Pedigree American venture capitalist Sequoia Capital has bought $30 million stake in Indore-based Prakash Snacks, makers of Yellow Diamond brand potato chips, as large financial investors aggressively chase tier-II food and beverage brands appealing to India's broader consumption story.
Sequoia, one of the most influential growth capital providers from silicon valley, is believed to have acquired a significant minority stake in Prakash Snacks, with reported turnover of Rs 250 crore and Rs 30 crore in net profit. The firm is also a supplier of private labels to the country's expanding organized retail industry.
Sequoia Capital IndiaMD VT Bhardwaj confirmed the just-concluded $25-30 million investment in Prakash Snacks. Last year, private equity giant Carlyleinvested Rs 102 crore in the South-based Tirumala Milk Products, which started as a small town enterprise at Narasaraopet in Guntur district of Andhra Pradesh.
Afund managed by Motilal Oswal picked up 20% stake in Bector's Food Specialties, makers of biscuits and breads under Cremica brand, in another instance of private investors tapping branded food and beverage enterprises originating in smaller cities but with pan-India aspirations.
“We believe in this hypothesis that suburban entrepreneurs probably understand the broader Indian consumers, especially B and C segments, better,” Bharadwaj said.
Domestic museli and oats maker Bagrry's India and Balaji Wafers have attracted private equity interest, banking sources added. Gaja Capital invested $12 million for a minority stake in Bangalore-based John Distillers, makers of Original Choice Whiskey, a strong branded player in the economy segment of the spirits . Private investors, both domestic and global, are mining deeper for suburban entrepreneurial stories as they take a detour to skip rocketing valuations of national brands.
“PE managers are beginning to realize that they are in the business to make profits and are showing the stomach to look for deals beyond the big cities. There are strong franchises with better cost structures in tier-II India. And smalltown business families are warming up to private equity now,” said Jacob Kurian, Partner , New Silk Route Advisors.
Source: Times of India