Race for Theobroma: Binding bids submitted, Switz Group ropes in GIC as a partner

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

The Khorakiwala family-backed multi-national foods major Switz Group has joined hands with Singapore's sovereign wealth fund GIC as the combine looks to pick up a majority stake in Theobroma, which has also been courted by top private equity players, multiple industry sources in the know told Moneycontrol on the condition of anonymity.

On August 20, Moneycontrol was the first to name Switz Group as a suitor for the deal along with numerous private equity firms.

Theobroma, a top patisserie chain counts ICICI Venture as an investor which made an entry back in 2017.

"The binding bids for a controlling stake in Theobroma were submitted recently and the Switz Group-GIC combine is being seen as a strong contender. With a marquee, long-term returns-focused partner like GIC, Switz Group will get the financial support for a deal of this size," said one of the persons above.

On March 8, Moneycontrol 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.

A second person told Moneycontrol, "The deal is in the advanced stages but no final call has been taken yet. Other suitors like ChrysCapital, Bain Capital and EQT have also expressed interest earlier in the deal and may still be in the fray. "

According to media reports, ChrysCapital is also considering the buyout of the dessert chain Belgian Waffle Co.

"Theobroma is a very good asset but is also richly valued. Keep in mind, that the Switz Group has been acquisitive in the past and operates in nine countries. As a strategic player, it has synergies with the operations of Theobroma," a third person elaborated.

Moneycontrol has sent email queries and reminders to Theobroma, ICICI Venture, Switz Group and GIC. EQT, ChrysCapital and Bain Capital could not be reached for an immediate comment.

Text messages sent to Theobroma founder and Creative Director Kainaaz Messman Harchandrai were left unanswered. When contacted, Switz Group MD Taizoon Khorakiwala said, "Switz Group does not wish to add to its perspective to this incorrect narrative." This article will be updated as soon as we hear from the other parties.

The March 8 report by Moneycontrol had added that ICICI Venture, which holds around 42 per cent stake, was evaluating a complete exit and the promoters of Theobroma were also looking to dilute stake, resulting in a controlling stake up for grabs, between 51 per cent to 74 per cent.

Moneycontrol could not independently verify the valuations or exact stake on sale as part of the current negotiations.

According to industry executives who spoke earlier to Moneycontrol, Theobroma is seen as a well-established D2C ( direct to consumer ) player with flexibility in terms of formats and offerings and quality, and professional management in place. The scope for expansion in the Western dessert segment is also a key factor, they had added.

"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, " one of the sources shared in the March 8 report.

A closer look at the Switz Group

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.

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.