Convergent Finance LLP, the private equity firm floated by former Fairfax India executive Harsha Raghavan, will invest Rs 180 crore ($23.8 million) in speciality chemicals maker Camlin Fine Sciences Ltd.
Convergent Finance, through its entity Infinity Holdings, will pick up a 22.65% stake in the Mumbai-based company, Camlin said in a stock market disclosure.
Camlin makes antioxidants, aroma ingredients and performance chemicals, among other products. It posted net sales of Rs 1,049 crore for 2019-20, up from Rs 892 crore the year before.
The company said it will use the money to buy out its joint venture partners in Dresen Quimica S.A.P.l. de C.V (Mexico) and CFS Wanglong Flavours Ningbo Co. Ltd (China).
Camlin will also use a part of the capital to add new products in the health and wellness portfolio.
Ashish Dandekar, managing director at Camlin, said Convergent’s investment will not only strengthen its position in Mexico but also reduce its reliance on China.
CFS Group owns a 51% stake in its Chinese subsidiary with the balance 49% stake owned by a local partner. CFS Wanglong manufactures vanillin, which is a key raw material for flavours, fragrances and pharmaceuticals.
Camlin said that, given the growing global trade tensions involving China, the company plans to import the technology and machinery to manufacture the same products out of a proposed factory in India.
“Camlin is well‐positioned to benefit from the current supply-chain disruption and the overall shift towards moving manufacturing away from China to other cost‐efficient locations including India,” said Raghavan.
On the other hand, Camlin aims to acquire the 35% that it doesn’t already own in the Mexican unit. Dresen Química makes antioxidant blends and other additives for human and feed sectors. The Mexican firm has five units in Peru, Guatemala, Columbia and Dominican Republic, and is a dominant antioxidant player in Central America.
The PE firm was floated by Raghavan – a Stanford alumnus – after he quit as the India head of Fairfax’s private equity wing, Fairbridge Capital Pvt. Ltd, in May 2018.
In December that year, VCCircle had reported that Raghavan’s new investment firm was looking to raise as much as $500 million (Rs 3,515 crore then) under its maiden fund – a near-record sum for someone breaking out on their own.
At the time, Raghavan said that Convergent Finance would invest in two opportunity sets across sectors. First, the fund would identify and invest with management teams and help them scale their businesses. Second, Convergent would likely adopt the Fairfax India playbook and drive bolt-on acquisitions for many investment firms.
Prior to Camlin, Convergent had invested in Jyoti International Foods Pvt. Ltd, a supply chain solutions provider for the food services industry, and Hindustan Foods Ltd, a contract manufacturer for PepsiCo’s Kurkure brand of snacks.