Chai Point raises $20 mn in fresh funding from Paragon Partners, others

Company is targeting profitability in FY19

India’s largest chain of organised tea stores Chai Point has raised $20 million in fresh funding at a time when the Tata Global Beverages is ramping up its presence in the space with its very own Cha cafes.

The funding was led by Paragon Partners, a mid-segment private equity investor, while existing investors, including Eight Roads (Fidelity’s India PE arm), Saama Capital and DSG also participated in the round.

This funding will be used to strengthen the brand’s multi-channel business model and also grow its number of automated hot beverage dispensing machines - boxC. The company will also invest heavily in its delivery unit which has been growing extremely fast on the back of increased investments being made by players such as Swiggy, FoodPanda and Zomato.

“We are looking at a balanced growth. Our investments proceeds will go in a fairly equitable fashion towards boxC as well as our food and beverages development in stores, more importantly the delivery side of it,” said the start-up’s co-founder, Amuleek Singh Bijral.

Bijral said the company, which is set to launch its 100th store in Bengaluru in May, will get profitable in the current financial year. “For the past two years, we have made investments in multichannel platforms. These are maturing very fast and we are clear that we will get profitable in FY19.”

The Bengaluru-based company, which was founded in 2010 by Bijral and Tarun Khanna of Harvard Business School, sells 300,000 cups of tea per day. As the average per capita consumption of the beverage is increasing at 20-30%, Chai Point looks to expand its business five times in the next three years. It had earlier raised $10 million in Series B funding in 2015.

For Chai Point, the market will soon be brewing with competition from Tata Cha cafes, which has already launched a pilot in Bengaluru. Delhi-based Chaayos has also expanded to six cities including Mumbai, Gurugram, Noida, Ghaziabad, Chandigarh.

However, Bijral said he welcomes the coming of new players in the segment. “We are the largest players in the organised retail tea chain segment, still we only have 0.01% share of the Rs 1,500-billion tea market,” says Bijral.

With the latest investment round in Chai Point, Siddharth Parekh of Paragon Partners will be joining the board of the company. “We are bullish on the consumption story in India. This investment is in line with our overarching investment theme of partnering high-calibre entrepreneurs with compelling business models,” Parekh said.