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Business News/ Industry / PE firms Kedaara, TA Associates, Carlyle in talks to invest in Cremica
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PE firms Kedaara, TA Associates, Carlyle in talks to invest in Cremica

The firms are separately in talks for a substantial stake in the bakery business of Cremica Group

Foreign direct investment has been growing in the food processing sector and has seen an annual average of 37% over the past five years. From 2010-13, the food processing sector has received foreign investment inflows of about `4,000 crore. Photo: ReutersPremium
Foreign direct investment has been growing in the food processing sector and has seen an annual average of 37% over the past five years. From 2010-13, the food processing sector has received foreign investment inflows of about `4,000 crore. Photo: Reuters

Mumbai: Three private equity firms—Kedaara Capital Investment Managers Ltd, TA Associates Management LP and Carlyle—are separately in talks for a substantial stake in the bakery business of Cremica Group, a Ludhiana-based food products company, according to three people.

The stake could range from a significant minority to a majority stake and would provide an exit to Cremica’s existing investor Motilal Oswal Private Equity Advisors Pvt. Ltd, which has been invested in the company for four years now, they said, requesting anonymity. One of them is directly involved in the deal.

In 2010, Motilal Oswal Private Equity acquired 20% stake in Cremica from Jade Dragon (Mauritius) Ltd, a unit of Goldman Sachs. Goldman Sachs invested in the company in 2006.

The transaction happened after a restructuring in the family business under which three sons of founder Rajni BectorAjay Bector, Anoop Bector and Akshay Bector—were given different businesses. The biscuit business is now with Anoop Bector and Ajay Bector, while 25% of the condiments business is with Akshay Bector.

“It’s (the bakery business) a 575 crore turnover business. There are both primary and secondary elements in the deal and (the deal value) could be about 250 crore to 350 crore," said one of people cited above.

Emails sent to Kedaara Capital, Carlyle and TA Associates did not elicit any response. Anoop Bector did not respond to phone calls and emails.

Mumbai-based investment bank Avendus Capital Pvt. Ltd is running the mandate, the people said.

“There has to be an exit is all I can say," said Vishal Tulsyan, chief executive, Motilal Oswal Private Equity Advisors.

Started in 1978, Cremica makes biscuits, breads, sauces, bread spreads, ready-to-eat curries, mayonnaise, slated snacks and syrups. The company’s key clients include McDonald’s India, Barista, Pizza Hut, Cafe Coffee Day, Jet Airways and Dominos Pizza.

The size of the biscuit industry is estimated to be 12,805 crore, which is expected to grow at a compounded annual growth rate (CAGR) of 8% in the next three years, according to retail consultancy Technopak Advisors Pvt. Ltd’s January report.

The market for snacks in India is estimated to be about 10,000 crore. The sector is expected to register an average annual growth of 8% over the next three years. A number of companies such as Frito-Lay, Parle Agro and ITC Foods have taken note of this segment, and are targeting consumers through new product offerings, Technopak said. Foreign direct investment has been growing in the food processing sector and has seen an annual average of 37% over the past five years. From 2010-13, the food processing sector has received foreign investment inflows of about 4,000 crore.

PE investors have also taken a bite into this segment. In 2011, Sequoia Capital invested $30 million in Indore-based Prakash Snacks Pvt. Ltd, while in 2013, India Value Fund invested $40 million food ingredients maker Vallabhdas Kanji Ltd (VKL). Rajkot, Gujarat-based potato chips and snacks maker Balaji Wafers Pvt. Ltd wants to sell a 10% stake and is in talks with PE firms.

Branded and processed food investments are linked to India’s consumption growth story, which is expected to only rise with increasing population and higher income, said Abhijieet Dhar, director, Equirus Capital Pvt. Ltd, an investment bank.

“Brands that are well established can offer incremental return on equity which can be very high and that is what is attracting PE investors to such firms. Historically, consumer businesses have given alpha returns to investors," Dhar said. “Companies that can increase their market share are being lapped up by investors."

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Published: 20 Feb 2014, 12:25 AM IST
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