Lighthouse has struck a partial exit from Bikaji Foods as part of a deal where IIFL Asset Management Company Ltd bet Rs 251 crore ($36 million) on the Bikaner-based firm.

Bikaji did not disclose how much came into the company but said Lighthouse sold some shares.

However, people privy to the development told VCCircle that around Rs 100 crore was ploughed into the company and a similar amount went to Lighthouse. The promoters of the company pocketed Rs 51 crore.

One person said the PE firm has generated over 4x returns on its original investment through the transaction.

“The Mumbai-based PE firm sold 2.5-3% stake during this transaction to IIFL Special Opportunities Fund and pocketed Rs 100 crore, or over 4 times its over four year old investment,” one of the persons mentioned above said.

This translates into internal rate of return (IRR) of 40- 50% in the part-exit, not counting dividend earnings, if any, over the years, according to VCCircle estimates.

PE firms typically chase 20-30% IRR or annualised returns on their investments.

Lighthouse had picked up a 12.5% stake in the snacks maker for Rs 90 crore in April 2014. It still holds around 10% stake in the firm. “They are likely to sell the rest during the company’s public float scheduled next year,” the other person said.

When contacted, a Lighthouse Finds spokesperson declined to comment on the development. An email query to Bikaji Foods and IIFL Asset Management didn’t elicit any response till the time of publishing this report.

Bikaji Foods

Promoted by Shiv Ratan Agarwal, the snacks maker was earlier called Shivdeep Industries Ltd. It was established in 1986 as a partnership concern before being converted into a limited company in 1995.

The company used to sell its products under the Haldiram’s brand until 1993, when it parted ways with the Nagpur-headquartered Haldiram Foods International Pvt. Ltd and took the Bikaji brand name.

Bikaji makes Indian snacks such as bhujia, papad, namkeensand sweets including rasgulla at its factory in Bikaner.

The company operates in a fragmented and unorganised food industry, where it faces competition from local manufacturers as well as organised players, according to a June 2017 report by credit rating firm ICRA.

Apart from its home turf of Rajasthan, the company has a strong presence is a few other states such as Bihar and Assam.

According to VCCEdge, the data research arm of VCCircle, Bikaji posted a net sales of Rs 609.6 for the year ended in March 2017 as compared to Rs 549.7 the year before. It’s net profit stood at Rs 43.7 crore as against Rs 41.2 crore during the period under review.

IPO Calling

The Rajasthan-based company is looking to float an initial public offering (IPO) of about Rs 600-700 crore to help fund its expansion plans. It is looking to launch its IPO by middle of next year. “The merchant bankers for the process will be hired next month. The IPO is expected to fetch a valuation of nearly Rs 4,000 crore,” one of the persons cited earlier, added.

Bikaji’s public float plan (https://www.vccircle.com/exclusive-lighthouse- backed-bikaji-foods-firming-up-ipo-plans/), which was first reported by VCCircle early this year, comes after a record year for IPOs in India when domestic companies raised nearly $10.4 billion via initial share sales in 2017 thanks to buoyant stock markets.

If it does go public, Bikaji will join the likes of Prataap Snacks (https://www.vccircle.com/sequoia-backed- prataap-snacks-surges-33-on-stock-market-debut/) and DFM Foods. Prataap Snacks, which makes Yellow Diamond chips, made a strong debut on the bourses last year. Prataap Snacks counts venture capital firm Sequoia Capital as an investor. DFM Foods, which operates under the brand Crax, counts private equity firm WestBridge Capital as a key shareholder (https://www.vccircle.com/westbridge-seeks-bigger- bite-crax-maker-dfm-foods-makes-open-offer/).

Last April, VCCircle reported that Balaji Wafers Pvt. Ltd was also mulling an IPO (https://www.vccircle.com/exclusive-balaji-wafers- eyes-ipo-next-year/). However, a couple of months later, founder Chandu Virani was quoted by The Hindu Business Line as saying that while the company had indeed been thinking about floating an IPO, there was no need to go public so long as banks were willing to lend.

Lighthouse

The PE firm invests in mid-market companies in India spanning sectors such as consumer goods, personal care, lifestyle, food and beverage, agriculture, building materials, healthcare and financial services.

The private equity firm was set up in 2001 by Mukund Krishnaswami, a former executive at Lehman Brothers’ private equity unit, and William Sean Sovak. It has been investing in India since 2006.

It recently marked the first close of its third India- dedicated fund at $150 million (https://www.vccircle.com/mid-market-pe-firm- lighthouse-hits-first-close-for-latest-india-fund/) (Rs 974 crore), and is aiming to achieve the final close at $200 million by June. The latest fund has institutional backers, including International Finance Corporation (https://www.vccircle.com/ifc-to-back-lighthouses- 200-mn-third-private-equity-fund/) (IFC), which said that it would consider committing up to $45 million.

Lighthouse’s last exit was in February 2017 when it had sold its stake (https://www.vccircle.com/lighthouse-exits-unibic- foods-selling-stake-peepul-capital/) in Unibic Foods to Peepul Capital.

(As published in vccircle.com on Mon, March 26 2018. )