Investors seek a bite of food & beverages pie
MUMBAI: A lot is happening over food. From Theobroma to Haldiram's and Biryani By Kilo, investors (investment firms and corporates alike) are lining up to take a bite of India's food (captures packaged food as well as food services like QSR) and beverages (F&B) space.
A broader sluggishness in consumption had slowed down the pace of deal closures; Haldiram's and Theobroma, for instance, were in the works for a long time, but the appetite to partake of India's consumption story remains high, and deal counters seem to be buzzing. Investors are evaluating brands (deals could be in the form of funding or acquisitions of significant stakes) such as Nik Baker's and Wow! Momo, an industry source said.
"There is also a QSR pizza chain based in the North which has seen some interest from investors. In the packaged food space, almost a dozen deals are in the pipeline in the ready-to-eat/ready-to-cook segments," the source said.
Fireside Ventures has a very strong pipeline of food deals, partner Dipanjan Basu told TOI, whereas Belgian investor Verlinvest, which has backed brands like Blue Tokai Coffee Roasters, Lahori Zeera, and Epigamia, is set to pump in fresh follow-on funds in its existing food companies in addition to new deals, taking the total amount of India investments this year to more than the targeted $100 million.
"For global investors looking to invest in India, consumer and healthcare must be on the shopping list! There is interest in performing companies, and the next couple of years should augur well for consumption given the tax breaks and factors such as the reduction in import duty for edible oil, etc.
," said Arjun Anand, managing director and head of Asia at Verlinvest.
Earlier this year, Temasek, IHC (International Holding Company), and Alpha Wave Global acquired minority stakes in Haldiram Snacks Food, valuing the family-owned company at $10 billion.
KFC operator Devyani International acquired a majority stake in Biryani By Kilo's parent, Sky Gate Hospitality, while most recently, ChrysCapital closed a deal to acquire a majority stake in bakery chain Theobroma Foods.
Another brand, The Belgian Waffle Co., has been in the market for at least a year now, although sources have indicated that the deal is now potentially looking like a minority stake acquisition compared to a majority transaction before.
"India's food space is a large industry with an attractive growth profile based on the shift from unorganised to organised. With an increase in disposable income and convenience-led multiple food options via food aggregators, Indians are eating out and ordering food more than before.
"This has given opportunity to many homegrown brands to scale. As private equity investors, our endeavour is to discover market leaders that are growing at 1.5-2 times the industry growth rate," said Rajiv Batra, director and leads, investment opportunities, consumer sector at ChrysCapital.
In the QSR space, interest is typically to back pan-India brands, while in the packaged food segment, regional brands are equally being looked at by investors. "In QSR, unit economics and TAM (total addressable market) are generally more attractive than the casual dining space, where returns on investments have been tepid. Investors made good returns in the QSR space," said Mayank Rastogi, markets leader, strategy and transactions practice at EY.
In the food services space, IPOs have largely been the mode of exit, while in packaged food, M&A is a big theme. "FMCG players are hungry for acquisitions," Rastogi added.
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