For most Bangaloreans, filter coffee is our first love. On top of that, ghee loaded Kesari Bath (Popularly known as Sheera) and Vada Sambhar makes it a perfect breakfast. Popular places to have them is either MTR, Vidyarthi Bhavan, Vasudev Adiga or Maiyas. Well most people like me share the passion to saviour them, a few of them are passionate to serve them to us. Here is a story of Dr. Sadananda Maiya, who rose thrice against the odds to fulfil his passion to serve delicious South Indian delicacies, gaining national and international prominence as the father of two pre-packaged brands – MTR and Maiyas. It also throws light on the infancy-stage relationship between traditional business families and PE-firms.
The journey from MTR to Maiyas
Mavalli Tiffin Rooms (MTR) was founded in 1924 by three Maiya brothers – Parameshwara, Ganappaya and Yagnanarayana at Lalbagh, Bangalore. Hailing from the temple town of Udupi (in Karnataka), it soon became one of the most sought-after locations in Bangalore for breakfast. But the eventful Emergency era changed MTR forever.
From the second generation Maiyas, Dr. Sadananda Maiya pioneered the diversification of MTR from a pure-play restaurant business by entering the pre-packaged food segment. Reason: The prices capped for food served at restaurants during the Emergency under the Food Control Act, made it unfeasible for doing business, resulting in its temporary shutdown.
That’s when the pre-packaged food venture MTR Foods was born. With humble beginnings with four products, by 1992 it shifted production to its own manufacturing facility in the suburbs of Bangalore. Soon in 1994, Sadananda Maiya and Harishchandra Maiya parted ways. The cousin of Sadananda Maiya retained the hotel business, while Sadananda Maiya paid Rs. 1.5 Crore for the MTR trademark and independently ran MTR Foods.
Little did he know that certain legal bindings would continue to haunt the fledging business. As per the legal documents, Sadananda Maiya owed 50% of the value to be paid for trademark rights. In 2007, it was worth around Rs. 24.3 Crore. To put that into perspective, MTR Foods had a revenue of Rs. 164 Crore at that time. Now that’s a huge amount, he owned to the third generation of Maiyas, the children of Harishchandra Maiya.
Only option seemed viable: Exit MTR Foods. So, in 2007, it sold MTR foods for $100 Mn (Rs. 364 Crore) to Norwegian Orkla Foods and signed a non-compete agreement for five years. A food business which Sadananda Maiya loved and nurtured is no more his. When people dream to create one brand in their lives, he created another with Maiyas Food and Beverages.
For the love of food
Soon after selling MTR Foods, Sadananda Maiya and his son Sudarshan Maiya started Maiyas Restaurant in BTM Layout, later shifting to a large Jayanagar outlet. With a strong family name recall in South Bengaluru, the restaurant’s first location was perfect. Lesser spends on marketing due to word of mouth and family name lineage.
A graduate from BMS College of Engineering, Sadananda Maiya always believed that technology can transform foods the way it should be consumed: – Authentic and Fresh. With a PhD which he completed in nanotechnology in 2010, he wanted to find the way food can be served with long-shelf life. This led to the birth of Maiyas Food and Beverages.
To put to perspective, Maiyas was entering the same market in which MTR was dominant. Made more sense to fight where MTR had very little presence. The bakery dominated segment for snacks like Chakli, Nippat, Kodubale, etc. was largely unorganized, made it an ideal target for Maiyas to foray with, post the non-compete agreement completion in 2012.
With decades of experience of pre-packaged foods at MTR and combination of nano technology to mitigate issues like reducing oil (by 30%), frozen idlis with larger shelf-life (48 hours), etc., Maiyas was a run-away hit in Karnataka, accounting to a major chunk of geographical-segmental revenue. The focus for product innovation never comes without the right sourcing of ingredients.
Like Paper Boat, Maiyas always focused on delivering products in the way it was consumed in the past. With Asafoetida sourced from Afghanistan, Cinnamon from Sri Lanka and Chillies/Tamarind from various regions mitigating season variations in quality. In terms of packaging, the sealed pouch packing of snacks, which helps it retain its freshness even after one serving. This helped it differentiate its offerings from the unorganized segment.
From reducing Stock-Keeping-Units in 2015 by removing non-moving products from their portfolio to 1-Minute Rasam cubes to bhelpuri bars, their ability to innovate and quickly re-order their portfolio paid rich dividends for the company. From Rs. 75 Crore revenue in FY2014, it grew four times to Rs. 300 Crore in FY2018 from their pre-packaged business. Their restaurant business clocks upwards of Rs. 30 Crore annual revenue which is reported independently.
It did not go un-noticed: Capital flowed in with Maiyas success
From the proceeds of MTR (it held 40% stake), they re-invested the money in their restaurant business and setup a manufacturing facility (at Rs. 60 crore) in Kanakpura Road. Like any other FMCG product, distribution was the key for Maiyas. Not very new for Sadananda Maiya, who was the first distributor of MTR products, it is like re-creating a similar network. Though it commanded double-digit market share in Karnataka, it required capital to quickly grow.
Both Ascent Capital (in 2014 & 2016) and Peepul Capital (in 2016) invested Rs. 140 Crore each for 30% stake. It helped it ramp up its production and distribution across India and abroad. Now available at prominent modern retail outlets, with a strong focus on NCR and Maharashtra, it is soon ramping up its existing distribution network across India in the years to come.
In 2017, the company appointed a new CEO to shift the focus of Maiyas from a Karnataka-centric approach to a pan-India focus. It seemed like Sadananda Maiya was able to recreate the MTR magic with Maiyas. Maiyas was able to clock the revenue at which he sold MTR in 2007. Everything was well till now.
The third coming for Sadananda Maiya
In June 2018, problems erupted at Maiyas. Peepul Capital and Ascent Capital held 30% equity each while the Maiyas controlled 40% equity. The Private Equity (PE) brought in Rs 280 Crore in the company as against Rs. 50-70 Crore by the Maiyas family.
The problem erupted when there were disagreements on how the operational metrics should be controlled/monitored between the PEs and the Maiyas. This led to drying up of working capital and halting the scheduled capital infusion from Peepul Capital and the promoter family. Because of the tussle, it had to stop operations. Ascent Capital stayed passive on the issue.
Peepul Capital was able to strike a different deal for their capital infusion when they came onboard in 2016. It is reportedly stated that if certain milestones were not achieved by the business, Peepul Capital would effectively take control of the company with 57% stake, reducing the promoters’ stake to 10%.
During the tussle, Sadananda Maiya offered to walk out with the restaurant business and also offered to stay as Chairman for the beverages business.
Finally, it reached the NCLT (Insolvency and Bankruptcy Code, 2016). If bids were not found satisfying, the Maiyas business would have to go for liquidation. One year later in May 2019, six parties placed bids for Maiyas. The list included
- Peepul Capital (existing investor)
- Akashika Foods (consortium of workers, employees and creditors, backed by Sadananda Maiya)
- Sadananda Maiya (Later decided to back Akashika Foods)
- MTR Foods
- Kamal Agrawal (Haldiram’s)
- Sanjiv Goenka (Guiltfree Industries)
NCLT went on award the bid to Akashika Foods, which mandated 100% upfront payment of Rs. 130 Crores to all creditors. Sadananda Maiya-backed Akashika has aimed to clock a Rs. 500 Crore revenue in the coming four-five years with a brand-new look sporting the blue theme.
Did I miss something?
Final Thoughts
It isn’t the first time that traditional family businesses and PEs have taken the court route to solve their problem. The food-chain Sagar Ratna also faced a similar issue with Jayaram Banan, the founder buying out the stake of PE fund India Equity Partners. Vasudev Adiga, the Karnataka-based food-chain had approached the Company Law Board when it was unable to sort out issues with PE fund New Silk Route. There have been disagreements in the past on how business families run businesses, whose way of working might not be adequately subscribed by PE funds.
Let’s take one step backwards. When Maiyas was up for sale, six bids were available for the grabs. What makes it so interesting that Haldiram’s or MTR or Guiltfree Industries were interested to buy out Maiyas business? In the Indian snacking industry, there are a lot of tastes and segments to cater. Haldiram’s being a north-Indian snack player, Maiyas would be a logical extension. Same goes with MTR, which would be wading off-competition in Karnataka.
The factor which unites all of them is the expertise traditional business families bring on the table. Sadananda Maiyas ability to recreate an MTR-like magic in Maiyas makes it a lucrative pie for any business. Same applies to PE funds. It is a two-way street for both. Traditional business families need more capital than they required in the past. And PEs don’t want to lose out on such opportunities. Well, this new relationship (unlike tech-geek startups) is still in infancy. Hopefully it matures soon for the greater good for the business community.