Iconic Restaurant Chain Adyar Ananda Bhavan Seeks ₹1,200 Crore in PE Funds to Boost Expansion

Mumbai: Adyar Ananda Bhavan (A2B), a well-known restaurant chain, plans to raise ₹1,000-1,200 crore by selling about 35% of its stake to private equity (PE) funds, according to sources. The Chennai-based brand, famous for its southern cuisine, is aiming for a valuation of around ₹3,500 crore.

Fundraising and Valuation

Veda Corporate Advisors will guide A2B in this fundraising effort, which is part of their strategy to professionalise the family-run business. They have reached out to both domestic and international funds and will soon launch an official process.

Neither A2B cofounder KT Srinivasa Raja nor a Veda spokesperson commented on the matter.

Expansion Plans

Founded in Adyar in 1979, A2B now operates about 150 outlets across Tamil Nadu, Karnataka, Telangana, and New Delhi, as well as 10 outlets in the US, UK, and Australia. They are also planning an initial public offering (IPO) within the next five years and aim to expand to 400-500 domestic outlets.

Professionalising the Family Business

In FY24, A2B’s revenue was ₹1,500 crore with an Ebitda of about ₹100 crore. This is their second attempt at a stake sale; the first was in 2016 with firms like Samara Capital, WestBridge Capital, Carlyle, and KKR, but the deal did not go through. Back then, the business was valued at ₹1,800 crore.

Kavil Ramachandran, a senior adviser at the Indian School of Business, Hyderabad, explained that professionalising family-run businesses for future growth is a key reason for seeking private equity funds.

Ingredients of Success

A2B is run by brothers Raja and KT Venkatesan, sons of founder KS Thirupathi Raja. The business started in 1979 with a sweets and savouries shop in Washermanpet, Chennai, under the name Sri Ananda Bhavan. The second outlet in Adyar was rebranded as Adyar Ananda Bhavan. A2B entered the restaurant business in 2005, growing it into a ₹1,500-crore enterprise with 14,000 employees. They also earn about ₹150 crore from packaged snacks.

Competitors

A2B faces competition from Saravana Bhavan, which has 30 outlets in India and 81 abroad, Sangeetha with over 30 outlets in Chennai and 21 abroad, and Sree Annapoorna with 19 branches in Coimbatore.

PE Interest in Family Businesses

Several southern family-run businesses have recently raised PE funds for expansion. In 2019, Dindigul Thalappakatti Hotels sold a majority stake to CX Partners for ₹260 crore, helping the brand expand and secure further investment in 2021. Last year, WestBridge Capital acquired a majority stake in Tamil Nadu-based fruits and vegetable retailer KPN Farm Fresh, valuing it at ₹800 crore.

PE funds are interested in family businesses run by second- or third-generation entrepreneurs with growth potential. Ramachandran of ISB noted that PE funds can provide much-needed capital and professional guidance to help family businesses grow.

Haldiram’s, India’s largest family-run snacks business, is also considering selling a controlling stake, valued at up to ₹70,000 crore. In May, ET reported that a consortium led by Blackstone was in talks with Haldiram’s promoters for a buyout.