New Delhi-based Franchise India Holding Ltd, one of Asia’s largest integrated franchise solution firm, is foraying into the investment banking and advisory services business besides launching a $100-million private equity fund. Franchise India plans to offer services like M&A and private equity advisory and debt syndication to companies.

Gaurav Marya, President of Franchise India, told VCCircle, this move is a natural extension of service offering by the firm. He said that 90% of companies, both international and domestic, use Franchise India to expand their business. Its clients include Videocon, Gitanjali Gems, Ferns & Petals, Levis, JK Tyres, Lakme, D’damas, among others.

Franchise India, which helps companies acquire franchise networks besides consulting services, is also planning to launch a $100 million private equity fund to invest in franchises by early next year. The fund will approach both domestic and international limited partners.

The franchise industry is a  $14-billion business in India and is growing at 30% year on year. "Large part of the expansion is coming through retail and education besides financial services. There is a lot of interest from international corporations to enter India and that is also driving part of the growth," said Marya.

Private equity investments into frachisees becomes a problem as they typically look to raise small amounts of $1-2 million, said Marya. Franchise India plans to build a very structured portfolio of  investments for its PE fund with 3-4 large investments and the rest across smaller transactions.

"We plan to look at opportunities which are scalable and then use it as a vehicle to invest in the similar category. We would look to acquire a strong asset and leverage that to buy more in that   category,"  said Marya. For instances, it might look at one company in the education sector with a great management and then use it as a platform to make more investments.

The interest in the franchise business has also increased since the IPO of Jubilant FoodWorks, which runs the Domino's Pizza chain in India. The firm's share price has increased nearly four times its issue price since listing in February.

Regional consolidation and large franchisee players looking to expand to newer markets are some of the major themes that Marya sees dominating the M&A market. "In franchisees, you see a lot of regional players who have achieved a significant size and have aspirations to enter newer markets. We are also seeing a lot of M&A activity at the SME level, which is largely unstructured," he said.

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