Talks were stalled for about a month and a half due to Theobroma’s poor financial results but resumed recently, with the valuation pegged at about Rs 1,800 crore ($206 million), they said, adding that it was down from the `2,400-2,500 crore that most suitors were offering late last year.
According to the people cited, promoters have reconsidered their options due to poor market conditions and little interest from other buyers. ET was first to report on September 27 that ChrysCapital was keen on creating a quick service restaurant platform.
This would be by buying out brands such as Theobroma and The Belgian Waffle Co. A few other private equity and venture capital-backed chains were also evaluated, according to industry executives.
Existing investor ICICI Venture, which holds a 42% stake, and Theobroma’s promoters hired Arpwood Capital last year to evaluate the sale of the company. ChrysCapital had been in advanced talks to buy Theobroma, but the deal was paused due to disagreements over valuation.
The chain had also explored the possibility of an initial public offering (IPO) but the plan was put on hold due to the dip in market sentiment. “A combination of factors have led to a significant reduction in valuation. The stock market meltdown of the past few months and slowing discretionary spending, especially in urban markets, have led to the decline in valuations,” said an executive with knowledge of the development. “Theobroma operates in the urban discretionary space, so a slowdown in spending in this sector impacts offtake directly, unlike mass brands, which sell at entry-level prices.”
ChrysCapital and Theobroma didn’t respond to queries. ICICI Venture’s spokesperson declined to comment.
The bakery company is expected to post revenue of Rs 525-550 crore in FY25, with Ebitda of close to Rs 80-100 crore, said the people cited. Adjusted Ebitda stood at Rs 60 crore, with a topline of Rs 400 crore in FY24. ICICI Venture acquired stake in Theobroma for Rs 130 crore ($20 million) in 2017.
“Most of the suitors—including Bain Capital, Carlyle and the Khorakiwala familyowned Switz Group, which operates Monginis — who had shown initial interest have backed out,” said another executive. “ChrysCapital was also keen on creating a combined platform to buy into both Theobroma and Belgian Waffle, but now with the latter’s stake sale being stalled for other reasons, the contours of the deal with Theobroma are being renegotiated.”
The privately-held chain was started by sisters Kainaz Messman Harchandrai and Tina Messman Wykes two decades ago, with their first outlet opening in 2004 at Cusrow Baug in Mumbai. According to its website, Theobroma has 200 stores in over 30 cities, offering brownies, cakes, desserts, chocolates, breads and snacks.
According to a report by BNP Paribas India, slowing urban mass consumption has continued to hurt the dine-in sector, with deliveries doing better. “Most companies have highlighted demand challenges and have refrained from making price hikes in recent quarters,” Kunal Vora, head of India equity research, wrote in the report.
Founded in 1999, ChrysCapital is India’s largest private equity firm, with a focus on enterprise technology, financial services, healthcare, consumer, new economy and manufacturing. Since inception, it has raised $5 billion across nine private equity funds, put almost $4.5 billion into more than 100 investments, and realised $7 billion through 80 exits, having also fully exited its first six funds.
A report by the National Restaurants Association of India estimates the domestic food services sector will hit sales of `7.76 lakh crore by 2028, up 8% from `5.7 lakh crore now. However, inflation in key commodities such as edible oil, cocoa, coffee and vegetables has hurt restaurant margins, executives said.
A December report by JP Morgan said cocoa prices are likely to continue to surge in 2025, further impacting prices in the chocolate and confectionery market. “Cocoa prices are rising due to factors including a global supply shortage and chronic underinvestment in cocoa farms,” the report said. “Despite hopes for a better crop in the 2024-25 season, cocoa prices look set to remain high in the medium term, hovering around the $6,000/tonne mark.”
