GST cuts, PE interest fuel sale frenzy in QSR and dessert brands

This, in turn, is cooking up a recipe for more platform plays and inorganic growth opportunities, driving brands in the ₹100 crore revenue bracket to scout for buyers and unlock their next phase of scale.

Quick-service restaurant (QSR) chains Kitchen Garden and Burger Singh, ice-cream brand Noto, and restaurant chain Nandhana Palace, among others, are now on the block actively scouting for buyers, five people familiar with the matter told Mint.

Organic QSR chain Kitchen Garden, which operates under the parent Suzette Gourmet Pvt. Ltd, has been evaluated by multiple potential buyers, the first person told Mint. The company is seeking a valuation of around ₹400 crore, translating into a 4-5x revenue multiple, the second person quoted above confirmed.

The parent company reported revenues of ₹30.6 crore in FY24 while narrowing losses to ₹20 lakh. It recently raised ₹10 crore from Yuj Ventures and existing investor DSG Consumer Partners. The company has not reported its FY25 financials to the corporate affairs ministry (MCA) yet.

Quick-service burger chain Burger Singh is exploring a ₹400-500 crore valuation, which suggests a 4x multiple, a third person quoted above said. A spokesperson for Burger Singh, however, denied this after the report was published.

The Gurugram-based chain reported revenues of ₹79.6 crore and losses of ₹27.9 crore in FY24, and has raised $18.6 million to date from investors including Rukam Capital, RB Investments, and Nine Rivers Capital at a post-money valuation of $52.1 million.

Broadly, companies that can demonstrate a strong brand presence and regional dominance command better valuation. It also depends on factors like scale, growth and path to profitability.

If they have a unique intellectual property, such as manufacturing or other processes, then the valuation gets a bigger boost, experts told Mint.

Meanwhile, Nandhana Palace, a chain of restaurants known for its authentic Andhra cuisine with a strong presence in Bengaluru and Chennai, is also exploring a sale, and is expected to command a 4x revenue multiple, a fourth person quoted above said. As per Tracxn, the company had an annual revenue of ₹241 crore in FY24.

Kitchen Garden, Burger Singh, Noto, and Nandhana Palace did not respond to Mint’s queries sent on Thursday evening.

Why the rush?

For certain categories like ice cream, sellers might see this as a favourable time. “Policy moves like the recent GST rate cut, from 18% to 5% in certain categories such as ice cream, have meaningfully improved margins and made these businesses far more attractive to private equity investors, driving valuations higher," said Keyur Majumdar, managing partner at Bay Capital, which has backed consumer brands such as Lenskart.

Noto, a plant-based frozen desserts platform, is also on the block, a fifth person confirmed to Mint. It posted revenues of ₹23 crore and losses of ₹9 crore in FY24, and has raised $9 million from investors including Equentis, Inflection Point Ventures, FirstPort and White Whale.

Industry experts, however, believe such valuations may not be easy to sustain. “Unless companies own their distribution or manufacturing or have an IP, it’s very difficult to command a 4x multiple in today’s time and age. FMCGs will definitely not reward such valuations," said Satish Meena, founder of research firm Datum Intelligence.

The typical range is between 2 and 2.5x revenue multiples, depending on the company and the kind of capital it has for survival, he added.

According to Meena, QSR brands, especially in the ₹50-100 crore category, struggle because they expand aggressively, even as average daily sales per store are stagnating, as catchment areas are not spending more. “High rentals have also hit margins, and experiments with highway outlets haven’t delivered much growth due to low footfalls. Larger chains with capital may still survive, but smaller brands with limited scale are finding it harder, especially with venture and private equity funding drying up," he added.

Fast-moving consumer goods (FMCG) majors, meanwhile, are increasingly open to acquiring sub-scale but well-positioned brands to tap into newer customer segments.

Different strategies

The appetite for acquisitions has only grown after Hindustan Unilever Ltd (HUL) announced its acquisition of a 90.5% stake in direct-to-consumer beauty brand Minimalist for ₹2,955 crore through secondary buyouts and primary infusion, one of the largest deals in the category.

Last month, Mint reported that Wellbeing Nutrition, a beauty and personal care company backed by HUL and Fireside Ventures, has also been put on the block. A potential deal is likely to value the company at ₹1,500-1,600 crore.

In the food category, Mint reported that The Baker’s Dozen, backed by Wipro Consumer Care Ventures and Fireside Ventures, is also exploring options for a sale.

Some large strategics and food majors, too, are scouting aggressively. Mint reported in August that Temasek-backed Haldiram Snacks Food Pvt. Ltd is exploring bolt-on acquisitions to expand its pan-India presence, particularly in the South. The report said bankers have been asked to show profitable assets with strong fundamentals.

A bolt-on strategy enables larger firms to buy smaller businesses to expand operations, diversify offerings or reach new markets.

Earlier on Sunday, Mint also reported that Chryscap has earmarked $200 million to create a desserts platform after the Theobroma transaction. The PE firm will consider acquiring assets in frozen desserts and ice cream brand categories as a part of a bolt-on strategy using Theobroma as an anchor.