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Olive Bar and Kitchen looking to raise 180-200 crore via private equity

Olive Bar and Kitchen is looking to raise anywhere between Rs 180 and Rs 200 crore from other private equity investors to fuel its expansion plans.

Updated: May 27, 2014, 06.14 PM IST
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Olive Bar and Kitchen is looking to raise anywhere between Rs 180 and Rs 200 crore from other private equity investors to fuel its expansion plans. 
Olive Bar and Kitchen is looking to raise anywhere between Rs 180 and Rs 200 crore from other private equity investors to fuel its expansion plans. 
MUMBAI: Restaurant chain Olive Bar and Kitchen, in which Aditya Birla Private Equity fund is an investor, is looking to raise anywhere between Rs 180 and Rs 200 crore from other private equity investors to fuel its expansion plans, three people with direct knowledge of the development said.

The deal signals the continued interest from PE investors in the fine dining and quick service restaurant chains. The restaurant chain initiated talks before the national poll results were announced and is currently in discussions with 4 to 5 PE funds, one of the three persons said.

"The company has exhausted the money it raised from Aditya Birla PE and will need more capital for its future plans," an investment banker with knowledge of the development said.

In 2012 Aditya Birla Private Equity, a part of the Aditya Birla Financial Services Group owned by billionaire Kumarmangalam Birla, invested around $10 million for a minority stake in Olive Bar and Kitchen Pvt Ltd., which owns the Olive, Monkey Bar, LAP, Ai and Soul Fry brands.

In 2000, AD Singh started Olive Bar & Kitchen’s flagship chain of restaurant Olive. The company owns a clutch of fine dining restaurants serving different set of customers, a night club and a catering business. Olive has presence across Mumbai, Delhi and Bangalore.

"Aditya Birla PE will not exit through this second round of fund raise. The company needs capital to expand and hence this will be primary fund raise,” another person with direct knowledge of the development said.

AD Singh, managing director of Olive Bar and Kitchen did not respond to emailed questionnaire, while Aditya Birla PE spokesperson declined comment.

Olive Bar & Kitchen also has Centrum Capital promoter Chandir Gidwani and Manmohan Shetty, the owner of Adlabs Films and entertainment park Imagica, as investors.

 
The company had revenues of Rs 37.84 crore in the financial year 2013 with profit after tax of Rs 1.53 crore, according to credit rating agency CARE Ratings.

"The overall revenue stream is fairly diversified across not only various locations but also across various brands," said the report released on April 2014.

"However, its ability to successfully achieve better occupancy at both existing as well as new outlets and maintain its profitability margins shall be critical from a credit perspective."

"Fine dining remains the smallest share in the overall market, but along with casual dining and Quick Service Restaurants is one of the segments which is growing faster," said Saloni Nangia, President at Technopak, adding that profit margins are better in fine dining.

With an increase in the disposable income levels and the frequent dining out fast catching up with the middle class, the restaurant industry in India is expected to grow at 17 per cent annually.

The growth of the Indian food service industry is broadly driven by the consumers and food service operators.

The food market was estimated at Rs 75,000 crore last year and would reach Rs 1.37 lakh crore in 2015, according to data released at the Indian Restaurant Congress held in August.

Even as number of PE deals increased from 23 in 2012 to 27 in 2013 in the food & agriculture sector, amount invested fell from $411 million to $247 million during the same period, according to data from EY, a consultant. But as private equity firms continue to chase India consumption story, appetite for restaurant deals remains strong.

"Towards the years there have been certain large investments in the restaurants and QSR sector," said Nangia, President, Technopak. "If you see the companies like Dominos owner Jubilant Foodworks and Mainland China's Speciality Restaurants, they have fared well in the capital markets over the years."

PE funds such as Everstone Capital, SAIF Partners and New Silk Route are building dedicated platforms to make multiple investments in the sector.

In 2013, Everstone entered into a $100 million deal with Burger King to become its master franchise in India, while SAIF Partners closed a deal with Delhi-based QSR Dana Choga's and NSR acquired majority stake in restaurant/cafe chain Moshe's.

Some of the other recent deals in the restaurant segment include CX Partners purchasing stake in casual dining chain Barbeque Nation for Rs 110 crore and Arisaig Fund's $58 million private placement with McDonalds' franchisee Westlife Development.

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