Mumbai: Sapphire Foods, the largest franchisee of Yum! Brands Inc. in the Indian subcontinent, has raised ₹ 225 crore in a fresh round of funding led by Edelweiss Private Equity, said a senior executive of the company. Existing investor Goldman Sachs, too, participated in the round, said Sanjay Purohit, group chief executive at Sapphire Foods, in response to Mint’s queries regarding the firm’s latest funding round.
According to one person aware of the development, the capital will be used to scale up and eventually look at a public listing. “The lead investor in the round is Edelweiss Crossover Opportunities Fund, which is a pre-IPO (initial public offer) fund managed by Edelweiss’ alternative asset management arm. The idea is that the company will start the process of going public in the next 18-24 months," he said, requesting anonymity.
The Edelweiss fund invested around ₹ 180 crore and the rest came from Goldman, he added.
Purohit declined to comment on any plans to go public. “At the moment, our principal focus is executing plans well and delighting customers. It is very premature to comment on the future."
“Sapphire Foods is delighted to welcome Edelweiss Private Equity on its board and looks forward to working with them and the existing shareholders in its quest to become the best restaurant and food services operator in the country. We believe there is significant potential to expand our current restaurant base," said Purohit.
The company operates more than 350 KFC, Pizza Hut and Taco Bell restaurants across India, Sri Lanka and the Maldives.
Pizza Hut directly competes with Domino’s Pizza in India, which is managed by Jubilant FoodWorks Ltd. The promoters of HT Media Ltd, which publishes Mint, and Jubilant FoodWorks are closely related. There are, however, no promoter cross-holdings.
According to Pranav Parikh, managing partner and head, Edelweiss Private Equity, the fund sees strong growth potential and major tailwinds for the company and the sector. “There are strong macro tailwinds for the QSR (quick service restaurants) space in India with the onset of urbanization and increasing preference for quick, reliable and high-quality food. This investment in Sapphire Foods is consistent with our thesis to partner with structurally high growth businesses led by strong management teams."
Sapphire Foods is backed by a consortium of private equity firms, including Samara Capital, Goldman Sachs, CX Partners and IDI Emerging Markets. The four funds have invested close to ₹ 750 crore through Sapphire to acquire six to seven franchisees, including those held by Mumbai-based Dodsal Hospitality Pvt. Ltd.
In 2015, Yum! Restaurants India Pvt. Ltd, the local arm of American fast-food chain Yum! Brands Inc., which owns Pizza Hut and KFC brands, had sold over 250 franchisee-owned stores in India and Sri Lanka to Sapphire Foods India Pvt. Ltd, Mint reported in September that year. The move was part of an exercise to reorganize its business under larger and well-capitalized franchisees.
Online delivery has also boosted the segment and given it a new growth dimension, which was not there earlier, Parikh said, adding that the company is growing at a healthy rate.
Edelweiss raised its first pre-IPO fund in November 2017 with the ₹ 1,750-crore Edelweiss Crossover Opportunities Fund.