SEAF India feasts on India fast food

A recent report by Indian research firm Crisil estimates by 2016 the size of the market will more than double to INR70 billion ($1.15 billion) from INR34 billion in 2013.

Private equity has not been slow to catch on. The recent acquisition of a significant minority stake in Kolkata-based fast-food chain operator Guha Roy Food Joint & Hotel (GRFH) by SEAF India Agribusiness Fund is the latest in a growing list of transactions targeting this lucrative sector.

Set up by chartered accountant Anuruddha Guha Roy in 2008, GRFH runs two QSR brands: its flagship 22-store chain Only Alibaba, which serves traditional Indian food, and fried chicken brand Baked & Fried, which currently has three outlets.

Hemendra Mathur, managing director of SEAF, explains the company was not only attractive because of its fast growth in eastern India, but also because it targets a region that is vastly underserved. "If you look at most of deals in this sector, they have been in Dehli, Mumbai and Bangalore; none have been in Kolkata," he says. "Kolkata is a market with a lot of potential, but for various reasons many funds have not gone there."

Another plus point was GRFH's two distinct formats, which broadens the customer base. While Only Alibaba's traditional menu positions it as more family-orientated mass market chain, Baked and Fried's burgers, fries, fried chicken and sandwiches are for a younger crowd.

But the real beauty of business, says Mathur, is in the backend. "The critical point that made the company so attractive is its logistics and supply chain. Kolkata is a huge market - there is the potential for as many as a hundred stores there - but for that to happen you need a very strong backend."

GRFH achieves this by centralizing operations, with the entire network served by a 30,000 square feet kitchen and warehouse at its heart.

"This company has done phenomenally well in terms of identifying the right vendors, cutting costs and doing most things in-house," says Mathur. "In its central kitchen they have their own ovens, their own chicken-slaughtering machines, their own spice-grinding machines, everything is right there."

A strong supply chain also allows the business to compete better on price. Mathur adds that while GRFH products are of a comparable quality to the most global brands in India, meals are 30% cheaper. This has been especially helpful when targeting a younger demographic.

Given Kolkata is still largely untapped, the short-term expansion strategy will be confined to tier-two centers within 300 kilometers of the city. A longer-term objective is to achieve sufficient scale that the business is an attractive target for any strategic investors looking to gain a foothold in QSR.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Expansion
• South Asia
• Consumer
• India
• Growth capital
• Consumer
• SEAF India Agribusiness Fund