The irresistible turnaround of Temptation

As a Chihuahua peered down from a frame on the wall, Vinit Kumar, clad in blue jeans and flowery red shirt on a Saturday afternoon, threw his hands behind his head and said: "Most of my management team works at a quarter of the salaries that it could get elsewhere. I like to think they love me."

Love and friendship often pop out of Kumar, the principal investor in Temptation Foods who has just taken over as its chief executive.

He packs in every bit of the surprise you expect while walking up the wooden stairs to the company's office across the road from Mumbai's Roxy Cinema.

After all, this is the company that has struck quick deals to acquire Everfresh, the food processing unit of Chambal Fertilisers and Chemicals for Rs 30-40 crore and Karen Gourmet Kitchen from celebrity chef Karen Anand for Rs 1.25 crore.

This has fetched much-needed credibility to Temptation, which had raised eyebrows by its earlier bids to acquire Hindustan Unilever's marine food business and Marico's processed food unit including the Sil and Mealmaker brands.

The incredulity was understandable. Temptation's turnover last financial year was just under Rs 40 crore and net profit about Rs 6 crore.

Founded in 1991 by an ex-IAS officer and two others, it was a loss-ridden company till last year. Although listed in 1993, its trading was suspended till February this year for violating the listing norms.  

MILESTONES
1991	Founded by an ex-IAS officer and two others
1993	Gets listed on the Bombay Stock Exchange
1996	Vinit Kumar buys 50% equity
1998	Kumar takes charge of the loss-ridden company
2001	Trading of company's shares on the BSE suspended for non-compliance with listing agreements
2002-2004	Becomes a private label manufacturer for processed food retailers in Western markets, begins exports
2004	Restructures balance sheet
2006	Becomes debt-free, clocks Rs 20 crore turnover
February 07	Trading of shares resumes on BSE
May 07	Acquires Karen's Gourmet Kitchen, enters domestic branded processed foods market. Submits a binding bid to acquire HUL's marine food business
September 07	Revives talks with Marico to buy Sil and Mealmaker brands
October 07	Raises Rs 116 crore through a QIP. Acquires Everfresh, the food processing unit of Chambal Fertilizers and Chemicals

"The company faced problems typical of first generation entrepreneurs and accumulated debt that was not serviced," said Kumar, who claims to have spurned a $65,000 a year job in the US to join Reliance

Industries "" where his father was president-corporate planning "" in 1989 for Rs 2,500 a month.

By 1996, Kumar had become a first-generation entrepreneur, burnt his fingers with a bio-technology firm, and made a reputation in deal making and debt restructuring.

It was then G P Gupta of Industrial Development Bank of India drew Kumar's attention to Temptation, a BIFR patient, and he acquired majority equity.

In 1998, Kumar started a clean-up of the company and re-focused it as a private label manufacturer. Its customers include ITC, Pizza Hut, McDonald's and Baskin Robbins. Cashing in on the rising appetite for Indian processed food in the West, Temptation came to garner 90 per cent of its turnover from overseas.

In October 2004, the balance sheet was restructured and a settlement with financial institutions hammered out. By March 2006, it was free of debt "" it still is.

A new management team vcame in headed by Raj Halve, whose pedigree includes TAS and Titan. "Every person in the management team is my close friend. I knew if I could have a good management team I could turn around the business," said Kumar.

He first met Halve four years ago when both, accompanied by their girlfriends, suffered a landslide in Matheran and waded through chest-deep mud.

"We improved our procurement. Fortunately, we bet on the right products and bought when supply was high to sell when supply declined," said Halve, who, with Kumar becoming CEO, has been redesignated president-brands and does not seem to be complaining.

In February this year, Temptation got listed again at the last traded price of Rs 1.45 a share. By April 25, the price had risen to Rs 78 a share. At today's closing price of Rs 230 a share, its market capitalisation stands at Rs 578.22 crore.

It has just closed a qualified institutional placement of Rs 114 crore "" 7,600,000 shares at Rs 150 apiece "" that was subscribed 1.58 times and attracted marquee names such as Citigroup Global Markets , Macquarie Bank, HSBC Financial Services, Morgan Stanley, Lehman Brothers, UBS Securities and Merrill Lynch.

The acquisitions of Everfresh and Karen Gourmet are harbingers of Temptation's increased domestic presence, which will pit it against formidable rivals such as ITC, HUL and Nestle.

Everfresh has given it two manufacturing facilities in the North and a ready distribution base. Karen Gourmet is a high-recognition brand.

"We are now looking to expand the portfolio of brands of Karen and Everfresh and introduce more food products based on the seasonal and convenience needs of people," said Halve.

Kumar plans to double capacity to 6,000 tonne in just over a year and enter the ready-to-eat segment. The dream is to become the biggest food company in the country. Is there a time-frame for that? As the hands go back behind the head again, Kumar says: "By yesterday."