Bikanervala in talks with PE funds to raise up to Rs200 crore
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Mumbai: Bikanervala Foods Pvt. Ltd, which sells Indian sweets and savouries under the brand Bikano, has initiated discussions with private equity funds to raise as much as Rs.200 crore, said two people familiar with the development.
“It (Bikanervala) is in the market to raise funds to the tune of Rs.200 crore. The promoters want to dilute a minority stake in the company,” said one of the two, requesting anonymity as the talks are private.
The company has hired investment banking firm IDFC Bank to advise it. A spokesperson for IDFC Bank declined comment. A spokesperson for Bikanervala, and Shyam Aggarwal, managing director of the company, did not respond to emails seeking comment.
Bikanervala started off selling Indian snacks but has, over the years, expanded its offerings to include beverages, cookies and papad.
The company has five plants in New Delhi, Greater Noida on the outskirts of the capital and Rai (Haryana). Apart from selling its products in India, it exports to countries across Asia, Europe, Africa, and to Australia, and the US.
Bikanervala plans to invest the money in its packaged foods business, said the second person cited above.
“It has two lines of business—the packaged foods business under which it sells snacks, sweets and other products and the store-cum-restaurant business under the Bikanervala brand. The fund-raising activity that the company is undertaking is for the packaged foods business; it wants to invest to expand the product portfolio and distribution network,” he said, adding that the packaged foods business was slightly bigger than the store/restaurant one.
According to the company’s website, Bikanervala operates 55 outlets in India and abroad in countries such as the United Arab Emirates, New Zealand and Nepal. Bikanervala recently entered the business of hospitality with the opening of Bikanervala Boutique Hotel, a premium segment hotel situated at Banjara Hills in Hyderabad.
According to filings with the registrar of companies, the company reported a revenue of Rs.492.6 crore in financial year 2014-15, compared with Rs.415.4 crore in the previous year. Its profit was Rs.20.5 crore, as against a profit of Rs.15.6 crore in the previous year.
Bikanervala’s fund-raising efforts come at a time when its peers such as Balaji Wafers Pvt. Ltd and Prataap Snacks Pvt. Ltd are planning to raise funds through the public markets.
In April, Mint reported that Sequoia Capital-backed Prataap Snacks, which sells potato chips and a variety of spicy Indian savouries under the brand name Yellow Diamond, is looking at an initial public offering that could see the firm raise around Rs.400-500 crore.
Prataap Snacks processes, makes and sells potato-based snacks, extruded snacks and namkeen (Indian snacks), and ventured into the noodles market last year.
In 2011, Sequoia invested around $30 million in the company. The size of the stake it received in return wasn’t disclosed.
In January, Mint reported that Gujarat-based snacks maker Balaji Wafers plans to sell a 10% stake through an IPO .
According to industry experts, regional snack makers are an attractive investment option for private equity funds.
The Indian snacks industry expanded nearly six times to Rs.47,000 crore in 2013 from Rs.8,000 crore in 2004, according to market researcher Nielsen India.
“Increasing disposable incomes, a need for convenience from fast-paced lifestyles and a cultural tradition of snacking between meals have fuelled explosive growth in this sector,” said a November 2014 report by Nielsen.
“The packaged foods market is expected to grow exponentially. Even today, several food categories are dominated by the unorganized market, with almost 90% market share in certain cases,” said Harminder Sahni, founder and managing director of Wazir Advisors, a consulting firm.
However, with rising urbanization and incomes and a large young population, there is a trend to move towards packaged and branded food products, he said, adding that the growth in the market for food companies will come from more and more of the market becoming organized and branded.
“The market is big enough to accommodate several players and going ahead, we will see more brands enter the fray. Private equity investors are willing to back brands in the packaged food space, given the sheer size of the opportunity,” he said.