Private Equity in Fruit & Vegetable Processing and Food FMCG

1. Aurum-DealCurry CXO Dialogues
__________________________________________________________
Webinar on the 10th October 2014: 3pm – 4pm
Private Equity in Fruit & Vegetable
Processing and Food FMCG

2. Aurum Equity Partners LLP
An investment banking firm, with a depth of diverse-sector experience.

3. Strictly Confidential
Nitin Jain
Lead – Agri, Food & Beverages
Sector specialization:
• Agriculture, Food & Beverages
• Financial Services
Deal Experience:
15+ years of experience spanning
investment banking and equity
research.
Academic Experience:
• Masters of Business Administration
(MBA) – Goizeuta Business
School, Emory University, Atlanta,
USA
• Post Graduate Diploma in Business
Administration (PGDBA) – NMIMS,
Mumbai
• Bachelor of Arts (Honors) –
Economics at University of Delhi.
Previous Work Experience
• Indcap Advisors Pvt. Ltd.
• IL&FS Limited
• Bank of America
• Standard Chartered Bank
Conferences & seminars:
Active Speaker at conferences organized by
industry associations like ASSOCHAM , PHD
Chambers of Commerce and ICAI.
.
Select Deals :
• Advisory to DMI Finance for raising funds
• IL&FS Limited divested their stake in NSE to a Private Equity Fund
• Merger of Sundaram Finance with Lakshmi General Finance

4. Strictly Confidential
Sagar Kurade
Sector Expert – Agri-Infrastructure and Food Processing
Sector specialization:
• Agri- Infrastructure
• Food Processing
Deal Experience:
14+ years of experience working in
India leading Industrial Consulting
company for Agri-Infrastructure &
Food Processing.
Academic Experience:
• Masters of Business Administration
(MBA) – University of Hartford,
Connecticut, USA
• Post Graduate Diploma in Food
Processing - IGNOU
• Bachelor of Commerce – Goa
University
Previous Work Experience
• Project Manager –SNET, USA
• G.M – Suman Food Consultants
• Director – Suman Project
Consultants Pvt. Ltd.
Conferences & seminars:
Active Speaker at conferences organized by
Ministry of Food Processing, Govt. of India as
well as Industry Associations like AIFPA,
CIFTI (FICCI).
.
Current Designations :
• Managing Director – Suman Project Consultants Pvt. Ltd.
• Vice President – All India Food Processors Association.
• President – Association of Food Scientist & Technologist (I) (Delhi
Chapter)
• Member – CIFTI, FICCI

5. Disclaimer
 This note has been prepared by Aurum Equity Partners LLP (‘Aurum’) to present to the
participants of the webinar dated 10th October 2014 titled “Private Equity in Fruit & Vegetable
Processing and Food FMCG”. This note is presented solely for the internal use of the recipient/
participants of the webinar and does not carry any right of publication or disclosure to any
other party. This note is incomplete without reference to, and should be viewed solely in
conjunction with, the verbal briefing provided by Aurum.
 In preparing this note Aurum has relied upon and assumed, without independent verification,
the accuracy and completeness of all information available from published and public sources.
Accordingly, neither Aurum nor any of its affiliates, shareholders, directors, employees, agents
or advisors make any representation as to the accuracy, completeness, reasonableness or
sufficiency of any of the information contained in the note, and neither of them shall be liable
for any loss or damage (direct or indirect) suffered as a result of reliance upon any statements
contained in, or any omission from this note and any such liability is expressly disclaimed.
 Aurum has developed this note on its own behalf and without prejudice. This note should not be
construed as an offer to sell any securities in or assets of any of the companies referred to in this
document, or an invitation to offer.
Strictly Confidential
5

6. SECTION 1 Fruit and Vegetable Processing
Strictly Confidential 6

7. Global F&V Processing Market
Global F&V Processing Market
(USD 190bn – 2014) by Geography
India &
Central Asia,
4.70%
South East
Asia, 7.20%
South
America,
11.30%
Africa &
Middle East,
4.10%
Oceania,
2.00%
North Asia, 27.70%
14.10%
Strictly Confidential
7
North
America,
Products Segmentation
Europe,
28.90%
 Canned Fruits and Vegetables (43%): Canned fruits and
vegetables, Jam, Pickles, Sauces (ketchup, salsa, tomato
paste) , Jellies
 Frozen fruit and vegetables (36%): IQF vegetables, frozen
potatoes, frozen ready to eat, frozen ready to cook, etc
 Dried and Dehydrated Food (10%): Dehydrated fruits &
vegetables, soup mixes and bouillon
 Juices, Precut vegetables and Ready-made salad (11%):
Fruit and vegetable juices, precut vegetables, fruit cups
and ready-made salads
Global F&V Processing Market (USD bn)
177 176 182 184 190 198
217
250
200
150
100
50
2.4%
 Demand for industry products is expected to grow
strongly in developing economies such as China and India.
 Demand in developed economies such as the United
States is expected to decline at a marginal rate, while
demand in Europe is expected to remain stable over the
next 5 years till 2019
-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: IBISWorld Industry Report, Global Fruit & Vegetables Processing,
August 2014
S NO Major Companies Food Revenue in
CY13 (USD mn)
* Estimated revenue
1 Nestle 84,343
2 Unilever 30,466
3 H J Heinz Company 11,529
4 McCain Foods 5,300*
5 Campbell Foods 4,910

8. Is Indian F&V Processing Conversion Really Low?
EXPORTS OF PROCESSED F&V IN FY14
Segment Quantity (MT) Value
Strictly Confidential
8
 Processed F&V form just 2.5% of the total produce in India,
which is far lower than in the developed countries (US –
65%) and developing countries (Brazil – 70%, China – 23%)
 Higher preference for fresh products in India
 Indian farmers are focussed towards table top production
 Low level of F&V processing can also be attributed to high
wastage as 18% of India’s fruit and vegetables are wasted
due to lack of cold storage facilities
Frozen F&V
Fruit Pulp & Concentrates
Canned F&V
Dehydrated F&V
Essential Oils, Perfumery etc
Juices
(INR 11 bn in FY13)
Jams, Jellies & Marmalades
(INR 7 bn in FY13)
Sauces & Ketchup
(INR 10 bnin FY13)
Soups
(INR 2 bn in FY13)
Pickles, Chutney and Relish
(INR 30 bn in FY13)
KEY SEGMENTS
Wafers & Salty Snacks
(INR 150 bn in FY13)
B2B
B2C and
HORECA
RTE and RTC Food
(INR 29 bn in FY13)
Source: APEDA, Ministry of Food Processing, KPMG, Emerson Report
(INR bn)
Cucumber & Gherkin (Preserved) 218,750 9.6
Dried & Preserved Vegetables 56,158 7.4
Mango Pulp 174,860 7.7
Other Processed F&V 287,385 22.7
TOTAL 737,153 47.4
Source: Canadean, Analyst Research
Indian Farmers are focussed towards table top
production in F&V
 Mango has various varieties, however only 3 or 4 varieties
are in demand for processing namely- Alphonso, Totapuri
and Kesar which forms only 10%-15% of total mango
production (18,000-19,000 MT) in India
 Similarly, Potato has various varieties however, only 3 or 4
varieties are in demand for processing like Chipsona,
Sindhuri, Kufri Bahar etc which form 8-12% of the total
production base of 40,000 MT

9. F&V Processing – Huge Market Potential
S No Type of
Processing
Source: Databoard, Public Sources 9
Strictly Confidential
Market
Demand
Market Growth
rate
Organized
Market
Processing
Penetration
Overall
Opportunity
L M H L M H L M H L M H L M H
1 Fresh F&V     
2 Canned     
3 De-hydrated     
4 Frozen     
5 Ingredients     
6 Packaged     
 Fresh F&V Market in India -
 97% of market unorganized. Modern retail is just 3-4% of the market. However, we believe this market will
grow at a robust rate
 Dehydrated F&V and Ingredients Market -
 Dehydrated F&V applications are in seasonings used in Food FMCG products like soup, pasta etc. Globally
the market is $20 bn. India opportunity for a B2B and Horeca distribution of de-hydrated F&V
 Food Ingredients market includes food flavours, stabilizers, emulsifiers, food additives etc. We expect
strong growth in this market
 Packaged Foods -
 Market in strong growth phase expected to grow by 15-20%+ over the next few years

10. F&V Processing: Key Issues and Opportunities
Supply Chain Issues
Key Issues
 Fragmented supply chain with multiple intermediaries leads
to high supply-chain wastages and high price build up
 Traditional F&V value chain have average wastage of 15-
20% as compared to only 5-10% wastage in case of direct
procurement from farmers
 Smaller land holdings of farmers
Opportunities
 Contract Farming is an opportunity for the processors that
will help in better price realization for farmers and
minimizing wastage. However, success of contract farming
requires greater enforceability of contracts
Infrastructure Issues
Key Issues
 There are inadequate and inefficient cold chain facilities and
lack of modern warehouse infrastructure in the country
 Wastage in the fruits and vegetables supply chain estimated
at INR 440 bn due to lack of suitable infrastructure
 India stores 1/3rd of its food grain production v/s China
storage of 2/3rd of its food grain production
Opportunities
 Private processing and retail players could play an important
role in addressing this infrastructure deficit
 Government need to play its part by making changes to
viability gap funding models, land acquisition etc
Price Build-up in a Typical F&V Value Chain*
Source: FICCI, ASSOCHAM, Emerson 10
Strictly Confidential
100% 25%
15%
15%
25%
20%
Total
Retailer
Commission
Agent
Wholesaler
Middlemen
Farmer
Source: Aurum Estimates
INFRASTRUCTURE DEMAND- SUPPLY GAP
Infrastructure Existing Capacity
(Mn Tons)
Estimated Demand
(Mn Tons)
Cold Storage 30* 61
 India has approximately 7,000 cold storage facilities with 30
MT of cold storage facility
 About 93% of this capacity is used for storage of potato
products, only ~1% used for other fruits and vegetables
 Of about 85 MT of vegetables and 45 MT of fruits being
produced in India, only 4 MT of fruits and vegetables are
transported in refrigerated vehicles

11. F&V Processing: Key Issues and Opportunities
Financial Issues
Key Issues
 Most food processing companies have varied EBITDA
margins depending upon the product portfolio, exports Vs
domestic sales and working capital requirement cycle
Opportunities
 Food processing companies should look to strengthen their
backward integration, thereby driving higher productivity
and improving quality and safety
 Players should also focus on value addition through modern
technology and scale
Recent Policy Initiatives
Source: FICCI, ASSOCHAM, Makeinindia 11
Strictly Confidential
FINANCIALS OF SELECT F&V PROCESSING PLAYERS
Particular Capricorn
Food^
Keventer
Agro
Food &
Inns
FY13 Revenue 2,541 3,008 2,576
FY13 EBITDA % 21% 8% 8%
FY13 PAT % 6% 0% 1%
ROCE* 19% 7% 9%
Debtor Days*@ 82 43 49
Inventory Days*@ 232 94 116
Creditor Days*@ 66 45 41
*Balance sheet items as on March 31, 2013
@ Days of FY13 Revenue
^FY12 financials
Regulatory Issues
Key Issues
 Agricultural markets in most parts of the country are
regulated under the respective state APMC acts
 Licensing of traders under APMC leads to monopoly and
provides little help to farmers in direct and free marketing
 India’s food safety regulations are not in-sinc with global
standards. Product approval process is time consuming and
cumbersome.
Opportunities
 Standardization of regulations such as APMC Acts and
adoption of global food safety standards like Codex should
be accelerated
Priority Sector: Food Processing is recognized as a priority
sector in the new manufacturing policy of 2011
FDI Policy: 100% FDI is permitted in the automatic route for
most food products except for items reserved for MSME
Deduction of Tax: Tax incentives available to new F&V
processing units, with tax exemption for first 5 years
Central Excise Duty: Against a standard excise duty of 12%,
processed F&V carries a merit rate of 2% without CENVAT or
6% with CENVAT

12. F&V Processing- M&A and PE Transactions
M&A and PE transactions pertaining to B2C segments like Juices, Jams, Pickles, Salty Snacks, RTE Food etc are
covered under Food FMCG sector
Strictly Confidential
12
SELECT M&A AND PE TRANSACTIONS (2010- PRESENT)
DATE TARGET SEGMENT TRANSACTION
TYPE
INVESTOR DEAL SIZE
(INR MN)
Sep-14 Allfresh Supply F&V Logistics PE Aspada Investment 120
Aug-14 Champion Agro Fresh (minority stake) Fresh F&V PE Exhilway Global 1,200
Jun-14 Nilon’s Enterprises (minority stake) Diversified PE Banyan Tree NA
Apr-14 Lucid Colloids (minority stake) Food Additives PE IFC 1,650
Jan-14 Brattle Foods (minority stake) F&V Logistics PE GTI Capital 68
Jan-14 Saraf Foods (29%) Dehydrated F&V PE DSG Consumer Partners 100
Jul-13 Capricorn Food Products India
(minority stake)
Pulp & Concentrates PE Quadria Capital 500
Jul-13 Exotica Fruits Private Limited (27%) Pulp & Concentrates M&A M/s Doehler Asia Pte Ltd 150
Apr-13 Lawrencedale Agro Processing
(minority stake)
Fresh F&V Supply Chain PE Aspada Investments NA
Source: Databoard, Public Sources

13. Our View
Strictly Confidential
13
SUPPLY SIDE
 Large Supply of F&V - India ranks 2nd in fruits and vegetables production in the world after China producing ~11%
and ~19% of global fruits and vegetables respectively in CY2012. India ranks No.1 producer in the world in –
 Production of Banana (31% global market share)
 Papaya (42% market share)
 Mango (42% market share)
 Lemons (22% market share)
 Focus on enhancing process-able produce –
 Opportunity in contract farming, organized farming
 Crop yield rates are remarkably low in India, and an opportunity to double production yield
 For instance, India’s three key crops namely cotton, corn and rice comprise nearly one-third of the land
acreage, and have yields 40-45% lower than global average yields in these crops
 This would imply that if global yields are matched, the production of these crops could grow by 75% to
100%
 DEMAND SIDE
 Strong demand of Packaged foods growing at 15-20% pa
 Opportunity to build world-class processing facilities for exports and domestic demand stemming from
growth in packaged foods
 STRONGER PE FLOWS TO HELP BUILD THE INFRASTRUCTURE, SUPPLY CHAIN AND PROCESSING –
 Fresh F&V procurement, supply chain management
 Cold chain
 Processing – Food Ingredients and de-hydrated
 Packaged Foods
Source: National Horticulture Board

14. SECTION 2 Food FMCG Industry
Strictly Confidential 14

15. Food FMCG Industry- Landscape
Strictly Confidential
Category Market Size (2011) (INR bn)
Projected 5 Year
CAGR %
Projected Market Size
(2016) (INR bn)
SNACKS, RTE AND RTC
Biscuit 126 15 253
Salty Snacks 120 20 299
Chips 30 22 81
Instant Food – Noodle 18 20 45
Instant Food – Pasta 1 25 3
Breakfast Cereals – Oats 1.5 28 5
Breakfast Cereals – Cornflakes 5 25 15
Ready to Eat 4 18 9
Ready to Cook 15 25 46
Total 321 756
CULINARY
Jam 4.5 20 10
Pickles 17 15 34
Sauces 3 18 7
Total 25 51
STAPLES
Packaged Salt 25 12 44
Wheat Flour 1000 8 1469
Rice 1000 25 3052
Spices 400 8 588
Edible Oil 900 7 1262
Total 3325 4565
Source: Analyst Research

16. Key Challenges in Scalability
Strictly Confidential
Advertising/ Promotion Cost % of Sales
13%
9%
17% 14%
4%
20%
15%
10%
5%
0%
HUL Britannia
India
GSK
Consumer
Dabur India Nestle India
High Advertising and Promotion Expenses (FY14)
 Due to highly competitive nature of the market with
multiple brands positioned with narrow product
differentiation, advertising and promotional spends of
the companies are very high
 On average, sales and promotional expenses account
for 10-11% of revenue for Top FMCG companies
1
Distribution Network Barrier
 Traditional trade still accounts for ~94% of overall
sales while modern trade accounts for only 6%
 Huge investments are required for setting up a
traditional distribution network, especially in Tier-II &
Tier-III cities and rural areas
2
Complex Tax Structure
 There are varying local tax structures across different
states- VAT, Octroi, Excise duties and Service taxes
 Because of these, products prices differ across states
 Further, smuggled goods account for~15% of the total
goods flow, making it difficult for FMCG companies
3
Taste Diversity
 There are huge variations in taste preferences of
Indian consumers across multiple geographies,
cultures and religions
 This is a serious challenge for regional players looking
to build pan-India presence
4
Source: FICCI, ASSOCHAM

17. Equally Large Opportunity – Key Growth Drivers
Favourable Demographics
 Large young population with 66% of population below
35 years where snacking incidence is high
 As GDP grow, these categories are expected to expand
given the high correlation of income and consumption
60+
35-59
15-34
Strictly Confidential
Headroom to Grow
 Other than Staples, all the other segments including
snacks, RTE, RTC and culinary products have low
penetration
 Low per capita consumption – The per capita
consumption of packaged food in India is 18 Kg/head
v/s 300+ kgs in developed countries
Favourable Consumer Trends
 Consumer looking for indulgence, variety seeking
 Convenience is a key need as consumer lifestyle
changes - hence ready to eat and cook
 Desire for branded products v/s unpackaged and
unbranded
Fresh Food vs Packaged Food
Consumption (Kg per capita)
Infrastructure to Aid Growth
800
600
400
200
 Huge opportunity of scaling up in rural/ hinterland
markets
 Easier to build distribution network and reach as
infrastructure develops
Source: FICCI, ASSOCHAM
31%
35%
26%
9%
0-14
Indian Population Age Distribution
Source: Census 2011
273 210 307
469
171
357
335 178
53
18
-
US France Brazil China India
Fresh Food Packaged Food
Source: Euromonitor International

18. Significant PE activity in Packaged Foods
Strictly Confidential
18
SELECT M&A AND PE TRANSACTIONS (2012- PRESENT)
DATE TARGET SEGMENT TRANSACTION
TYPE
INVESTOR DEAL SIZE
(INR MN)
Sep-14* Rasoi Brand (100%) Edible Oil M&A Emami Biotech 800
Aug-14 Manpasand Beverages (minority stake) Juices PE SAIF Partners; Aditya Birla PE 800
May-14* Maiyas Beverage & Foods (minority stake) Diversified PE Ascent Capital 1,000
May-14* Keya Brand- Amalgam Group Seasonings M&A Vallabhdas Kanji Limited NA
Mar-14* Bikaji Foods International (25%) Savory Snacks PE Lighthouse Funds 1,200
Feb-14 Global Beverages Juices PE Goldman Sachs, Mitsui Global 3,150
Jan-14 DFM Foods (25%) Savory Snacks PE WestBridge Capital 645
Dec-13 Kohinoor Foods (20%) Staples M&A Al Dahra International 1,130
Dec-13 Capital Foods (44%) Instant Food PE Artal Group SA 1,800
Dec-13* Tierra Food India Pvt Ltd (25%) Savory Snacks PE DSG Consumer Partners NA
Jul-13 VKL Seasoning (66%) Seasonings PE India Value Fund 2,400
*Transaction not yet completed
Source: Databoard, Public Sources

19. SECTION 3 Case Studies- 2 Business Models
Strictly Confidential 19

20. Case Study: PE Investment in Manpasand
Beverages
Strictly Confidential
20
About the Company
 Established in 1997 by a first-generation entrepreneur Mr Dhirendra Singh, Manpasand Beverages Pvt Ltd is a
Gujarat-based juice manufacturing and marketing company
 The company has a brand “Mango Sip” (4th largest mango drink brand in India) which has a strong presence in
semi-urban and rural parts of India
 The beverage maker has its manufacturing units in Vadodara, Varanasi and Dehradun
PE Investment by SAIF Partners
 In 2011, growth capital investor SAIF Partners India invested $10 million into the company for 26.5% stake
 In 2010 the company had revenues of Rs. 40 cr. Over the next 4 years, the company expanded its distribution
network significantly across other states focussing on Tier II and Tier III cities
 The company clocked revenues of Rs. 290 cr in FY 2014 and is estimated to clock revenues of Rs. 500 cr in FY
2015, growth of over 12x during FY10-FY15, with distribution network now across 20 states in India and over
200,000 retailers
 Besides its renowned Mango sip brand, it has also expanded into Apple Sip, Guava Sip and Litchi Sip brands
 It has recently undertaken a capex to double its capacity from 60,000 cases per day currently
Pre-IPO Funding
 Manpasand Beverage in 2014 has raised further private equity capital of INR 800 mn from SAIF Partners and
Aditya Birla PE. It is looking to come out with its IPO issue at the start of FY16.
Source: Databoard, Public Sources Note: This case study is based on public information, and on Desktop research.

21. Case Study: PE Investment in Capital Foods
 Established in 1996, Capital Foods is a renowned player in the Indian processed foods market offering ingredients
for a variety of cuisines such as Chinese, Thai, Italian, Indian and European. It has two established brands
 Ching's Secret- Instant Chinese noodles, soups, condiments, curry pastes and frozen entrees
 Smith & Jones- Range of niche sauces, baked beans
 In 2006, Future Group’s investment arm, Future Ventures, picked up 33% stake in Capital Foods for INR 130 mn.
Over the years, it hiked its stake in the company to 44%.
Strictly Confidential
21
Future Group’s Investment into Capital Foods (2006)
POSITION BEFORE FUTURE GROUP INVESTMENT
Particulars Unit FY 2005
Total Revenue INR mn 199
Market Share - Instant Noodles % Negligible
Market Share- Instant Soups % Negligible
CURRENT POSITION
Particulars Unit FY 2013
Total Revenue INR mn 1,455
Market Share - Instant Noodles % 2%
Market Share- Instant Soups % 11%
 Revenues of Capital Foods have grown at a CAGR of 28% from FY 2005 – 13. The company further expects to
double its revenue to INR 3,000 mn till FY16
 Capital Foods is already the No. 3 player in the instant soup segment after Knorr (64% market share) and Maggi
(23% market share); Ching’s Secret leads the market in Chinese soy and chilli sauce
 Much of the growth of Capital Foods is due to its association with Modern Trade -- approx. 40% of Capital Foods
turnover comes from Modern Retail with 8-9% sales coming from Future Group stores like Big Bazaar
 The company has presence at all major modern trade outlets as well as 125,000 general trade stores across four
states — Maharashtra, Gujarat, Punjab and Karnataka
 Future Group sold entire stake in 2013 – Future Consumer Enterprises (FCEL) in December 2013 sold its entire
44% stake in Capital Foods to a European private equity fund Artal Group for INR 1,800 mn
Source: Databoard, Public Sources Note: This case study is based on public information, and on Desktop research.

22. Aurum’s View on Food FMCG Sector
Strictly Confidential
22
OPPORTUNITY FOR GROWTH CAPITAL
 Regional Expansion Model –
 For years, Food FMCG industry has been dominated by MNCS (Nestle, HUL etc) and few India
corporates (Britannia, Parle, Dabur etc). However, there is enough room for emergence of
medium sized regional players (revenues of INR 500-1,000 cr) catering to
 Taste preference of the local population; and
 Focusing on product innovation
OPPORTUNITY FOR CONSOLIDATION
 Also, we expect consolidation in the industry where by large Indian or global MNC may acquire
local or regional brands for their established distribution network
 PE players backing Professional Management to grow businesses organically and via acquisition
e.g. Recent PE funding of A. Mahendran (ex-Godrej Consumer professional) founded Global
Beverages & Foods Pvt Limited by Goldman Sachs, Mitsui Global

23. Strictly Confidential
Contact us at
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Website : www.aurumequity.com
Email: info@aurumequity.com
Contact me at -
nitinjain@aurumequity.com
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http://www.linkedin.com/pub/aurum-equity-partners-llp/86/91b/12