Vegetable and fruit retail too hot for private equity firm

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Software, data analytics, and financial technology are hot sectors that attract private equity (PE) firms. But, Coimbatore-based KPN Farm Fresh, which sells fruits, vegetables and groceries, is joining the club in taking PE financing as WestBridge Capital has taken an undisclosed stake in KPN Farm Fresh, which operates retail outlets Kovai Pazhamudir Nilayam (KPN), for 600 crore. KPN Farm Fresh sells fruits and vegetables and is a household name in Tamil Nadu.

Sources familiar with the investment details said, WestBridge Capital’s investment in KPN Farm Fresh is only for its outlets in and around Chennai. The KPN outlets will be in Coimbatore, Tirupur, Tiruchi and Thanjavur with the promoters, who will continue to own a 40 per cent stake in KPN Farm Fresh, valued at ₹900 crore.

WestBridge’s website lists KPN as one of the portfolio companies that have raised Series A funds.

WestBridge is known to have acquired the stake in an all-cash transaction. The remainder of the stake will remain with KPN Managing Director Senthil Natarajan, son of Natarajan, one of the founders. Senthil did not respond to requests for comment.

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humble beginning

Pazhamudir Nilayam’s first retail outlet in Coimbatore was started in 1965 by four brothers – Chinnaswamy, Natarajan, Kandaswamy and Rathinam. They began expanding to other cities in the 1990s individually. Natarajan expanded to Chennai through partnerships and put stores under his management under the Kovai Pazhamudir Nilayam label, sources say.

As per the information available on its website, KPN has 34 outlets in Chennai; three in Puducherry and one in Cuddalore and Tirupathi except for four in Coimbatore and the same number in Tirupur; Three in Thanjavur and one in Tiruchi.

Go to local brands

Commenting on the deal, Sathyanarayanan Ramachandran, Sundram Fasteners Assistant Professor of Marketing at IFMR GSB – Krea University, commenting on the deal, said that this is a significant development for a Tamil Nadu-bred brand and sector such as selling food and vegetables. In an air-conditioned retail atmosphere, KPN has provided customers with a solid value proposition of fresh, high-quality fruits and vegetables (along with dairy and other groceries over time). KPN has created trust and dependability while making it an enjoyable shopping experience.

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WestBridge’s investment will help the brand expand to other countries and strengthen logistics and supply chain. He said that the recognition of a growing and reliable local brand will give impetus to entrepreneurial activity in this field.

Arun Natarajan, Chennai based company founder Project intelligence, a research service focusing on private companies’ financial data, transactions, and their valuations. From an industry point of view, there have been private equity purchases in the supermarket sector event earlier – eg Nilgiri (2006) and more (2020). However, the Kovai Pazhamudir deal is unique in that the chain’s main focus is on vegetables and fruits.

For WestBridge, which has so far focused primarily on minority investments in technology and technology-enabled businesses, this deal is also unique. He said it would certainly be interesting to track how the deal plays out in the coming years.