For those seeking a meal in India’s cities, there is little middle ground between street vendors and pricey sit-down restaurants. Apart from western fast food chains such as McDonald’s and Domino’s Pizza and emerging Indian coffee shops such as Café Coffee Day, options for mid-range meals at branded restaurants are limited.
Now India’s homegrown restaurant chains are expanding to fill a growing appetite for “quick service” and casual dining. Nirula’s, the Delhi fast food chain founded in 1934, has embarked on a national expansion plan to bring its menu of curries, pizzas, and mutton and veggieburgers to other cities in India.
India Hospitality Corporation (IHC), an investment vehicle focused on hotels and travel-related industries, last week agreed to buy Mars, the Mumbai-based hospitality group, for $110m from Navis Capital Partners.
Mars, founded in 1996, has 13 restaurant chains focused mainly in Mumbai, including Birdy’s, a bakery with 25 outlets, as well as casual restaurants such as The Pizzeria, Dosa Diner, Jazz by the Bay and Just Around the Corner.
The deal also includes purchase of Sky Gourmet, an airline-catering company that serves airlines such as Jet, Indian Airlines, and Air France. Shareholders in Mars will receive $91.6m in cash and the remainder in ordinary shares of IHC.
IHC also disclosed that talks are under way to acquire Nirula’s from Navis Capital in a separate deal. Navis Capital, a private equity firm based in Malaysia, bought Nirula’s last year. It manages $500m in various sectors, including hospitality, food processing and car rental, in eight countries across Asia.
Growth in travel, airlines and infrastructure such as roads and airports “will create substantial expansion opportunities for hotels, restaurants and airline-catering services”. said Jason Ader, chief executive of IHC. “Further infrastructure investment in shopping malls and office parks creates additional opportunities to leverage these restaurant brands in food courts.”
India’s hospitality sector is largely driven by its domestic market, particularly domestic tourism, which grew 13.7 per cent each year between 2000 and 2004.
Sanjay Narang, president of Mars, said IHC’s investment will help spur the growth of its hospitality businesses. “With the economic growth India is currently experiencing, combined with a growing middle class, we believe we are on the cusp of a strong growth cycle,” said Mr Narang.
IHC, the special-purpose vehicle of the New York investment firm Hayground Cove, last year raised $100m on London’s Alternative Investment Market (Aim) for acquisitions of mid-market hotels in cities such as Chennai, Hyderabad and Pune.
The vehicle was launched to address the severe shortage of mid-range hotels in India, where luxury hotels dominate. Other hoteliers are also racing to build mid-scale and budget hotels in India, including Best Western, Accor and Marriott. India’s luxury Taj Hotel group last year rolled out a budget brand called Ginger.
Similarly, Birdy’s and Dosa Diner offer affordable meals. At Birdy’s, a chicken tikka sandwich costs Rs55, while The Pizzeria has a Bombay Masala pizza for Rs165 – enough to fill a rumbling stomach without emptying the wallet.