Sequoia Capital-backed Prataap Snacks is looking at an IPO that could see the firm raise around Rs400-500 crore
Mumbai: Sequoia Capital-backed Prataap Snacks Pvt. Ltd, which sells potato chips and a variety of spicy Indian savouries under the brand name Yellow Diamond, is looking at an initial public offering (IPO) that could see the firm raise around ₹ 400-500 crore, according to three people aware of the development, on condition of anonymity.
Prataap Snacks processes, makes and sells potato-based snacks, extruded snacks (design-specific food) and namkeen (Indian snacks), and ventured into the noodles market last year.
“The discussions have been going on for some time; they plan to hire merchant bankers very soon to start work on the IPO," said one of the people mentioned above.
The IPO will be a mix of primary offer and an offer for sale from Sequoia, which wants to sell part of its stake in the Indore-based snack-maker, he added.
“They will use the proceeds to expand into newer markets, increase manufacturing capacity and to invest in new products," said the second person cited above.
The company decided to go public after it dropped its private fund-raising plans, he added.
Last year in March, Mint reported that the Sequoia Capital-backed snacks-maker was looking to raise around $50-70 million from private equity investors to fund its expansion plans.
An email and several calls to Amit Kumat, founder and chief executive officer of Prataap Snacks, enquiring about the company’s plans, went unanswered. Emails sent to Sequoia Capital on Wednesday too remained unanswered.
With its IPO plans, Prataap joins another snacks-maker, Balaji Wafers, which is also planning to go public.
In January, Mint reported that Gujarat-based Balaji Wafers Pvt. Ltd will sell a 10% stake through an IPO.
According to experts, regional snacks-makers such as Prataap have grown strongly on the back of better knowledge of local markets vis-à-vis larger national brands and a market that is growing rapidly.
“The regional brands have grown strongly by leveraging their knowledge of local tastes and better understanding of local markets in terms of the distribution networks and channel partners. Also, product pricing vis-à-vis national players is quite sharp," said Siddharth Bafna, partner and head of corporate finance, Lodha and Co.
They are also helped by the fact that the category of processed foods has strong growth potential in India, he said. “Overall consumption of processed foods is increasing. While in the US almost 80% of the food consumed is processed, in India the number stands at just 2-3%," he said.
The demand for snacks has grown exponentially in the country.
The Indian snacks industry expanded nearly six times to ₹ 47,000 crore in 2013 from ₹ 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 the November 2014 report by Nielsen.
Prataap Snacks was started in 2003 by Amit Kumat, his brother Apurva Kumat and Arvind Mehta in Palda, near Indore, in Madhya Pradesh. In 2011, Sequoia invested around $30 million in the company. The size of the stake it received in return wasn’t disclosed.
According to the company’s filings with the registrar of companies, Prataap Snacks’ revenue grew 30% in the financial year 2014 to ₹ 446.9 crore from ₹ 344.3 crore in the previous year. The extruded snacks division contributed ₹ 211.9 crore to revenue, the highest, followed by the potato chips division with ₹ 166.9 crore.