KOCHI: Hindustan Unilever Ltd (HUL), which bought the public sector Modern Foods having manufacturing units in six cities including one in Edapally, Kochi, back in 2000, has sold the breadmaker to private equity firm Everstone Capital for an undisclosed amount.
Modern Foods was India’s first complete privatisation of a public sector entity. HUL bought 74 per cent of shares owned by the Central Government for Rs 105 crore in the first tranche and bought the remaining 26 per cent stake for Rs 44 crore in 2002.
In a statement on Tuesday, HUL said it has signed an agreement for the “sale and transfer of its bread and bakery business under the brand ‘Modern’ to Nimman Foods Pvt Ltd, an investee company of the Everstone Group”. HUL’s decision to divest is in line with its strategy to exit non-core businesses, while “continuing to drive its growth agenda in the core packaged foods business”, the company said. Modern Foods has manufacturing units in six cities including in Kochi, where the total staff strength is reckoned to be in the region of 50-60 people.
For the employees of Modern Foods, this will be the third owner in a gap of 15 years. Sanjiv Mehta, CEO & Managing Director of HUL, said: “Modern is an iconic brand which has been delighting consumers over the years through its range of high-quality brand and value added bakery products.” Analysts said the exit from bread and bakery business shows HUL want to focus on soaps, detergents and beauty products segments. The bread business is highly competitive and fragmented with Britannia being the market leader.
HUL had admitted in the past that the acquisition of Modern Foods was a mistake on account of improper due diligence and even referred the loss-making company to BIFR in 2001.
A CPM trade union leader said neither the party nor the union has anything to do with the transaction as it was a deal between two private companies. “We opposed privatisation at that point of time, but now we have no role,” he said.
HUL’s bread and bakery business consists of a full range of white and sweets breads, health and wellness breads and value added bakery products such as cakes, muffins, buns, pavs, cream rolls under the ‘Modern’ brand name.