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Sanwaria Consumer, a mid-sized company dealing with value-added agricultural products, plans to raise ₹500 crore in three tranches for funding its retail expansion plans. The company is in talks with various investors to raise about ₹150-200 crore through the issue of equity share warrants, which is expected to be finalised by end of next month.
Sanwaria plans to open 150 ‘ATM-size’ retail outlets in Tier-III and Tier-IV cities of Madhya Pradesh, Maharashtra and Gujarat, which will exclusively sell over 35 products of the company including basmati rice, wheat flour, dal, edible oils and sugar. The company has already opened 50 stores in Madhya Pradesh and has seen good sales traction. Similarly, it has started operations in Maharashtra with two stores at Vidarbha before stepping into Gujarat.
Potential in small cities
Anil Agrawal, Director, Sanwaria Consumer, said the funds are most likely to be raised through equity warrants as it would enable investors to take advantage of possible rise in share price over a period of time. The company’s retail focus will be limited to three States, though it sells products in bulk in about 18 States.
Asked about the risk involved in retail ventures, particularly at a time when big players such as Big Bazaar and Reliance Retail are consolidating their position, Agrawal said big companies are targeting the cream of the society, while Sanwaria will focus on smaller cities which has higher growth potential.
Unlike large-format stores, where nobody makes money, he said the small Sanwaria stores will not only promote the company’s products but also add to its profitability by increasing the margins.
Sanwaria Consumer has a debt of ₹750 crore, which has largely been used as working capital. The EBITDA from retail sales is much higher at 15-20 per cent, against 3-5 per cent in bulk sales. The contribution of retail sales has been growing steadily and has touched 20 per cent this year with the opening of 50 stores in Madhya Pradesh. In the previous fiscal, it was 5 per cent of the overall revenue of ₹5,000 crore.
The company also plans to increase its product offerings from 35 to 50 over a period of time.
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