PE deal: CIPEF may buy 15% in Balaji Wafers

 

Mumbai: Balaji Wafers Pvt. Ltd is in advanced talks with Capital International Private Equity Funds (CIPEF) to sell nearly 15% in the snacks maker according to two people familiar with the development, who did not want to be named. One of them is directly involved with the transaction.

 

“It is the decision of the next generation and since they have to run the business in future I have left the decision (of stake dilution) to them,” said Chandubhai Virani, managing director and founder, Balaji Wafers. Virani confirmed that talks were at an advanced stage with CIPEF. “We are looking at closing the deal with Capital International in a month’s time. We are looking at diluting close to 15% stake at a valuation of about Rs.4,000 crore for the company,” said a top official of Balaji Wafers who asked not to be named because of a non-disclosure agreement with the PE fund. 

 

Emails sent to the media relations team as well as to a US-based spokesperson of CIPEF on Wednesday did not elicit any response. A singapore official of the firm on Wednesday also declined to comment.

In December, Mint reported that investment firms Actis Capital and CIPEF were the frontrunners to buy the stake in Balaji Wafers and that EY was advising the seller on the transaction.

 

 

 

Apart from the money that will be used for setting up new plants, Capital International will also bring their rich global experience to our management. We have seen in the past how other homegrown companies like Paras Pharma have turned around and grown with the help of PE firms,” said the Balaji Wafers official cited above. 

 

In 2006, Actis acquired a minority stake in Paras Pharmaceuticals Ltd; by 2008, it held 63% in the company. In 2010, Reckitt Benckiser Group Plc agreed to buy Paras Pharmaceuticals for about Rs.3,260 crore, acquiring Actis’s shareholding. Actis made more than a threefold gain on its 2006 investment in Paras, Bloomberg reported in December 2010. 

Balaji Wafers, with revenues of about Rs.1,000 crore in 2013-14, initiated talks with PE and strategic investors last year to raise capital. Founded in 1976, Balaji Wafers is one of the country’s largest makers of potato chips. The regional brand has a presence in states such as Gujarat, Madhya Pradesh, Rajasthan, Maharashtra and Goa. The company claims it has a 60-65% share in the wafers and snack market in Western India, and is eyeing entry into the Northern and Southern markets.

 

The stake sale is in line with the company’s plan to generate sales of Rs.1,500 crore by 2015, Keyur Virani, director of Balaji Wafers, told Mint in July. 

 

Investors can’t get enough of the food business in India. In February, Mint reported that three private equity firms, Kedaara Capital, TA Associates and Carlyle, were separately in talks for a substantial stake in the bakery business of Cremica Group, a Ludhiana-based company. 

 

Last month, Singapore based agri-commodity firm Wilmar International picked up 27.5% stake in the first phase of a larger deal in Shree Renuka Sugars for Rs.517 crore. In January, WestBridge Capital Partners bought nearly 25% stake in DFM Foods, which makes salted snacks under the Crax brand, from its promoters for over $10 million (around Rs.60 crore). The same month, DSG Consumer Partners invested Rs.10 crore to buy an undisclosed stake in Vadodara-based freeze dried agricultural products company Saraf Foods Ltd. In January, Europe’s biggest dairy company Groupe Lactalis SA agreed to acquire a controlling stake in Tirumala Milk Products Pvt. Ltd for $250 million to $300 million.

 

Private equity and strategic investors have always been keen on these firms, said Siddharth Bafna, partner and head of the corporate finance and transaction services practice at Lodha and Co. Processed foods is a well-accepted growth story and the demand for such products is expected to only go up in the future, he added

 

“Indians consume a very small percentage of processed food as compared to the rest of the world. With an increase in nuclear families and working women, longer work hours and a younger population, consumption of these products will only go up,” Bafna said. “There have just not been enough investment opportunities available as successful processed or packaged food brands have very healthy cash flows and the need for capital is typically limited.”

Rahul kumar Gupta

PGDM,1st Year

source:-Mint