Resturant Market Emerges as Hot Investment Target (Article)
New Delhi: As more Indians with higher disposable income take to dining out, the hitherto-fragmented restaurant market, estimated at over Rs 1 lakh crore, is emerging as a hot investment target. Moods Hospitality-owned Chinese fast food chain Yo! China plans to raise around Rs 50 crore over the next few months.
Also, New York-based India Equity Partners is in talks to buy out the food services company, Sagar Ratna , an ethnic food retailer which runs a chain of outlets specialising in south Indian cuisine. The food company has been on the block for over a year now. "With growing middle-class incomes and urbanization, we see increasing trend of people dining out. This is why mass market food chains and restaurants are seeking to expand," said Gaurav Mathur, MD at Indian Equity Partners .
The private equity firm has earmarked funds up to $100 million for acquisitions in the in the fast growing food sector. As per the Food Franchising Report, 2009, prepared jointly by Ficci-CIFTI and Franchise India Holdings, almost one-third of the working class eat out at least once a month and a majority of them spend Rs 101-150 per meal.
Private equity firms are increasingly queuing up to invest in restaurant chains as they seek capital to meet growing demand. "The level of penetration of food services and restaurants category in India when compared to some of the more developed markets is much lower and is bound to go up," said Mayank Rastogi, partner (private equity) at Ernst & Young.
"The financial backing helped us develop our back-end operations and build our supply chain," said Ashish Kapur, co-founder and MD at Yo! China. He, however, declined to comment on his plans to raise additional money for the company. Moods Hospitality received its first round of funding of Rs 25 crore from private equity investor Matrix Partners India in 2006. Chennai-headquartered TVS Capital recently invested $11 million in Om Pizzas & Eats. Other prominent investments in the sector include Darby Overseas Investments' funding of $25 million in Cafe Coffee Day, Chess Capital's $38 million in US Pizza and SAIF Partners' Rs 90-crore investment in Speciality Restaurants.