Sweet timing

SAIF is juicing its return from Manpasand Beverages

Mridul Arora, principal at the Bangalore-based SAIF Partners, is making the most of the private equity fund’s investment in Manpasand Beverages. After making a killing by selling part of its stake in the Gujarat-based fruit juice manufacturer through an IPO last year, SAIF has now sold close to 11 lakh shares for Rs.70 crore in the open market. Following the stake sale, the fund’s holding in the company, known for its brand Mango Sip, has fallen to 20.09% from 22.35%.

Between 2011 and 2014, SAIF had picked up close to 30% stake in the company for Rs.45 crore, at an average of Rs.80.45 a share, and subsequently offloaded around 8% in the IPO. Though the stock ended up with a marginal listing premium of 2% to the issue price of Rs.320, SAIF was laughing all the way to the bank. Moreover, given that stock has more than doubled to its current level of Rs.656, SAIF is still sitting on a fortune. At the current price, the PE investor’s remaining 20% holding is worth Rs.659 crore.

Given that the company has shown robust growth performance in the past, Arora will be smacking his lips in anticipation. In FY16, revenue at Manpasand grew 55% year-on-year to Rs.556 crore, while net profit was up by 72% to Rs.50 crore. The company has a strong presence in Tier II and rural markets in India and also sells products under the Manpasand ORS and Fruits Up brands besides Mango Sip.

Even though the mango drink is still the biggest revenue driver— accounting for 80% of sales, its contribution has shrunk from 97% last year. This is largely due to the company's portfolio diversification. In FY15 it had launched Fruits Up, a premium fruit drink (carbonated and non-carbonated) in mango, litchi, guava, apple, orange and mixed fruit flavors.

Going forward, Manpasand is expected to improve its market share by 3% to 8% by FY18 in the Rs.13,200-crore fruit juice market. However, the focus will continue to be on rural markets that account for over 55% of revenues. The company is also looking to expand its capacities by 80% over FY16-18 in the north and south, by incurring an investment of Rs.320 crore. This is expected to not only address supply related issues but also help the company reduce logistics costs.  

Not surprising that investors are valuing the stock at a rich 24 times FY18 estimated earnings. But for Arora, that’s a juicy prospect.