Backed by a growing consumption story, private equity investors have been signalling a growing appetite to invest in the Indian restaurant chains.
Indian restaurants and food chains are experiencing good time to infuse money and scale up their operations by either taking Angel Funding or PE route. With the new development-driven government and ready to experiment young bloods, the country is all set to embrace new opportunities. Capitalising this sentiment of growth and development, restaurants and food ordering majors in the country are expanding their operations.
The Long Race
Multi-stage investor SAIF Partners has increased its holding in Anjan Chatterjee’s owned fine dining chain operator Speciality Restaurants, whose brands include Mainland China and Oh! Calcutta. The PE firm had originally invested in the company in 2007. It stayed put as Speciality Restaurants went public in mid-2012 and since then SAIF has been raising its holding for the last one year. The Fund IV invested Rs 14.4 crore ($2.36 million) to buy 2.27 per cent stake through open market on 25th September. Earlier this year, it formed a joint venture with Doha-based Al-Mohannadi Group to expand its flagship brand serving oriental cuisine Mainland China overseas.
In an instance, Gujarat-based Neopolitan Pizza Pvt Ltd, which operates under quick service restaurant (QSR) format, has raised an undisclosed amount in an angel funding from Sarthi Angels Venture Foundation (SAVF). Started in 2012 by Mukund Purohit, an Indo Canadian entrepreneur, Neopolitan Pizza has positioned itself as a vegetarian Italian meal chain. Besides traditional Italian fast food it also offers Jain Special food.
However SAVF, launched in August 2013 by Sarthi Group, comprises high net-worth angels among others and invests in start-ups operating in sectors like e-commerce, IT, agriculture and food processing, consumer, clean tech, healthcare and media. The platform can invest at any stage of a start-up lifecycle (even in ideation stage companies) and the amount invested can go up to $2 million.
Attractive Business Model
QSR as a business has attracted several investors in the past. Most recently, Nilgai Foods, which operates QSR chain PICO and sells condiments and gourmet processed foods products, raised its first round of equity investment from an unnamed high net-worth investor (HNI).
"We will be looking at raising a further $7-10 million to finance our ongoing expansion plans," says Abhay Jaiswal, CEO, Nilgai Foods. The company is also planning to take its QSR brand PICO Express to all major metro cities like Delhi and Bangalore in the next few years.
"Our FMCG products are currently in Delhi and Mumbai, but we plan to expand that reach rapidly over the next couple of years to reach over 10,000 retail stores across India," Jaiswal adds.
On the other hand, TexMex Cuisine, development partner for American casual dining restaurant chain Chili’s Grill & Bar in South and West India, is planning to invest $10 million to open ten outlets in India within the next two years.
“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. However, the business looks alluring at these places," says Ashish Saxena, CEO, TexMex Cuisine.
At the same time, online food ordering portal are also looking for funding options. Matrix Partners India has provided a Series A round of funding for Alchemy Web Private which operates online food ordering platform LimeTray. However, the company did not disclose the amount of funding.
"Restaurants are adopting a range of mobile-first technology at a rapid pace to solve their business needs be it discovery, dining experience, ordering, loyalty or restaurant management. The food-tech market is deep enough to have multiple winners,” says Vikram Vaidyanathan, MD, Matrix Partners India.
The Way Ahead
Backed by a growing consumption story, private equity investors have been signalling a growing appetite to invest in the Indian restaurant chains. Names like Olive Bar and Kitchen, Barbeque Nation and Impresario Entertainment operated by Riyaaz Amlani have secured funding in the past and they have been doing well in the domestic market.
PE funds such as Everstone Capital, SAIF Partners and New Silk Route are building dedicated platforms to make multiple investments in the sector. Everstone Capital led F&B Ventures has already acquired 51 per cent stake in the Indonesia franchisee of Dominos Pizza recently. Everstone previously has brought Burger King in the Indian market.
Thus, we can say that food brands are inspired by the recent market upward surge. In the coming days, we may see more of such happenings with major as well as midsized restaurants and online ordering portals raising their funds.