share capital of its subsidiary while Rs. 472 crore will be for sale of business undertaking by way of slump sale. Tirumala Milk is a wholly-owned subsidiary of French multinational Groupe Lactalis, which is one of the world's largest dairy players.

The company in a exchange filing stated that it wishes to share large share of this sale proceeding with its shareholders. On a consolidated basis, the Sunfresh Agro generated around Rs. 1,529.2 crore for FY18, which was nearly 98 per cent of the total revenue of Prabhat Dairy. The sale is subject to approvals from the Competition Commission of India, and other conditions precedent.

The company now aims to develop cattle feed business and in-line with this aim it has signed a Joint Development Agreement with DLG Group, a Denmark-based leader in high quality vitamin-mineral feeds. The company in its earlier press release mentioned that the animal feed industry in India is anticipated to be worth US$ 30 billion by 2020 and to capitalise this business Prabhat Dairy has forayed into Animal nutrition business.

In response to this development, the stock of Prabhat Dairy opened gap up at Rs. 111.65 apiece as against its previous close of Rs. 93.05 per share. However, later it cooled down and at 10:40 hours, the stock was trading at Rs. 102.5 apiece.