Everstone Halts Burger King Stake Sale Amid QSR Sector Slowdown

Everstone Capital has decided to pause the sale of its stake in Restaurant Brands Asia (RBA), which operates Burger King in India. The private equity firm struggled to secure buyers at a valuation it found acceptable, a challenge made even more difficult by the current struggles in India’s quick-service restaurant (QSR) sector. This decision comes after potential deals with Advent International and General Atlantic fell through, and no new investors stepped forward.

A spokesperson from Everstone Capital confirmed the move, stating, “We do not have any intent to sell any further stake in the near future in RBA. We look forward to building RBA into India's largest and most profitable listed QSR.” Despite seeking a buyer for over two years, the firm has now withdrawn from any immediate plans to sell its 13.17% holding in RBA.

RBA’s performance has shown mixed results recently. In the July-September quarter, the company reported a 9% year-on-year revenue growth. However, a crucial performance indicator, same-store sales (SSS), registered a 3% decline. The dip in SSS, which reflects customer retention, was attributed to subdued consumer demand. RBA’s investor presentation highlighted these challenges, noting the ongoing struggles faced by the QSR industry in India. A report by Motilal Oswal further pointed out that the sector’s demand challenges would likely mean a slow recovery in the near term.

Industry insiders explained that Everstone's difficulty in finding buyers was largely due to the valuation expectations not aligning with market realities. “Everstone Capital, which has been in the market to sell its entire stake in Burger King for well over two years, found no takers at the valuation it was asking,” an executive familiar with the discussions revealed. As a result, Everstone has decided to withdraw the stake sale for the immediate future.

RBA currently operates 464 Burger King outlets across India, but the QSR market environment remains tough. Discussing the latest quarterly results, Rajeev Varman, Chief Executive of RBA, addressed these challenges. “We know the environment has been tough in India, and the traffic numbers have been kind of subdued and so forth,” he said. He also acknowledged the negative same-store sales growth but maintained a focus on the company's long-term vision. “We are steadfast on our progress,” Varman emphasized, signaling confidence in RBA’s resilience despite the difficult landscape.

The entire QSR sector in India is facing significant hurdles. Factors such as rising operational costs, changing consumer spending habits, and increased competition have contributed to a sluggish demand recovery. As a result, even major players like RBA are feeling the impact, forcing stakeholders to reconsider their strategic plans.

This development marks a moment of reflection for Everstone, which has been instrumental in establishing and expanding Burger King’s presence in India. While the private equity firm is stepping back from its selling intentions for now, its commitment to making RBA a leading and profitable QSR chain in the country remains firm. As the market slowly adapts, the future of Burger King India and its journey toward sustainable growth continues to be one to watch.