Sequoia, Peepul Capital in race to pick stake in Kovai Pazhamudir

Kovai Pazhamudir Nilayam, the Coimbatore-based fruits and vegetables retailer, is close to raising private equity funds up to Rs 100 crore. The company, which has a network of 40 stores and is expanding at a pace of 10 stores a year, is understood to be in advanced talks with Sequoia Capital and Peepul Capital for the fund raise, which if finalised will be signed within end of this month. The funds are expected to be raised at the holding company - KPN Farm Fresh Private Limited. Investment bankers in the know indicated that Blackstone may also be in the race for this asset.

While none of the PE funds could be reached for their views, the management of Kovai Pazhamudir Nilayam, confirmed that they are looking to raise funds, but they have not finalised if they have to tap external sources. "I cannot comment on the PE funds. We have had discussions with various interested people and we will take a call if we have to take the PE route," said Senthil Natarjan, MD, Kovai Pazhamudir Nilayam.

Investment bankers indicated that if Kovai Pazhamudir Nilayam does indeed proceeds with PE funds, it will be diluting 10-15 per cent for this transaction. he company has store sales of around Rs 170 crore and is growing at 10-15 per cent on a year-on-year basis. Kovai Pazhamudir Nilayam currently has presence across ten cities in Tamil Nadu and has recently expanded into Kerala with presence in Ernakulam and is also looking at Calicut for opening a new store.

Kovai Pazhamudir Nilayam, operates on a franchisee structure for expansion, but most of them are through partners who are pretty well known to the promoters.

"We are looking to invest resources in beefing up our logistics, storage as well as to enhance the cold-chain network," Natarajan said. The chain started during 1965 has been growing steadily and with enhanced back-end in place the network expansion would be speeded up, indicated bankers.

In addition to retailing fruits and vegetables, Kovai Pazhamudir Nilayam, has since ventured into fresh juices and as well as exports.