Jitendra Virwani, owner of Bengaluru-based real estate conglomerate Embassy Group, is close to buying a controlling stake in JSM Corp. Pvt. Ltd, which runs Hard Rock Café and California Pizza Kitchen in India, two people aware of the development said.
The deal will lead to the exit of one of the two founders, as well as private equity investor PremjiInvest. Financial details of the transaction could not be ascertained.
Mumbai-based JSM Corp.’s founders Jay Singh and Sanjay Mahtani currently hold 27% and 28%, respectively, in the company, totalling a 55% stake. PremjiInvest, the private equity arm of billionaire Azim Premji’s family, holds 22%, while the remaining 23% is held by other investors.
According to one of the two people cited earlier, Virwani will buy all of Singh’s and PremjiInvest’s shares, and some from other investors, adding up to a total of 68% in JSM Corp. Mahtani will retain his 27% stake, said the second of the two people, both of whom declined to be named. The remaining 5% will remain with other investors.
“It’s a distress sale and there is a lot of debt involved in this transaction,” the second person added.
Virwani confirmed the development. “The company (JSM Corp.) is currently under cash flow stress and it requires capital for its growth, we strongly believe we can turn around the business because the company has good brands in their portfolio,” said Virwani.
Singh and Mahtani did not respond to phone calls and emails. A PremjiInvest spokesperson declined to comment.
Founded 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 acquired 22% in JSM for $25 million (about Rs150 crore).
In April 2016, Mint reported on the company’s plan to raise about Rs200 crore from private equity investors. The plan did not bear fruit.
JSM also holds a licence for Panda Express in India, which hasn’t been launched yet. Panda Express is an American casual Chinese restaurant chain. Virwani said that Panda Express will be launched soon and can be part of Embassy’s IT parks, as well as shopping malls and airports. Hard Rock Café contributed about half of JSM’s revenue in 2015-16, while California Pizza Kitchen accounted for 25-30%.
Virwani has made several private investments in other sectors. In 2015, he invested in Bengaluru-based online fashion and lifestyle startup, Styletag. With a net worth of $2.2 billion, Virwani appeared in the Forbes India Billionaire list for 2016.
India’s food services industry will be worth Rs4.98 trillion by 2021, according to a report by the National Restaurant Association of India (NRAI), released last year. The size of the total market, both organized and unorganized, was Rs3.09 trillion in 2016 and NRAI’s estimates take into account a 10% compound annual growth rate. According to the industry lobby group, the restaurant sector is expected to contribute about 2.1% to the country’s total gross domestic product, or GDP, by 2021.
Restaurant space in India, which had been off private equity investors’ radar, has made a gradual comeback and witnessed a few deals in 2017.
For instance, Massive Restaurants Pvt. Ltd, owned by celebrity food writer and chef Jiggs Kalra and his son Zorawar, has raised about Rs80 crore from private equity fund Gaja Capital last month.
Source: Mint