Five months after it got its first controlling stake in an FMCG company in India, New-York based private equity firm India Equity Partners (IEP) is licking its lips over the food category here and scouting for more buys.

“We are looking at snacks, spices and health-related equities such as fruit-based products,” says Mr Kannan Sitaram, Chief Operating Partner of IEP

In February, India Equity Partners had bought out the Tata-group controlled Innovative Foods, which retails the Sumeru brand of frozen paranthas, peas and sea food products. It not only acquired the 70 per cent stake of the Tata group company, Indian Hotels Company Ltd, but also all the shares of founder Mr Abraham Tharakan, and now holds near 100 per cent stake (about 2 per cent is in the public domain as the company used to be listed earlier).

“This acquisition in Innovative Foods is in line with our plan to look at medium-sized and small-sized companies in the FMCG sector and construct a value to them,” says Mr Sitaram.

For instance, IEP is looking to scale up the Kochi-based firm into a Rs 200-crore player in four to five years' time. Although it would not divulge how much it paid for the company, indications are the deal size was in the region of Rs 60 crore. “We want to be a market leader in the frozen foods category,” says Mr Sitaram, who has taken charge as the new CEO of the company.

Cost efficiencies

IEP, which has taken over the strategic planning for the company, is investing in making the four units in Kochi more productive by introducing cost efficiencies. “In addition, we will be investing in advertising and promotions, which had not been done before and adding more people, especially in the sales as well as product development functions,” says Mr Sitaram. Going forward, the company will add more facilities in line with the growth rate

According to Mr Sitaram, IEP decided to acquire controlling stake in Innovative Foods mainly because of its belief in the frozen foods category.

As he points out, when Kochi-based sea food exporter Mr Abraham Tharakan first set up Innovative Foods in the 1990s, there was hardly any retail support to stock frozen food. In 2006, when the Tatas took controlling stake of the firm, modern retail had come in but the Indian household was still not looking at convenience as a factor.

“Today, consumer acceptance of the frozen category in India is increasing and we expect strong growth in this segment,” he says.

Competition in this segment at the national brand level is from Godrej Agrovet's Yummiez, Venky's, McCain and Mother Dairy's Safal. “The first two are chicken-based products, McCain is potato-based whereas Safal is focussed on vegetables. We are the only ones with a full range,” says Mr Sitaram.

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