September 19, 2017

Singapore-based Mandala Capital has invested Rs 160-170 cr (US$25 million) in exchange for a 15 percent stake in Keventer Agro – a major presence in the food processing, dairy, and beverage sectors in East India.

The deal values Keventer at Rs 1,200 cr (US$180.4 million) and represents one of the biggest PE deals in the food industry in Eastern India after TPG Growth acquired a 25 percent stake in Dodla Dairy from Proterra Investment Partners for US$45 million in March of this year; KKR’s investment of US$77.4 million in Kwality Ltd in July 2016; and Rabobank Equity Advisors’ US$81.26 million investment in Kwality in January 2014.

Keventer Agro, which is the cornerstone business of the $270 million Keventer Group, has reportedly set a target to become the controlling presence in the highly fragmented Rs 30,000 cr (US$4.5 billion) dairy sector in the country’s eastern region. Currently, Amul holds the greatest market share at 10 percent, however, Kevernter’s dairy business, which is currently operating under the name Metro Dairy, is the second largest name in Bengal, according to the Times of India. To do this, Keventer plans to increase its dairy output four-fold to 1 million liters per day.

“East is a milk-deficit market. So there is a huge potential to develop dairy business here,” an unnamed industry expert told the Times of India.

Currently valued at Rs 340 cr (US$51 million), Keventer’s dairy business is looking to achieve a value in excess of Rs 1,000 cr (US$150 million) in the next three to five years, while its food business, which is currently valued at Rs 800 million (US$120,25 million) is targeting a value of Rs 2,000 million (US$300 million).

“We have charted out a robust growth plan for each of our businesses, namely dairy, banana, or frozen foods. With this fresh infusion of capital, we intend to invest about US$100 million into our dairy business in West Bengal within the next five years and grow our food processing business exponentially – all towards our endeavour of turning into a US$ 500 million company by 2022,” said Mayank Jalan Keventer, Agro chairman and managing director.

Noted Food Processing Engineer Er. Ganesh Shelke stated in 2015 that between FY06-FY13, India’s food processing sector saw a compounded annual growth rate (CAGR) of 6.3 percent. When considering the potential for value addition along the value chain, India’s food processing sector, which accounts for 32 percent of the country’s total food market, is positioned to see significant growth.

Meanwhile, the revenue generated by the organized dairy industry in India could account for 25 percent of the total dairy market from 19 percent in 2015, according to a report released by CRISIL Ratings, reports Dairy Reporter. Additionally, the sector has been growing at a CAGR of 22 percent for the five fiscal years to 2015 – but is expected to see even more significant growth by 2018.

This growth, driven by demand from an increasingly urban, health conscious, and wealthy population is expected to draw investments of between Rs 9,000 cr and Rs 10,000 cr (US$1.35 billion – US$1.5 billion)  by 2021, according to Shiva Mudgil, vice president senior dairy analyst, food and agribusiness research and advisory at Rabobank.

Mandala

In August 2016, Mandala Capital announced its first close of $140 million for its second fund created to invest exclusively in India-based agricultural and food companies. The firm’s portfolio contains a diverse range of ag and food related companies including non-banking financial company (NBFC); Sustainable Agro-Commercial Finance Ltd (SAFL); Jain Irrigation; Jain FarmFresh – a subsidiary of Jain Irrigation Systems specializing in food processing including fruits, pulps, concentrates, and dehydrated products; Godavari Biorefineries – a producer of sugar, biofuels, compost, waxes, and other related products; cold chain solution provider Gati Kausar; and Arcadia Biosciences – a developer of agricultural traits and products that provide value to growers, processors, and consumers.

“We believe there is significant potential in the food processing sector and Keventer Agro has all the right ingredients to become the leading player in Eastern India,” Uday Garg, managing partner with Mandala Capital, said.

-Lynda Kiernan