General Atlantic in talks to buy Ching’s Secret maker Capital Foods

Kochi: Private equity (PE) firm General Atlantic LLC is in final stages of discussions to buy a controlling stake in Capital Foods Pvt. Ltd, the owner of the instant noodles brand Ching’s Secret, according to two people aware of the development.

General Atlantic will acquire the stake in Capital Foods from existing investor Invus Group, which holds a 44% stake, and promoter Ajay Gupta, who holds the remaining 56% stake.

The deal will value the company at Rs1,500 crore, said the first person on condition of anonymity.

Besides General Atlantic , other private equity investors interested in Capital First include US-based TA Associates.

However, General Atlantic is in advanced talks with Capital Foods and is likely to acquire an about 80% stake in the company, said the second person, also on condition of anonymity.

Capital Foods also sells the Ching’s Secret brand of masalas and sauces, and Smith & Jones range of pasta masala, ketchup and cooking pastes.

Capital Foods, which reported a revenue of Rs500 crore in 2016-17, generates about 80% of its sales from the Ching’s brand.

Capital Foods is present in 11 states, with Maharashtra and Gujarat contributing about half of its overall sales.

Spokespersons for General Atlantic and TA declined to comment.

Mails sent to Invus Group and Ajay Gupta of Capital Foods went unanswered.

In 2013, Kishore Biyani’s food and fast-moving consumer goods, or FMCG, business division Future Consumer Enterprises—formerly known as Future Ventures—had exited its seven-year-old investment in Capital Foods by selling its entire 44% stake to Invus Group for Rs180 crore.

The deal had valued Capital Foods at Rs408 crore.

In 2006, Future Ventures had invested Rs13 crore for a minority 33% stake in Capital Foods, and had eventually increased its stake over the years.

An experienced hand in the advertising field and a former chairman and managing director of Forefront Advertising and Marketing, Ajay Gupta founded Capital Foods in 1996.

In Indian markets, Smith & Jones competes with Dabur’s Hommade brand.

The other brands in the cooking paste market, a segment where ginger-garlic paste dominates, has also brands such as Mother’s Recipe, Nilon’s and Priya.

In the soup category, Ching’s Secret competes with products such as Hindustan Unilever’s Knorr and Nestle India Ltd’s Maggi.

“With more and more unit families, women working full time and help (cooks and maids) becoming expensive and less available, the ready-to-cook and ready-to-eat, and processed ingredients market is set to grow exponentially,” said Harminder Sahni, founder and managing director of retail consultant Wazir Advisors.

In a highly competitive area of blended masala category, Capital Foods created a niche category of Chinese masala, where the brand holds a leading position.

In January, Morgan Stanley Private Equity Asia had invested Rs152 crore in Southern Health Foods, the makers of Manna Foods brand of ready-to-cook products.

In 2016, Bengaluru-based packaged foods company Maiyas Beverages and Foods Pvt. Ltd had raised Rs200 crore from investors in a funding round that was led by Peepul Capital.

“The brands that will succeed have the potential to become billion-dollar companies over the next 10-to-15 years. However, the success will require a lot of investment in product development and marketing, and that can come from private equity firms with patient long-term capital,” Sahni added.

US-based General Atlantic, which has been operating in India since 1999, has invested in Billdesk, IIFL Wealth, Mu Sigma and National Stock Exchange.

Last year, General Atlantic had acquired a minority stake in Absolute Barbecue, a Chennai-based chain of casual-dining restaurants.

In the Asia-Pacific market, General Atlantic owns a stake in PT MAP Boga Adiperkasa, a leading food and beverage retailer operating five exclusive brands—Starbucks, Pizza Express, Krispy Kreme, Cold Stone Creamery, and GODIVA—in Indonesia.