Two months on, IEP yet to respond to Banan's offer

An amicable settlement of the tussle between Sagar Ratna Restaurant's private equity investor and its promoters seems nowhere in sight. India Equity Partners (IEP), majority stakeholder in the restaurant chain, is learnt to have rejected the buyback offer made by the promoters, the Banan family.

Sources in the know said in October 2013, the Banan family had offered Rs 132 crore for buying back IEP's 73 per cent stake in Sagar Ratna Restaurants. Jayaram Banan, owner of Sagar Ratna, valued the restaurant chain at Rs 172 crore, the same valuation at which IEP bought the chain in 2011. Banan has already roped in a high net worth individual for the buyback.
 

The sources added the fact that IEP hadn't responded even after two months indicated the investor wasn't interested in the offer and was scouting for a better deal.

THE SAGAR RATNA SAGA

• 1986 First Sagar Ratna outlet opened in Delhi
• Aug 2011 IEP buys controlling stake
• Mar 2013 Gaurav Mathur quits IEP
• Oct 2013 Banan gave buyback offer
• Nov 2013 Arvind Nair quits as Sagar Ratna CEO
• Dec 2013 Executive chef at Sagar Ratna quits

Arvind Nair, former chief executive of Sagar Ratna, holds less than five per cent stake in the chain. While Nair quit the restaurant chain, as well as IEP, last month, Suparna Shah, executive chef at Sagar Ratna, quit last week. When contacted, Shah confirmed her exit but refused to discuss further.

In October, Business Standard had reported about differences between IEP and the Banan family, as well as the promoters' plan to rope in a high net worth individual to buy back the stake.

Besides Sagar Ratna, Banan runs another chain, Swagath, in New Delhi. In 1986, Banan had started the first Sagar Ratna branch in Defence Colony in New Delhi, with a seating capacity of only 40. Now, the chain has outlets across Haryana, Himachal Pradesh, Punjab, Rajasthan, Uttar Pradesh, and the Delhi National Capital Region.

"Though the image of Sagar Ratna has been tarnished in the last couple of years and Ebitda (earnings before interest, tax, depreciation and amortisation) is negative, it's surprising Banan has offered the previous valuation to IEP," said a PE veteran, on condition of anonymity.

Following IEP's investment in 2011, the fund's founder and managing director Gaurav Mathur had joined Sagar Ratna as non-executive director. The exits of Mathur and principal Abhishek Sharman, who were handling the restaurant portfolio at IEP, worsened the company's functioning.

Sid Khanna, chairman and managing director of IEP Fund Advisors, declined to respond to Business Standard's queries, saying he was travelling. Jayaram Banan, too, refused to talk on the subject.

People in the know say after IEP acquired stake, there was concern the quality of food at Sagar Ratna had deteriorated. Sagar Ratna director K S Bhatt and human resources head Vijayantt Verma had quit, following IEP's entry.

IEP's portfolio companies include Axiss Dental, Amtek Auto, A2Z Maintenance and Engineering Services, Fourcee Infrastructure, Bharti Infratel, Ikya Human Capital, Manappuram Group and TNT Express. IEP, which raised its first fund of $350 million in 2006, has seen various senior-level exits such as those of co-founder Gaurav Mathur and operating partner Arvind Nair.

In October, IEP had filed a petition with the Company Law Board (CLB) in Mumbai, seeking a CLB-appointed administrator be appointed to take control of Fourcee Infrastructure Equipment, one of IEP's portfolio companies, following alleged financial irregularity at Fourcee.