Bengaluru: Morgan Stanley’s private equity arm has been looking to sell all or part of its stake in Manna Foods as the business has struggled to grow sustainably and increase profits in recent years, three people familiar with the matter told Mint. “The discussions are still ongoing and no concrete decision has been made yet,” one of these people said. Morgan Stanley and Manna Foods did not respond to Mint’s queries.
The news comes amid growing consolidation in India’s rapidly growing health food industry, and about six years after the private equity firm invested about ₹152 crore in Manna’s parent company, Southern Health Foods. The proceeds were used to fund the company’s expansion in south India and to provide a partial exit to some of its earliest investors, Morgan Stanley said in January 2018.
“Over the past year, the private equity firm has held talks with several strategic investors including FMCG giants to offload its stake in the company,” said a second person cited above. “Manna has introduced several offerings and diversified into too many categories in recent years, which has made the business model very fragmented. It has not panned out as expected,” this person added.
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Manna’s revenue from operations rose 11% to ₹414 crore in FY23 while its profit narrowed to ₹4.4 crore from ₹9 crore a year earlier. After Morgan Stanley’s infusion, Manna’s revenue from operations surged nearly five-fold to ₹204 crore in FY20. However, revenues and profits rose only moderately in the following years.
More consolidation expected
India has the fastest-growing health food market worldwide, expected to grow at a compound annual rate of 20% over the next five years, according to a report by Avendus in 2022. This is three times the global average and 1.5 times that of India’s overall packaged food & beverage market, the report said. Avendus projected in 2022 that the health food market would grow to $30 billion in the next five years.
The industry has seen significant consolidation in recent years. Soulfull, one of Manna’s competitors, was acquired by Tata in February 2021. ITC acquired another competitor, Yogabar, in February 2023. It also competes with ID Fresh Foods.
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As disposable incomes rise and consumers become more health-conscious, market watchers expect to see more such transactions among private equity and venture capital firms, leading to greater consolidation over the next 10 years as brands reach adequate scale, Avendus said.
Last valued at $25.7 million in 2022
Founded in 2012 by Nazar Isak and Syed Sajan, Chennai-based Manna Foods sells ready-to-cook millet-based infant food, millet grains, soya nuggets, dried fruits, breakfast cereals, purees and pastes, among other products.
It’s owned by Southern Health Foods, which manufactures and markets more than 25 varieties of healthy packaged goods. It also operates in northern and western India and in overseas markets such as the US, UK, Malaysia, Singapore and Australia.
In 2015 it raised ₹30 crore from early growth investors led by Fulcrum. To date it has raised about $33.7 million in external funding. Morgan Stanley, its largest shareholder, and Fulcrum together own 87.5% of the company, according to data from Tracxn. It was last valued at $25.7 million when it raised funds in 2022.
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While the founders have left the company, they along with current chief executive Murugan Narayanaswamy held a 5.3% stake in it as of 2022, data from Tracxn showed. The remaining 7.2% is held by other enterprise investors, angel investors including Rahul Garg, Atul Gupta, Amit Gupta and TK Kurien, and other minority shareholders.