Theobroma stake sale: Switz Group, Kedaara Capital, Carlyle, ChrysCapital seek a big bite

Theobroma (‘Food of the Gods’ in Greek) was founded in 2004, when the first pastry store opened its doors at the iconic Cusrow Baug at Colaba, Mumbai

At least four companies, including food giant Switz Group and private equity firms Kedaara Capital, Carlyle, and ChrysCapital, have submitted non-binding bids for a majority stake in bakery chain Theobroma, according to four people familiar with the matter.

The patisserie chain is backed by ICICI Venture, which owns around 42 percent stake.

On March 8, Moneycontrol had reported that ICICI Venture and the promoters of Theobroma had hired Arpwood Capital to evaluate the sale of a controlling stake at a valuation of around Rs 3,500 crore.

ICICI Venture, which first invested in the firm in 2017, is eyeing a complete exit and along with a partial dilution by the promoters, a combined stake of between 51 percent and 74 percent is available to potential buyers, the March 8 report added.

"The non-binding bids were submitted earlier this month. Theobroma is a well-established brand and D2C (direct to consumer) player with lots of flexibility in formats and offerings. Western desserts are an interesting segment with a lot of scope to expand," said one of the persons above.

"Firms like this which have a central kitchen model are a complex business requiring a certain logistical expertise. This segment is growing at a frenetic pace and the initial response to the transaction has been really good," a second person added, indicating the submission of more than four non-binding bids.

There is industry speculation about potential interest from the likes of Advent International, Warburg Pincus and Multiples PE as well, but Moneycontrol could not independently verify if the three private equity firms have thrown their hats in the ring.

A third person added that the current suitors may explore tie ups or consortiums if required for the proposed transaction.

According to a fourth person familiar with the process, "a premium valuation has been sought and amongst other factors, the range of bids will also depend on the target's financial performance in recent quarters."

Multiple email queries to Theobroma , ICICI Venture, Switz Group, ChrysCapital and Kedaara Capital remained unanswered at the time of publishing this article. This article will be updated with their responses, if any.

When contacted via text message, Switz Group MD Taizoon Khorakiwala said : "We operate in the bakery space globally and are happy to see the progress of Theo in India. We congratulate the management on the fine job they have done. I cannot comment on your article as it's not our policy to do so in public before or even after a transaction."

A text message sent to Theobroma founder and Creative Director Kainaaz Messman Harchandrai on the proposed transaction was also unanswered. A spokesperson for Carlyle declined to comment.

Theobroma: A closer look at the suitors

Switz Group is bakery-focused and closed 2023 above $500 million in revenues and $80 million in EBITDA, according to the Linkedin profile of MD Taizoon Khorakiwala. It was started by the legendary Mumbai entrepreneur (late) Fakhruddin Khorakiwala, who also incubated Akbarallys, Wockhardt and Monginis.

The group started in Saudi Arabia and has manufacturing operations in GCC (the UAE, Saudi Arabia, Oman) developing economies (India, the Philippines, Sri Lanka) and developed nations (Greece, Turkey, Cyprus and Australia).

Mio Amore (the largest retail bakery in Eastern India), Master Baker (baking ingredients supplier), Modern Oman Bakery and Caravan Fresh (Sri Lankan bakery and patisserie chain) are some of the brands housed under the Switz group umbrella, according to its website.

In the F&B segment, South Korean premium dessert cafe and coffee franchise 'Á Twosome Place' and Japan's Orion Breweries are part of the Carlyle Asia portfolio. In the consumer space in India, Amit Jain led Carlyle promotes wellness and beauty services platform VLCC Healthcare.

ChrysCapital's consumer portfolio includes beauty brand Wow Skin Science and Lenskart. Kedaara Capital also backs Lenskart, along with ice cream brand Dairy Day, beauty brand Purplle and Olivia Skin and Hair Clinic.

Get a Whiff of Theobroma

Theobroma (‘Food of the Gods’ in Greek) was founded in 2004, when the first pastry store opened its doors at the iconic Cusrow Baug at Colaba, Mumbai. According to reports, former Oberoi Hotels pastry chef Kainaz Messman Harchandrai and sister Tina Messman Wykes borrowed Rs 1 crore from their father to launch the store.

Today, the firm is a pan-India chain with more than 190 stores in 20 cities ranging from Dehradun to Chennai, excluding Navi Mumbai and Thane. Its range of offerings includes brownies, cakes, desserts, chocolates, breads, savouries and other fresh bakery products.

In FY23, the firm recorded a net profit of Rs 19.59 crore compared to a loss of Rs 11 crore in the previous year. Revenue increased from Rs 254.74 crore in FY22 to Rs 351.67 crore in FY23.

ICICI Venture has made more than 55 private equity investments across sectors since 2002.

It has bet on companies, including Bharat Biotech, Devyani International, Krishna Institute of Medical Sciences (KIMS), PVR, Team Lease and Star Health and Allied Insurance.