October 26, 2016

MOPE Investment Advisors, the private equity arm of Motilal Oswal, has invested Rs 100 cr (S$15 million) through two of its funds – the India Business Excellence Fund II and the India Business Excellence Fund IIA – in Kolkata-based branded staple food producer and marketer, Ganesh Grains.

This investment is the first instance where Ganesh Grains has raised private equity capital since its founding in 1936. One of the oldest and largest staple food brands in eastern India, Ganesh has eight manufacturing facilities in West Bengal, Uttar Pradesh, and Andhra Pradesh and a significant distribution network of more than 35,000 retailers that sell its “Ganesh” branded whole-wheat flour, porridge, and semolina and other wheat products.

Through its business, Ganesh Grains posted healthy revenues of Rs 500 cr (US$75 million) in 2015/16, and Manish Mimani, managing director of the company told Live Mint that the investment is more meaningful than simply a capital infusion. For two years Ganesh has been seeking out a strategic investor that would provide mentoring to help scale up the business and deepen its “management bandwidth” so it can better capitalize on growth opportunities.

The Promise in Food Grains

“The food staples industry is undergoing a fundamental transformation. The combined effects of demographic shifts & rise of new consumption centers, will have a profound impact on the shape of demand over the next few decades,” said Vishal Tulsyan, managing director and CEO, MOPE.

Annual consumption of staple grain foods in India is driving a market with an estimated value of Rs 70,000 cr, or just over $1 billion, but the industry is highly fragmented, with the organized sector referred to as “miniscule” by Tulsyan. This industry structure has created a framework in which companies such as Ganesh Grains are expected to see year on year expansion of sales of between 20 percent and 25 percent.

Moving forward, Ganesh plans to use the financing to fund the expansion of its capacity, to further the reach of its distribution network and to build its brand – all steps that it sees as building value for its stakeholders.

“Partnering with MOPE will help the company achieve its three dimensional goal of becoming the fastest growing food staple business in the country while continuously improving its market share and strengthening the ‘Ganesh’ brand,” said Mimani. “The MOPE teams’ partnership approach, along with proactive growth focus, will provide the necessary impetus for Ganesh.”

Although the size of the stake acquired was not disclosed, Vishal Tulsyan, managing director and CEO of MOPE Investment Advisors told Live Mint, “We typically take 20-40 percent in any company.” Indicating a valuation for Ganesh of between Rs 250 cr and Rs 500 cr (US$37.5 million – US$75 million).

“We are pleased to be part of what we believe is one of the fastest growing food staple brands in the country,” said Tylsyan. “The food staples industry is undergoing a fundamental transformation. Through this partnership with Ganesh Grains, we intend to help create a large, differentiated leader in India’s food staple industry.”

MOPE Bucking the Trend

This investment in Gansh comes only one day after MOPE announced its strategic investment of Rs 110 cr (US$16.5 million) in Bangalore-based Dairy Classic Ice Cream Pvt Ltd.

It also follows only one day after the release of a new report issued by News Corp-VCCEdge that explores the significant slow-down in investment activity in India’s food and agri sectors this year. The report detailed how in 2016 India’s food and agribusiness sectors have seen 62 private equity deals with a total value of $250 million – a significant decrease compared to 153 deals with a total value of $1.15 billion for this time period the year before. Despite this drop in investment activity, industry watchers are not seeing it in a completely negative light.

“After the irrational exuberance in 2015, self-correction this year has come in as boon,” Nita Kapoor, Head -India New Ventures, News Corp and CEO, News Corp VCCircle told the Economic Times. “It gives entrepreneurs in food, agri and consumer business space to recalibrate their models and desist from ‘me too’ ideas to realign themselves with the evaluation criteria of investors.”

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Lynda Kiernan