Rabo Equity Advisors Pvt Ltd is a 51% Rabobank held company with the balance 49% largely held by Rajesh Srivastava, chairman and managing director of the company. It is currently investing from the India Agri Business Fund II (IABF-II), which is a $150 million private equity (PE) fund focused on investing in the expansion and growth of Indian food and agri-business companies. In conversation with Ashish K Tiwari, he speaks about the company's latest investment, business plans and more.
You recently picked up stake in Olive Bar & Kitchen. Can you share more details about this transaction and shareholding?
We have picked up 40% stake in this food service firm. It's a secondary transaction wherein we have acquired complete 32% stake held by Aditya Birla PE, around 6% held by Manmohan Shetty and the balance 2% from a few other shareholders in the company. So basically, we have streamlined the capital structure and the present shareholding pattern is Rabo's IABF-II fund with 40%, existing investor Centrum holding around 11% and the balance is with company promoter AD Singh.
Over the last two weeks, we have seen over Rs 200 crore worth deals in the Indian foodservice space. Can you share valuations-related details?
We have invested around Rs 110 crore in this transaction. I think we are almost at the same level, not so cheap not so expensive. The good part is that this company is quite scaled up and profitable. The company's current revenues of Rs 200 crore, presence across formats and all of them are making good money, which is not true for many other companies in this space. So somewhere, what AD Singh is doing is very good and is hitting the top very well. This deal (with Olive Bar & Kitchen) is secondary in nature and unlike many deals not based on forward numbers. Yet, it is all done and dusted and at a reasonable price.
Where do you see the Olive Bar & Kitchen business going from the current 33 restaurants?What is the future growth plan?
Now we have sufficient accruals and debt-raising capacity to go on for two years. Besides, if the growth becomes too high, and beats our business plan, then we have the scope to put in more money ourselves in the company. The growth plan is to continue with the existing formats. We may add a few if required, but not too many. The formats will be established in different locations across India. We may also open up some overseas outlets gradually considering every format nowadays is in markets like London, Dubai and Singapore. So, we will also open (in these international locations) but a bit carefully. I think, the idea is to take this company from Rs 200 crore to Rs 1,000 crore in six years' time.
Is this doable?
Yes, it is doable. As you see, out of 33 stores around 12-13 stores have come up in the last six to eight months and are yet to touch their full potential and, will take time to flourish. The point I am making is, from these 32-33 stores also the topline could have been Rs 250 crore on an annualised basis, which is Rs 200 crore at the moment. So this kind of growth is very much possible. We are quite bullish on it. As you know this is our first deal in food service industry. We have gone through all the deals, but we picked up this one. So, we've waited long enough.
Was it because the market wasn't appealing earlier and now it is?
First of all, we did not want to enter into any format which is too expensive per store and the second thing was to find a promoter who is very creative as is AD Singh. As you know, in 2015 -2016 the overall food service sector was down including the quick service restaurants (QSR) space. So, we had to wait for the recovery to happen, which has happened now. Per store sales are growing. They were negative earlier. Hence, we are bullish now; we like this format and the promoter. We think he is in the right space. Also, in any format where you need Rs 2,000-2,500 as the cover to succeed, that is not something that we can support. As in India, it's largely the value proposition (that is more important).
Does this investment open more opportunities for you to add similar businesses considering you've looked into other related businesses as well?
It does but honestly speaking, we try to diversify our sub-sectors in any fund. We don't want to repeat sectors and even in food service if possible. We would rather make this company as our main platform. So now if you see, regionally there are too many chains operating. There are four to five restaurants chains which you can easily pick up. So, we will see with time. There will be some inorganic part to the growth for sure.
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