Prataap Snacks Pvt. Ltd, the maker of Yellow Diamond Chips, has raised another round of external funding before going ahead with a rumoured initial public offer (IPO), a person privy to the transaction said.
The Indore-based company, which was formerly known as Prakash Snacks, has raised Rs 47.5 crore ($7 million) from mid-market private equity firm Faering Capital.
The transaction was routed through Faering Capital's second fund—Faering Capital India Evolving Fund II. Earlier, separate media reports had said that Faering Capital is raising Rs 1,800 crore in its second fund. The PE firm is yet to make a formal statement on whether it has hit a fundraising milestone.
E-mail queries sent to Faering Capital and Prataap Snacks did not elicit any response. Aditya Parekh, co-founder of Faering Capital, did not respond to phone calls and text messages either.
The person mentioned earlier said that Faering Capital has picked 3% stake in this deal, valuing the firm at $233 million (Rs 1,600 crore).
This would mean a big mark-up for Sequoia Capital that owns around 65% of Prataap Snacks, having invested around $40 million in three rounds, according to VCCEdge, the data research platform of VCCircle.
Prataap Snacks, which was launched in 2003 by brothers Amit andApurva Kumat and Arvind Mehta, makes and sells potato-based snacks, extruded snacks and namkeen. It also ventured into the noodles market last year.
The company has churned out over 25% growth in net sales with the top-line rising to Rs 559 crore in the year ended March 31, 2015. The company is yet to file its financials for FY2015-16 with the Registrar of Companies.
It had first raised $30 million from Sequoia Capital in 2011 and later raised two more rounds from the growth equity and venture capital investor in 2013-14.
Last year, Mint had reported citing unnamed persons that the company is looking at a fresh funding of $50-70 million and has hired a banker for the process. Amit Kumat had told the newspaper that it is in discussions to raise funding but did not acknowledge the amount. Early this year, the newspaper said that Prataap Snacks is looking to raise up to Rs 500 crore through a public issue in which Sequoia Capital may sell some stake.
It could not be immediately ascertained if Prataap Snacks has struck a pre-IPO funding round.
If it goes ahead with the planned IPO, Prataap Snacks will join another snacks-maker, Balaji Wafers, which is also planning to go public.
Balaji Wafers was earlier in advanced discussions with PE firms such as Capital International, Blackstone and Actis to raise capital where it was rumoured to be selling as much as 15% stake. But the terms of the proposed deal turned off the promoters.
The snacks space has attracted several PE investors in the last couple of years. In 2014, mid-market-focused private equity firm Lighthouse invested $15 million in Rajasthan-based snacks maker Bikaji Foods International Ltd to buy 12.5% equity stake in the company.
In another deal that year, WestBridge Capital Partners picked nearly 25% stake in DFM Foods, the maker of salted snacks under the 'Crax' brand from its promoters for Rs 64.5 crore or a little over $10 million then.
DFM Foods that was half the size of Prataap in FY2014-15 but enjoys higher margins, currently has a market cap of Rs 2,191 crore ($320 million). DFM's revenues grew 34% to Rs 389.5 crore and the firm saw its net profit more than double to Rs 25 crore for the year ended March 31, 2016.
According to consultancy firm Technopak, the branded salty snacks market was estimated to be worth Rs 10,000 crore ($1.68 billion) in 2013, and was projected to grow at a CAGR of 15-18% over the medium term.
This market can be broadly divided into two segments. First represents western snacks potato chips, extruded snacks like kurkure, etc. And the other is traditional snacks namkeen, bhujia, bhakarwadi, khakhra, banana chips, etc.
PepsiCo leads the western snacks market, and, together with other prominent players in this segment (ITC, Balaji, Parle Products and Haldiram’s), holds a share in excess of 70% of the market.
In the traditional snacks space, Haldiram’s and Balaji Wafers are two prominent brands. The rest of the market is highly fragmented, and understandably so, given that the market is driven by strong regional tastes and preferences.
Faering Capital
Meanwhile, for Faering Capital this translates into the second investment and first addition to its portfolio this year. Early this year it had reinvested in fin-tech startup TranServ with other firms.
Prataap Snacks would be the 10th portfolio firm for Faering Capital, a PE firm floated by elder son of HDFC chairman Deepak Parekh. It has also invested in firms such as online financial services transaction platform FundsIndia.com, apparel firm Biba and sports education startup KOOH Sports.
These apart, it has backed RBL Bank (formerly Ratnakar Bank), Avantha Power & Infrastructure, Gokaldas Intimatewear, Manipal Health Enterprises and Linkstreet Learning.
