New Silk Route eyes stake in Punjabi By Nature

Private equity (PE) investors seem to be liking the taste of India's fast-growing food service industry.

Take, for instance, New Silk Route (NSR) Partners, one of the leading India-focused PE funds. A year after infusing Rs 200-crore in Bangalore-based quick service restaurant (QSR) chain Adigas Fast Food, the PE fund is now exploring another investment opportunity.

According to people in the know, New Silk Route (NSR) is in talks with the promoters of north Indian restaurant chain, Punjabi By Nature, to acquire a minority stake in the chain. The financial details are not yet known.

Punjabi By Nature, set up by brother-sister duo Arjun and Piya Puri, had started its first restaurant in Noida in 1998. It later expanded to Vasant Vihar, Raja Garden and Gurgaon in the National Capital Region and also to Bangalore, which was in 2011.

An email questionnaire sent to NSR's CEO Parag Saxena did not elicit any response, while Arjun Puri could not be contacted despite repeated attempts.

NSR is in the process of expanding its food and restaurant portfolio with a $100-million investment. It plans to set up a holding company, which will acquire controlling stake in portfolio firms and nurture them. NSR's key investments in India include Coffee Day Resorts and Hotels, 9X Media, Capricorn Hospitality, KS Oils, Ascend Telecom Infrastructure, Reliance Infratel and VRL Logistics.

According to a study from Technopak Advisors, the Indian food service industry is currently a $14-billion market, of which the unorganised sector has a lion's share, accounting for about $12-billion business. QSR rules the organised sector, with the largest share of 50 per cent.

Last week, another PE major, CX Partners, invested Rs 110 crore in Barbeque Nation Hospitality. In December 2012, Bangalore-based QSR Mast Kalandar had raised Rs 32 crore ($6 million) from Helion Venture Partners and Footprint Ventures. With the new fund, Mast Kalandar outlets will be scaled up to 100 outlets from the current 40.

Last year also witnessed more number of PE deals (12) worth $122 million in the restaurant sector in India, compared with 2011 which saw nine deals worth $159 million.

US-based NSR, with $1.4-billion of assets under management, had hit the headlines when two of its co-founders, Rajat Gupta and Raj Rajaratnam, were convicted for insider trading charges in the US.

Recently, Gupta filed a breach-of-contract lawsuit against Saxena. Gupta said he had transferred his voting shares in NSR to Saxena. He also alleged Saxena breached the agreement by improperly removing Gupta's designee to the board and refusing to permit NSR to acquire directors' and officers' insurance.