Mexico’s largest food and bakery company Grupo Bimbo is buying a controlling stake in India’s bread and bakery products maker Harvest Gold.
The deal, which values Harvest Gold at around Rs 340 crore ($50 million), will see the promoter Adil Hassan selling around 65% stake in the company, said three people with knowledge of the deal. This is the first instance of a global company buying a controlling stake in an Indian bread and bakery manufacturer.
“The Mexican group wants to expand its base in Asia, and as India offers a huge opportunity, the group has decided to grow inorganically here,” said one of the persons with direct knowledge of the deal.
Group Bimbo also has an arrangement to acquire more stake in the company going forward, said another source.
Deloitte Touche Tohmatsu India has been mandated by the company to manage the deal. Harvest Gold was founded in 1993 by Adil Hassan, a chemical engineer from IIT Delhi as Harvest Gold Foods.
With an initial investment of just Rs 1 crore, Hassan set up the company’s first manufacturing plant in Rajasthan’s Bhiwadi. The plant started production in June 1993.
The $13.5-billion Grupo Bimbo is present in 23 countries in America, Asia, and Europe. With over 13,000 products such as fresh and frozen sliced bread, buns, cookies, cakes, bagels, pre-packaged foods and confectionery products among others, and over 100 brands, Grupo Bimbo is looking to expand in the growing Indian market now. The group has grown both organically and inorganically in newer markets across geographies. Spokespersons for Grupo Bimbo and Harvest Gold did not respond to emailed queries.
Harvest Gold Industries operates various brands under various entities such as Ready Roti India, Food Magic India, Rhodanthe Foods and Mindscape One Marketing. These companies have a common management and are owned by the parent company.
The organised bread and bakery business accounts for 45% of the total market and is currently growing at around 9% annually. The market is dominated by Britannia and Modern bread. Homegrown private equity fund Everstone Capital bought out Modern Foods business from consumer giant Unilever in 2015 for Rs 250 crore.
According to a research report by ValueNotes Database, the bread industry in India grew at a CAGR (compound annual growth rate) of 9% over the last three years and was valued at Rs 3,300 crore in FY15 (estimated). The industry is expected to grow at a CAGR of 10% over the next five years to around Rs 5,300 crore in FY20.
“Entry of the mid-size regional players is consolidating the industry towards a more organised structure. Brown and nutritional bread are fast growing segments while white bread is the largest at 75%. Though urban market accounts for 65% of the demand, rural market is growing faster,” the report said.
Source: Economic Times