Private equity (PE) investors who want a major pie of the Indian consumption story have found a new investment opportunity-- kitchen appliances.
The urbanisation of Indian kitchens as a result of the mounting number of nuclear families, as well as multinationals' entry into the segment, has made the sector a sought-after one for PE funds.
During a week's span, TTK Prestige, the leading pressure cooker maker in India, has received investments worth $40 million (Rs 300 crore) from global PE investor Cartica Capital.
TTK has a diversified its product profile, with 37 per cent of its revenues coming from pressure cookers, about 20 per cent from cookware, and the rest from gas stoves and other appliances.
According to experts, TTK, a well-known brand in south Indian markets, plans to expand operations to the north Indian region. With the recent stake purchase, Cartica's stake in TTK will go up to 5.68 per cent, making it the largest non-promoter shareholder in the company.
Farida Khambata, global strategist at Cartica Capital, said: "We believe the company will continue to gain market share in the non-southern regions and we expect strong long-term growth as disposable incomes rise and the organised sector continues to gain share from unorganised players."
According to reports, another kitchen appliances leader Sunflame Enterprises is in discussion to raise PE fund to meet its expansion plans.
Last year, Reliance PE had acquired a minority stake in Butterfly Gandhimathi Appliances by investing about Rs 100 crore (Rs 100 billion). Similarly, Stovekraft Pvt Ltd, which operates through the Gilma and Pigeon brands, raised funds from Sequoia Capital and SIDBI Venture Capital.
Vinmre Anand of Singhi Advisors said: "When urbanisation comes into Indian kitchens, innovative appliances are considered as a necessity. The increasing demand for modern appliances has resulted a growth of 20 per cent per annum in the sector, which makes it attractive for investors." Singhi Advisors had advised the Delhi-based appliance maker Maharaja Whiteline to sell a controlling stake to French Groupe SEB last year.
Similar to the expansion of TTK Prestige, all branded kitchen appliances makers are keen for a pan-India distribution network with outside funding.
Mohit Bahl, partner, transaction services, KPMG India, said: "PE funding is needed for several regional players that have strong brands in their own space with an ambition to go pan-India. Also, the sector itself is seeing a shift from unorganised to branded, higher quality products, which is pulling further demand and makes it attractive for investors."
Experts believe multinational corporations (MNCs), which look for a strong foothold in the Indian kitchen appliances space, target the leading organised players in the industry. Apart from SEB's buyout of Maharaja Whiteline, global major Philips had acquired Maya Appliances that sells its products under the Preethi brand in 2011.
MNCs such as Fisher and Paykel Appliances, a New Zealand high-end kitchen appliances brand, and US-based Westinghouse Electric Corp have already entered into the Indian kitchen appliances space.