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IIFL fund strikes debut deal in alcoholic beverages space

IIFL Asset Management Ltd has invested in a craft-beer maker, marking the firm's debut deal in the alcoholic beverages segment, two people privy to the development told VCCircle.

The investment firm has come on board as the lead investor in the Series A round of funding for Mumbai-based White Owl Brewery Pvt. Ltd, the people said, asking not to be named.

White Owl, which also runs a pub in Mumbai, raised nearly Rs 10 crore ($1.4 million) in the first tranche of the round, one person said. IIFL, through its IIFL Select Equity Fund, invested Rs 4 crore, the second person said.

IIFL didn't respond to an email query till the time of publishing this report. White Owl co-founder Javed Murad declined to comment on the development. He, however, said the company intends to raise funds for expansion.

The company has made its presence felt through its on-tap offerings in bars, restaurants and retail stores. "We are present in over 600 points of sales in Mumbai, Pune, Goa and Bengaluru," said Murad.

White Owl has recently launched bottled beers in Goa and Bengaluru. "Now, our aim is to introduce bottled offerings in Mumbai, Pune and other parts of Maharashtra. We will soon get into Hyderabad and Delhi," he said.

The company has its own micro-brewery in Mumbai. Besides, it has tied up with a contract manufacturer, which has a brewery each in Madhya Pradesh and Karnataka. The Bhopal, Madhya Pradesh brewery makes bottled beers.

White Owl was founded in 2011 by Murad and Kunjan Chikhlikar. Murad, who studied at Harvard Business School, previously worked at consulting firm Analysis Group and advisory and asset management firm Perella Weinberg Partners. Chikhlikar, who is a Wharton Business School graduate, previously worked at several private equity firms.

The brewer posted net sales of Rs 5.73 crore for 2016-17, up from Rs 4.22 crore the year before. Net loss widened to Rs 2.44 crore from Rs 1.34 crore, according to VCCEdge, the data research platform of News Corp VCCircle.

In June 2017, VCCircle reported that White Owl had raised Rs 10 crore ($1.5 million) to create a bottled version of its craft beer. The investors who participated in the round included RAAY Global Investments, the family office of Amit Patni of Patni Computers; and early-stage investor advantEdge Partners.

Before this, the company had raised funds from RAAY Global in 2015.

IIFL's bets

The latest deal is the second known transaction by IIFL Select Equity Fund, registered as a Category II alternative investment fund under the Securities and Exchange Board of India. Category II includes private equity funds. Its first deal was to invest in Mumbai-based Wellthy Therapeutics Pvt. Ltd, which operates a mobile-based diabetes management platform, in March.

IIFL also invests from its Special Opportunities Fund, another Category II fund, which was raised to invest in companies before their initial public offerings as well as participate in both anchor allotment and during the IPO itself. This fund has already deployed more than half of its total corpus. The fund was striking smaller deals in the beginning, but soaring investor interest prompted it to increase its corpus and make larger investments.

The Special Opportunities Fund's two largest investments are bets on the National Stock Exchange (NSE) and NSDL e-Governance Infrastructure; it has put in Rs 1,000 crore each in the two companies. The fund bought shares in the NSE in several tranches from various investors. It acquired a minority stake in NSDL e-Governance from IDBI Bank earlier this year.

Other companies in which the Special Opportunities Fund has invested include Bikaji Foods, Indian Energy Exchange, ICICI Lombard General Insurance Company, Reliance Nippon Asset Management Company, HDFC Life Insurance Co., SBI Life Insurance Co. and Nazara Technologies.

Deals in alcoholic beverages segment

A number of companies in the alcoholic beverages segment have raised funds over the past year. These include B9 Beverages Pvt. Ltd, which makes craft beer under the brand Bira 91. B9 raised Rs 335 crore ($50 million) last month in a round led by Belgium-based investment firm Sofina.

Venture capital firms Saama Capital and DSG Consumer Partners have recently backed craft beer maker Goa Brewcrafts Pvt. Ltd. This was the second bet by Saama Capital on an alcoholic-beverage company; it had previously invested in wine maker Sula Vineyards Pvt. Ltd.

Bengaluru-based United Breweries, which dominates the Indian beer market with its Kingfisher Strong beer, has said it plans to launch a craft beer brand by the end of 2018.

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