Mumbai: Hindustan Lever Ltd (HLL) will have to pump around Rs 44 crore to acquire the remaining 26-per cent government equity in the Modern Foods Industries (India) Ltd. State Bank of India Capital Markets has valued the government equity of Modern Foods at Rs 11,489 per share, which is to be divested to HLL, the strategic partner in Modern Foods.

SBI Caps officials say subsequent to the divestment of 74 per cent in Modern Foods in favour of HLL for a consideration of Rs 105 crore in January 2000, the government had appointed SBI Caps as the sole advisor for the divestment of its remaining 26-per cent equity in the company.

"We have valued the government equity at Rs 11,489 per share and submitted the valuation report to the cabinet committee on disinvestment," the officials say. "This means, while acquiring the remaining 26-per cent stake in Modern Foods, HLL has to infuse around Rs 44 crore more in the company."

As per the agreement with HLL, post-divestment the government will offload its remaining 26-per cent equity in Modern Foods so that fresh infusion of funds in the company could be facilitated by HLL.

The FMCG major, which enjoys the right of first refusal, had also expressed interest in buying the government equity. The government sold its 74-per cent Modern Foods stake at the rate of Rs 11,000 per share for a face value of Rs 1,000 per share.

Industry analysts say Modern Foods fits into HLL's major thrust in the area of foods. Its branded atta business (under the Annapurna brand) has been showing a handsome growth. In this context, Modern Foods strategically fits into HLL's business plans. There are direct-buying synergies in the area of wheat procurement, which ensures that maida, the main raw material for bread, is made available at the desired quality and at the most competitive prices to the company.

Besides bread, the Modern brand has been extended to cakes and rusks in a few Indian states. In due course, HLL also plans to look at biscuits as a potential category and may launch these under the Modern brand.

Annapurna atta, initially launched as Kissan Annapurna atta, has, over the years, attained a very strong brand-equity. It is now the largest-selling packaged atta brand in India in the organised sector. Now Modern Atta, the newly-launched bread brand, is priced at Rs 9 for a 400-gm pack - similar to competing brands like Britannia and Harvest Gold.