26 March 2016 07:18:21 IST

Vada pav chains eye PE funds to scale up presence

COIMBATORE, 28/05/2012: The display of food item, Vada Pav Calcutta Chaat, at a hotel in Coimbatore on May 28, 2012. Photo: S. Siva Saravanan

Lower price points are the key to increasing sales

Vada pav , the humble Indian burger, may attract big bucks, going by the moves that organised players such as Jumboking and Goli Vada Pav are making. They are getting ready to raise funds of up to ₹100 crore.

Claiming to be profitable, both the Mumbai-based companies are seeking a new set of investors to scale up their operations at a time when international burger chains are struggling to make money.

Being asset light, operating through a franchise network with lower price points (between ₹20 and ₹40 ) and smaller outlets measuring 300 sq feet, may have helped these companies target the ‘on-the-go common man’ unlike the high splurging MNC brands, backed by high profile PE funds. “We have been funded by HNIs all these years but now we need PE funds to raise our next round of almost ₹75 crore this year when we will cross 100 outlets. Our valuation is expected to be 3-5 times of the topline, which is at ₹35 crore today,’’ said Dheeraj Gupta, Managing Director, Jumboking.

Expecting to cross 100 outlets this year, Gupta pegs the ‘ vada pav ’ segment at ₹500 crore with Mumbai alone selling 10 lakhs of the ‘desi’ burgers, which translates to almost ₹1.5-crore sales in a single day.

Jumboking however expects to have limited operations across the cities of Mumbai, Pune, Bangalore and Hyderabad instead of spreading thin its operations across the country.

“Even investors understand the potential of this still unsaturated category and today we would rather get better density in our existing markets than trying to expand rapidly into new territories,’’ added Gupta. On the flip side, Goli Vada Pav, which has restricted itself to the smaller markets with 350 stores in places like Porbandar in Gujarat to Gorakhpur in Uttar Pradesh, plans to step up presence in the metros by raising funds to the tune of ₹100 crore from a new set of investors. “ We are trying to increase our valuation to raise ₹100 crore from new investors to get into the top seven cities with 300 stores, since we have stayed out of the metros markets by having a flanking strategy so far,’’ says S. Venkatesh, MD & CEO, Goli Vada Pav. In 2011, Goli Vada Pav had offloaded a 33 per cent stake to venture capital firm, Ventureast, to raise ₹21 crore with valuation of ₹75 crore.