Sequoia Capital buys minority stake in Vini Cosmetics for `110 cr

Mumbai: Sequoia Capital has bought a minority stake in Ahmedabad-based Vini Cosmetics Pvt. Ltd for ₹ 110 crore, of which ₹ 35 crore was used to purchase the stake of an unnamed investor.

Darshan Patel, chairman and managing director of Vini Cosmetics, confirmed the transaction but declined to give details of the stake diluted to Sequoia.

Patel founded Vini Cosmetics, the maker of Fogg deodorants and talcum powder White Tone and Jinjola, in 2010. He is one of the three brothers who founded Paras Pharmaceuticals Ltd.NextMAds

“Our annual turnover is about ₹ 175 crore and we intend to utilize the funds raised for diversifying to over-the-counter (OTC) products and nutraceuticals,” he said. “We have got a valuation of 4.5 times of the topline.”

Deepam Patel, joint managing director of Vini Cosmetics, said the funding will help them in introducing new products and expand their products portfolio.

Sequoia Capital India’s managing director Abhay Pandey said Vini Cosmetics is one of the fastest growing FMCG companies that it evaluated in the recent past. “We expect it to close this year with a revenue of ₹ 250 crore. The promoter understands the sector and we have seen him making money in his last venture (Paras),” said Pandey.fourthMAds

Packaged consumer goods firms are generating strong interest among private equity investors. There have been 19 transactions in this space till date, worth $309.3 million, according to VCCEdge estimates, an investment tracker. There were 24 such transactions in 2012, worth $593.8 million.

Some of the largest deals this year include Qatar-based Hassad Food Co.’s acquisition of 51% stake for about $100 million in New Delhi-based basmati rice seller Bush Foods Overseas Pvt. Ltd. In June, ChrysCapital invested ₹ 250 crore in Chennai-based consumer goods company CavinKare Pvt. Ltd, the maker of Nyle and Chik shampoos, for an undisclosed stake.

Private investors favour this segment as there is still a lot of scope left for regional brands to scale up nationally, said Sunil Jain, founder partner at Sprout Capital Advisors LLP, an investment bank.. sixthMAds

“Apart from the large MNCs, what we have in India are five to six strong regional firms like CavinKare,” he said. “They have the opportunity to scale further.”

Citing the domestic consumption theme that has typically been favoured by investment firms, Jain said despite the current economic downturn, India’s demographic profile makes it certain that there will be sustained consumption.

As much as 40.2% of the population are between 25 and 54 years old.

There is more private equity interest in minority transaction in the packaged consumer goods space, he said. “There are buyout transactions underway.”