New York and Mumbai-based India Equity Partners is investing Rs 180 crore ($35 million) to buy a majority stake in the restaurant chain Sagar Ratna, which serves South Indian cuisine, primarily across the Nation Capital Region (NCR), sources with direct knowledge of the development told VCCircle.

VCCircle was the first to report on June 28, 2011, that India Equity Partners is investing in the restaurant chain.

The monies raised will be used to open more outlets and establish a better pan-India presence. Arvind Nair, the operating partner at the PE firm, will be actively involved in the day-to-day operations of the restaurant chain.

India Equity Partners, which invests through a $350 million fund, has been actively scouting for investment opportunities in the fast-growing food and retail space in India, including buyouts. Last year, it had roped in Arvind Nair from DLF Retail and Dabur India consumer care unit’s COO Kannan Sitaram as operating partners. Nair was earlier with Chhabria Group's Jumbo Electronics, a prominent retailer of consumer electronics in the Middle East, which has expanded its footprint in India a few years ago.

Sagar Ratna started as a 40-seater restaurant, serving South Indian cuisine. The first outlet was located in Defence Colony, New Delhi, and it has now expanded to over 225 seats. The company also grew by opening a multi-cuisine restaurant chain under the brand name of Swagath, which now serves Coastal, Chettinad and specialty Mughlai & Chinese cuisine.

The company, incorporated as Sagar Ratna Hotels Pvt Ltd in 1997, has a network of 56 restaurants, including 23 owned/revenue-shared outlets and 33 franchise outlets. The company has overseas outlets as well, in countries like Thailand, Singapore and Canada. It is now planning to enter the quick-service restaurants space through Sagar Ratna Express, which will open outlets in malls and commercial buildings.

There have been several deals in this space during the last six months. In May, 2011, ICICI Venture Ltd invested $56 million in Devyani International Ltd, which owns and operates fast food retail chains including Pizza Hut, KFC and the UK-based coffee chain Costa Coffee, and also runs Disney Artist outlets in India.

The company is a subsidiary of RJ Corporation, which is engaged in diversified businesses, such as beverages & breweries, fast food joints, dairy products, education, healthcare and hospitality. Chennai-headquartered TVS Shriram Growth Fund had also invested in Indian Cookery Pvt Ltd, the restaurant business promoted by celebrity chef Sanjeev Kapoor, and owns The Yellow Chili, Khazana and Indii. TVS Shriram has also backed Om Pizzas & Eats Pvt Ltd (Indian franchisee of international chain Papa John’s Pizza), Chili’s Grill & Bar and The Great Kabab Factory.

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