CapVent taps into Indian water market

It follows then that the Indian water purifier market - valued at INR18 billion ($311 million) with a CAGR of 20% - is an attractive segment for investors looking for companies driven by consumer growth.

When CapVent's team met with management at Morf India, the Chennai based company - which makes water purifiers and waste water treatment equipment - had been actively seeking investment to support its growth plans.

Morf caters for the consumer market but the bulk of its business has so far been in supplying institutional and industrial clients such as Apollo Hospitals, Tata and Vedant. The company had entered into an agreement with Electrolux Home Products in 2012 to sell the Kelvinator range of water purifiers and air purifiers in India and Sri Lanka. Its own brand of domestic purifiers is now sold under the Kelvinator brand.

Morf wanted to reinvent itself and scale up fast but needed the capital to do it. The solution was for Capvent to acquire a 51% stake via an investment from its $150 million Asia Consumption Co-investment Fund. The value of transaction was not disclosed but fund typically makes investments of $2-10 million.

"The business was very exciting from two angles" says Varun Sood, managing partner and co-founder of Capvent. "One is the opportunity for water filtration devices because tap water needs to be filtered. The big cities are quite penetrated with these products but the smaller towns and villages are yet to be brought in. So there's a market of millions or tens of millions of devices per year."

The second attraction was Morf's strong direct sales platform which had helped the company grow in South India. "The sales strategies of other companies were facing limits so you had to think of a new way to do it. Morf had a strong sales platform working with a network marketing business", says Sood.

Morf will use its multi-tier business sales network to establish a pan-Indian footprint for its consumer products by the end of this year. The company will target tier I cities such as Delhi and Kolkata in the first phase of expansion and then move into tier two and three cities.

M.V. Praveen, managing director of Morf India, says he expects 60% of the sales to come from the company's direct sales platform which, when combined with the well-known Kelvinator brand, is hoped to give Morf an advantage over competitors.

The parent group of CapVent's anchor investor Unilever Corporate Ventures has also entered the space with a product called Pureit. "We always get a lot of input from Unilever and due diligence information on every business we do" says Sood. "For them it's very important to see where the growth trends are."

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• Topics
• Buyouts
• South Asia
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• buyout
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• India