Singapore's distressed assets fund management firm SSG Capital Management Group is investing up to Rs 580 crore ($87 million) to acquire 40 per cent stake in Future Supply Chain Solutions Ltd (FSC) from the company's existing shareholders.
The deal includes the purchase of the entire 26 per cent stake held by Hong Kong's Fung Capital and the rest from Future Retail Ltd (FRL) and FSC's management team, the Kishore Biyani-led retailer said on Thursday. The deal values FSC at up to Rs 1,450 crore.
Biyani, managing director at FRL, said the deal is a step towards the company's stated intent of optimal monetisation of some investments. "FRL has followed a multi-pronged approach for strengthening its balance sheet and this partial monetisation of its stake in FSC is a step in this direction,†he said.
He added that the supply chain arm is of critical importance for Future Retail’s overall business objectives, and it will continue to hold a majority stake in FSC.
Incorporated in April 2007, FSC is a supply chain and logistics company that caters to companies in sectors including food and beverages, apparel, lifestyle, consumer electronics and IT, automotive and engineering, home and furniture, and healthcare.
During the year ended March 31, 2015, FSC registered income from operations of Rs 408 crore and earned a net profit of Rs 25 crore. Future Retail currently holds 70.17 per cent of FSC, with Fung Capital and the management team owning the rest.
Fung Capital is the private equity investment arm of the families of Victor Fung and William Fung, the controlling shareholders of the Fung Group with businesses in trading, logistics and retailing. It had picked up 26 per cent of FSC in 2009 for $30 million (Rs 144 crore then). It gets to exit the venture with Rs 377 crore ($56 million).
Shyam Maheshwari, partner at SSG Group, said the deal gives the firm a stake in a fast-growing logistics company in India.
SSG Capital has struck deals in India in the past, too. In 2014 it acquired 49 per cent stake in Asset Care and Reconstruction Enterprise. It also invested in a couple of real estate projects.
Asia Pacific-focused SSG Group was started in 2009. It was co-founded by Shyam Maheshwari, a former member of Lehman Brothers Asia Special Situations Group. The firm specialises in distressed and special situation investments in assets that are afflicted by dislocations in pricing and market liquidity. It has over $2 billion of assets under management.
Bantry Capital Pte Ltd, Singapore, acted as the sole financial advisor for the transaction.
Supply chain attracts capital
The rise of modern retail and surge in e-commerce activities have pumped up demand for organised supply chain management. The sector has seen hectic activity in the recent past with at least half a dozen ventures of all sizes, including those in agri supply chain, attracting private capital.
In January, Siddhivinayak Agri Processing Pvt Ltd, a Pune-based potato supply chain management company that operates as SV Agri, raised a Series B round of funding led by impact venture capital firm Lok Capital.
Also in January, Mumbai-based startup White Shadow Technology Pvt Ltd, which runs a fresh farm vegetables and fruits supply chain venture under the banner of Truce, raised angel funding from co-founders of Snapdeal and InMobi among others.
In February, Asia Climate Partners invested in Gwalior-based food cargo supply chain service provider ColdEX Logistics Pvt Ltd. Asia Climate Partners, which is backed by the Asian Development Bank and ORIX Corporation of Japan, also agreed to buy the stake held by India Equity Partners as part of the deal. India Equity Partners had acquired the stake in ColdEX in December 2010.
There have also been some consolidation moves. Last month, GS Farm Taaza Produce Pvt Ltd, a fresh produce supply chain management firm backed by former iGate CEO Phaneesh Murthy, acquired two farm supply chain startups to expand its market share in south India.