Chennai: After selling its Rs90-crore turnover packaging company, Packaging India Private Limited, the Chennai-based fast moving consumer goods (FMCG) group, CavinKare, is hungry for food business.

The group raked in Rs63.5 crore by handing over Packaging India to Essel Propack Limited. As a part of the deal, Essel Propack will take over debt to the tune of Rs25 crore. The sale price is between five and six times of Packaging India''s operating profit.

"We are looking at acquisitions in the Indian foods business," declares chairman and managing director, C K Ranganathan.

Leveraging the sale proceeds (Rs63.5 crore), he can raise a similar or higher amount as loan to fund the acquisitions. It may be recalled, the FMCG company CavinKare Private Limited acquired one of the popular pickle brands in the South - Ruchi - in 2003 for Rs15.50 crore. Later, the company launched gulab jamun mix, asafetida and dates under the Ruchi brand. CavinKare also retails Chinni's, another pickle brand. The company is expected to get into the nascent heat-and-eat food segment.

The company is also looking at increasing its food product exports to the US. "We started exports to US three months. This year exports to the US is expected to grow big," says Ranganathan.

The main reason for unlocking value out of its packaging business is to grow the foods and FMCG business unhindered. Originally the packaging company was floated as a backward integration mainly to serve the needs of the group''s flagship company selling brands like Chik / Nyle shampoos, Fairever fairness cream and others.

Over a period of time with innovative solutions Packaging India grew to become the country's third and South India's largest flexible packaging company. The company served many industry majors in confectionery, food, beverages, soaps, detergents, cosmetics out of its Pondicherry plant. As a result the dependency on the group''s flagship company business came down to just 20 per cent.

But with CavinKare storming various FMCG segments and the food business, Packaging India''s clients, who were in the same space, changed their packagers, fearing competition.

For instance, an increase in packaging orders or introduction of promotional offers are market sensitive information that FMCG companies like to keep close to their chest. The Naturally the packaging companies clients felt threatened by the possibility of CavinKare becoming privy to such competitive information.

For Ranganathan, the focus is on expanding the FMCG and food business. That would have increasingly made life difficult for Packaging India as client attrition would only be expected to increase each time CavinKare entered a new segment. For instance, biscuit major Britannia Industries will move away from Packaging India when CavinKare starts selling biscuits.

"It is not good for the flagship company to factor the interests of other group companies while making its business plans. It is certainly not for raising funds," he explains the reason for the exit. CavinKare is also setting up its first manufacturing plant in Uttaranchal.

While Spark Capital advised sale news came as a sudden surprise to the Packaging India employees despite director T D Mohan''s assurance to the around 150 employees that there would not be any disturbance. "The will be no change in the management nor will there be any loss of jobs," Mohan asserted.

According to him, the acquisition by Essel Propack would enable Packaging India to enter into the pharma product-packaging segment in a major way.