PE cos look to invest in KFC operator Sapphire
Hong Kong-based secondaries private equity (PE) firms, Newquest Capital Partners and TR Capital, are in an advanced stage of discussion to invest in Sapphire Foods India Pvt Ltd—one of the largest franchisees of Yum! Brands, and Pizza Hut. The move is expected to help the two secondaries PE firms, which have been looking to increase their exposure in India, strike a new bet in a consumer-facing business like Sapphire Foods, a person directly privy to the development told Vccircle.
The investors, the person said on condition of anonymity, are in talks to invest a total of around $75 million (₹558 crore) in Sapphire Foods. The latter was reportedly close to raising another $75 million from Malaysia-based private equity firm Creador. Sapphire Foods is valued at nearly ₹4,000 crore ($537 million), the above-cited person said.
The transactions will simultaneously provide a secondary exit to the company’s four existing investors—cx Partners, Samara Capital, Goldman Sachs and Edelweiss PE. “All of them would be supposedly part-exiting with almost 4x returns,” the person added.
Email queries sent to Sapphire Foods, Newquest Capital Partners, TR Capital and existing investors didn’t elicit any response till the time of publishing this news report. Goldman Sachs declined to comment.
Sapphire Foods, which is planning to raise ₹1,000-2,000 crore through an initial public offering (IPO) by the end of this year, was set up in 2015 by acquiring 250 KFC outlets. It currently runs nearly 400 KFC, Pizza Hut and Taco Bell outlets across India, Sri Lanka and the Maldives. It owns a controlling stake in Gamma Pizzakraft Overseas--a franchisee of Pizza Hut and Delifrance in north India and Sri Lanka. The company recorded consolidated net sales of ₹1,340 crore for 2019-20 as compared with ₹1,193 crore the year before. Its net loss shrank to ₹159.4 crore from ₹44.6 crore during the period, according to VCCEDGE.
The quick service restaurant space in India is dominated by multinational chains Mcdonald’s, KFC, Burger King and Subway. Fast-food chain Burger King India Ltd, controlled by private equity firm Everstone Capital, received a positive response to its IPO last December. In March 2021, casual dining chain Barbeque Nation launched its IPO.
Newquest Capital Partners, a private equity (PE) firm focused on emerging markets, acquired a minority stake in maternity clinic Kids Clinic India Pvt Limited,
which operates Cloudnine chain of hospitals. The investment in Cloudnine was said to be Newquest’s third investment in India in the last six months. Newquest’s other recent investments in India include Cosmosmaya and Kreditbee.
Private equity firm TPG acquired a majority stake in New Quest earlier this year.
TR Capital, on its part, was established in 2007 to invest in Asia-focussed PE secondary transactions. It has executed 34 transactions via three funds that it floated in 2008, 2012 and 2016. It manages capital commitments of $600 million, according to the firm. In India, TR Capital has stakes in eyewear retailer Lenskart Solutions Pvt. Ltd, non-bank lender Arohan Financial Services Pvt Ltd, and the firm that operates Bigbasket.
In 2018, it bought out some LPS in mid-market Private equity Tano Capital. Earlier this year, it overshot its target to raise $350 million for the fourth secondaries fund.