Palmy to diversify with Sh26m PE firm cash injection

Private equity firm Grofin has invested Sh26 million in Palmy Enterprises, a Nairobi-based sanitary products manufacturer, that is looking to diversify into new product lines.

The family-owned business makes toilet papers and other sanitary products under the “Palmy” and “Lovely” brands.

Grofin’s investment will go into working capital, buying machinery, vehicles and expanding capacity to distribute the products to stores in locations not served by competitive mega retailers.

“Consumption from the base of the pyramid and emerging middle class is registering high growth. Palmy has focused on building its toilet tissue brands in “suprettes” (small shops and supermarkets),” said Grofin Kenya general manager Rishi Khubchandani.

The investment will also enable Palmy diversify its product range to include serviettes and liquid hand wash.

Mr Khubchandani said Palmy had chosen to focus on areas where the growth was highest instead of competing aggressively on price and display in the modern trade outlets.

Palmy’s products are mainly sold in kiosks and small shops in Nairobi‘s Eastleigh, Umoja, Kayole, Donholm and Embakasi and the satellite towns of Rongai, Ruai, Kiambu and Limuru.

Palmy Enterprises which is located in Nairobi’s Industrial Area started operations in April 2010.

Grofin aims to fund companies with needs of between $50,000 (Sh4.3 million) and $1.5 million (Sh130 million) for a period of between four and six years, through debt, equity or a hybrid of the two.

Grofin did not indicate what form its latest investment has taken. Previous investments include computer retailer Bestell, healthcare products distributor Luwada Management Services, and logistics companies Zuka Travel, Wargen and Centaurus.

Private equity investments have picked up in earnest since the beginning of this year. TBL Mirror Fund bought a minority stake in city salon chain Neo Amadiva that has branches in Riverside and Hurlingham in January.

READ: Nairobi salons chain sells stake to Dutch fund

It did not indicate how much the deal is worth but on average it invests up to $1 million (Sh86 million) per investee while Pearl Capital Partners recently bought a stake worth Sh200 million in Eldoville Dairies.

Catalyst Principal Partners bought a stake in EEFCO, a Tanzanian a heavy equipment rental and logistics and stated that more investment could be in the offing this year.

“In any given year, we would be seeking to make between two to four investments —but we would only make an investment where we believe we can earn superior risk adjusted returns,” said Catalyst managing director Rajal Upadhyaya in a previous interview.

Data from the Private Equity Survey 2012-2013 by consultancy Deloitte and Africa Assets shows that there were six deals worth$36.1 million.

A year before the 2012-2011 survey showed that there were 12 deals worth $83.1 million.