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Venture capital fund Sequoia Capital and UK government-owned CDC Group are close to picking up a controlling stake in the country’s largest organic food maker Sresta Natural Bioproducts, which sells the 24 Mantra brand, multiple people familiar with the matter said.
The deal, which is in final stages, is expected to give Sequoia and CDC, who are bidding jointly, around 70-80 percent stake in the Hyderabad-based company for nearly USD100 million or Rs 680 crore, sources said.
Existing investors Peepul Capital and Ventureast are likely to exit the company by selling their stakes, another person familiar with the development said. They collectively own about 70 percent in Sresta with the rest of it being held by founder Rajashekar Reddy Seelam.
Sources said the company had earlier approached leading Indian and international food companies such as ITC, Dabur, Global Consumer Products, HUL and Danone, however, those talks were preliminary in nature.
Raj Seelam said, "We do not comment on speculative news." Financial advisory firm Alvarez and Marsal was hired by Sresta to find a buyer last year, but with most strategics having passed the deal citing the nascent organic market and a supply chain that’s still evolving, sources said it is likely to be a financing round.
Another source said, "Right now there are competing offers from financial investors and a foreign strategic. The deal is expected to close by next month or latest by March."
The investment in Sresta would be attractive for CDC, which is a finance institution focused on sustainable development, as it aims to improves the livelihoods of Indian farmers giving them better pricing power. The company’s revenue is estimated at around Rs 200 crore, out of which Rs 60 crore is in sales from international markets like the US and UK where the brand is sold in ethnic stores.
