VKL to get $40m investment to focus fully on Indian QSR supply

Private equity investor India Value Fund Advisors has revealed it will invest US$40m to finance the next phase of growth of a domestic food ingredients company – the latest in a line of QSR suppliers to catch the eye of buyout firms.

The sum will be for an undisclosed stake in Vallabhdas Kanji Limited, which manufactures food ingredients and flavourings in India and the Middle East with a strong focus on quick-service restaurants and the processed food industry.

Changes in direction

Until this deal the flagship company of the Kanji Moorarji Group, VKL started operations in 1935 as a whole spice dealer and later expanded into the private label and food ingredients business.

In 2011, it sold off its bulk spices and private label businesses to Olam International in order to focus on valued-added food ingredients, and funds from the IVFA investment will be used to finance VKL’s plans to break entirely clear from its wholesale business.

"VKL has an impressive customer base, a strong knowledge of the local palate and we strongly believe it is well positioned to benefit from a robust growth in the underlying QSR and processed foods industries," said Vishal Nevatia, managing partner at IVFA, adding that the fund has been closely tracking the food industry in India for opportunities like this.

Ajay Mariwala, VKL’s managing director, said: "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."

QSR on the rise

According to reports published by Rabobank and by Assocham India, the country’s QSR segment is worth US$600m and is expected to grow at an annual rate of 30% until 2015. The packaged food industry, meanwhile, is growing about 15-20% each year and is likely to touch US$30bn by 2015.

Several Indian investment funds, including Everstone Capital, India Equity Partners, Saif Partners and New Silk Route, have taken direct exposure in the food sector, while several others have invested in QSR.

Motilal Oswal Private Equity 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 chains operating in India.