Stories of tussles between private equity (PE) investors and promoters are hitting the headlines again. After its dispute with promoters of Fourcee Infra, New York-based private equity fund India Equity Partners (IEP) is headed for a showdown with the founder of Sagar Ratna Restaurants, a 27-year-old restaurant chain, in which IEP owns a controlling stake.
Following the differences with IEP, Jayaram Banan, founder of Sagar Ratna Restaurants, is planning to buy the chain back from IEP by roping in an HNI (high networth individual) investor, according to sources in the know.
IEP holds 75 per cent stake in Sagar Ratna, while Arvind Nair, the current CEO of the chain, holds less than five per cent. The remaining is with Banan family.
Sagar Ratna is a well known brand of restaurant chain in north India, serving vegetarian cuisine. Besides Sagar Ratna, Banan runs another chain, Swagath, in New Delhi.
Currently, Sagar Ratna owns about 60 restaurants while another 35 restaurants are run as franchisees. At present, Sagar Ratna is valued at about Rs 200 crore.
It was in 2011 that IEP bought a controlling stake in Sagar Ratna for about Rs 180 crore. Following the deal, IEP founder and managing director Gaurav Mathur joined the chain as a non-executive director. However, the exit of Mathur as well as principal Abhishek Sharman, who was handling the restaurant portfolio at IEP, has made things worse, said people in the know. IEP's Arvind Nair is the current CEO, while Banan remains as chairman of Sagar Ratna.
"The exit of IEP executives who enjoyed a good rapport with Banan and Sagar Ratna team and had thorough knowledge of Sagar Ratna's operations has created a gap between Banan and IEP. Banan is unable to cooperate with the new IEP team, which has taken over the charge of Sagar Ratna, causing strong differences between him and IEP," said a person close to the development.
A detailed questionnaire emailed to Banan did not elicit any response. When Business Standard contacted him on the phone, he refused to discuss the matter saying he would call back later. Sid Khanna, chairman and managing director of IEP Fund Advisors, too, has refused to respond Business Standard's queries saying he is travelling and will be back next week.
The declining quality of foods served at the restaurants after the IEP buyout was another reason for the tussle, said another person in the know. According to news reports, South Delhi Municipal Corporation sealed Sagar Ratna Restaurant's outlet at Malviya Nagar in Delhi in April this year, on the ground that the establishment was running without a licence for the past one-and-a-half years. According to the reports, many people have fallen sick after eating at the restaurant, allegedly due to poor quality of food, the reports added.
Banan started the first branch of Sagar Ratna in Defence colony in New Delhi with a seating capacity of just 40 in 1986. The chain now has outlets across Haryana, Himachal Pradesh, Punjab, Rajasthan, Uttar Pradesh, and the national capital region.
It is learnt after the IEP buyout, a few from management team at Sagar Ratna such as director K S Bhatt and human resources head Vijayantt Verma had quit the chain.
Last week, IEP and its counterpart General Atlantic had filed a petition with the Company Law Board (CLB) in Mumbai, seeking remedies including appointment of a CLB appointed administrator to take control of Fourcee Infrastructure Equipment, one of IEP's Mumbai-based portfolio companies, following an alleged financial irregularity at Fourcee.
IEP, which had raised its first fund of $350 million in 2006, made investments in Axiss Dental, Amtek Auto, A2Z Maintenance and Engineering Services, Fourcee Infrastructure Equipments Pvt Ltd, Bharti Infratel, Ikya Human Capital, Manappuram Group and TNT Express. As IEP is unable to raise its second fund, it has seen a few exits at the top level.
STRAINED RELATIONS
* Jayaram Banan opens first Sagar Ratna outlet in 1986
* India Equity Partners buys controlling stake in 2011
* India Equity Partners appoints Arvind Nair as CEO
* Jayaram Banan plans to buy back Sagar Ratna
