India Value Fund Advisors to invest up to $40 million in VKL Seasoning

Wed Jul 3, 2013 1:46pm IST

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Buyout firm India Value Fund Advisors (IVFA) is investing up to $40 million in VKL Seasoning to finance its next phase of growth as the firm moves from a wholesale firm to a value-added player. The investment is expected to flow in tranches.

Vallabhdas Kanji Ltd, now known as VKL Seasoning, started operations in 1935 as a whole spices dealer and later expanded into private label and food ingredients businesses. In 2011, it decided to exit from bulk spices and private label businesses via a sale to agri and food commodities major Olam International Ltd for $18 million.

The deal with IVFA includes both primary infusion and a secondary sale of shares of investors. According to sources familiar with the development, the deal would also mark an exit for Ascent India Fund, managed by Ascent Capital Advisors. The fund had invested $6 million in the company in 2006.

With this investment, Haresh Chawla and Vikram Nirula, partners at IVFA have joined VKL's board of directors. Avendus Capital and DSK Legal were the advisors on the deal.

VKL currently makes food ingredients and flavouring solutions in India and the Middle-East with a strong focus on the quick service restaurants (QSR) and processed food industries.

VKL is the flagship company of Kanji Moorarji Group that also includes Kancor Flavours and Extracts Ltd and Autohangar (India) Pvt Ltd, a dealer of Mercedes-Benz vehicles in India.

"Our goal is to enhance our product offerings substantially over the next few years in related food segments with the growth coming from a combination of organic and inorganic initiatives. This funding will help us grow our domestic capacities and expand business development efforts in the Middle East and Africa," said Ajay Mariwala, managing director, VKL.

Betting on derivatives of consumption

According to reports published by Rabobank and by Assocham India, the QSR segment is worth $600 million and is expected to grow at an annual rate of 30 per cent until 2015, while the packaged food industry, which is growing about 15 to 20 per cent annually, is likely to touch $30 billion by 2015.

While funds like Everstone Capital, India Equity Partners, SAIF Partners and New Silk Route have taken direct exposure to this sector, several players have invested in derivatives of this sector.

Motilal Oswal Private Equity has invested in Mrs Bector's Food, which supplies to fast food chains like McDonald's and Domino's while Bakers Circle, which is backed by GEM India Advisors and former Goldman Sachs' partner Hank Uberoi's fund Haystack, also supplies to major QSRs operating in India.

Then there also specialised logistics and supply chain companies such as Brattle Foods (GTI Capital) and Snowman Logistics (Norwest Venture Partners), which have also raised PE funding.

"We have been closely tracking the food industry in India and are very excited about this partnership. We believe VKL is well positioned to benefit from a robust growth in the underlying QSR and processed foods industries. The company has an impressive customer base, strong knowledge of the local palette and robust track record in the attractive flavours and seasonings segment," said Vishal Nevatia, managing partner, IVFA.

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