A stand-off between the founder of the six-year-old Maiyas Beverages and Foods and private equity investors over governance issues has left the Bengaluru-based food company starved of funds to run its operations.
The impasse is the result of a widening chasm between Maiyas founder P. Sadananda Maiya and private equity investors including Peepul Capital on how the business should be run and the governance practices at the firm.
Existential crisis
The stand-off ended up stalling Peepul Capital’s planned infusion of fresh funds that it had committed to invest in the company.
As a consequence, Maiyas is starved of funds and has slipped into an existential crisis. The Maiyas, sources said, insisted on a realignment of governance practices in the organisation.
This was not acceptable to the active private equity investors including Peepul Capital.
An earlier agreed arrangement for fund infusion between the three stakeholders — Peepul Capital, Ascent Capital and the Maiyas — is now in a limbo.
“Investors have been concerned that the operating metrics of critical business areas under the supervision of Maiyas were suspiciously off-kilter which, along with conflicts of interest with certain related parties, is leading to a probability of mismanagement or malfeasance by the Maiyas,” said a source close to Peepul Capital, who did not wish to be identified.
Ascent initially invested ₹120 crore in the company. In 2016, Peepul Capital invested ₹140 crore. Ascent, at that point, invested an additional ₹20 crore.
The investor agreement was reconfigured to provide for issue of forward compulsory convertible preference shares so that pre-existing shareholders could claw back eroded equity. These shares were to be converted into equity by financial year 2017-2018. If this had happened, the holding structure would read like this — Peepul Capital 57%, Ascent Capital 33% and promoters 10%.
When Peepul invested in Maiyas, the firm had debt of more than ₹200 crore. The investment effectively gave a fresh lease of life to the firm.
Since the fund infusion, business performance had improved. However, it again started to skid when the friction came to the fore. Sources said that while Ascent had taken a selective passive stance, Peepul was keen that commercial reality and fairness guided the action plan going forward.