Morgan Stanley Eyes Exit from Manna Foods Amid Struggles in India’s Booming Health Food Market

Bengaluru: Morgan Stanley’s private equity arm is considering selling all or part of its stake in Manna Foods due to the company’s struggle to grow and increase profits in recent years, according to three people familiar with the situation. “Talks are still ongoing, and no final decision has been made,” one of the sources said. Both Morgan Stanley and Manna Foods declined to comment.

This news comes amid increasing consolidation in India’s rapidly expanding health food industry, roughly six years after Morgan Stanley invested around ₹152 crore in Manna’s parent company, Southern Health Foods. The investment was intended to help the company expand in South India and provide a partial exit for some early investors, as Morgan Stanley announced in January 2018.

“In the past year, Morgan Stanley has been in discussions with several strategic investors, including FMCG companies, to sell its stake,” said a second source. “Manna has introduced many new products and expanded into various categories in recent years, making its business model fragmented and less effective than expected,” the source added.

Manna’s Financial Performance

Manna’s revenue from operations increased by 11% to ₹414 crore in FY23, but its profit decreased to ₹4.4 crore from ₹9 crore the previous year. After Morgan Stanley’s investment, Manna’s revenue surged nearly five times to ₹204 crore in FY20, but both revenue and profits have grown only slightly since then.

More Consolidation in the Health Food Industry

India’s health food market is the fastest-growing in the world, expected to grow at an annual rate of 20% over the next five years, according to a 2022 report by Avendus. This growth rate is three times the global average and 1.5 times that of India’s overall packaged food and beverage market. Avendus projected that the health food market would reach $30 billion within five years.

The industry has seen significant consolidation recently. For instance, Tata acquired Manna’s competitor Soulfull in February 2021, and ITC acquired another competitor, Yogabar, in February 2023. Manna also competes with ID Fresh Foods.

As disposable incomes rise and consumers become more health-conscious, market experts expect more deals between private equity and venture capital firms, leading to further consolidation over the next decade as brands grow.

About Manna Foods

Founded in 2012 by Nazar Isak and Syed Sajan, Chennai-based Manna Foods offers a range of products, including ready-to-cook millet-based infant food, millet grains, soya nuggets, dried fruits, breakfast cereals, purees, and pastes.

Manna Foods is owned by Southern Health Foods, which sells over 25 varieties of healthy packaged goods and operates in northern and western India, as well as in international markets such as the US, UK, Malaysia, Singapore, and Australia.

The company raised ₹30 crore from early investors led by Fulcrum in 2015 and has raised about $33.7 million in external funding to date. Morgan Stanley, the largest shareholder, and Fulcrum together own 87.5% of the company, which was last valued at $25.7 million in 2022.

Although the founders have left the company, they, along with current CEO Murugan Narayanaswamy, held a 5.3% stake as of 2022. The remaining 7.2% is owned by other enterprise investors and angel investors, including Rahul Garg, Atul Gupta, Amit Gupta, TK Kurien, and other minority shareholders.