MO Alts pays $48m for stake in Indian diaper maker

Pan Healthcare was set up n 2016 as a unit of Pan Group, a conglomerate with interests spanning construction materials and agriculture. Its brands include Little Angel (baby diapers), Liberty (adult incontinence), and Everteen (feminine hygiene), as well as Neud, Naturesure, and Mansure (men’s and women’s wellness).

There is a manufacturing facility in Rajkot, a network of 350,000 retail outlets nationwide, and various third-party e-commerce channels. Much of the plan for the new capital is to build out this distribution infrastructure.

Vijay Dhanuka, a director and head of consumer at MO Alts, observed that India’s hygiene products segment is significantly underpenetrated. This is reflected by per capita diaper consumption of about 60 units, compared to 1,000 in the US and 400 in China. The market has also been dominated historically by international brands with no large Indian brand to date.

“We are reasonably confident that with its sharp focus on manufacturing excellence, and having delivered on its vision of creating a best-in-class manufacturing plant that surpasses even international setups, Pan Health will be able to address the above issues and create a huge impact in the personal hygiene space,” Dhanuka said.

“The company’s strategy of creating large-scale operations, be it in manufacturing or in offline distribution through a large feet-on-street workforce, will allow them to offer high-quality products at competitive prices not just across tier-two and three cities but even rural areas. This perfectly positions Pan Health to create a brand that embodies the dictum Bharat ke products, Bharat ke liye.”

MO Alts has flagged the concept of Bharat – India’s regional and low-income consumer base – as an important target market for Pan Healthcare, as well as its broader portfolio.

The private equity firm closed its fourth flagship growth fund last October with INR 45bn in commitments. It said it wanted to allocate a significant portion of the corpus to companies in tier-two and tier-three cities. The vehicle's first investments include Simpolo, a ceramic tile brand based in Morbi, a city of 400,000 including surrounding areas.

Bharat has emerged as a strong theme in Indian PE and VC in the past two years despite significant challenges. Much of the necessary infrastructure, including mobile penetration, is in place. But cultural and logistical hurdles, as well as stubbornly low discretionary spending capacity, have checked the penetration of some business models.

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• Topics
• South Asia
• Consumer
• Expansion
• India
• Motilal Oswal Private Equity
• Growth capital
• manufacturing