Nirula's - A Recipe Turns Sour

In May this year, Samir Kuckreja exited Nirula’s. Almost exactly a year ago, I had met him at Nirula’s corporate office in Noida. There was a child-like exuberance as Kuckreja spelt out his plans to bring back the glory of the fast food chain. He had already turned around the operations and now wanted to take Nirula’s further – to improve margins, increase outlets and expand beyond Delhi and even take it international. These words were music to Nicholas Bloy of Navis Capital, a majority shareholder in Nirula’s. It was no secret that the Malaysian private equity firm was looking for an exit, but was forced to delay for lack of buyers at the right price. If the Kuckreja could pull it off, Navis was sure to be spoiled with suitors. But, soon after this the  plan turned sour.

Neither Kuckreja nor Navis Capital is ready to talk. After his exit (he also sold his stake in the company), Kuckreja took a break, went on a holiday- and is now back in the country. “I’m looking for opportunities,” is all what he had to say. Navis Capital has been in the news for talking with various suitors and is said to be looking for Rs 300 crore for its stake in the company.

So what happened? Is the Kuckreja-Navis Capital another tussle in the struggling entrepreneur Vs aggressive investor genre?  The last such story was the duel between Lilliput’s founder Sanjeev Narula and Bain Capital and TPG.

First a little background. As I had written in the feature last year (http://forbesindia.com/article/changing-lanes/a-new-recipe-for-nirulas/26972/0), it was almost flimi that Navis Capital would ask Kuckreja to join Nirula’s as a shareholder and managing director in 2006. Navis had just taken over Niruala's.

As a youngster, Kuckreja had watched his maternal uncles running Nirula’s, which was set up by his maternal grandfather. And it was in one of the outlets that he learned his first lessons in running a restaurant before setting out to make a career in the industry. He got back in India in 1992, worked with his uncles for nine years and left never expecting to work at Nirula’s again, “tad disappointed that his push to modernise the brand and expand operations had few takers.” Unexpectedly and to his delight, he was back, now at the helm, five years later!

Despite his good work in turning around Nirula’s in the next five years, Kuckreja was against tough odds to meet the next targets. First, the likes new generation quick service restaurants, like McDonald’s, KFC and Domino’s Pizza had taken quite a sheen off Nirula’s. Even today I hear about people in Delhi reminiscing about the “good old Nirula days”. The iconic burgers marked their first date, the shared ice-creams were memories of good times. But most of the charm is in the past tense. On a recent visit to Noida’s GIP mall, I found the Nirula’s outlet full with at least two families waiting. But on the same row were much longer queues at outlets of Domino’s and McDonalds.

Second, Kuckreja  had set himself (or was set by Navis) tough targets. A year ago, Nirula’s had about 80-odd outlets and Kuckreja wanted to add another 50 (in various formats) in the next one year. That surely didn’t happen as the number of outlets still hover around the same 80-mark. Similarly, from my conversations with former employees it is clear that the margins and revenues have remained at the year-ago levels.

My conversations with two former employees paint a picture of a managing director being squeezed. “From the middle of last year, Navis had appointed Bharat Sarma (Senior Investment Director at the private equity firm) in Nirula’s and he would be present in each meeting, keeping a close tab,” says a former employee. There was also talk within the company of Navis not very eager to put in more capital to expand operations.

Things got more difficult when Ajay Khanna, head of operations, left the organization. While one of the former employee said that Khanna was asked to leave, it could not be confirmed. (Nirula’s corporate communication executive Jaspreet Kaur said the company doesn’t want to respond to questions at the moment). “ The operations department is the critical function for a food chain. After Khanna’s exit, Kuckreja had taken on the additional burden and not surprisingly, he was finding it difficult to cope,” says a former employee.

So did Kuckreja leave because he couldn’t meet the targets set by his partner? Or did he choose to put in his papers, being unable to implement his plans for Nirula’s? With both sides keeping mum at the moment, it might be sometime before the true story emerges. Either ways, Delhi’s iconic brand has lost the last connection to its founding family.

The thoughts and opinions shared here are of the author.