India’s mid-sized organised restaurant chains and quick-service restaurants (QSRs) are facing growing difficulty in raising fresh capital as investors become more selective and place greater emphasis on profitability, unit economics and capital-efficient expansion.
At least a dozen mid-sized restaurant chains are looking to raise funds or provide exits to existing investors, according to industry executives. Punjab Grill, Truffles, Mad Over Donuts, Charcoal Eats, YouMee, Dindigul Thalappakatti and Absolute Barbecues are among the businesses seeking fresh capital or exploring stake sales.
The funding environment has become more challenging for restaurant businesses that have established consumer demand but have yet to demonstrate sustainable profitability and strong store-level returns.
“Investors today are also much more disciplined,” said Rahul Singh, co-founder of The Beer Cafe and an investor in restaurant chains. He said investors are increasingly looking for proven unit economics, profitability and capital-efficient growth rather than businesses focused primarily on expanding revenue.
The shift has created a funding gap for restaurant companies that require additional capital to expand but have not yet reached the financial benchmarks investors are demanding.
Stake sales and fundraises under consideration
The Burman family, promoters of Dabur India, has been exploring the sale of a majority stake in some of the core brands operated by group company Lite Bite Foods, including Punjab Grill and Asian cuisine chain YouMee.
Mad Over Donuts has also been seeking fresh funding for around six months. The company is looking to raise capital to support its next phase of expansion.
“We are now planning our next phase of expansion; we are in conversations with partners,” said Tarak Bhattacharya, executive director, Mad Over Donuts, without providing further details.
Dindigul Thalappakatti, the Tamil Nadu-based biryani chain, is exploring a majority stake sale as some of its initial investors seek an exit. The company is backed by CX Partners, Tree Line Investment and the family office of the Havells Group. CX Partners had acquired a majority stake in the business at a valuation of about ₹450 crore in 2019.
The regional nature of India’s food market is another challenge for restaurant chains seeking to build national brands. Consumer preferences for dishes such as biryani vary significantly across states, making it difficult for operators to replicate a single format across the country.
Stronger businesses continue to attract investors
While funding has become difficult for some mid-sized operators, investors continue to deploy substantial capital into restaurant businesses that demonstrate strong financial performance and clear expansion potential.
Recent transactions include Vixar, formerly Arpwood Partners, acquiring a significant minority stake in dessert and waffle chain The Belgian Waffle Co for about ₹770 crore.
Popo Global, which owns The Pizza Bakery and other restaurant brands, recently raised ₹532 crore from Artal Asia. Siguler Guff invested $40 million, or around ₹380 crore, in Trimex Foods, the operator of Chili’s, PAUL and Cinnabon outlets in India.
Subway India raised about ₹130 crore from Playbook Partners earlier this year and has since filed for a ₹600-crore initial public offering.
Siddharth Bafna, partner and head of corporate finance at Lodha & Co, said the correction in valuation multiples across parts of the listed QSR sector has not closed the funding market for strong private restaurant businesses.
Businesses with solid operating performance, strong unit economics and a credible growth pipeline continue to attract investor interest, he said. The greater difficulty is being faced by companies whose operating performance has weakened.
The divergent funding environment is creating a widening gap within India’s organised restaurant sector. While well-performing chains continue to secure large investments, mid-sized businesses with weaker profitability or store-level economics are increasingly being pushed towards strategic stake sales, fresh partnerships or slower expansion.