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Hindustan Lever set to divest dairy wing to Nutricia India

Abhinaba Das

MUMBAI, May 20: Hindustan Lever (HLL) announced on Thursday that it is divesting its Rs 80-crore dairy business to Nutricia India, a wholly-owned subsidiary of Nutricia International BV of the Netherlands-based Koninklijke (Royal) Numico NV group.

A memorandum of understanding (MoU) signed between HLL and Nutricia India provides for transfer of the former's dairy-manufacturing facilities and milk-collection infrastructure at Etah in Uttar Pradesh, along with licences, permissions and other tangible assets, including the Anik trademark.

HLL did not wish to disclose the consideration for the sale of the dairy business at this stage. Analysts, however, say that the dairy business will fetch around RS 120 crore.

"The sale will be effective upon receipt of various approvals and permissions, including approval from shareholders at an extra-ordinary general meeting scheduled to take place in July. It is anticipated that all the approvals will be obtained within four months," HLL said in a release.

NutriciaIndia, set up in February last year, will utilise the acquired facilities to continue with HLL's dairy product range. The company also plans to launch the Numico range of infant foods and other health products.

The $1.7-billion Royal Numico is a leader in the business of infant milk formulae and cereals, nutritional supplements and other health and dietary products. Besides the core brand Nutricia, the groups owns leading brands like Cow and Gate, and Milupa.

"All permanent employees of the Etah unit will become employees of Nutricia India on existing terms and conditions and with continuity of service," the release said. HLL's dairy business has been facing severe competition from the National Dairy Development Board's Amul brand, a market leader. HLL had to outsource milk from local producers, and this placed it at a disadvantage vis-a-vis the market leader. Margins for HLL were much lower and the dairy business plunged into the red.

According to the company's annual report for 1998: "The market foradult milk powders declined as a result of improved liquid milk availability across the country. Consequently, the financial performance of the company was well below expectations."

The dairy business last year fetched HLL around Rs 87 crore. The company has a turnover of about Rs 9,500 crore."HLL had said that it stood committed to ensuring the continuing prosperity of these businesses and safeguarding the interests of all stakeholders, including employees.

The HLL board is of the view that the the MoU on the dairy business with a company belonging to the Royal Numico group, a leading player with core competence and technology edge in this industry, indeed fulfils this objective," the release adds.

Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.

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