Heritage Foods to divest stake in retail business

KPMG appointed to find prospective investors

Heritage Foods, a company promoted by Andhra Pradesh Chief Minister Chandrababu Naidu's family, would hive off its retail business, Heritage Fresh, into a separate company to rope in investors.

The percentage of dilution would be decided once the investors are identified, said Dharmendar Matai, chief operating officer, retail & bakery, Heritage Foods. Heritage has appointed KPMG to find investors.

The retail chain, which is currently making losses, is exploring many options to turn profitable in the next two years with the help of new investors, he said. "Apart from adding new stores, we are planning double digit same store growth in FY17 by refreshing our assortments, revamp our pricing strategy and rationalise operational costs," Matai said.

Heritage Fresh posted earnings before interest, depreciation, taxes and amortisation (Ebidta) loss of Rs 2.2 crore in FY15. Accumulated losses from the retail business over the years were around Rs 284.1 crore, he said. Matai said retail vertical is expected to be Ebidta-positive from this financial year.

In 2015-16, Heritage Fresh is expected to report turnover of Rs 600 crore, compared with Rs 495 crore last year, through its 105 stores.

Heritage Fresh would invest Rs 20 crore every year to expand its stores across Bengaluru, Chennai and Hyderabad.

"We would like to add 75,000-100,000 sq ft of trading space per year for the next five years. We expect to cross Rs 1,000 crore turnover by FY19,'' Matai said.