Bengaluru/Mumbai: Bengaluru-based Lal Sweets is in talks to raise about $40 million from private equity investors. The potential deal values the company at $150-175 million, according to three people with knowledge of the matter.
The company, which sells sweets, cookies and savories, has received a term sheet from the private equity arm of Motilal Oswal Group, one of the person cited above said.
“The fund raise is a mix of primary and secondary capital, with the promoters selling some stake,” the person added.
The company has appointed investment bank Veda Corporate Advisors to help with the fundraise. This is the first time the company is looking to raise external capital since its inception in 2010.
“Motilal Oswal PE is doing due diligence,” the second person cited above said.
While Veda and Motilal Oswal did not respond to Mint’s requests for a comment, Lal Sweets’ managing director Prateek Athwani declined to comment on the developments.
Founded by Athwani, the Bengaluru-based company has exposure across general trade, modern trade, online marketplace, exclusive airport outlets and the export market. Lal Sweets is known for its ‘signature products’ such as Mysore Pak, Besan Laddoo, Kaju Katli and Dharwad Peda, as per the company’s official website.
According to the third person cited above, the capital will help company expand into newer product categories like health snacking options, instant mixes and frozen ready to eat options. “While Lal Sweets is currently a profitable company, it is focused on improving its revenues in the near-term,” the third person said.
Spreading wings
Lal Sweets is prominent in the southern part of India apart from Delhi NCR in the north. Besides doubling down on its existing geographies, it is looking to deepen its focus in northern India and cater to international demand.
Lal Sweets ships its products to countries with large Indian population such as the US, Singapore and West Asia.
In FY23, Lal Sweets’ total revenue grew nearly 40% to ₹85 crores from a year earlier, according to its latest filings sourced from Tofler. It posted an annual profit of ₹14 crore from a loss of ₹2 crores in FY22.
The broader snacking industry has been witnessing sustained momentum in recent times with several new-age startups snapping up funds from investors. Some recent examples include Fireside Ventures’ $1.5 million investment in Chennai-based snacking brand Sweet Karam Coffee in October last year, Farmley’s $6.7 million fund-raise from a group of investors led by BC Jindal Group in December 2023, direct-to-consumer snacking brand Adukale’s $1.3 million led by Force Ventures in April this year.
Mint also reported in May that private equity firms Blackstone, Temasek Holdings and Bain Capital were evaluating a controlling stake in sweets-and-savouries maker Haldiram Snacks Food Pvt. The investors were looking to buy at least 51% stake in the company at a valuation of $8-10 billion, people in the know said.