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Last Updated : Jun 06, 2020 03:12 PM IST | Source: Moneycontrol.com

Exclusive | PE firm Everstone Capital prepares to take Modern Foods off its menu

Singapore-headquartered private equity firm Everstone Capital has decided to put Modern Foods, which it acquired in 2015 from HUL, on the block, people with knowledge of the matter told Moneycontrol.

Modern Foods
Modern Foods

Iconic bread and bakery brand Modern Foods, the first public sector undertaking (PSU) to be privatised, is again set to change hands, the third occasion it will have a new owner.

Singapore-headquartered private equity firm Everstone Capital has decided to put Modern Foods, which it acquired in 2015 from HUL, on the block, people with knowledge of the matter told Moneycontrol.

“Everstone Capital has mandated investment bank Investec for the sale process. The firm wants to show returns to its limited partners (investors) by exiting a few of its portfolio companies in India,” one of the persons cited above told Moneycontrol.

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A second person also confirmed Everstone’s intent to divest Modern Foods. The returns from the private equity firm’s food and beverages business platform have not been as per expectations, he said.

“Both strategic players (domestic and overseas) and private equity suitors would be interested in a target like Modern Foods as the brand has strong recall value and they can also get access to the company’s well established distribution channel and sell other products as well,” said a third person.

A fourth person who keenly tracks the consumer segment said, “Margins are not very high in such a business, but a suitor with a complementary product portfolio, who wants to fill gaps, may be keen to participate in this transaction.”

All the four persons spoke to Moneycontrol on the condition of anonymity. Moneycontrol is awaiting an email response from Everstone and will update this article when it hears from the firm. When contacted, Investec declined to comment.

MODERN FOODS: THE JOURNEY SO FAR 

Launched in 1965 as Modern Bakeries (India) Limited, the company was rechristened Modern Foods India Ltd (MFIL) in 1982.  According to the DIPAM (Department of Investment and Public Asset Management) website, the company went through a minor restructuring in 1991-94 when its Ujjain plant was closed, the Silchar project was abandoned and the production of Rasika drink was curtailed.

The company was referred to the Disinvestment Commission in 1996. In February 1997, the commission recommended 100 percent sale of the company, treating it in the non-core sector.

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In September 1997, the government approved 50 percent disinvestment to a strategic partner through competitive global bidding. In October 1998, ANZ Investment bank was named the global advisor for assisting in disinvestment.

In January 1999, the government decided to raise the disinvestment level to 74 percent. HUL emerged as the solo bidder and acquired 74 percent of Modern Foods in January 2000. Two years later, the FMCG giant purchased the remaining stake.

On September 9, 2015, HUL said it will sell Modern Foods to Everstone Capital for an undisclosed amount.

‘DOUGH’ YOU HAVE IT IN YOU?

Modern Foods competes with other bread brands such as Britannia, Harvest Gold, Nature’s Own and English Oven, among others. Over the years, the brand has diversified from its core bread business to other categories such as cookies, cakes, rusks, sweet fills, pizza bases, batter and mixes.

The company’s consolidated sales as of March 2019 were Rs 390-Rs 400 crores, sources said.

At its peak, Modern Foods enjoyed more than 40 percent share of the bread market in India. Modern Foods products are available nationally in nearly 100,000 stores and are made in 40 factories.  It is present in more than 15 states and has a strong presence in south India.

In September 2019, Modern Foods purchased a majority stake in Sonepat, Haryana-based  Supreme Baker Pvt Ltd, which produces bread and cookies.

A CLOSER LOOK AT EVERSTONE

Everstone is focused on India and South East Asia and has assets in excess of $5 billion across private equity, real estate, green infrastructure and venture capital. It has invested in more than 30 portfolio companies in the region and its India portfolio includes fast-food chain Burger King (which has received the Sebi nod for an IPO), Indostar Capital Finance & nutraceutical ingredient player OmniActive Health Technologies.

It recently agreed to exit Hinduja group promoted Hinduja Leyland Finance. Moneycontrol was the first to report the PE fund’s plans to exit the NBFC arm on January 29, 2020.
First Published on Jun 6, 2020 02:57 pm
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