Sequoia, CDC Eye for a Stake in Sresta Natural Bioproducts

Venture capital fund Sequoia Capital & CDC Group plan to acquire significant stake in Sresta Natural

India: Sequoia Capital and UK government’s CDC Group are in close talks to acquire a controlling stake of the country’s largest organic food making brand Sresta Natural Bioproducts, which sells the products under the 24 Mantra brand.

The deal is almost in its final stages and is expected to give Sequoia and CDC around 70-80% stake in the Hyderabad-based company which amounts for nearly USD100 million. Apart from that some foreign strategic players are also in talks with Sresta for investment in the company.

The existing investors Peepul Capital and Ventureast are likely to sell their stakes. As they collectively own about 70% in Sresta with the rest of it stays with the founder Rajashekar Reddy Seelam. A former Murugappa group executive and an IIM-A alumnus, Raj Seelam is credited with giving pesticide-free organic food movement a crucial momentum in the past decade. Sources said that the Sresta Natural had earlier approached some leading Indian and international food companies such as ITC, Dabur, Global Consumer Products, HUL and Danone, for investment in their company, however, those talks were initiatory in nature. Sresta Hired financial advisory firm Alvarez and Marsal to find a buyer last year, but with most strategic 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.

According to TechSci Research, the investment of CDC would be attractive as it is a finance institution focused on sustainable development and it aims to improves the livelihoods of Indian farmers by giving them better pricing power. The company's revenue is estimated at around USD31 million, out of which USD9.2 million is in sales from international markets like the US and UK where the brand is sold in ethnic stores.

According to a recent report published by TechSci Research, “India Organic Food Market By Product Type, Competition Forecast and Opportunities, 2011 - 2021”, the market for organic food in India is anticipated to grow at a CAGR of over 25% during 2016–2021, on account of changing food consumption patterns and increasing instances of contamination of farm produce with chemical fertilizers and pesticides, surging investments in organic food market and rising use of bio fertilizers. Organic pluses and food grains segment dominates India organic food market, as pulses and food grains form an important part of staple diets in India. Further, West India is anticipated to continue dominating the organic food in the country through 2021, on account of high disposable income levels and rising health consciousness among consumers in the region.