ChrysCap close to buying 10% stake in CavinKare for Rs 350 cr

The FMCG company will use the proceeds from the proposed stake sale to expand its product portfolio

Chennai-based consumer goods company CavinKare Pvt Ltd is set to conclude its private equity (PE) fund raising. According to sources in the know, PE major ChrysCapital is close to acquiring about 10 per cent stake in the company for Rs 350 crore.

CavinKare was in talks with various PE investors for the past year and ChrysCapital and Everstone Capital were engaged in the final stages of discussion. However, discussions with Everstone failed a month ago due to a valuation mismatch, sources said. The deal is likely to be announced in a couple of weeks, it is learnt.

The Rs 1,100-crore CavinKare markets popular brands such as Chik Shampoo, Spinz Talc, and Nyle cold cream under its personal care unit. Its food and beverages units sell products such as Garden Namkeen, Ruchi Pickles and Maa fruit drinks. The company was founded in 1983 as Chik India Ltd by C K Ranganathan with a single product - shampoo in sachets.

The fast moving consumer goods (FMCG) company will use the proceeds from the proposed stake sale to expand its product portfolio. It has already announced plans to expand its beauty salon business, Trends in Vogue Pvt Ltd, by increasing the number of salons from the current 110 to 350 in the next two years.

Mails sent to C K Ranganathan, chairman and managing director of CavinKare and ChrysCapital's spokesperson did not elicit a response till the time of going to press.

ChrysCapital, the India-focused firm which manages assets worth $2.5 billion under six funds, has a wide portfolio including Hexaware, KPIT Cummins, NCC, Intas Pharma, ING Vysya Bank, Gammon, and Mankind Pharma.

India's FMCG sector has clocked revenues of $13 billion as of 2012 and is expected to grow to a $33-billion industry by 2015. In order to tap the growth, all leading PE investors are vying for a pie of the FMCG segment in India.

Singapore government owned Temasek had invested about Rs 685 crore to acquire a five per cent stake in Godrej Consumer last year. In last April, GIC, another sovereign wealth fund, and Baring India PE invested Rs 500 crore to acquire about five per cent stake in listed consumer company Marico. Last month, Qatar-based Hassad Food Co, picked up a 51 per cent stake for about $100 million (Rs 545 crore) in Standard Chartered PE-backed basmati rice seller Bush Foods Overseas. In 2011, SCPE had invested Rs 110 crore in Bush Foods.

PE investments in the FMCG sector have grown by about 60 per cent in the last year, compared to 2011. Year 2012 witnessed 22 deals worth $595 million against 24 deals worth $376 million in 2011.

According to the data, out of the $595-million PE investment in the FMCG sector, as much as $319 million was made in the personal care products space. This is more than double of the $158 million that was invested in personal care products in 2011. The packaged food sector, too, witnessed deals worth $99 million in 2012.