Sameer Sain pulled Blue Foods out of debt and losses. He’s now looking for hypergrowth
When Sameer Sain spun off the private equity (PE) business from Kishore Biyani’s Future Group in 2009, few would have expected that the firm he founded would, just three years later, be running the biggest fine dining restaurant chain (by number of restaurants) in the country, serving more than 550,000 people every month.
To see Sain’s handiwork one only has to step into Mumbai’s High Street Phoenix, among the top-rated malls in the country. In a 50-metre stretch, one can see Copper Chimney, Spaghetti Kitchen, Noodle Bar, Bombay Blue and the ice-cream chain Gelato Italiano. All these restaurants are run by the same parent company—Blue Foods, which Sain’s Everstone Capital now owns.
“India has three religions: Bollywood, cricket and eating,” says Sain, and Blue Foods’ success certainly bears that out.
The 41-year-old Sain is an MBA from Cornell in the US. After 11 years at Goldman Sachs, he partnered with Kishore Biyani to form Future Capital Holdings (FCH). He founded Everstone Capital, the PE arm of FCH, in 2006. In 2009, he parted ways with Biyani and bought out Everstone. With this deal came all its assets and liabilities, one of them being Blue Foods.
Blue Foods, founded by Sunil Kapur and Sanjay Chona in 2000, had expanded swiftly to 13 brands and 15 cities across India. But the rapid expansion took its toll: By 2008, it had Rs 96 crore of debt on revenue of Rs 85 crore. It had Rs 40 crore of accumulated losses. The monthly attrition rate across the Blue Foods franchise was around 37 percent. The business was poorly managed and massively undercapitalised.
That’s when Sain, who was still with FCH, got a look into the deal. When the offer for Blue Foods came in, Everstone was already thinking of entering into the consumption space.
“We did not know anything about the restaurant business when the Blue Foods proposal first came to us,” says Sain. But he knew one thing: As urbanisation spreads to smaller towns, markets will open up for his restaurants.
Today, the fortunes of this once cash-strapped company have improved dramatically. Blue Foods has revenues of Rs 200 crore. It is now making a net profit and is debt-free. “Hypergrowth comes next,” Sain adds.
It currently has 150 restaurants under different brands, which include 75 locations of Gelato Italiano, which are small-format stores.
Sain’s first challenge in attempting this turnaround was to stabilise the processes at an operational level. To see if this was possible, he put down a condition: His own management team would run the show for three months and the final decision to invest would be taken based on the outcome. Sain sent in Jaspal Singh Sabharwal and Amit Manocha, who both worked with Coca-Cola for over a decade before joining Blue Foods.
“The business was in such financial distress that the previous owners had nothing to lose,” says Sain.
In these three months (it actually stretched to six), Everstone realised that the restaurant chain had no stable processes, resulting in huge variations in quality and customer dissatisfaction.
Yet it was clear to him that it was essentially a plethora of good brands which were poorly managed. So, Sain bit the bullet and put in Rs 150 crore to buy out all the partners completely.
Sabharwal now came in as CEO and Manocha as CFO. They started by laying off 1,000 people.
“That was a painful decision but it had to be done to save the company and today we employ more people than when we took over,” says Sain.
They shut down unprofitable restaurants and strengthened the back-end supply chain.
(This story appears in the 06 July, 2012 issue of Forbes India. To visit our Archives, click here.)