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Sagar Ratna founder buys out PE firm India Equity Partners

23 May, 2017

Jayaram Banan, the founder of popular south Indian restaurant chain Sagar Ratna Restaurants Pvt. Ltd, has bought back the stake held by private equity firm India Equity Partners (IEP) for an undisclosed amount.

Banan is also planning to open 25 Sagar Ratna restaurants in the current financial year, the Press Trust of India reported. The new outlets will be a mix of company-run and franchised units, it reported, citing Banan.

Email queries to Sagar Ratna and IEP didn’t elicit any response till the time of filing this article.

VCCircle was the first to report in February that IEP and Banan had agreed on a valuation for the PE firm’s exit.

At the time, a person privy to the development had said that the two parties had initially decided on a Rs 90 crore deal, valuing Sagar Ratna at Rs 118 crore. However, they renegotiated the value to Rs 60 crore, after Banan agreed to not go ahead with legal proceedings against the investment firm.

The PE firm had invested Rs 138 crore to buy the stake in 2011, as per VCCEdge, the data research platform of News Corp VCCircle. This valued privately held Sagar Ratna at Rs 182 crore then.

The relationship between the two soured as both accused each other of violating the share purchase agreement. IEP accused Banan of infringing the contract by starting a restaurant chain called Shree Rathnam. Banan accused IEP of destroying Sagar Ratna’s brand value.

Banan had proposed to sell his entire stake in Sagar Ratna to IEP at a higher valuation. When IEP did not respond to this offer, Banan filed a police complaint in 2014, accusing the restaurant’s IEP-controlled management of cheating and forgery of documents, according to a report in The Economic Times.

The stake buyback may also lead to a consolidation between Sagar Ratna and Shree Rathnam, one of the co-founders of which is a relative of Jayaram Banan.

This venture was seen as a clone of Sagar Ratna, following similar positioning and business model. As per its website, Shree Rathnam runs 44 outlets of which half are believed to be run by franchisees. Sagar Ratna owns a chain of over 90 outlets, of which half are franchisee-run.

Banan separately runs the Swagath chain of restaurants.

Sagar Ratna competes with the likes of Saravana Bhavan, Nalaas Aappakadai and Vasudev Adiga’s.

Last year, private equity firm New Silk Route said it was looking to buy the stake it doesn’t already own in Bengaluru-based Vasudev Adiga’s, a development that could end a bitter legal spat between the principal shareholders of the company.

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Sagar Ratna founder buys out PE firm India Equity Partners

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