Venture and growth capital investor Norwest Venture Partners is picking up 14 per cent stake in the cold chain services firm Snowman Logistics Ltd for Rs 60 crore ($10.4 million) through a fresh issue of shares. The investment is a play on the domestic consumption story for Norwest, a Silicon Valley-headquartered multi-stage investment firm that manages more than $3.7 billion in capital.
The deal is expected to value Snowman, a subsidiary of the BSE-listed Gateway Distriparks Ltd, at Rs 420-430 crore. Shares of Gateway Distriparks closed at Rs 116.5, up 0.43 per cent on the BSE on Friday.
As part of the transaction, Gateway Distriparks has also bought part of the stake held by IFC. Gateway has picked up 5 per cent stake (on a pre-diluted basis) in Snowman from the World Bank arm for Rs 18 crore. IFC’s stake is expected to reach around 13 per cent after Norwest’s investment.
After the deal, Snowman is expected to remain a subsidiary of Gateway Distriparks with the latter holding around 51 per cent stake in the firm, according to VCCircle estimates.
Derivative play on domestic consumption growth
Bangalore-headquartered Snowman provides temperature-controlled storage services to a number of industries, catering to customers like Hindustan Unilever, Baskin Robbins, Pizza Hut, Mother Dairy and ITC, among others. It has an aggregate capacity of 33,400 pallets, spread over 18 locations, and operates a fleet of 158 reefer vehicles.
“The investment is a derivative play on India’s general consumption growth as Snowman works with a range of consumer goods businesses such as FMCG, ice cream and packaged foods, as well as pharma companies,” Sohil Chand, managing director at NVP India, told VCCircle. Chand will join Snowman’s board of directors as an observer.
The deal will be the third fresh investment for Norwest this year, after radiology diagnostics company Nueclear Healthcare and non-banking finance company Cholamandalam Investment & Finance Co Ltd.
According to a Technopak report last year, the market for cold chain storage and transportation is expected to grow from Rs 18,490 crore to over Rs 32,000 crore by 2014-15.
There has been considerable private equity interest in the cold chain logistics space with players investing in Swastik Roadlines (India Equity Partners) and JICS Logistics (IL&FS Private Equity). Last year, IDFC Private Equity also invested in Staragri Warehousing and Collateral Management Ltd, which plans to foray into cold chain.
Snowman was initially promoted by the Amalgam group in 1997. Subsequently, three Japanese companies (Mitsubishi Corporation, Mitsubishi Logistics Corporation and Nichirei Logistics Group) acquired a significant stake in Snowman.
In November 2006, Gateway Distriparks acquired 53 per cent stake while other major shareholders – Mitsubishi Corporation, Mitsubishi Logistics Corporation and Nichirei Logistics Group – together held approximately 26.1 per cent stake. With NVP’s investment, their stake is also likely to fall to around 23 per cent in the company.
Gateway Distriparks operates two container freight stations and also serves as the holding company for other logistic businesses. Besides Snowman, it includes Gateway Rail Freight Ltd, which operates inland container depots (ICDs) with rail movement of containers to major maritime ports. Gateway Rail Freight is backed by the private equity major Blackstone, which invested Rs 300 crore in the firm in 2009.
(Edited by Sanghamitra Mandal)