CESC mulls opening snack manufacturing unit for FMCG venture

Firm recently picked up 70% stake in Apricot Foods Pvt Ltd- owner of the e-Vita brand

Shortly after making its foray into the fast moving consumer goods (FMCG) space by floating a new closely held company, Guiltfree Industries, which currently deals in the snacks business, CESC Ltd will shortly be coming up with its own plant to manufacture snacks.

It has shortlisted potential locations, which includes food parks, in West Bengal, Rajasthan, Uttarakhand, Uttar Pradesh and Telengana. The venture will entail an immediate investment of Rs 70-80 crore. 

“After launching the Too Yum brand, we are seeing that the demand exceeds supply in a big way and hence we have decided to build our own plant to cater to the current and future demand,” said Sanjiv Goenka, chairman of the RP-Sanjiv Goenka Group- the parent company of the CESC Ltd.

It is considering an automated and mechanised plant to begin operations on its own, while also factoring in the possibility of setting up more such units for its new FMCG venture.

So far, it has been relying on outsourced manufacturing of products from the Pune-based STK Foods Processing, Delhi-based Indulge Foods, Bangalore-based Meghraj Food Processing India and Surat-based Shanta G Foods. However, the company will continue to outsource manufacturing of snacks.

In the next two years, the group will be infusing Rs 150 crore as the capital investment.

Goenka reasoned that the FMCG space, unlike power and other core sectors, doesn’t attract huge investments. While these sectors are capital-intensive where the bottomline is constrained, the FMCG sector requires less capital infusion and assures higher profitability.

“The focus of the group is now on the bottomline”, he said.

It has also picked up a 70 per cent stake in the Rajkot-based Apricot Foods Pvt Ltd, which sells a range of snacks under the e-Vita brand. The enterprise value of this company stands at Rs 440 crore along with a topline of Rs 200 crore. The acquisition provides Guiltfree Industries direct control over Apricot Foods’ plants in Rajkot and Hyderabad.

Speaking at the company’s annual general meeting in Kolkata, Goenka said the acquisition will help Guiltfree Industries to widen its product portfolio as well as price points. While the company had rolled out foxnuts and wheat-thins under the Too Yum brand, which is in the mid-price bracket, Goenka wanted to extend products in the budget category as well as premium organic range too.

After this acquisition, Guiltfree Industries will own two brands– Too Yum and e-Vita.

Although the company will continue to position e-Vita products in the budget category, it will convert the potato chips and popcorn products under the premium range at a later day.

After the restructuring of the group, Guiltfree Industries will become part of the proposed CESC Ventures from its current direct holding by CESC Ltd

Entry in Uttar Pradesh also on the cards?
 

After winning power distribution contracts in Kolkata, Howrah, Noida, Jaipur and Rajasthan, the power distribution arm of CESC Ltd is eyeing to bid for power distribution in Uttar Pradesh– a state, which the company had so long kept off radar.

“Owing to the political situation there, we had deliberately avoided considering Uttar Pradesh for power distribution business. But after Yogi Adityanath took charge as the new chief minister, things are changing and thus we’ll eye this state”, Goenka said.

For the ongoing fiscal year, CESC Ltd has earmarked Rs 1,000 crore as capital expenditure, of which, Rs 600 crore has been earmarked for West Bengal, while another Rs 150 crore has been set aside for its operations in Rajasthan and others.