Consumer-focused venture capital firm Sixth Sense Ventures will bet on Parag Milk Foods Ltd while promoters and World Bank’s International Finance Corporation (IFC) will invest more in the dairy firm that offers products including the Go brand of cheese.
Parag Milk said that Sixth Sense Ventures will invest Rs 50 crore ($6.82 million) through primary infusion as part of the dairy firm's larger fundraise of Rs 316 crore ($43.1 million).
IFC will invest up to Rs 155 crore via fresh shares and foreign currency convertible bonds (FCCBs). This is in addition to the Rs 150 crore offered in December by the World Bank arm via non-convertible debentures.
In 2013, the finance institution’s board approved a loan of up to $15 million to help the firm shift to value-added products having better margins.
The promoters --Devendra Prakash Shah and Netra Pritam Shah -- will further invest Rs 111 crore. With this, the promoter holding would be maintained at 46%.
Parag Milk, set up in 1992, maintains a strong presence in West and South India. It has a milk processing capacity of up to 3.5 million litres per day, with operations in Maharashtra, Andhra Pradesh, and Haryana.
Nikhil Vora, founder and CEO of Sixth Sense Ventures, said Parag Milk fits perfectly in the investor's thesis of betting on first-generation founders pioneering products for new-age consumers within the over $100 billion dairy segment.
"We believe the Indian branded dairy space will get deeper with consumers migrating from the unorganised (75% currently) to the organised space across product segments. Parag Milk, with its strategically focused branded dairy products, is best positioned to reap the benefits of changing consumer preferences," he added.
Sixth Sense Ventures has invested in listed firms earning substantial profits.
For instance, in 2019, the firm took home blockbuster returns from Hindustan Foods after WestBridge Capital Partners bought its stake in the contract manufacturer for fast-moving consumer goods.
Last year, VCCircle reported that Sixth Sense Ventures was floating its third fund.