Kwality Ltd's Haryana unit to produce 4.3 million litres per day

Delhi-based sweet and snack makers Haldiram Group is all set to buy Kwality’s dairy business.

The snack-maker has emerged as the sole bidder for debt-ridden dairy company Kwality with an offer of around Rs 130 crore in the ongoing insolvency process.

The lenders are likely to vote on Haldiram's bid later this month with the extended insolvency resolution process due to end in early November. Kwality, which owes around Rs 1,900 core to a clutch of lenders, was referred for insolvency resolution to NCLT in December, when it failed to stick to a repayment schedule to pay off private equity fund, KKR.

Haldiram Group, set up as a backward integration company for Kwality Ice Creams India, had raised Rs 300 crore from KKR in 2016 along with an additional commitment of Rs 220 crore, to fund its expansion into the consumer segment.

From being a back-end player for FMCG majors such as Amul and Britannia, the company started selling value-added dairy products ranging from ghee and paneer to flavoured milk and lassi under the "Dairy Best" brand.

KKR India Financial Services Pvt Ltd has dragged Dairy major Kwality Ltd to the National Company Law Tribunal (NCLT) on loan default of more than Rs 1,200 crore.

KKR & Co's non-banking finance unit has filed a petition against the Kolkata-headquartered company before NCLT under the Insolvency and Bankruptcy Code (IBC).

Kwality has a debt of about Rs 2,000 crore, of which 80% had gone bad because of poor business decisions. Its market value and financial performance have also declined considerably over the past year.

Kwality Ltd is a processor and producer of several types of dairy products, which include milk, ghee, butter, milk powder, curd, yogurt and cheese under the brand 'Dairy Best'.

Kwality Ltd, a reputed dairy firm recently signed an agreement with Bank of Baroda for providing Rs 4,000 crore loans to the former's one lakh farmers from whom the company procures milk.

In a filing to BSE, Kwality said, “it has signed an MoU with Bank of Baroda to disburse Rs 4,000 crore of loan to its one lakh farmers in initial phase out of its established network".

The company has a network of about 3.25 lakh across about 4,500 villages in Uttar Pradesh, Haryana and Rajasthan which are amongst the largest milk producing states of India.

Kwality Ltd would attend to the remaining farmers in successive phases over a period of time.

The dairy brand emphasised that the funds would be available at preferential rate and shall be utilised primarily towards purchasing of milching animals, smartphone and two wheelers. The scheme is aimed at providing financial assistance to improve socio-economic lives of farmers and guide them towards digitisation.

Regarding the event, Nawal Sharma, company's President and Head Business Transformation said, "This is a win-win situation for all the three stakeholders which are farmers, bank and company. This will help in increasing our direct sourcing of milk from farmers and faster rolling out of high-margin value added products thereby improving the profitability."

As per Nawal, Bank of Baroda would get a readily available customer base for the priority sector lending and would also get operational support from the company in identification of farmers and payment management system.

Nawal said, "Farmers will get financial assistance at attractive terms with which they can create additional infrastructure leading to higher income. This will also promote digitisation among farmers.”

He also said that farmers would get loans up to Rs 4 lakh at less than 9 per cent interest rates. Furthermore, he said, "It would allow us to develop a robust engine to increase our procurement directly from farmers who currently contribute 22 per cent of our total milk handling capacity of 3.4 mn litres/day, pinpointing that the company is targeting to increase direct procurement to over 50 per cent over the next 3-4 years.

Kwality plans to roll out 10-12 variants of high margin value-added products such as flavoured milk, paneer, cheese, UHT, cream in tetra packs, table-butter, yoghurts, amongst others over next 12-18 months.

Dairy firm Kwality has roped in Bollywood actor Akshay Kumar as brand ambassador for its entire range of products for a period of two years.

Akshay Kumar is today the fittest Bollywood actor and therefore fits perfectly as the brand ambassador of the company, Kwality said in a filing to the BSE today, reported PTI.

The company is on a high growth trajectory and undergoing a major strategic transformation. We have robust plans for the consumer market and this association will help us draw a lot of strength from his reputation and will bring a direct connect with our target audience," Kwality Managing Director Sanjay Dhingra said.

Kwality has six milk processing units in Uttar Pradesh, Haryana and Rajasthan.