A clutch of Indian Angel Network (IAN) investors has walked away with a bountiful harvest from their one-and-half-year-old investment in Wow! Momo Foods Pvt. Ltd as part of the quick service restaurant (QSR) chain operator’s first institutional round of fundraising.
VCCircle was the first to report last month that India-focussed mid-market private equity firm Lighthouse Advisors India Pvt. Ltd is putting money in Wow Momo which owns and operates over 100 QSR outlets under the same name across eight cities in the country.
Wow! Momo, which was co-founded by Sagar Daryani and Binod Homagai in 2008, raised Rs 44 crore (around $6.8 million) from Lighthouse in its Series B round of funding, the firm said in a statement.
“Some IAN investors decided to sell their shares partly/completely to Lighthouse at a return of 106% on their initial investment,” it said.
The deal generated an internal rate of return (IRR) of nearly 50% in less than 18 months, it said. Private equity and venture capital firms typically chase an IRR of 20-30% in rupee terms.
While KPMG acted as financial adviser to the company, Khaitan & Co acted as legal adviser.
Wow! Momo had raised Rs 10 crore from IAN in 2015. Sanjeev Bikhchandani, Saurabh Shrivastava and Ashvin Chadha were lead IAN investors in that round which valued the QSR chain at Rs 100 crore.
Sanjeev Bhikchandani, who has been the lead investor in Wow! Momo on behalf of IAN, said the team at Wow! Momo has sustained positive cash flows in geographies where it has achieved economies of scale. “This company is now going national and might possibly even go overseas,” Bhikchandani said.
Wow! Momo posted net sales of Rs 31 crore in financial year 2015-16. The financials for FY2016-17 couldn't be immediately ascertained. However, the company claims it is clocking a turnover of over Rs 5.5 crore a month.
The PE firm is planning to raise $200 million for its third mid-market fund. It has reportedly returned 1.7 times of the invested capital from its first fund with four more exits to go.
It recently exited cookie maker Unibic India Pvt. Ltd by selling its entire stake to Peepul Capital.
Earlier, it had sold its stake in Surakhsha Diagnostics to healthcare-focussed fund Orbimed Advisors.
Lighthouse had made six investments from its second fund. It had pumped in $10-20 million in apparel maker Fabindia in November 2016, in a round led by PremjiInvest. It had also bet on non-banking financial company Capital Trust Ltd.
Lighthouse was set up in 2001 by Mukund Krishnaswami, a former executive at Lehman Brothers’ private equity unit, and W Sean Sovak. It has been investing in India since 2006 and has Sachin Bhartiya as partner and Brian Larcombe as an adviser. Larcombe is former global CEO of UK-based PE fund 3i Group.