Software, data analytics and fintech are some of the hot sectors that attract private equity (PE) firms. But, the Coimbatore-based KPN Farm Fresh, which sells fruits & vegetables and groceries, joins the club in getting PE funding as WestBridge Capital picked up an undisclosed stake in KPN Farm Fresh, which runs Kovai Pazhamudir Nilayam (KPN) retail outlets, for ₹600 crore. KPN Farm Fresh retails fruits and vegetables and is a household name in Tamil Nadu.

Sources, who are in the know of the investment details, said the WestBridge Capital investment in KPN Farm Fresh is only for its outlets in and around Chennai. The KPN outlets in Coimbatore, Tiruppur, Tiruchi and Thanjavur will be with the promoters, who will continue to hold 40 per cent stake in KPN Farm Fresh, which has been valued at ₹900 crore.

WestBridge’s website has KPN as one of the portfolio companies having raised funds in Series A.

It is learnt that WestBridge has picked up the stake in an all-cash-deal. The rest of the stake will remain with KPN’s managing director Senthil Natarajan, son of N Natarajan, one of the two founders. Senthil did not respond to requests for a comment.

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Humble beginning

The first retail outlet of Pazhamudir Nilayam was started in Coimbatore in 1965 by four brothers — Chinnaswamy, Natarajan, Kandaswamy, and Rathinam. They started expanding to other cities in the 1990s individually. Natarajan expanded to Chennai with partnerships and brought the stores under his management under Kovai Pazhamudir Nilayam brand, say the sources.

According to information available on its website, KPN has 34 outlets in Chennai; three in Puducherry, and one each in Cuddalore and Tirupathi apart from four in Coimbatore and the same number in Tiruppur; three in Thanjavur and one in Tiruchi.

Fillip to homegrown brands

Sathyanarayanan Ramachandran, Sundram Fasteners Associate Professor of Marketing at IFMR GSB – Krea University, commenting on the deal said this is a significant development for a brand grown and nurtured in Tamil Nadu and a sector like food and vegetable retail. In an air-conditioned retail ambience, KPN gave customers a strong value proposition of fresh and quality fruits and vegetables (with dairy and other groceries over time). KPN established trust and dependability while making it a pleasant shopping experience.

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The WestBridge investment will help the brand expand to other States and strengthen the logistics and supply chain. Recognition of a growing, dependable local brand will also give a fillip to entrepreneurial activity in this space, he said.

Arun Natarajan, Founder of the Chennai-based Venture Intelligence, a research service focused on private company financials, transactions, and their valuations, said from an industry’s point of view, there have been PE buyouts in the supermarket segment event earlier — for example Nilgiri’s (2006) and More (2020). However, the Kovai Pazhamudir deal is unique in the chain’s key focus on vegetables and fruits.

For WestBridge, which has thus far been focused mainly on minority investments in tech- and tech-enabled businesses, this deal is unique as well. It will definitely be interesting to track how the deal pans out in the years ahead, he said.

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