MOPE Investment picks up stake in Ganesh Grains for Rs100 crore
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New Delhi: MOPE Investment Advisors Pvt. Ltd has bought a stake worth Rs100 crore in Ganesh Grains Ltd, the seller of the Ganesh brand of packaged foodgrains.
For MOPE Investment, which has bought shares worth Rs1,600 crore in 23 firms over a decade, this is the first investment in a Kolkata-based company. The mindset seems to be changing and companies based in eastern India are slowly opening up to external investors, said Vishal Tulsyan, managing director and chief executive of MOPE Investment.
More than the money, Ganesh Grains needs mentoring to scale up its business, said managing director Manish Mimani. The company, which in 2015-16 clocked revenue of around Rs500 crore, has a “healthy” cash flow, but to take advantage of the growth opportunities it needs to expand its management bandwidth, he said. Ganesh Grains had been scouting for such an investor for almost two years.
Though Tulsyan and Mimani declined to provide details of the transaction, the latter said MOPE has acquired a “sizeable minority stake” in Ganesh Grains and its representatives on the board will closely oversee the company’s operations. “We typically take 20-40% in any company,” said Tulsyan, which implies Ganesh Grains was valued at Rs250-500 crore.
Ganesh Grains was founded in 1936 in Kolkata’s oldest commodity market at Burrabazar—where it still has its registered office. It started to drive its packaged foodgrains business only 10 years ago, said Mimani, 42. Previously, his extended family ran a small store in Burrabazar where wheat was ground into flour.
Ganesh Grains now sells a wide variety of products such as whole-wheat flour, porridge and semolina, which are now processed at its own factories. The firm has eight manufacturing facilities in West Bengal, Uttar Pradesh and Telangana, producing around 100 stock-keeping units (SKUs), or unique products.
The combined annual consumption of these foodgrains across India is estimated at Rs70,000 crore, and the share of the organized sector is “minuscule”, said Tulsyan.
Companies such as Ganesh Grains are expected to expand their sales by around 20-25% year-on-year for a long time to come, said Tulsyan. The aim is to help the company improve on governance and stay ahead of the growth curve, he added.
Ganesh Grains has not expanded its distribution outside West Bengal and Jharkhand—around Rs400 crore of its revenue comes from West Bengal alone, according to Mimani. Sales within the state alone can be scaled up to Rs800 crore within two years, he said.
Going forward, it plans to enter the seven north-eastern states and ramp up distribution in other states such as West Bengal and Jharkhand. It has no immediate plans to sell its products outside eastern India. “Eastern India alone has a bigger market than the whole of Europe,” said Mimani.
These companies typically have an operating margin of 13-15%, but because of fast product turnaround, they deliver for their shareholders a return on capital of around 30%, according to Tulsyan.
Tulsyan said his company would typically look to liquidate its investments in 4-7 years. A share sale through an initial public offering may be considered when the revenue of Ganesh Grains has been scaled up to Rs1,500-2,000 crore, Tulsyan said.
In the current year, the company expects its revenue to go up to Rs600 crore with a peak utilization of 75-80% of its processing capacity, said Mimani.