French dairy giant Lactalis may buy Kwality Dairy in fire sale

French dairy giant Lactalis is in talks to buy Kwality Dairy (now Kwality) in a fire sale as the company’s creditors have failed to reach a timely agreement on its debt resolution, forcing the National Company Law Tribunal (NCLT) to send it to liquidation, according to multiple people aware of the matter.
Talks between Lactalis and Kwality Dairy’s creditors have gathered steam over the past few weeks and could result in the former making a formal proposal for Kwality Dairy in the next 8-10 days, according to sources in the know.

This could be Lactalis’s fourth acquisition in India, if the creditors agree to its proposal. The French company has spent Rs 5,000 crore on acquisitions in India over the past six years.

Kwality Dairy was admitted into bankruptcy proceedings in 2018 after private equity firm KKR approached NCLT claiming the company had defaulted on a Rs 600-crore financing arrangement.


Multiple other creditors including Punjab National Bank also subsequently filed their claims at NCLT. The financial creditors are owed Rs 1,900 crore by the Delhi-based dairy company.

Lactalis had not responded to ET’s queries until press time.

The liquidation orders for the ghee and flavoured milk producer were passed by NCLT in January.

Kwality Dairy was originally set up as a backward integration facility to supply milk for making ice creams that were sold under the Kwality brand. Hindustan Unilever acquired the Kwality ice creams brand from its original owners, the family of Iqbal Ghai and PL Lamba, way back in 1994. The dairy backend business was purchased by the Delhi-based Dhingra family in 2002 from the Ghai-Lamba duo.

Kwality Dairy raised financing from KKR in July 2016 in a bid to turn the business from a B2B to a B2C franchise. The financing was to help the company diversify into a manufacturer of branded ghee, flavoured milk, cheese, butter and yogurts. Kwality Dairy has been a milk supplier to leading brands such as Cadbury, Mother Dairy and Vadilal .

It has also been a supplier to HUL, Britannia Industries and ITC. It has six milk processing units in Uttar Pradesh, Haryana and Rajasthan. Haldiram’s was the only bidder to have made an offer for the company within the stipulated timeline of 270 days laid down under India’s bankruptcy laws.

Haldiramhad offered Rs 145 crore for Kwality Dairy, implying a haircut of 93% for the financial creditors. They eventually failed to agree on Haldiram’s offer, resulting in the company’s liquidation.

Lactalis has been steadily expanding its footprint in India.

It acquired southern India-based Thirumala Milk Products from private equity firm Carlyle in 2014 and followed it up with the acquisition of ghee-maker Anik Industries two years later.

It also acquired the milk business of Prabhat Dairy in 2019. Lactalis has operations in 100 countries and sales of Rs 18 billion. It is the world’s largest dairy company.