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L Catterton eyes takeover of Riyaaz Amlani’s restaurant empire


MUMBAI | NEW DELHI: Ace restaurateur Riyaaz Amlani — the man behind popular fine dine restaurants, delicatessen and bars like Saltwater Grill, Smoke House Deli and Social — has caught the fancy of Louis Vuitton Moet Hennessy, the world’s largest luxury group by revenue.

L Catterton, the firm formed with the 2016 merger of LVMH’s investment arm L Capital and American consumer-focused PE venture Catterton, is looking to buy a controlling stake in Amlani’s company Impresario Entertainment & Hospitality Pvt Ltd, multiple sources with knowledge of the matter said.

The valuation being considered for the company is around Rs 600 crore and the fund is believed to be currently doing a due diligence of the businesses, they said.

The deal will include a primary infusion of capital to grow the company’s existing brands like Social and Smoke House Deli, as well as a secondary share sale that may see some of the existing investors reducing their stake or exiting entirely, they said.

Though the exact quantum of stake that will change hands is not yet final, it is likely to be as high as 60-75 per cent. Amlani is likely to continue as a minority partner with around 20-25 per cent.

Amlani owns 31 per cent of the company. Beacon India, a PE investor, owns a 36 per cent stake while Mirah Hospitality, a company in the restaurant space, holds another 16 per cent. The rest is scattered among several investors.

Amlani, CEO & MD of Impressario Hospitality and Sanjay Gujral, regional managing director at L Catterton Asia, declined to comment.

Since 2001, with a mission to create a great “cafe experience”, Amlani has spread his footprint to 13 cities with over 26 owned and 13 franchised outlets under various brands. Most of the outlets are in Delhi, Mumbai and Bengaluru.

Impresario began its journey with Mocha-Coffees & Conversations. Today, Social, a hip “urban hangout”, is fast emerging as the flagship brand, with the all-day cafe and bar format bringing highest revenue and growth for the company.

In fiscal 2017, Impresario posted Rs 225-Rs 275 crore of revenue and Rs 25 crore of operating profit, sources said. Each of the large Social properties is generating an average Rs 7-8 crore annually, with a store-level operating margin of around 20 per cent.

“Impresario raised money from an Avendus wealth management arm to fund growth. It has since been trying to find investors but it’s been difficult,” said one of Amlani’s peers, speaking on condition of anonymity. “Fine dining formats do not always give the numbers that investors seek. They have never made PAT (profit after tax) level profits till date. Amlani is a fantastic innovator of brands and formats but it’s increasingly becoming difficult to sustain. The entire sector has also been hit by the rise of the food tech companies,” he said.

“The issues, basically, have largely been around execution challenges and lack of scalability across the board. Any business which has managed to solve those has received funding,” said Ritesh Chandra, executive director and head-Consumer, FIG and services group at Avendus Capital.

The best way to manage costs is by increasing scale, and gaining efficiencies. Simply pushing up prices in an extremely competitive market like India, will see you losing market share, feels Pinakiranjan Mishra Partner & Sector Leader, Consumer Products and Retail, India at EY.

However, buyouts by PE funds too have not really worked in the food services industry. Nirula’s acquisition by Navis Capital, Moshe’s and Adiga’s by New Silk Route and SagarRatna’s takeover by India Equity Partners had all got into trouble, sometimes even getting mixed up in legal disputes.

High capex, faulty business models, excessive experimentation, promoter credibility and a clash between passionate founders and new investors often lead to depressed financial returns and clashes.

L Catterton’s India portfolio includes FabIndia and PVR. It is also believed to be investing in Manyavar.

Source:  The Economic Times


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