Private equity firms General Atlantic and Advent International are reportedly in advanced talks to acquire Everstone Capital’s stake in Restaurant Brands Asia (RBA), the operator of Burger King in India.
Everstone Capital currently holds a 40.9% stake in RBA and played a significant role in bringing Burger King to the Indian market in 2014. According to executives from the PE firms cited in an ET report, Everstone is looking to sell its stake in Burger King and is currently undergoing due diligence with General Atlantic and Advent. It is worth noting that Everstone also operates Subway India and Lavazza Coffee in the country.
As of March 2023, Burger King, along with its coffee and beverage sub-brand BK Cafe, has nearly 400 stores across India.
The due diligence process comes at a time when the growth of Western fast-food brands in India has slowed down due to a shift in consumer sentiment favoring regional brands and Indian startups.
ICICI Securities, a brokerage firm, highlighted in a post-earnings note on May 18 that key risks to RBA include slower-than-expected improvement in customer footfalls, delays in store expansion plans, and increased competition in the northern and eastern markets.
RBA reported a loss of INR 73.3 crore for the March 2023 quarter, a 9.4% increase compared to the INR 67 crore loss in the same quarter the previous year. The loss was primarily attributed to food inflation and the opening of new stores. However, revenue from operations witnessed a 28% year-on-year growth, reaching INR 514 crore.
Devyani International, a rival company that operates KFC and Pizza Hut in India, also reported a 21% decline in net profit for the March quarter.
Despite the challenges, QSR chains have expressed their commitment to expanding their store networks, particularly in small towns, along highways, and emerging channels such as convenience stores at petrol stations.
According to a report by credit rating agency ICRA, the top five QSR chains in India are projected to add nearly 2,300 stores across the country between FY23 and FY25, with an estimated expenditure of INR 5,800 crore.
The report also revealed that the average daily sales of these brands increased from INR 67,479 in FY21 to INR 97,696 in the nine months ending December 31, 2022.
The acquisition of Everstone Capital’s stake in RBA comes after Jubilant FoodWorks announced its plans to integrate Domino’s India with the government’s digital commerce network, the Open Network for Digital Commerce (ONDC), following McDonald’s entry into the network.