First PSU sold for Rs 105 cr to HLL in 2000 planned to be listed by current promoter Everstone
Modern Food, the first privatisation of a public sector unit in India, is being primed for an initial public offering by its current promoter Everstone Capital.
The bread maker was sold in 2000 by the central government to the then Hindustan Lever Ltd (HLL) for Rs 105 crore.
It changed hands again in 2016 when Hindustan Unilever Ltd sold it to Everstone in August 2016.
Everstone which is exiting its 31% stake in S Chand & Co through an IPO, is looking to replicate the success with Modern Food.
The bread maker, which ended fiscal 2017 with a turnover of Rs 270 crore with a positive operating profit, has set a target to reach Rs 1,000 crore turnover within the next five years.
The company, known for its sliced bread, is expanding its product portfolio, starting with pre-cooked foods in the southern states, to be followed by entry in other food and bakery items.
"While it is primarily a bread company, the consumer feedback told us resoundingly that Modern can go much beyond bread, into, cakes, buns and rusks. In fact, we have launched chapati and paratha in ready-to-cook form. We have launched chapati in Tamil Nadu and Karnataka and Malabar paratha in Kerala," Roshini Bakshi, managing director of Everstone Capital Asia, told DNA Money.
Following the acquisition Everstone, a premier India and Southeast Asia-focused private equity firm with assets under management of $3.3 billion, completed revamped the management of Modern Food, bringing in former ACC head Kuldip Kaura as chairman and Aseem Soni from Cargill Foods as its chief executive officer.
The turnover target has been set by Everstone even at the time of acquisition indicating a possible exit by the PE fund by 2021 though Bakshi said they could remain invested till about 10 years from the time of the investment.
"We would stay invested till the initial public offering definitely," Bakshi said.
On expansion, Aseem Soni said, "We also need to scale up through entry into other indulgent categories in the bakery category which would be core building block for us. Within the next five years, one-third of our revenue would come from non-bread categories when we are planning to achieve a level of Rs 1,000-crore turnover. The product portfolio that we have then would depend on the matter of continuous evaluation."
Bakshi said seeing the acceptability of the products in the South where the products are doing brilliantly, the company plans to extend them to other regions as well, targeted at young working couples demanding healthy food but wanting to avoid the hassles of making them.
"We have re-energised the brand and invested a lot in upgrading the plants and in getting people. It's is now ready to achieve our targets," she said.
Apart from six own factories, Modern has tied up with 20 different third-party manufacturers.
Will the success story of S Chand story get repeated in Modern? "Absolutely," Bakshi said.
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