Speciality Restaurants

Please have a look at Speciality Restaurants IPO.

Here is some information about the company.

Specialityâs strong foothold in the fine dining restaurants segment in India with 73 restaurants and confectionaries under 11 brands spread across 17 cities in India and one in Dhaka, Bangladesh. The company has been successful in creating brands like Mainland China (also the flagship brand) and Oh! Calcutta.

It operates 35 restaurants under the two brands namely Mainland China and Oh! Calcutta. Company’s other brands are Flame & Grill, Haka, Just Biryani, KIBBEH, Kix, Machaan, Sigree, Shack, as well as a confectionary brand, Sweet Bengal.

Specialityâs business is dominated by the success of a singular brand, Mainland China, which contributes more than 50% to overall revenue.

Specialityâs revenues for FY10 were Rs 1,298 mn and Rs 807 mn for 6MFY11. EBITDA margins were 20.4% in FY10 and 21.5% during 6MFY11 and PAT margins were 6.9% and 9.4%, respectively. As of September 30, 2010, the net worth of the company was Rs 906 mn against a debt of Rs 210 mn.

Please see Red Herring Prospectus at the following link.


Considering the bullishness of “consumption story” in India, please have a look at this IPO and share your view if it is worth investing?







Also find the Crisil report which has given 4/5 rating.


Conference CallKey highlights By Capital Market.

  • During Q3 FY’13, margins were under pressure as there were no price increases made, while the raw material prices remained high. Infact unlike every year, for the entire 9 months ending Dec’12, no price hike has been taken.
  • Also the number of footfalls have been coming down and average spend per customer is also coming down. High inflation on one side and general slowdown can be felt hitting the customer’s pocket. Average rate per table cover stood at Rs 675. So the overall OPM was under pressure by about 200 bps on y.o.y basis
  • From Mar’13 onwards till April’13, management has indicated that the prices will be increased for different food items at different times in the range of about 4-6% max, but will not be enough to meet the entire hike in raw material and other inflation costs. Going forward, the intention is to ensure better margins.
  • Same store sales growth stood flat and the 12% growth in sales on y.o.y basis is largely due to new stores. As on Dec’12, the company has 48 Mainland China stores operational of which 32 are owned restaurants and rest are franchisees. In first 9 months, 8 owned stores and 3 franchisee restaurants were opened and by FY’13-end, another 6 more owned restaurant is in the pipeline.
  • New models in form of the all day dining at Pune will be tested in Q4. Management plans to leverage the model, which starts from morning Breakfast and goes till midnight. Also in malls, restaurants are open on full day basis from Friday to Sunday.
  • Take away, currently constitute only 5% of total turnover and management has never focused on this in past due to lack of consistent and professional delivery channel. Company has tied up with Just Dial Service to tap the Take away market, which the management expects to be around 10% of total turnover going forward.
  • Lower tax rate for first 9 months ending Dec’12, was due to higher dividend income from Mutual funds shown in other income. Tax rate for FY’13 will hover around 24%, but will inch up in FY’14, once the money is used for expansion.
  • Going forward, management sees early signs of trend of the raw material prices coming down.
  • Company has plans to go global and start in form of JV format in Middle East and UAE markets, but better clarity will merge by the end of the year.
1 Like

Anybody still tracking this or have any input on this?

I had purchased this stock few years back but got out of with some loss :cry:. very capital intensive business with very less pricing power. Another challenge is to get repeat customers as people tend to try out different restaurants all the time.

I feel the business might turn around in the coming quarters based on some of the measures taken by the management.

  1. Closing down the restaurants that are not profitable.

  2. Converting Mainland china to Asia Kitchen so that its a longer format and can sweat the assets better

  3. Obtaining more liquor license for new format of restaurants so that it attracts more footfall and expands margin as liaquor business has higher margin

  4. Foreign expansion - This should yield in higher margin

  5. Depreciation expense should come down or remain stable as i believe they follow WDV method. Since they now are going slow on expansion this should remain stable.

hat does it do?

Speciality Restaurant operates several food chain restaurant like Mainland China and Asia Kitchen.Some its new concept are Hoppipola specially targeted towards youth. Most of us would have visited one of its branded restaurant if you arr major cities. Below are its brand.

Cafe Mezzuna: Semi-casual dining restaurant and specializes in Mediterranean, Moroccan, Spanish, French and Italian cuisines.
Flame & Grill: Restaurant specializes in Kebabs.
Haka: Restaurant specializes in Dim sum; a style of Cantonese cuisine.
Hoppipola: Bar; offering mostly finger food.
Machaan: Offers Indian cuisine.
Mainland China: Flagship restaurant. Restaurant offers Chinese food and has over 50 outlets.
Mainland China Asia Kitchen: Offers cuisines from Asia, beyond Chinese.
Oh! Calcutta:
Sigree Gobal Grill:
Sweet Bangal: Confectionery.

Why its an Opportunity?

Speciality restaurant has for last two quarters has been making losses . The company attributes this to rising input cost and its inability to increase it prices as it may impact the footfall.

The current market cap of the company is 408 crores. It has about 120 odd restaurants. So roughly if you were to buy the entire company you are paying about 4 crores for each restaurant. Most of their restaurant are on rental premises.

How will it turnaround?

Closing down the restaurants that are not profitable.

Converting Mainland china to Asia Kitchen so that its a longer format and can sweat the assets better

Obtaining more liquor license for new format of restaurants so that it attracts more footfall and expands margin as liquor business has higher margin- Hoppipola

Foreign expansion - This should yield in higher margin

Some of restaurants are in the same building this should sweat the assets better.


Anjan Chaterjee and Susim Mukul Data seem to have a credible background . Anjan is passionate about the food business and having a passionate promoter is always a plus

Future Projections

If company is able to increase its sale from present 320 crores to 400 crores and its able to attain a operating margin of 15% -20 %as it did in the past is should make a operating profit of 60- 80 crores. Comparing it with like of jubilant food works which is the closest comparison we can get in the listed space it should have market of 1200 croes - 1500 crores market cap. This would be a three bagger from here. I dont see the stock coming below 65 rupees as then you would get 120 restaurant pretty cheap . Hence the downside is pretty limited.

However it would take sometime for the business to turnaround.

What are the risks.

The risks are that the company might not be able to turnaround and might still struggling to profits.

The online food chains could be another competition.

Disc: Invested.

Could you please explain why do we need reduce reserves from Mcap ?

Kiran You are right, i should not be reducing the reserve from the market cap. I have edited it.

  1. Is management planning to indulge into QSR or online platform, if yes then do we have breakup of future projection growth. which can be future growth driver for the company.
  2. how do we know to it is at inflection point of the cycle
  3. Is there any plan to deploy strategic investor for foreign jv

Hi Rishi,

  1. Yes they are into QSR format. It is called as Zoodles and initiative started by Avik. Not sure how many of them do they have currently. As mentioned in the interview they are building an exclusive app. However they have already tie up with other online portal,

  2. I dont think it is right now at the inflection point. I feel it is at somewhere close to the bottom of the cycle. I think inflection point we may have to wait till the measures taken by the management starts reaping result.

  3. I dont think right now they have any plans for strategic investor for Foreign JV. I think they have done the expansion needed and dont need any fund. Infact they are closing the restaurant that are not profitable. I think the current focus of management is profitability and further expansion.

These are my views based on what ever i have read from the investor meet or heard from the management.



Strangely enough, whether it’s fast food or fine dining the return on investment is about the same for all restaurants. With multiple successful units or through franchising a fast/casual chain can increase that percentage with larger purchasing power. Casual and fine dining establishments can increase the percentage too with effective wine programs and liquor sales.

Regardless of which direction a restaurant chooses 20% is about average for all and each percentage point above that is a hard fight to gain and maintain. It requires close attention to every cost. Food cost, labor cost, overhead, equipment maintenance, grease disposal, power and water, licenses, fire suppression, printing costs the list goes on and on and every single broken glass or burned out light bulb is chipping away at profits.

so to speak, a relative predetermination of profitability can be expected, but even that is no guarantee.

Fine dining can make an impressive cash profit, once you have filled the place. It is difficult to scale up fine dining beyond something local.

As a general rule the fast sector will have more net profit if they have scaled.

but globally fast food have created real wealth like Mcdonalds, KFC , etc… since these are global player and scaled up really well.

I am not sure if speciality restaurants can do lots of mix match and turn around the tables.

Anybody tracking this stock? Its has fallen sharply and trading below book value now. If you remove the cash it is available at 220 crores. Anybody knows the reason why its falling sharply for last couple of days?

the operations are not doing well . Technically its best time to invest in down and beaten businesses but ill prefer to take a back seat at the moment before jumping in . Just to let you know just today received an SMS from them that their rewards program http://speciality.mloyallive.com/microsite/ has also been abandoned due to some Technical Issues The management might want to turnaround as it has some fab brands . The problems are high rent exp, super competitive industry . Previously the number of options were reduced but now a days in bigger cities the options have increased exponentially . Customer stickiness is a problem as people love to try out new cuisines , new restros inspite of how good their prevous exp with the one particular restuarant has been . Not all is lost for Speciality they are proactive. They recently even closed down one or two restuarants in Kolkata if I am not mistaken due to losses. Closing the loss making and maybe chalking out a new growth strategy can be a game changer for the company . And customer stickiness will always remain a problem for these restros as they are no Fast Food Chain . Corporate lunches , office parties still love Mainland China so thats a obvious plus point for them .

Yes operationally they have been not doing good. They have a good brand and have about 70 crores of cash.In the last conference call it was mentioned that raw material cost is coming down which could be cyclical play as well. So with the measures that management has taken and raw material cost coming down it might be able to turn around operationally. However patience could be also the key here but might be rewarding.

Disc- not invested yet

Speciality restaurants to my mind has a lot of unrelated brands and has lost focus in their expansion plans. They should sell some of their brands to other players, concentrate only on Mainland China exclusively and own the category. It is so well positioned to do that. I fail to understand why they would not do it. After 5 pm on indian streets - Desi Chinese food rules the roads.

Speciality restaurants could be a nice brand arbitrage in Indian chinese food. That is - you develop the brand in India which i assume is relatively less costly than developing a brand in the US ( lets say ) and then sell it to indians living abroad. Indian Chinese food is unique, is only found in India and is wildly popular across the length and breadth of our great land. I have traveled to many places and never have i even found place where it was not available on the streets.

The know how accumulated by Speciality Restaurants in preparing Indian Chinese could be a strong intangible along with its strong brand recall amongst chinese fine-dine.

I know from friends living outside india (and others on the forum living abroad please share your views!) that food available abroad is tasteless and bland ( even for the non-vegetarians). It has no personality.

Indian Chinese is a unique category and Mainland China is somewhat of a leader in that specific segment amongst the organized players. I am sure that homesick indians living abroad would be very happy having a strong established brand from back home setting up shop serving them desi chinesss ( not the regular bland chinese fare )

Management keeps promising but hasn’t delivered for a long time.


The company managed to clock multi-year high (or, maybe lifetime high?) quarterly sales and profit by adapting improved strategy.

“We launched our existing brands on cloud kitchens, opened kitchen-in-kitchen, shut underperforming stores, downsized staff. So it is a combination of things that worked for us,” Chatterjee told Moneycontrol