A clutch of venture capital investors including A91 Partners, NewQuest Capital Partners and TR Capital are in separate talks to acquire a minority stake in Hector Beverages, owner of ethnic drinks brand Paper Boat, two people aware of the development said.
In this round, Paper Boat plans to raise about $25-30 million at a valuation of $200 million (about Rs 1,400 crore), said one of the people. Existing Belgian investor Sofina is likely to pump in additional money, while a few investors are expected to make part exits, said the person.
Founded in 2010 by former Coca-Cola India employees Neeraj Kakkar and Neeraj Biyani, Hector Beverages initially raised investments from NR Narayana Murthy-led Catamaran Ventures and Footprint Ventures in 2011, followed by Sequoia Capital. In 2015, it raised $30 million from Sofina Capital and China’s Hillhouse Capital, at a valuation of $100 million.
A91 Partners is a new investment firm set up by ex-Sequoia managing directors Abhay Pandey, VT Bharadwaj and Gautam Mago, who were instrumental in Sequoia’s investment in Hector. TR Capital was one of the contenders to acquire a stake in craft beer company B9 Beverages that owns and sells the Bira brand. Sofina had invested $50 million in that company last year.
Paper Boat chief executive Kakkar and spokespeople for TR Capital and Sofina did not respond to emails seeking comment. Spokespeople for A91 and NewQuest declined to comment.
Hector Beverages had posted a 71% increase in revenue at Rs 118 crore for FY18, compared with Rs 69 crore the previous year. Its target for this year is Rs 200 crore. The nine-year-old company trimmed its loss for the last financial year, and in May claimed to have posted a profit on an operational basis, or before interest, tax, depreciation and amortisation.
Hector Beverages had initially launched energy drink Tzinga, which it later stopped production due to issues around licencing. It was reported that the company was planning to bring back the brand. In 2013, it launched the Paper Boat brand of traditional drinks, which is available in nine flavours, along with two seasonal ones. The company is known for its popular aam panna, aamras, anar, chilli guava, jaljeera and kokum drinks.
As part of expanding the horizon, the firm was looking to move beyond the metro cities, and into small cities and towns in 2019, ET had reported last year. Beyond expansion of its distribution network, Paper Boat is looking to introduce low-priced products for the new markets.
The non-alcoholic beverage market in India, valued at Rs 52,400 crore in 2015, is expected to grow at a CAGR of 17.6% through 2020, according to a 2017 PwC report. The market holds huge potential given the low per-capita consumption in India – 9.4 litres a year compared with 347 litres in the US, 291 litres in Germany and 92 litres globally.
Top brands in packaged juice market include Dabur’s Real, PepsiCo’s Tropicana, ITC’s B-Natural and those of NourishCo, a joint venture between Tata Global Beverages and PepsiCo India.
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