Premji fund back in retail with Heritage Foods stake buy

Last Updated: Wed, Dec 05, 2012 05:05 hrs

Premji Invest, the $1.2-billion private and public equity fund of Wipro chairman Azim Premji, has bought a stake in Hyderabad-based Heritage Foods. The latter is a publicly held company, owned by Chandrababu Naidu, former chief minister of the state, with revenue of around Rs 1,400 crore in 2011-12.

It is understood that the stake was bought recently, after a private equity fund managed by the Kotak Mahindra Group offloaded a majority of its 10 per cent stake in the open market. With this, Premji Invest has again takenp direct exposure into the food and groceries retail chain sector, despite the ongoing legal tussle with the promoters of Subhiksha, the failed retail chain in which they’d put a huge amount, shortly before the latter went bankrupt.

While Premji Invest did not respond to queries for this report, senior management officials of Heritage Foods confirmed the move.

Prior to this investment, the PE fund took exposure in Fab India, JSM Corp (which runs the Hard Rock Cafe in India),Trent (part of the Tata Group), Carnation (a car servicing company started by Jagdish Khattar), Manipal Global Education and Healthcare Global (a cancer care chain), among others.

The management of Heritage Foods is understood to be in the advanced stages of spinning off the company’s retail arm, which runs 75 neighbourhood convenience stores under the ‘Fresh’ brand, focused on South India. Heritage Foods gets 90 per cent of its revenue from the dairy business; the rest comes from agriculture and bakery segments.

Heritage’s president, M Sambasiva Rao, told Business Standard they were open to a strategic partnership in the retail business. This business contributes around five per cent, at Rs 300 crore, to the revenue; it report a loss of Rs 20 crore in 2011-12.

The PE sector is also abuzz with reports that Heritage might also be looking for a strategic investor at the group company level. “The stock price during the past three months has had a good run. It has gained as much as 80 per cent and is trading at Rs 465 a share on the NSE. There is a buzz in the market that a strategic player might take a stake and then make an open offer in a total transaction value of $100 million,” two investment bankers told Business Standard.

However, the management of Heritage Foods categorically denied that the promoters were looking at selling stake in the main company. A senior official said during the past two quarters, the profit levels had improved substantially, with the dairy business performing well as procurement costs come down. “That is one of the reasons for the spike in the stock price,” he said.

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