Mid-sized restaurants hungry for funds as investors stay away

Mumbai | New Delhi: Mid-sized organised restaurant chains and quick service restaurants (QSR) are battling a financing hurdle with at least a dozen chains finding it increasingly difficult to attract fresh capital. Executives attributed this to investors turning more cautious on funding businesses that are yet to show sustainable profit metrics and strong store-level economics.

Mid-sized chains including Punjab Grill, Truffles, Mad Over Donuts, Charcoal Eats, YouMee, CX Partners-backed Dindigul Thalappakatti and General Atlantic-backed Absolute Barbecues are among chains seeking either the next round of funding or investor exits, said industry executives.

"Investors today are also much more disciplined," said Rahul Singh, a serial investor in restaurant chains and co-founder of The Beer Cafe. "They are looking for proven unit economics, profitability and capital-efficient growth rather than simply a large top line. That creates a real funding gap for businesses that have demonstrated consumer acceptance but need another meaningful tranche of capital to reach scale."


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The Burman family, promoters of packaged goods maker Dabur India, has been exploring selling a majority stake in some of the core brands under group company Lite Bite Foods such as Punjab Grill and Asian cuisine brand YouMee. Similarly, doughnut chain Mad Over Donuts, founded by entrepreneur Lokesh Bharwani, has been looking for a fundraise for the past six months, said the executives cited above.

Tamil Nadu-based biryani chain Dindigul Thalappakatti (DT) is also exploring a majority stake sale, as the initial investors want an exit. DT, also backed by Tree Line Investment and the family office of Havells Group, was valued at ₹450 crore in 2019 when CX Partners took a majority stake. "Biryani in India is as diverse as its languages," said a Mumbai-based private equity investor. "What works in Telangana can be very different from what appeals to consumers in Karnataka, Delhi or Punjab. Anyone looking to build a pan-India biryani brand will therefore face significant challenges in catering to these distinct regional tastes." The challenge, executives say, is more intense for mid-sized chains as large investments are continuing to gain traction.

"We are now planning our next phase of expansion; we are in conversations with partners," said Tarak Bhattacharya, executive director, Mad Over Donuts. He didn't elaborate.

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Lite Bite Foods, Charcoal Eats and CX Partners didn't respond to queries. A General Atlantic spokesperson declined to comment.

"While valuation multiples in parts of the listed QSR universe have corrected, that has clearly not shut the market for high-quality private restaurant businesses," said Siddharth Bafna, partner and head of corporate finance, Lodha & Co.

"In our experience, businesses that are performing well, have strong unit economics and a credible growth runway continue to attract significant investor interest," he said. "It is primarily businesses whose operating performance has struggled that are finding fundraising difficult."

Recent major deals include Vixar's, formerly Arpwood Partners, acquisition of a significant minority stake in homegrown dessert and waffle chain The Belgian Waffle Co for about ₹770 crore. Popo Global, which owns The Pizza Bakery and other brands, recently raised ₹532 crore from Artal Asia. Siguler Guff invested $40 million, or about ₹380 crore, in Trimex Foods, the operator of Chili's, PAUL and Cinnabon outlets in India. Subway India secured about ₹130 crore from Playbook Partners earlier this year and has now filed for a ₹600-crore IPO.