CavinKare in talks with PE firms to raise Rs 350 crore for expansion

Capital likely to be raised by April this year

CavinKare Pvt Ltd, Chennai-based Fast Moving Consumer Goods (FMCG) firm, is in talks with five to six private equity investors to raise around Rs 350 crore, diluting around 10% shares in the company. The fund would be raised by April, this year, according to top official from the company.

Speaking to reporters in the sidelines of announcing expansion plans of the Group's beauty salon business, C K Ranganathan, chairman and managing director of CavinKare said, "Yes, we are looking at raising funds through Private Equity for our expansion plans. We are planning to dilute around 10% stake to raise about Rs 350 crore."

While the earlier reports says that the company is in talks with various PE firms including Chrys-Capital, Carlyle and Everstone Capital, Ranganathan declined to comment on the potential PE firms the company is in talks with. JM Financial is negotiating the deal.

"The money will be used for our expansion plans across the segments in which we are present in," he said. However, he refused to comment on the expansion plans commenting that the plans would be ready for announcement within May, this year. The company has plans to expand its dairy related products capacity in Chennai.

"We have run the business successfully all these years with seed capital of Rs 15,000. But it cannot be the same always, so we have to bring in more money for growth," he added.

The company today announced its plans to expand its beauty salon business, Trends in Vogue Pvt Ltd, increasing the number of salons from current 110 to 350 in next two years. The total investment into the proposed pan-India expansion would be around Rs 80 crore in next two years, which would be from internal accruals and borrowings.

The salon business, which is currently around Rs 7,000 crore market in India, has around 1,70,000 players in top 800 towns, of which 5,000 are unisex salons and 50,000 are ladies beauty parlours and 1,15,000 barbershops, says the company. Almost 99% of the segment is unorganised at present, and the company expects around 40% to be organised in the sector in a decade.

The company has two brands in the segment - Green Trends for middle class customers and Limelite, to cater the premium segment and focused on major cities. At present, there are around 110 Green Trends and around seven Limelite and the company is looking at expanding presence in both, though Limelite would not be more than 75 salons even after the proposed expansion, he added. It is also looking at options to set up salons in neighbouring countries where CavinKare already have a presence.

Plans are to increase number of franchisee in the salon business, a model the company started in 2012, along with setting up its own salons.

Meanwhile, the group has exited from its restaurants business last month, informed Ranganathan. There were three restaurants run by the company on experiment basis and all has been sold out to individual entrepreneurs. The restaurants business was not viable for the company and demands the management to dedicate time on it, while the margins are not conducive under the model it was operating, he added.

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