Mumbai: JSM Corp. Pvt. Ltd, the company that runs Hard Rock Café and California Pizza Kitchen in India, plans to raise about Rs.200 crore from private equity investors.
The latest fundraising will also see some of JSM Corp.’s older investors sell their shares. Lodha Capital Markets is advising the company on the fundraising.
“About Rs.150 crore will be raised primarily from new investors, while Rs.50 crore will be a secondary transaction where the legacy investors will be bought over,” said Jay Singh, co-founder and executive director, JSM.
Founded by Singh and Sanjay Mahtani in 2004, JSM also runs frozen dessert chain Pinkberry in India and restaurants such as Shiro, The Big Kahuna, street-food inspired restaurant Plus91, casual-dining restaurant Ginger Tiger and Asilo, a rooftop bar in Mumbai.
In 2012, PremjiInvest, the private equity arm of billionaire Azim Premji family, acquired 22% in JSM for $25 million (Rs.150 crore). PremjiInvest may put in additional funds, said Singh.
The founders together hold about 55% in JSM, while the remaining stake is held by other investors.
The funds raised will be used to expand the number of current outlets, as well as for bringing in more international brands, Singh said.
As part of the expansion plan, JSM will launch Panda Express, the popular Chinese food chain, by August. Panda Express has about 1,800 outlets across six countries and revenue exceeding $2 billion.
JSM clocked a revenue of about Rs.200 crore in the year ended 31 March, according to Singh. Hard Rock Café contributed about 48% to revenue, while California Pizza Kitchen accounted for 16% and Shiro 15%. The rest came from other brands, said Singh.
“The strategy of bringing global brands into India is a reflection of urban India’s growing desire for global taste and refined palate. It started with fast food and slowly we have seen the space attract more niche positioned brands,” said Ankur Bisen, senior vice-president at Technopak, a retail consulting firm.
The business has decent gross margins and that is one reason that it attracts private equity investors, Bisen said, adding that most private investors assess these investments based on their growth potential over three to five years.
The Indian food and beverage industry will expand at an average annual pace of 24% to reach Rs.3.8 trillion in sales by the year ending 31 March 2017, said a May 2015 report by consulting firm Grant Thornton India and Federation of Indian Chambers of Commerce and Industry (Ficci). Fast-food joints, which have the largest market share at 45%, will grow by 16.6% a year, while casual dining, with a 32% share, will expand 10.1% annually, it said.
Indians spend about half of their total consumption expenditure on food, which continues to rise among people between aged 20-25, said the report.
The key drivers for growth in the food and beverages sector include urbanization, changing lifestyles, rising number of working women and eating-out options, added the report.
A number of India-focused private equity firms have invested in the Indian franchises of global food and beverage brands in recent years.
Last year, a consortium of investors led by Samara Capital bought the south and west India franchise operation of Pizza Hut from the Dubai-based Dodsal group for close toRs.200 crore, Mint reported in July.
In 2013, private equity firm Everstone Capital Advisors Pvt. Ltd, had entered into a joint venture with Burger King Corp., a popular American fast food chain to set up its India operations. Everstone owns an 89% stake in the venture, with 11% controlled by Burger King.