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 Economic Laws Practice       Avalon Consulting

 Technloogy Holdings   

April 11, 2017

Does Zephyr Peacock's Fingerlix investment signal a focus shift away from B2B?

Until 2014, Zephyr Peacock India's (ZP India) major investments were mostly focused on B2B and industrial sectors - in companies like 20Cube Logistics, Trimax IT Infrastructure, Pennar Engineered Building Systems and E to E Transportation Infrastructure. Post 2015, the firm's portfolio seems to have taken on a more consumer bent - adding student loans focused MPower Financing, Swarna Pragati Housing Microfinance and now, ready-to-cook food service Fingerlix. We asked Zephyr Peacock India Managing Partner Mukul Gulati what is attracting the firm towards consumer businesses at this point and to Fingerlix (in which ZP India has just invested $3-M) in particular.

There is no planned shift to consumer sector. We like businesses with sustainable competitive advantages and a path to market leadership. Sometimes, these businesses sell to other businesses, while other times they target consumers. We continue to seek differentiated business models across the consumer and b2b space. All our businesses serve consumers directly or indirectly. For instance, one of our investments, Varthana, provides loans to educational institutions. These institutions, in turn services more than a million students across the country.

Coming to Fingerlix, the macro thesis is driven by the fact that India’s packaged food industry is expected to grow from $1.6 Billion in 2015 to $4.6 Billion by 2021 driven by growth in urbanization, increase in number of working women and growth of nuclear families. Consumers are seeking solutions to certain core lifestyle problems that include busy schedules, evolving food preferences and need for cost and time efficient food options. 

Fingerlix (owned and operated by Mumbai-headquartered Maverix Platforms Pvt Ltd) makes and delivers Ready-To-Cook (“RTC”) fresh Indian food such as idli-dosa batters, dal vada batters, curries, parathas and pasta sauces. It is targeting customers from the middle and upper income households seeking to reduce lead time to prepare their meals. Fingerlix delivers its products directly to customers (who can order on phone, online or via a mobile app) and also sells them through retail outlets. The founders of Fingerlix - Shripad Nadkarni and Shree Bharambe - have over five decades of cumulative experience in the Consumer Packaged Goods industry in India. Over the next four years, the company is expected to strengthen its supply chain and become a category leader in the fresh foods RTC category. 

As a PE investor, we need to have a clear exit thesis as well. Here, we are encouraged by the fact that the packaged food segment has witnessed high level of M&A interest from large food companies seeking to expand their product portfolio by acquiring promising brands. 

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