PE firm honcho brings in Indian flavour to Walmart’s door

Amrita Nair-Ghaswalla
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Mr Jaspal Singh Sabharwal
Mr Jaspal Singh Sabharwal

We like things that are difficult to build. There should be a significant risk element involved and we are eager to scale up such businesses.

At the Walmart cash-and-carry outlet at G. T. Road, in Jalandhar, Pind Balluchi has made a small beginning.

For the past three months, the restaurant chain, set inside the Walmart outlet in Paragpur, is sizing up the market “in a new experiment,” according to Mr Jaspal Singh Sabharwal, a partner in Everstone Capital, a private equity (PE) firm that invested $20 million in the restaurant operator, JS Hospitality Services, for a 45 per cent stake in January.

JS Hospitality runs about 30 Pind Balluchi restaurants, mostly in the National Capital Region, serving north Indian cuisine.

“We decided, ‘why not give it an opportunity?’ It is too early to talk about the success or otherwise of the exercise, for it will take time to understand the footfalls and the consumption patterns that emerge,” he said.

For the restaurant industry, private equity has been an important source of capital. While there have certainly been failures, there have also been many successful investments.

The JS investment was made through Cuisine Asia. Everstone Capital, which manages assets in excess of $1.5 billion in India, created Cuisine Asia — a Mauritius-based holding company for its restaurant business.

Eager to scale up

As Mr Sabharwal noted, “We like things that are difficult to build. There should be a significant risk element involved and we are eager to scale up such businesses”.

As for competition from the American retailer, Mr Sabharwal replied, “They are no threat. They are an opportunity. Indian manufacturers should seize it (opportunity) and understand the products that can be sold through Walmart. They are all about quality products and quality standards. All about customer service and unique merchandise,” he said.

“Agreed there are several things to comply with to be a part of the giant in the retailing industry, but it is not a tall order. They have no child labour and have very strict rules on quality,” he added.

Incidentally, the world's largest retail company, with global revenue of $400 billion, is tightening anti-corruption practices in India, with US lawmakers asking Walmart to review its operations in the country. Walmart has over 17 wholesale outlets in India.

A recent PWC report on the ‘Outlook for the retail and consumer products sector’ had highlighted that although inflation is depressing food and general retail sales on a volume basis, increased prosperity is driving new trends such as rising demand for functional foods.

Bullish on F&B

Everstone Capital has been bullish on the F&B (food and beverage) sector. Its investments in the consumer products domain include owner of Sula Wine, Nashik Vintners, Faces Cosmetics, and Pan India Food Solutions.

In 2008, Everstone took a majority stake in Pan India Food Solutions, one of the country’s largest restaurant operators, and a Mumbai-headquartered food company. It operates well-known brands such as Spaghetti Kitchen, Copper Chimney, Bombay Blue, Gelato Italiano, Noodle Bar, The Coffee Bean & Tea Leaf, and food courts Spoon and Foodtalk.

It has 127 outlets in major cities including Mumbai, Delhi, Bangalore and Kolkata.

Responsible for advising on the operations of all portfolio companies as well as operational due diligence for potential investments in private equity, Mr Sabharwal insists more merchandise and fashion handicrafts companies are warming up to Walmart. “It is an association with a world leader in the retail business space. The onus is on Indian manufacturers to come up with quality and commercial standards and be compliant,” he said.

Opportunity, not threat

Mr Sabharwal is eager to turn on its head the argument that foreign retailers could soon kill India’s mom-and-pop stores. “Some of our investee companies are already in discussion with them. Soon, there will be a cosmetic range ‘Faces’ sold through Walmart, as also ‘Ozone’, which is into architectural hardware,” he noted.

Everstone Capital had invested Rs 60 crore in Delhi-based Ozone Overseas in November 2011. Mr Sabharwal terms Ozone the Indian equivalent of German brand Hettich, the furniture and hardware major. Ozone manufactures floor springs, glass doors and bathroom accessories for commercial and residential purposes. It has a manufacturing facility in Himachal Pradesh and is looking to set up a factory in South India.

(This article was published on July 21, 2012)
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