Mumbai: Pan India Food Solutions Pvt. Ltd, a restaurant operator and owner of Noodle Bar, Bombay Blue and Copper Chimney brands, is in talks with private equity and strategic investors to sell stake, said three people with knowledge of the development. Pan India Food Solutions, also known as Blue Foods, is run by private equity firm Everstone Capital.

India’s fine-dining restaurant sector has been impacted by increasing costs due to high inflation, and consumers cutting back on discretionary spending in a slowing economy, causing investors to rethink their portfolio as returns remain elusive, one of the people said. None wanted to be named.

Pan India Food Solutions, also known as Blue Foods, is run by private equity firm Everstone Capital, which had in November formed a joint venture with Burger King Worldwide Inc. to expand the fast-food chain’s presence in India and South-East Asia.

The plans to divest stake in its fine-dining restaurant business in India comes at a time when the company is looking at introducing Burger King in India, said one of the three people cited above.

Everstone Capital, through its investing platform Cuisine Asia, owns nearly 80% in Blue Foods, and has an investment of about 200 crore.

A few investors have evaluated the investment opportunity, two of whom spoke with Mint on condition of anonymity, citing confidentiality issues. “Everstone will remain invested in the company. The new investor can take anywhere from a minority to a controlling stake. Everstone has turned the company around," said one of these potential investors.

Emails sent to Everstone remained unanswered.

“We have been in the industry for 21 years and the past year has been one of the worst that we have seen," said Anjan Chatterjee, managing director, Speciality Restaurants Ltd, which runs restaurant chains like Mainland China and Oh! Calcutta, while explaining that the prolonged slowdown in the Indian economy, along with high inflation has impacted a lot of the smaller restaurant chains with just one or two branches and even bigger chains that had taken on debt to expand. Many of them are now looking to exit the business or bring in investors to support the business.

While the past five years saw inflation remaining consistently high, 2013 was exceptionally challenging with prices rising on average by over 10%. Food inflation hit 19.93% in November and was the highest contributor to the overall wholesale inflation rate (7.52%), said a March report on Indian food service trends by Technopak Advisors Pvt. Ltd.

The food and beverages industry, which is already challenged on the cost front, has not been able to pass on the impact of spiralling prices to the consumer, adding to pressure on profitability, the retail consultancy firm said. The greatest impact is felt by non-organized companies who are least insulated against inflation, and by the value-driven chains for whom entry-level pricing is a key demand driver.

The last quarter results of major food service firms has actually shown that growth has shrunk, which is a cause of concern.