Ready for a haircut: PE firm True North in talks for distress sale of hair-oil brand Sesa Care

True North acquired a 74% stake in the business in 2018 for Rs1,125 crore. The company’s losses increased to Rs 115.59 crore in FY23 from Rs 63.8 crore in the previous year.

Homegrown private equity firm True North is in talks with strategic investors to sell its majority stake in ayurvedic hair-oil brand Sesa Care. The PE investor has been struggling to revive the business, which has been in the red for several years now, sources aware of the development said.

Sesa Care sells ayurvedic products across categories such as hair-oil, shampoos, juices and others. The hair care segment constitutes the majority of its business.

True North acquired a 74% stake in the business in 2018, with the original promoters of the company holding the rest. True North acquired the stake with an investment of around Rs1,125 crore.

“True North is working with a domestic investment bank to find an investor for the business and they have been in talks with some strategic investors to pick up a controlling stake in the company. The company has struggled to grow its topline and been a loss-making entity for many years,” said one of the sources.

“True North had taken a debt of around Rs 325 crore for the acquisition of the business, which has become a big drag on the business and True North, as the company’s cash flows are not strong enough to service this loan and the PE firm has had to infuse more cash into the business to repay the loan. The sale talks are geared more towards solving the debt issue,” the source added.

Steady slide

In fact, Sesa Care witnessed a sharp decline in its revenues after True North took over and has not seen its revenues return to pre-acquisition levels even over five years after the acquisition.

In FY18, the company registered revenue of Rs 239.5 crore, but sales fell to a mere Rs 78 crore in the first nine months of FY20 (pre-covid lockdowns), as per a report by credit rating agency IndiaRatings.

For FY23, the company recorded a consolidated revenue of Rs 130.29 crore, increasing marginally from Rs 111.9 crore in FY22, according to filings made by the company with the registrar of companies (RoC)

However, Sesa Care saw its losses almost double to Rs 115.59 crore in FY23, from a loss of Rs 63.88 crore in FY22,

An email sent to True North did not elicit a response.

“Sesa Care’s scale of operations remains small with a revenue of Rs63.77 crore earned till September 2023, driven by a moderate demand for its ayurvedic hair oil. The hair care segment contributed over 90% to Sesa Care’s revenue in FY23. However, the hair oil industry remains fragmented with limited product differentiation and low entry barriers. Ind-Ra believes given the highly competitive nature of the industry and the company’s limited product portfolio, Sesa Care’s scale of operations is likely to remain small over the medium term,” IndiaRatings said in a report.

Profitable exits elsewhere

While True North has faced headwinds at Sesa Care, the fund has recently made strong exits from other investments.

Last year, the PE firm sold a 20 percent stake in health insurance company Niva Bupa Health Insurance to its partner Bupa, a UK healthcare multinational, for Rs 2,700 crore.

True North became Niva Bupa's majority shareholder in 2019 after acquiring the 51% stake held by Analjit Singh’s Max India for Rs 511 crore.

The PE firm sold a part of its stake, worth over Rs 400 crore, in the IPO for Federal Bank’s NBFC arm FedFina Financial Services Ltd. The PE firm had invested about Rs 375 crore in the NBFC.

True North is also selling its stake in Kerala-based hospital chain Kims Health to Blackstone-backed Care Hospitals.