Godrej Agrovet, a subsidiary of Godrej Industries, has increased its stake in Creamline Dairy Products to 51 per cent from 26 per cent with an investment of ₹150 crore.
The deal will be funded through internal accruals.
Creamline procures 5.90 lakh litres of milk per day from over 1.35 lakh farmers in Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra and Madhya Pradesh.
It has a modern plant to process 7.63 lakh litres of milk per day into milk powder at Ongole in Andhra Pradesh.
Branded as Jersey, the company distributes its value added products such as curd, ghee, butter, lassi and flavoured milk through 3,000 agents and 470 distributors.
Creamline plans to set up three processing units with facility to produce value added products and enhance milk procurement in Telangana, Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra.
Milk production Balram Singh Yadav, Managing Director, Godrej Agrovet, told BusinessLine that the reach and customer base of Creamline products would be enhanced with strong recall of Godrej Agrovet brand among farmers and consumers. On the prevailing glut in milk production, Yadav said the sector is known to be cyclical in nature with milk production increasing in winter and dropping in summer, but the farmers were hit badly this time around due to increase in feed cost.
Milk procurement prices for processing companies have already gone up by ₹3 a litre to ₹20-23 a litre due to the high benchmark price set by the state governments.
Despite Godrej Agrovet buying majority stake, Creamline will be run by the current promoters, he said.
India is the world’s largest producer of milk and demand is expected to cross 200 million tonnes by 2020 from the current level of 135 million tonnes.
Though the rural economy is not in good shape, Yadav said the turnover of Godrej Agrovet is expected to grow 13 per cent to ₹4,400 crore with acquisition of Astec Lifesciences and Creamline Dairy.
In September, the company had acquired 52 per cent stake in Astec Lifesciences for ₹246 crore.
Given the bright prospect of dairy business, the competition in the sector has intensified.
The world's largest dairy group Le Groupe Lactalis acquired Hyderabad-based Tirumala Milk Products for about ₹1,750 crore.
The French dairy group has bought the 74 per cent stake held by Tirumala Milk's founders and remaining from private equity investor Carlyle Growth Capital Fund.