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McDonald's to get a fillip as Jatias consolidate operations with listed company

Group will basically consolidate 2 firms Hardcastle, Westpoint Leisureparks into Westlife

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In a move aimed at giving a leg-up to its consumer business, the diversified B L Jatia Group, which holds a development license for McDonald's in the west and south of India, is consolidating Restaurants, which runs the McDonald's operations, into its listed company Westlife Development. This way, Hardcastle will become a direct subsidiary of Westlife, hitherto an indirect subsidiary.

The Group will basically consolidate two firms Hardcastle and Leisureparks into Westlife. Westpoint is the holding company of Triple A Foods. The latter, on the other hand, is the holding company of Hardcastle. This way company and structure will be streamlined, Amit Jatia, vice-chairman, Westlife Development said.

The move will also ensure of operations of the group under three broad verticals - consumer led by Westlife, real estate and mall development under West Pioneer Properties and industrial lubricants under Hardcastle Petrofer. The latter is a joint venture between the and Petrofer of Germany.

"The primary business of Westlife will be quick service restaurants under McDonald's," Jatia said. "While Hardcastle will not be listed on the bourses, investors can still partake of the growth in the business via Westlife."

Currently, Mc Donald's has 148 restaurants in the west and south of India, with plans to take the number up to 250 by 2014.

This will be done with the help of a Rs 500-crore investment into the business. The Jatias have already ploughed Rs 80 crore into the business in the last financial year. This is likely to go up this fiscal as the company ramps up operations.

In the last few years, the Jatias have been taking control of the McDonald's business in the west and south in phases. What began as a 50:50 joint venture in the 1990s was converted into a development license in May 2010. That is, the Jatias bought McDonald's 50 per cent stake in Hardcastle to take complete control of the business.  McDonald's, however, still retains its 50 per cent stake in the second joint venture Connaught Plaza Restaurants that runs operations in the north and east of the country.  This JV is with Vikram Bakshi, who is also the managing director of McDonald's India.

Jatia says that the current consolidation will allow the Group to leverage the balance sheet of Westlife should there be need for debt. Loans to the tune of Rs 183 crore on Hardcastle's books were retired two years ago. The subsidiary, which contributes bulk of Westlife's revenues, is a debt-free company, Jatia said.

For the year ended March 31, 2012, Westlife's consolidated revenues stood at Rs 547.4 crore - of which Hardcastle's revenues alone were  Rs 544.4 crore. Consolidated net profit for the year stood at Rs 31.3 crore.

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