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Private equity (PE) has emerged as a means of raising funds for small and mid-sized companies, but when Kolkata-based Ganesh Grains recently said it got PE investment of Rs100 crore from Motilal Oswal, it was seen as an aberration.
Ganesh Grains is counted among the fast-growing mid-sized family-owned business houses owned by Marwaris in Kolkata. Marwaris are known for their aversion to outside interference in businesses, especially from PE investors.
Breaking this stereotype, Ganesh Grains invited a PE investor on board with the expectation that it will bring in professionalism and help expand the company’s market reach. With the deal, Motilal Oswal became a ‘significant minority shareholder’ in the firm. PE firms typically pick up 20-40 per cent stake in companies.
Ganesh Grains, which is into manufacturing and marketing of branded food staple, started off as a small mill shop or Chakki in Bara Bazar in 1936. Around 1960s, Purushottam Mimani, father of Manish Mimani, the current managing director of the company, inherited the shop. The younger Mimani took over the reins around 1994, when the company forayed into packaged staple food business.
Around 2006, Ganesh Grains set up its first manufacturing unit and clocked a turnover of around Rs20 crore. At present, the company’s turnover is close to Rs500 crore, with around eight manufacturing facilities and an installed capacity of around 1,400 tonnes a day.
“Being a family-driven business, coming out of a conservative mindset, we decided to go for PE investments, as we thought that Motilal Oswal can lend its experience to bring in professionalism and management bandwidth. The funds will be used for expansion of capacity, deepening the distribution network and brand building,” says Mimani.
However, not many Kolkata-based companies are open to the idea of professionalism in family-run businesses.
Binay Kumar Agarwal, director of Fast Capital Market, had been pursuing as an advisory to at least four Kolkata-based companies to tie up with a PE investor. So far, he has not been able to convince any of the promoters, who perceive PE investments as an unwanted intrusion.
“I find the Marwari companies in Kolkata to be extremely conservative in approach when it comes to PE investments. They are not open to the idea of scrutiny and they don’t want them to be questioned by anyone,” says Agarwal.
Even some of the established firms, who have grown up in size to become big corporate entities in Kolkata, see PE as an intrusion.
Take, for instance, Shree Cement. This year, B G Bangur, 85-year-old chairman of Shree Cement, catapulted to the ranks of top 15 in the India Rich List by Forbes for the first time. A professionally driven firm, Shree Cement has been focusing on de-risking its balance sheet to remain debt-free company. According to H M Bangur, managing director, Shree Cement has always remained shy of PE investors and will continue to do so.
“While the new generation is more open to risk-taking and conversant with new ways of fund-raising, the older generation seeks stability, rather than mobility. Any risk should be taken at the initial stages, when there is nothing to lose,” says Bangur.
Another Kolkata-based company, Emami, which was started in the mid-1970s when two childhood friends, R S Agarwal and R S Goenka, left their management jobs with the Birla Group to set up Kemco Chemicals, has an illustrious history.
According to Aditya V Agarwal, director of the Emami Group of Companies, while PE firms do clip the wings of a company, they do bring opportunities also. However, a fine balance between the two is key to a meaningful investment.
“Sometimes, they (PE) will slow down your business processes as one has to take a lot of approvals. Then there are compulsions on returns. But at the same time, PE brings in a lot of opportunities. It has to be a very healthy balance. Selecting the right partnership is important,” said Agarwal.
In the early days, the founders of Emami personally retailed their ayurvedic cosmetics from shop to shop. Surely, the hard work of the promoters is an unrivalled asset, too difficult to be risked for easy funding.
Taking the legacy of its founders, Emami has been focusing on building brands rather than assets.
“When we were growing, we were not averse to new things. Normally, business houses invest in assets. But, we did not invest in assets; we invested in brands. One of our very first investment was in a brand called Boroplus, which has the largest share in antiseptic crème segment. Then we invested a lot on Fair and Handsome, which was a new category,” Agarwal added.
Surely, the Marwaris of Kolkata are yet to catch up with the new-age funding dynamics. However, the risk-averse community has some key lessons for new-age entrepreneurs looking for easy funding.
