An exclusive interview with Ashish Saxena, Leading Investment, TVS Capital (F&B).
Ashish Saxena is currently leading investments of TVS Capital in the F&B space. He also serves as the CEO of TexMex Cuisine (Chilli’s Grill & Bar) in West and South India. Saxena who brought the globally acclaimed brand to India shares his view on funding scenario in Indian F&B sector and why PEs are more attracted towards casual dine in an exclusive chat with Restaurant India.
What is your take on the recent funding scenario in the Indian F&B industry?
The investment scenario in India is changing. PEs are today on great demand when one is planning to expand their restaurant business. At the same time, investors are building the business on their own by creating the backend to introducing the brands in the country. We are seeing a lot of F&B activities happening over the last two years. As an investor, we like the strong cash flows at the business bringing to the table especially in the casual dine segment, where a store is profitable in the first year itself. So, that excites any investor towards the Indian F&B industry.
What are the elements or areas that make Indian F&B industry alluring to investors these days?
The basic economics and the basic data are in place in the segment. We are far lower in eating out as compared to the developed nation. For example – when compared to the US, we are 1/10th to them in eating out. But with the discretionary spending level going up, eating out activity is certainly going to increase. With the trend of more women joining the workforce, eating out trend is going to rise. At the same time, I feel that the basic growth economics are in place for this industry. Therefore, the sector is attractive to investors, though finding the right infrastructure piece is still a challenge.
What are some of the challenges faced by brands like you operating in India?
There are various issues that foreign brands like Chili’s are facing in India. The major challenge is to find the right location for putting up the brand. There are very less high street options available for global brands to place their restaurant. Other issue is getting the licenses in India. One has to follow different process of getting licenses not only officially but internally also; especially getting a liquor license is a tough job in India. You have to wait for over 5-6 months period to get a license, whereas, you have to start paying rent from day one. As a result, you have to open the store without liquor which is not profitable. These are the challenges which make restaurant business unattractive at this point of time. But I think this problem will get resolved as soon as there is growth.
What is the reason that investors like you are keen on sharing opportunities with casual dining segment rather than fine dine segment?
In my opinion, fine dine space in India is very limited. There are very few brands running under the fine dine segment. But casual dine segment caters to the major brands in the country. Brands like Smoke House Delli, Indigo Delli, Cafe Mangii, Barbeque Nation and other brands are creating a success story for the investors in the country. The other thing which bars investors from investing in a fine dine segment is the limitation of stores. One can have only 8-10 fine dine restaurants in India and that only in the major cities where people can spend more on eating. In the QSR or casual dine segment, the boxy economy is slightly more dependent on the economy of scale, so you need to have at least 20 or 30 store in a city to get the economies of scale to make the business profitable and it takes a lot of time to build that kind of network. For an investor to have ‘low profitability or no profitability period’ is very painful. So our preference at TVS is towards casual dine sector, where you have to manage limited number of stores getting immediate profitability. You are able to break-even in the first year itself and start generating cash flow for returning the capital.
You have partnered with Chilli’s Grill & Bar. What led you to the venture?
Before partnering with any brand, we see scalability in the business. Chilli’s is a great brand to partner with globally. They have a success in managing the franchise outlets. Chilli’s globally has 1,400 outlets and out of that about 1,004 are franchised. They successfully manage to run those franchise-owned outlets over 30 years. We understand that the brand has their requisite infrastructure in place to manage the franchise.
How many stores do you operate for Chilli’s Grill & Bar in India?
We are the development partner for South and West India. We currently operate five outlets, out of which one is located in Mumbai, two in Bangalore, one in Hyderabad and Pune. We are building our sixth store in Bangalore and are planning to open 10 stores within two years in South and West region – predominately in Mumbai, Hyderabad, Bangalore and other cities, where we are not present like Chennai, Goa, Cochin, Coimbatore and Mangalore. The business looks alluring at these places.
How beneficial do you find for a restaurateur to take the PE route?
If you are looking for capital and dealing with one individual or one entity, you get that from PE. At the same time, you get the value in terms of expertise and expansion. Many a times, when you are regional and you want to go national, PE is the best route to choose from.