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PE Investments in Indian Food Service Sector Likely to Grow in the Next 3 Yrs

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The Food Service Sector has seen strong deal activity in the last 3 years, with over 30 investments totaling USD 250 mn invested in early and growth stage companies. In the same period the sector saw few exits, given most companies are in the growth phase.

Exit by TVS Capital in , Navis Capital’s exit from Nirulas to A2Z Excursion Group and Sequoia’s exit from Amalgamated Bean Coffee Trading Co were the key exits in the three-year period. Specialty Foods was the only IPO, where the initial PE remain invested. The number of scale players (USD 100 mn or more in sales) are still in low double digits, prominent being Cafe Coffee Day, Jubilant Foods Hardcastle Restaurants and Devyani Foods.

The next three years are thus likely to see a spectrum of players targeting listing or subsequent rounds of PE investing. Private Equity investors have invested across all stages eg. growth capital by in Devyani Foods and Arisaig Partners in Westlife Development. Prominent on early stage/venture were Sequoia in Faaso’s, Helion in Spring Leaf Retail(Mast Kalandar) and Mayfield in BTB Marketing(The Beer Café). The sector also saw consolidators and hands on managers like Everstone in Cuisine Asia having Blue Foods and now Burger King (in the form of a Joint Venture) raise investments through Verlinvest .

Apart from Private equity the sector has also seen family offices active as in case of Lite Bite Foods and its portfolio of brands eg. Punjab Grill, Subway, SFI, Zambar, Fresco, Baker Street etc. Overall, despite economic slowdown the sector has seen good investor interest, at all stages of investment given the confidence on demand side and sector shift from unorganised to organised. Some of the key pointers that private equity today are seeking in Food Service include:

1. Scalable model

2. Casual and QSR segments

3. Proven store economics in atleast a few locations

4. Knowledgeable management team with execution track record

5. Early adoption on organised supply chain and operations/sales management