Indian Economy News

Temasek to invest Rs 400cr in KFC, Pizza Hut operator

Mumbai: Singapore state investor Temasek Holdings is likely to make an investment of about Rs 400 crore in KFC, Pizza Hut and Costa Coffee store operator Devyani International, upping its play in the country's fast-growing consumer sector.

The four-decade-old fund, with assets worth $173 billion globally, will purchase a significant minority stake in the New Delhi-based company, owned by soft drink bottling king Ravi Jaipuria. If the transaction materializes, Temasek will be the second private equity investor in Devyani after ICICI Venture, which had invested Rs 250 crore for a 10% stake in 2011.

The Temasek deal will be a combination of primary and secondary investment components, and the primary investment is intended to support Devyani's expansion plans, said a person familiar with the situation. The fresh development will also push back Jaipuria's plans for an initial public offering for the quick service restaurant unit.

A Temasek spokesperson said the company does not comment on market speculation. Despite repeated attempts, Jaipuria couldn't be reached for comments.

Besides the international food and beverage brands, Devyani also has its own brand, Vaango, a South Indian-themed restaurant. The food services provider currently has over 300 outlets cutting across its various brands and the additional funds are to ramp up its network in the highly competitive $48-billion market. Devyani, named after Jaipuria's daughter, is one of the fast-growing units within the billionaire's business empire.

With the proposed Devyani investment, Temasek will increase its exposure in consumption-driven sectors as these are seen as good proxies to economic growth and a way to profit from rising consumer spending in Asia's third largest economy. Temasek has been buying consumer-related assets in financial services, healthcare, agricultural services and e-commerce. It owns about 5% stake in Godrej Consumer Products, maker of Cinthol soaps and Good Knight mosquito repellents, and has investments in e-commerce site Snapdeal and online baby care retailer Firstcry.com.

In recent years, global investors have been investing big time in India's food and beverage sector institutionalizing several niche margin businesses.

KKR, New Silk Route and Standard Chartered Private Equity had invested a combined $200 million in Cafe Coffee Day, while Everstone had invested $30 million in Pan India Food Solutions, which runs Noodle Bar, Bombay Blue and Copper Chimney chains, and Arisaig Partners put in $30 million in McDonald's India (west and south) franchise Westlife Development. Sequoia Capital picked up a stake in kebab and wraps chain Faaso's while CX Partners cut out a deal in casual dine restaurant Barbeque Nation.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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