Special cuisines IPO rush

The fine dining chain, Speciality Restaurants of Mainland China fame, had issued its public offerings. The outcome was successful generating an upbeat mood in the food service sector.

The Initial Public Offering (IPO) by Speciality Restaurants has turned out well with the restaurant chain mopping up over `175 crore.   The issue had subscribed 2.54 times according to the National Stock Exchange on the final day, ie, 18th May. Speciality Restaurants issued 1.17 lakh shares at the price band of `146-155. Through allotting shares to five anchor investors, Morgan Stanley Mutual Fund, International Opportunities Funds-India Equity, SBI Magnum Global Fund, Reliance Equity Opportunities Fund and HSBC India Alpha (Mauritius), the company raised Rs 26.41 crore.

Speciality Restaurants is the second restaurant, only after Jubilant Foodworks, to issue public offering. Jubilant had registered a strong growth and is on an expansion spree with the main focus on market positioning of Dunkin’ Donuts. While the Jubilant runs QSRs, Speciality Restaurants is primarily a fine dining chain operating 69 restaurants and 13 confectionary stores, Sweet Bengal, located across 22 cities in the country.  Under its umbrella it has the outlets like Mainland China, Oh! Calcutta, Machan, Sigree, etc.  The core brands of Speciality are Mainland China, contributing about 60% of revenue, followed by Oh! Calcutta, with about 12% of revenue.

How’s the money to be utilised?

With this raising of funds, the company plans to open another 16 outlets  within the period of 2012-2013, of which 75% will be Mainland China, focusing mostly in metros and tier I cities and occasionally in tier II cities, as revealed by Anjan Chatterjee, Founder & Managing Director of Speciality Restaurant. The expansion plan includes scaling up Mainland China outlets to 100 by 2016 and launching Italian café, a bar cum eatery, Mizuna.

Both the core brands of Speciality Restaurants, Mainland China and Oh! Calcutta, had earned fame for their exclusive cuisines and have been present in the market for more than 17 years. Considering the popularity of Mainland China, the company comes up with a few combo formats where other brands under its umbrella are present besides Mainland China. To have such formats always plays favourable to the company since leasing larger space always lends an advantage in negotiating rental agreement. At the same time, common kitchen, and common management and stuff cut down the cost of operation.

Successful for the PE investors too

The IPO has proven to be gainful for the two PE investors of the company, SAIF Partners and Glix Securities Pvt Ltd. So far, Speciality Restaurants received a total `50.5 crore of PE funding with SAIF investing `35.5 crore in December 2007 and Glix `15 crore in May 2010. The prospectus of Speciality Restaurants shares that after the conversion of preference shares, the cost of per share for SAIF Partners is `71 and for Glix it is `81. These figures actually hint at the possible gain by the PE investors. For SAIF this can be about internal rate of return of 18.16%, and for Glix, it may be around 31.17%, as reported by a national business daily.

How’s the share valued?

Though the company shows a steady sign of growth, the company has registered a turnover of `173 crore in the FY 2100 at a growth rate of 34.5%, the valuation of Speciality Restaurant seems to be quite expensive as viewed by many stock market experts. Also, some are of the opinion that Speciality Restaurants being a fine dining restaurant chain cannot grow as fast as Jubilant Foodworks, which is in QSR segment and follows different business model.    

The IPO raised a fund of `175 crore Raised `26.41 crore from its five anchor investors

The fund will be utilised to scale up Mainland China to 100 and opening an Italian café, Mizuna

 

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