Aiding this M&A game will be the government decision to place milk and dairy products on the open general licence (OGL). With a few good brands and local distribution network, the food-processing sector in India can prove to be good hunting ground for potential takeovers and acquisitions. And, with most companies reeling under a severe cash-flow problem, sell-outs could well be on the cards.

This would explain the sudden buying interest in a host of food-processing counters. On July 5, Lanyard Foods, for instance, hit its all-time high of Rs 51.20 on BSE, while Vintage Foods inched up to its 52-week highof Rs 40.50. Godrej Foods remained frozen for almost the entire session at Rs 25.30. Even Swojas Energy Foods zoomed up by 7.89 per cent to Rs 35.55.

Apart from HLL, who is believed to be foraying into biscuits and breads with the takeover of Modern Foods, International Bestfoods Ltd (formerly called Corn Products) is also learnt to be on the look-out for potential takeovers.

Last year, Italian food major, Parmalat SPA, entered the market by acquiring Swojas Energy Foods, which produces value-added dairy products. A UK-based company is learnt to be in talks with Hyderabad-based Heritage Foods for a strategic partnership. One of the largest private sector milk processing companies, Heritage Foods, has a strong hold in Andhra Pradesh and Tamil Nadu. Bangalore-based Vintage Foods is reported to be in talks with its technical partner, Golden Foods (a subsidiary of Irish major Avonmore Foods Plc.) for an equity tie-up. Although the company is tight-lipped about the possible financial tie-up, operators havestarted speculating in the counter.

Godrej Foods, which is in the midst of a restructuring drive to bring down its interest costs, is reportedly keen to sell off its mineral water and squash division. The company is on the look-out for fresh equity and may consider a financial tie-up with a foreign company. MNC chocolate majors, including Hershey Foods Corporation, are in talks with Hyderabad-based Lotus Chocolates to buy out its manufacturing facilities. Lotus is a contract manufacturer for companies like Cadbury India, Nestle and boasts of brands like Chukcles, Supercar, Tango, Mystique Coffee and Mystique Orange.

At present, Lotus is a subsidiary of Sunshine Allied Investments, Singapore, which belongs to the MUI group of Malaysia. The MUI group, through Sunshine, holds 52 per stake in Lotus.