NEW DELHI: Rahul Bhatia-controlled InterGlobe group is in advanced discussions to acquire the Burger King India franchise from private equity firm Everstone Capital for about Rs 1,400 crore, according to two people directly aware of the matter.
The franchise rights for the fast-food chain are held by Singapore-based Everstone Capital’s QSR Asia Pte, a holding company for its restaurant investments in the region.
Two US-based buyout firms and a local private equity fund that were in the fray to purchase the business have backed out, citing inability to match the expected price, the people said. Discussions with Bhatia are in the final leg but may not necessarily lead to a deal.
Burger King operates about 140 outlets in India and clocked sales of Rs 375 crore in FY18. The business is lossmaking at a consolidated level but is making operating profit at the store level, implying it can generate a surplus after meeting costs including raw material, staff and lease rentals, according to one of the people.
Bhatia, who is currently locked in a dispute with his partner Rakesh Gangwal over his flagship airline business IndiGoNSE -5.59 %, has created a pool of other business interests cutting across hospitality, IT services, luxury goods and travel booking. He personally owns three upmarket restaurants located in the National Capital Region.
The hotel business, which is a joint venture with the Accor group, operates the popular Ibis, Novotel and Pullman brands. Ibis runs 19 properties across India with an inventory of over 3,500 rooms.
In terms of sales, Burger King surpassed Starbucks, which posted Rs 348 crore for the India region in FY18, ET reported on October 23. Burger King entered the market two years after the coffee chain, which has an alliance with the Tata group.
Everstone Capital, which manages a $5 billion portfolio, invested in setting up the Burger King franchise in India about five years ago. It also runs some of the US-based fast-food chain’s restaurants in Indonesia, though these are not part of the deal being negotiated with InterGlobe. Everstone has invested at least Rs 500 crore to build the franchise in India.
The PE firm initially sent out requests for proposals to prospective investors late last year through its advisor EY.
Neither Bhatia nor Everstone Capital had responded to requests for comment as of press-time on Wednesday.
The Burger King outlets are spread between cities in north, west and south India, with the north accounting for the the largest number of 60 stores.
Everstone has the rights to restaurant brands such as Coffee Bean & Tea Leaf, Copper Chimney, Bombay Blue and Noodle Bar in India, apart from owning rights to Domino’s Pizza in Indonesia.
India’s restaurant and food services market was pegged at Rs 3.7 lakh crore as of 2018, according to a report prepared by CARE Ratings. The organised segment accounts for 35% of the market.
The industry is expected to grow at over 10% over the next five years. Growth is being driven by a young working population with high disposable incomes, the report said.
