Target Information

Hangyo, a prominent ice cream brand founded in 2003 by Pradeep Pai and Dinesh Pai, has recently secured $25 million (approximately Rs 211 crore) from Faering Capital. This funding round marks one of the largest venture investments in an ice cream brand in India to date. Hangyo offers a diverse range of products including cups, cones, sorbets, stick ice creams, tubs, and kulfis, which are distributed across various trade channels, including general trade, modern trade, and online platforms, such as quick commerce applications.

The company boasts a significant business footprint in South India, with strong market presence in states like Karnataka, Tamil Nadu, Kerala, Goa, Andhra Pradesh, Telangana, and Maharashtra. Hangyo operates a robust distribution network of over 350 distributors and claims more than 30,000 retail touchpoints. Furthermore, the brand has reportedly served over 3 million consumers as of February this year.

Industry Overview in India

The ice cream industry in India has shown considerable growth, driven by increasing consumer demand and changing lifestyles. As of 2023, the market is projected to witness rapid expansion fueled by factors such as rising disposable incomes, a growing young population, and evolving consumer preferences towards premium and innovative products. With the advent of modern retail formats and rapid delivery services, ice cream brands are finding new avenues to capture a larger market share.

Recent trends indicate a diversification of flavor profiles and the introduction of health-centric products, including low-calorie and dairy-free options, reflecting changing dietary preferences among consumers. New-age ice cream brands are also leveraging social media and digital platforms for marketing and consumer engagement, creating a vibrant and competitive landscape.

The pandemic accelerated the shift towards online sales channels, and many companies have embraced e-commerce as a key driver for revenue growth. The investment climate for food and beverage startups has also improved, attracting substantial capital from venture investors, thereby fostering innovation and expansion.

While challenges such as supply chain disruptions and fluctuating raw material costs persist, the overall outlook for the ice cream industry in India remains positive, with opportunities for both established and emerging players to thrive.

Rationale Behind the Deal

The $25 million investment from Faering Capital will significantly enhance Hangyo's production capabilities, expedite the development of new products, and facilitate its expansion into key markets. With a strong performance indicated by a revenue growth of 50% to Rs 233 crore in FY23 and a remarkable profit increase, acquiring this funding is strategically positioned to leverage the current market dynamics and consumer trends.

Hangyo's successful history in serving a large consumer base and establishing a solid distribution network makes it a competent contender in a burgeoning market, which likely contributed to Faering Capital's decision to invest in the brand.

Investor Information

Faering Capital is a well-regarded investment firm focusing on emerging companies with significant growth potential in India. Known for investing in sectors that demonstrate strong consumer demand and scalability, Faering Capital aims to partner with innovative businesses to facilitate their growth trajectories.

The firm's expertise in guiding companies through their growth phases, coupled with strategic capital infusion, provides a solid foundation for long-term success for its portfolio companies, including Hangyo. This investment aligns with their strategy to capitalize on increasing consumer interest in premium food and beverage products.

View of Dealert

This investment is seen as a promising opportunity not only for Hangyo but also for Faering Capital. Given the brand's impressive revenue growth and rising demand for ice cream products in India, the financial backing could result in substantial returns over time. The infusion of capital will enable Hangyo to enhance its market reach and product offerings, positioning it well against competitors in the evolving ice cream industry.

Furthermore, the recent trend of substantial investments flowing into the food and beverage sector highlights a confidence in the market's growth potential. Should Hangyo successfully execute its expansion and innovation strategies, it stands a good chance of solidifying its market position and boosting profitability, making this a commendable investment.

However, as with any investment, potential challenges remain, including market competition and supply chain management. Continuous monitoring of market trends and consumer preferences will be crucial for Hangyo to maintain its competitive edge. Overall, it is a calculated risk with the potential for lucrative returns if managed well.

View Original Article