Theobroma stake sale: ICICI Venture, promoters appoint Arpwood Capital; eye valuation of Rs 3,500 crore

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

Investor ICICI Venture and the promoters of Theobroma Foods have hired investment bank Arpwood Capital to explore the sale of a majority stake in the popular patisserie and cafe chain, multiple people familiar with the development said.

“Arpwood Capital has been taken on board recently as the sell-side advisor for this deal. These are early days, and no quantum or structure has been finalised as yet, but the plan is to evaluate the sale of a controlling stake anywhere between 51 percent and 74 percent,” said one of the people cited above, adding that the plan could change later depending on developments.

ICICI Venture, the alternative investment arm of ICICI Bank, holds around 42 percent in Theobroma and first invested $20 million in 2017.

A second person confirmed that the stake sale mandate was given to Arpwood Capital.

“This process is being driven by the private equity investor ICICI Venture, which is keen on a full exit, and the promoters are likely to dilute some stake as well to unlock value, which would result in a control-transaction. The valuation expectation for the entire firm is around Rs 3,500 crore,” a third person familiar with ongoing negotiations said.

According to a fourth person, “Theobroma has professional management in place with a good CEO in Rishi Gour, who joined them in 2020 from Sodexo. A strong brand like Theobroma works for an Asia Pacific play, and an incoming suitor could look to scale up the business and/or add it to their existing portfolio or offerings.”

A fifth person said that the deal had not been launched yet by Arpwood Capital, which is likely to reach out to prospective suitors in April or May.

All five people spoke on the condition of anonymity.

Email queries to Theobroma, ICICI Ventures and Arpwood Capital remained unanswered at the time of publishing this article. This article will be updated with their responses, if any.

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

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 include 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 Insititute of Medical Sciences (KIMS), PVR, Team Lease and Star Health and Allied Insurance.

In recent years, many Indian companies and business groups have boosted their presence in the domestic food & beverage and restaurant space.
In January, Tata Consumer Products shelled out Rs 7,000 crore to acquire Capital Foods, owner of brands Ching’s Secrets and Smith & Jones, and organic tea and health food player Organic India.

The Birla Group is also betting big on the sector. ABNA, promoted by Birla scion Aryaman Vikram Birla, aspires to create the ‘most preferred house of food and beverages brands in India’ under its umbrella.

In November 2022, India Resurgence Fund, an India-focused investment platform promoted by Piramal Enterprises Limited and Bain Capital, announced an investment of Rs 550 crores in top food and beverage firm and Social, Smoke House Deli operator Impresario Entertainment and Hospitality Pvt Ltd.