CESC Ventures Ltd

CESC Ventures Limited (CVL) was incorporated in 2017 as a wholly owned subsidiary of CESC Limited, a flagship company of the RP-Sanjiv Goenka Group, engaged in the business of generation and distribution of electricity across Kolkata and Howrah in West Bengal. The company was incorporated with the objective of engaging in the business of owning, operating, investing and promoting business in the fields of information technology, business process outsourcing and such other ventures (including fast moving consumer goods business) as may be identified by our Board.

CVL was a part of CESC until 29^th October 2018, when it got demerged along with the retail business of the group, Spencers Retail Limited. After the demerger, core business of CVL will be information technology and information technology related services. The company will provide all information technology related routine and expert services to the members of the RP-Sanjiv Goenka Group. With an initial focus on servicing the needs of CESC and its subsidiaries the company plans to gradually expand the scope of its operations and provide such services outside the Group as well.

Apart from the IT services business, the company will also own the following businesses:

• Firstsource Solutions Limited (FSL), a company listed on BSE and NSE and engaged in the business of business process outsourcing. CVL will hold 54% in FSL and the balance will be held by public shareholders of FSL. FSL is among the leading business process outsourcing companies in India with delivery centres across India, the United States of America, the United Kingdom and Philippines. FSL operates information technology and BPM business in the areas of customer management, transaction processing and collection service to Fortune 500 and FTSE 100 companies in the US and UK that operate in the telecom and media, and banking, financial services and insurance industries. FSL's consolidated gross revenues for the six months ended September 30, 2018, and the year ended March 31, 2018, was Rs. 1,876 crore and Rs. 3,541 crore and its profit after income tax (PAT) on a consolidated basis for the six months ended September 30, 2018, and the year ended March 31, 2018, was Rs. 181 crore and Rs. 327 crore, respectively.
• Quest Properties India Limited (Quest), which is engaged in the business of property development, operation of 75 mall and other real estate properties and owns and operates the “Quest Mall” in Kolkata, which houses shops, retail outlets, an entertainment zone, a multiplex, food court and fine dining. Quest is also in the business of making various investments including in venture capital funds. CVL’s shareholding in the company is 100%.
• Bowlopedia Restaurants India Limited,(Bowlopedia), which operates eleven restaurants in Kolkata, New Delhi and the National Capital Region under the brand names Waffle Wallah and The Chef’s Bowl. CVL’s shareholding in the company is 100%.
• Guiltfree Industries Limited (GIL), which is engaged in the business of fast moving consumer goods under the brand name Too Yumm! CVL’s shareholding in the company is 100%. Additionally, GIL has acquired a stake of 70% in Gujarat based Apricot Food Private Limited, another company engaged in the manufacturing of food products.

Revenue Break-up:

Profit & Loss:

Balance Sheet:

Investment Rationale:
Stable businesses will continue to throw out cash:
The company’s stake in FSL and Quest provides it a good annuity flow of cash. Around 90% of the company’s revenue comes from these ventures which will continue to perform stably going forward. The cash generated from these businesses will help expand the other fast growing businesses of the company. We expect these businesses to continue to do well and keep the cash generation going for the company. FSL alone generated Rs. 1,060 crores in free cash in 5 years to FY18.

FMCG to drive growth:
The company operates two brands in FMCG, namely Too Yumm and e-vita. The company has invested over Rs. 500 crores in the business and plans to invest more to take the annual business revenue to Rs. 10,000 crores in the next five years. Its current annualized revenue is Rs. 500 crores. It has a retail presence in over 4.5 lakh outlets and is expanding at a rapid pace (30,000 outlets every month). It is also setting up an R&D facility in Thane to develop new products. The company already has two plants in Rajkot and Hyderabad and is setting up a new plant in Telangana at an investment of Rs. 247 crores. This plant will have a capacity of 40,000 tonnes per annum.

Too Yum is expanding very fast in the guiltfree snacking market and has already cornered 3.5% of the market in short span of time. As told by the management, it is growing by 20-25% month-on-month. This business will be a major growth driver for the company going forward.

Outlook :
We believe that CVL is a self sustaining growth story, which is expanding fast in a category which is exceptionally large in size. The scope for growth is huge for the company and the management is doing a fine job in developing differentiated products, building the distribution reach and branding. While FSL and Quest will provide an element of certainty in topline and bottomline, FMCG will add growth to the overall business.