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Can Motilal Oswal PE hit the jackpot by selling its stake in the Mrs Bectors biscuits
business?
Part of the excitement around the Mrs Bectors exit is because MOPE had made a respectable
3X return when it exited a part of its holding in Parag Milk Foods in September last year.
MOPE had invested 55 crore in 2008 for a 10-12% stake in the dairy company. This
investment was made out of its India Business Excellence Fund (corpus: $125 million),
where the average ticket size was in the $5-15 million range. The investment in Mrs Bectors
is also a part of this fund.
The sudden flurry of activity is because of a division of the firm between the
founders three sons. Akshay Bector will lead the 200-crore B2B business that
supplies bread, sauces and syrups to clients such as McDonalds, Pizza Hut and
Barista. The two other sons, Anoop and Ajay, will run the B2C business that owns
Cremica biscuits with a 500 crore turnover, said to be second-largest by volume in
Punjab and Haryana. Incidentally, the firm will also engage in contract
manufacturing for Cadburys Oreo biscuits and some Sunfeast brands owned by ITC.
Following the demerger, MOPE will stay invested in Akshays business but will exit
the biscuits business. While MOPE has put its 22.44% holding on the block, Ajay is
also expected to sell his 24% stake. Anoop Bector, managing director, Mrs Bectors
Food Specialities, and head of the biscuits business, will continue to hold 53% and
has no intention of selling his stake. Says Anoop, The biscuits business is growing
well at 18-20% a year and plans are afoot to set up a third plant. We are in the
process of firming up the location and it should be ready in about a year.
What could impact Mrs Bectors biscuit business valuations are Cremicas limited
presence outside north India and pressure on margins across players on the back of
rising input costs. Siddhartha Nigam, partner and leader (consumer sector), Grant
Thornton, points out that there is much interest among PE funds around the
domestic consumption story. However, this is subject to having a strong brand,
good distribution and scale of operation. Growth in this industry normally takes the
shape of a hockey stick and PE funds will have to wait longer than usual to make
good returns, he says.