Jatias consolidating half of McDonald’s India ops within listed firm Westlife, looking to raise funds

BL Jatia Group is consolidating Hardcastle Restaurants Pvt Ltd with a subsidiary of the public-listed firm Westlife Development Ltd. Hardcastle is the master franchisee for McDonald’s chain for south and west India.

Westlife Development has two direct subsidiaries – Westpoint Leisureparks Pvt Ltd and West Leisure Resorts Pvt Ltd. Westpoint, in turn, owns 80 per cent of Triple A Foods Pvt Ltd – the firm which owns almost the entire stake (99.9 per cent) of Hardcastle.

Under the proposed move, the group is seeking to consolidate Hardcastle and Westpoint under Westlife Development. This would make Hardcastle’s operations a direct subsidiary of the listed firm.

Amit Jatia, vice-chairman of Westlife Development, told VCCircle, “We are looking to raise funds for further expansion and this consolidation will help us get Indian investors. This can be either through debt or equity.”

He also added that the quick service restaurant chain (QSR) business in India is growing and the consolidation under Westlife Development opens up options to accelerate growth plans for expanding McDonald’s restaurants in west and south India.

Almost two years ago, the Jatias bought out McDonald’s in its 50:50 joint venture for the operations running the chain in south and west regions of the country.

Last year, a Westlife arm acquired indirect majority stake in Hardcastle Restaurants, one of the two master franchisees of the world’s largest QSR chain McDonald’s in India.

At present, Jatias own 85.7 per cent in Westlife Development but is in the process of issuing bonus shares to the public which would not be subscribed by the promoters to dilute their own holding. This is essential for meeting the public listing norms which require all listed firms to have at least 25 per cent non-promoter shareholders.

Total revenues for Westlife stood at Rs 547.4 crore with EBIDTA of Rs 68.6 crore and net profit of Rs 31.4 crore for the year ended March 31, 2012. Bulk of this was from Hardcastle which clocked revenues of Rs 544.5 crore with EBITDA of 67.2 crore and net profit of Rs 42.5 crore.

Hardcastle currently has a footprint in west and south India with 148 restaurants. It grew its restaurant footprint by 20 per cent in FY12, increasing its store count from 107 in FY11 to 130, as of March 2012.

It has presence across 14 cities in the states of Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra and Tamil Nadu, and employs over 7,000 people.

Hardcastle reported 126 per cent growth in profit during FY12 and revenues rose 44 per cent. It absorbed investments worth Rs 78 crore last year in capex and the firm has no external debt.

“We plan to aggressively increase our retail footprint to fortify our presence in the existing market and enter newer markets,” said Amit Jatia. “We will drive core and new product offerings, and expand the beverage landscape to gain share across key day-parts, consumer segments and product categories,” he added.

Westlife Development has a market cap of just Rs 275 crore. In contrast, Jubilant Foodworks, which has the India franchise rights for Domino’s chain, has a market cap of Rs 8,500 crore. Jubilant is twice the size of Hardcastle in both revenue and profit.

(Edited by Sanghamitra Mandal)

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