Pune-based processed foods and pickles firm Nilon's Enterprises Pvt. Ltd is looking at acquisitions to expand its product portfolio, a top company executive said.
The company is in preliminary talks with two investment banks to help it identify assets said Rajheev Agarwal, director and chief executive of Nilon's.
Agarwal, who also has a 5% equity in the company, declined to name the investment banks or the time frame for the proposed acquisition.
“We have looked at three firms till date, but none of them met our requirements", said Agarwal, who is looking for companies for access to new products and brands.
Nilon's has already spoken to banks, including State Bank of India, HDFC Bank Ltd and Axis Bank Ltd to raise up to `400 crore for the acquisition “Funding is available, but the cost of money has increased by 200 basis points in the past one year, which is a dampener,“ said Agarwal, adding: “The increase in interest rates or an economic slowdown will not hamper expansion plans. One basis point is one-hundredth of a percentage point".
The Reserve Bank of India has raised its key policy rate 11 times since March 2010 in ef- forts to curb inflation.
Nilon's is also merging its , group firm Deepak Foods, which makes fruit based candies, with another group firm Sanghavi Foods Pvt. Ltd, which makes sauces and jams.
Yet another group firm is Sanskar Recipes Pvt. Ltd, manufacturer of pickles in the North-East.
The group recorded a net profit of `7 crore on `175 crore sales in fiscal 2011. It has a distribution reach of 400,000 stores and a network of 3,600 dealers. In 2008, the group raised `75 crore from UK based entrepreneur Kirit Pathak, who now owns between 26% and 50% in the different companies.
India's processed foods mar- ket is close to a `1 trillion industry, growing at about 15% per annum, said Pankaj Gupta, practice head of consumer and retail practice at Tata Strategic Management Group. The high growth is being driven by the transition from unorganized to organized play, he added.
The industry has seen regional firms making acquisi- tions to increase product range or gain new markets. It has also attracted multinationals. Early this year, one of Norway's larg- est companies, Orkla ASA, acquired Rasoi Magic Foods (In- dia) Pvt. Ltd, a Pune-based manufacturer of spices and spice mixes, through its Indian company MTR Foods Pvt. Ltd.
In 2010, ADF Foods Ltd, which has a large exports and international presence, re-entered the Indian market with Soul range of pickles and sauces. The company had owned Mother's Recipe that it sold to Pune-based Desai Brothers Ltd in 2002.
“Overall, deal activities are increasing. The nature of the deal could differ with promoters selling out or getting pri- vate equity funding,“ said Gupta.
(Source-mintlive.com)