iD Fresh Food in talks with PE funds to raise Rs100 crore

Venture capital (VC) firm Helion Venture Partners-backed iD Fresh Food (India) Pvt. Ltd, popular for its packaged idli and dosa batter, has initiated talks to raise at least ₹ 100 crore from private equity (PE) funds, according to two people aware of the development.

The company, started by IIM Bangalore alumnus P.C. Musthafa, sells various packaged ready-to-cook products such as idli and dosa batter, Malabar parotas and whole wheat chapatis, under the brand iD Fresh.

“They are looking to dilute a significant minority stake to incoming investors. The firm is in talks to hire an investment bank to help them raise funds from PE firms,” said one of the persons cited above, requesting anonymity as he is not authorized to speak to the media.

VC firm Helion Venture Partners had invested ₹ 35 crore in the Bengaluru-based firm in October 2014. “Helion had picked up around 25% stake in the company, valuing it at over ₹ 140 crore. Then the company’s revenues were around ₹ 40 crore. Today, they have a top line of over ₹ 100 crore,” the person added.

Helion Venture Partners declined to comment on the development. Emails sent on Friday to Musthafa and iD Fresh did not elicit any response.

iD Fresh started in 2006 as a small store selling idli and dosa batter, operated by Musthafa and his cousins. Today, it has seven factories manufacturing and packaging various products and retails these in several cities across south and west India such as Bengaluru, Mumbai, Chennai, Hyderabad, Pune and Mysuru. The company has also expanded overseas to Dubai.

“The fund-raise will help iD Fresh launch more products. They are already planning to add products such as rava idli and vada batter, and they also have plans to add dairy-based products such as paneer,” said the second person cited above, also on condition of anonymity.

Funds will also be used to increase their distribution reach and include more retail stores in their network, while also helping them to enter newer geographies within the country, he added.

“They have also come out with a unique distribution model called iD Trust Shops, which are unmanned self-service stores that are put up in large residential complexes. These provide customers easy access to their products 24x7, and it is something that they are looking to scale up,” he said.

Other firms in the packaged foods category are also expanding their businesses and have raised funds from PE investors for the same.

Earlier this month, Cremica Food Industries Ltd, a Ludhiana-based food products firm, raised $15 million from Rabo Equity Advisors Pvt. Ltd, the investment advisors for India Agri Business Fund, reported Mint. Cremica, known for its sauce, condiments and snacks, is looking to achieve sales of ₹ 1,000 crore by 2020 from ₹ 200 crore in 2014-15.

In May, The Economic Times reported that Maiyas Beverages and Foods, founded by P. Sadananda Maiya, also the founder of the popular Bengaluru-based firm MTR Foods Pvt. Ltd, raised ₹ 200 crore from PE firm Peepul Capital and existing investor Ascent Capital. In 2014, the firm had raised ₹ 100 crore from Ascent Capital. The company, which sells products such as rava idli mix, packaged rasmalai, badam milk, among others, plans to use the funds to launch more food products.

In the last five years, PE and VC investors have put $821 million in consumer-facing food and beverage businesses, according to data from Venture Intelligence.

The ready-to-cook/eat market is witnessing healthy growth, driven primarily by lifestyle changes and the convenience that these products provide, said Dhanraj Bhagat, partner at Grant Thornton India Llp.

“People today, especially the urban and working population, are finding these products very useful, given the shortage of time for cooking meals. Also, the growing trend of dual income households, where both husband and wife are working professionals, is also pushing the adoption of these products,” he said.

Additionally, there is also a fairly big export market for these products that firms are trying to tap, he said. “The large population of Indians living abroad are looking for Indian tastes and these ready-to-cook food is perfect for them,” Bhagat said.