Future grp to complement food park with Rs 150-200 crore cold storage acquisition

With agri-produce and fast moving consumer goods (FMCG) segments set to become a bigger play for Future Group in the coming years, its chief executive officer, Kishore Biyani is aggressively working towards tightening a few loose ends in the entire value chain. To complete the cycle, Biyani will be making an acquisition in the area of cold storage that is likely to be concluded within this fiscal.

"Cold storage is an area where we still need to build capacity and with our mega food park already operational, we will require such facilities for procuring and storing purposes across the country. We are in very advanced stage of discussions for an acquisition (in the cold storage space) and should be closing the deal in the coming months," said Biyani on the sidelines of the launch of the group's mega food processing facility that got inaugurated by Indian prime minister, Narendra Modi on Wednesday, September 24, 2014.

While Biyani refrained from sharing further details on the potential acquisition, company sources said that talks are currently on with a cold storage chain based out of Delhi and that the deal could be valued between Rs 150 and Rs 200 crore.

"Various options are currently being explored in terms of structuring the deal. It could be a complete buyout or merger into the group's logistics arm (Future Supply Chain – FSC) wherein the company being acquired will get the shares of FSC," said a senior executive from the group.

Industry experts are of the opinion that the number of transactions and emergence of new brands and players in the food and beverage space in the last few years is a testament that both the consumer and the investor are actively participating in the growth of this sector which has a strong growth potential. "Supportive logistics infrastructure is a key requirement that will further boost the growth and thus these investment plans from one of India's leading retail players is a positive and an encouraging development. "Investing in the support infrastructure gives a direct access to the consumers without spending on marketing which enables entrepreneurs to build brands, market products and expand operations, especially for local entrepreneurs supplying perishable goods and no access to kirana channel," said Prashant Mehra, partner, Grant Thornton India LLP.

Christened 'India Food Park' and spread across 110 acres at Tumkur in Karnataka, work on Biyani's food processing facility began four years ago. In fact, it is among the first of the 24-odd food processing facilities that the Ministry of Food Processing Industries (MOFPI) has planned to be launched in India in the coming years.

"Four such (food processing) facilities will become operational in a year's time and we are already working on 17 more to be finalised in the coming years," said Harsimrat Kaur Badal, Union Cabinet Minister of Food Processing, Government of India at the inauguration of India Food Park.

The India Food Park facility is being developed on a public-private-partnership basis wherein the Karnataka state government has invested Rs 50 crore (in the form of the land parcel) and the balance 200 crore has been pumped in by Future Consumer Enterprise Ltd.

"An additional Rs 750 crore will be invested in this facility in the coming years and we are hoping this unit to be completely operational in another two to three years time," said Biyani adding that the group is targeting revenues upwards of Rs 20,000 crore from the food processing business.

He also said that two more facilities are being planned in West Bengal (Kharagpur, 65 acre) and Madhya Pradesh. The two units will cater to food processing activities in the east, north east and north India regions.

Once completed, India Food Park will have around 50 units for food processing and dedicated plants to manufacture Indian savories and snacks, frozen food products, chutneys, pasta, dry fruits and nuts, chocolates, and much more. The facility will employ close to 10,000 people eventually and positively impact the livelihoods of farmers, producers and agri-entrepreneurs in Tumkur and beyond.