FCL II

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The proposed investment is a straight/quasi equity investment of up to INR2,100 million in Future Consumer Limited (“FCL” or the “Company”), a food and consumer products company in India, listed on the Bombay Stock Exchange (BSE). FCL is part of the Future Group, India’s earliest and largest organized retailer of groceries and apparel, and an existing IFC client since 2016. IFC approved an equity investment in FCL in 2016 (project#37943). FCL is a food company with an integrated business model (from farm to fork) and has following key business verticals: (a)     Center-of-plate (COP) and Fresh Fruits and Vegetables: COP is involved in sourcing and processing (mainly grading, sorting, packing) for everyday essentials for the Indian kitchen such as flour, pulses, cereals, spices, dry fruits etc. The COP operations are carried out at five processing facilities across India (including one in the food park). FCL sources about 1,000 MT of produce per day [like fruits and vegetables, staples (rice, wheat, sugar) spices, oils] sourced through over sixty five processing, collection and distribution centers and over 8700 farmers. (b)   Processed food, home and personal care brands: FCL has brand presence across multiple food & fast-moving consumer goods (FMCG) categories with a mix of in-house as well as acquired brands of:Processed food (cookies, jams, chips, corn flakes, snacks, etc.) Home and personal care (cleaning range, aluminum foils, tissues etc.) Emerging categories (frozen snacks, frozen vegetables, edible oil etc.)  Production of these brands is outsourced to a number of suppliers and FCL has set-up few manufacturing and processing facilities directly or through a joint venture partner.  (c)   Food manufacturing & processing: FCL has set up Integrated Food Park Limited (“IFPL”), a subsidiary of the company in partnership with the Ministry of Food Processing Industries, Government of India to facilitate end-to-end food processing along the value chain (grading, sorting, pulping, packaging and distribution) from the farm to the market. IFFPL has a food park, located in Tumkur, near Bengaluru, in Karnataka (referred as the “food park”) spread over an area of 110 acres and houses over 20 food processing facilities (FCL, owned by FCL’s joint venture and third parties) and storage.  The food park has been divided into a number of plots and the company is offering land, flatted factory space as well as “Plug & Play” infrastructure for small and medium enterprises or companies looking to set up processing units in the food space. Currently, FCL is operating its pulping, fruits and vegetables (F&V) packing, frozen F&V, spice grinding and packing, and frozen snacks. Also, few of the joint venture (JV) companies are operating within the food park manufacturing sauces, biscuits, and rice flour. Few of the plots have been leased to external companies. Associated facilities provided at the food park includes cold rooms, warehouses, grain silos, grid power, water supply, water treatment plant (WTP), effluent treatment plant (ETP), fire hydrant system, roads and office space for temporary use. (d)     Nilgiris: Nilgiris is a leading dairy and bakery brand in South India with a franchisee network of 240 stores that was acquired by FCL in Nov 2014. It has a dairy processing facility (50,000 liters/day capacity) located in an industrial area in Anekal, near Bengaluru. Bakery products are sourced from an external supplier and FCL has been moving out production from the dairy processing facility as well to external suppliers. (e)     Aadhaar: Aadhaar is a wholly owned subsidiary of the company which is engaged in the business of rural and semi-urban wholesale and distribution through its wholesale distribution centres (seven with an average area of 20,000 ft2 or 2000 m2). It supplies to small format retail stores (franchisee owned) and other retailers.  FCL has also formed a number of joint ventures (JVs) for food, dairy, health and personal care products. Many of the manufacturing facilities are located within the food park.The proposed investment is for financing FCL’s growth plan (“the project”) that includes including a major thrust into rural distribution across India, expansion of its manufacturing facilities (in the food park), product development, marketing of brands and channel growth and meet upcoming debt repayments.