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RJ Corp May Tap $100M PE Funds For Pepsi Bottling Biz

12 May, 2010

Varun Beverages Ltd, PepsiCo’s largest bottler in South Asia, may look at private equity fund-raising of at least $100 million by divesting up to 10% stake, said Ravi Jaipuria, a New Delhi-based serial entrepreneur, who controls Varun Beverages through his holding company RJ Corp.

Varun Beverages operates 11 bottling plants for Pepsi making it the anchor bottler for the soft drinks giant in India. The Jaipuria family, which also include brothers SK Jaipuria and CK Jaipuria, togther control 20 bottling plants for Pepsi in India, covering the entire country except Bihar.

The diversified RJ Corp has business interests in soft drinks bottling, beer, foods and stem cell banking with a cumulative turnover of around Rs 3,000 crore.

“We are having early discussions with bankers regarding fund-raising options. I would think we can fetch a valuation of over $1 billion, and raise at least $100 million divesting not more than 10%. We are not in a hurry and no deal is possible if the valuation for Varun Beverages is below $1 billion,” Jaipuria told VCCircle.

PepsiCo is in agreement with the fund-raising plans of Varun Beverages, as India’s soft drinks market is in the midst of exponential growth. “The business is seeing unprecedented growth, and it needs to be funded since Pepsi would not allow us to slow down,” Jaipuria explained. He also controls some of Pepsi’s bottling operations in Africa, but that is not part of Varun Beverages and is held separately through a company in Mauritius.

Another RJ Corp entity, Deyvani International, which operates food reatil chains like Pizza Hut, KFC and Costa Coffee, was planning to tap the market with an initial public offer (IPO) possibly within FY11. “We may go straight for an IPO in this company diluting around 15% stake. I think our valuation expectations are well below a billion dollars even though the work to discover the same is on currently. At the moment, I do not have a number on how much we would like to raise in the foods business,” he explained.

Jaipuria said, there was no plan to raise equity in the holding company RJ Corp. “This is not something we are considering at this stage,” he added.

RJ Corp also has a joint venture with global beer giant Anheuser-Busch InBev (AB InBev), where it holds 51% stake in the Indian joint venture. “We are progressing well, but I could have been happier,” Jaipuria said, on his beer investment. Currently, the JV, InBev India International Ltd, operates AB InBev’s brands like Budweiser and Beck’s and another one Stella Artois will be introduced shortly.

“We have a long history of working with global brands and developing businesses in difficult conditions, and bleeding. I have no intention of selling my interest in beer. But AB InBev can buy me out if they want after paying a penal price. I can only say that I will not be very happy about it,” Jaipuria added. However, there are no ongoing discussions on this at present, he added.

AB InBev, like its global peers Carlsberg, has found the going tough in India’s beer market that is heavily consolidated between United Breweries Ltd and SABMiller, both of which together control nearly 80% of the domestic consumption. However, Jaipuria said, he will not have any objection to AB InBev hammering out a deal with Carlsberg for utilizing each other’s breweries in India. “I think that sort of an arrangement makes sense, but it is for the global headquarters of both AB InBev and Carlsberg to green signal it,” he added.

Last month, VCCircle that AB InBev and Carlsberg were discussing a possible co-operation in the Indian beer market to optimise manufacturing footprint. 

Meanwhile, Jaipuria said, he has offloaded his brewing company in Mauritius, Universal Breweries, to an investor group from Madagascar. “We exited the beer venture in Madagascar. It was a rather small deal by value,” he said.


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RJ Corp May Tap $100M PE Funds For Pepsi Bottling Biz

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