Eight months after stepping down as managing director of Godrej Consumer Products, Arumugham Mahendran, responsible for stitching up many of the company’s deals in the past few years, will begin his innings as an entrepreneur.
The 58-year-old go-to man at the consumer goods maker will helm Global Beverages & Foods that will launch confectioneries, juices and snacks in six-nine months.
The sector veteran has roped in investment banks Goldman Sachs and Mitsui Investment to pump Rs 315 crore (Rs 3.15 billion) into the venture. Without revealing how much capital he would bring to the venture, Mahendran said Goldman Sqachs would be the majority stakeholder.
The company is expected to finalise business plans in three months, following which it will begin manufacturing using technology procured abroad. Mahendran said he was talking to prospective partners in Japan, the US and Israel for technology tie-ups.
“Manufacturing will be outsourced and we will come up with a brand name for the products in about three-four months,” Mahendran said. “Once products are launched, we will push them both in urban and rural areas,” he added.
A qualified chartered accountant who graduated from the Loyola College in Chennai, Mahendran is also eyeing buying local brands and companies. Acquisitions, however, are not on the cards in the first phase as Mahendran looks to stabilise the business, likely to take two years.
Global Beverages & Foods is the second announcement by Mahendran after he bought back Hi Care, a pest management company launched under the Godrej group in 2004, alongwith private equity investor India Value Fund Advisors, from Danish company ISS last month.
India Value owns 80 per cent in Mumbai-based Hi Care, with the rest held by Mahendran, the chairman. The deal was pegged at Rs 150 crore, two times Hi Care’s sales.
Mahendran, considered an authority on household insecticides, created brands such as Good Knight and Hit in the 1980s under Transelektra Domestic Products, which he subsequently sold to the Godrej group in 1994.
“Operations of the company (Hi Care),” he said, “will be managed by India Value. My role is more advisory in nature. I can therefore devote full attention to Global Beverages & Foods.”
The packaged foods and beverages business is pegged at Rs 1.5 lakh crore a year in India, a tenth of the largely unorganised overall market. “Indian family-owned businesses hardly operate in the business, with the exception of Britannia and Parle Agro. The rest are largely multinational companies, which come in with global expertise. I saw an opportunity here, given the market itself can expand,” he said.
In the past two years, PepsiCo and Coca-Cola have said they would spend $5 billion (Rs 30,000 crore) each to increase reach in India. The investment plans came even as the economy slowed down to a decade-low of 4.5 per cent year-on-year growth in 2012-13. The current financial year is also estimated to see under five per cent growth. Some expect things to get better next financial year after the Lok Sabha elections.
Mahendran said he was not worried about demand for his products as sentiment was expected to improve in the coming months. “We will study the market carefully before launching our products,” he said.