Regional ice-cream companies are seeking better valuations and are ready for strategic deals after Korean company Lotte scooped up Ahmedabad- based Havmor Ice Creams last month.

Considering Lotte was willing to pay two-and-a-half times Havmor’s ₹400 crore turnover, at ₹1,020 crore, the regional ice cream brands are now pinning their hopes on getting better valuations for their capex-heavy businesses in the ₹6,000-crore ice-cream segment.

Ice cream has always been a territorial business and even national brands have their weak markets. This makes regional players strong on their own turf and the latest deal only reinforces their expected valuation.

“Today we expect to get a valuation of even more than 2.5 times our turnover as we have consolidated our position in markets like Maharashtra and Goa. With a capacity of 35,000 litres a day at our Boisar facility, we have a good hold of the market and are a debt-free and profitable company,’’ says Rahil Gandhi, Director, Vadilal Dairy International.

Its counterpart, Vadilal Industries, also enjoys a leadership position in markets such as Gujarat, Rajasthan, Uttar Pradesh and Uttarakhand and is the second largest ice-cream player after national player Amul, with a 6.2 per cent share of the market.

Getting strong valuations will only help the promoters of the ₹500-crore Vadilal Industries, who are now said to be keen to cash out of the ice-cream business.

Kolkata-based Kunal Pabrai, founder of the Fresh & Naturelle brand of ice creams, is also ready for strategic suitors. “We have always thought about strategic investors and with this deal with Havmor going through, we expect more investor interest. Today, we should have a valuation higher than 2.5 times our ₹22 crore turnover,’’ says Pabrai.

Eye on profitability

Most of these regional players have been trying to go national but not at the cost of sacrificing profitability, which might impact their valuations.

Chennai-based Arun Ice Creams recently decided to enter the Maharashtra market after being in the business for 45 years. The regional brand has a 60 per cent share in Chennai and considers itself a market leader with a 30 per cent share in south India, even beating FMCG stalwart HUL in the segment.

“Ice cream is a concentrated business and spreading out does not not help as there are logistics costs, which can impact profitability and share-of-market for most regional players. It takes time to build this infrastructure-led business but valuations have always been high and this latest deal between Havmor and Lotte proves it,’’ said RG Chandramogan, Founder of Chennai-based Arun Ice creams, a part of Hatsun Agro.

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