Hot Pot

Abraaj Group exits investment in Hot Pot through IPO on Thai stock exchange

Private equity investor the Abraaj Group has exited its investment in the restaurant chain Hot Pot, through an initial public offering on the local Thai stock exchange that was more than three times oversubscribed.

The Abraaj Group first invested in the restaurant chain in 2006. Since then, the restaurant chain’s revenues have grown at a compound annual growth rate of approximately 25 per cent and restaurant branches have expanded from 58 to 126.

The IPO is another successful exit for Abraaj’s first South East Asia Fund. Earlier this year, the group sold its stake in Yupi, a leading Indonesian confectionary company, and exited its investment in Cirtek Electronics, a semi-conductor business, through an IPO on the Philippine Stock Exchange (PSE).

The Abraaj Group’s investment in the SukiShabu and international buffet restaurant group was based on an expectation that demographic trends in Thailand, combined with an explosion in disposable income amongst even the moderately well off, would provide a fast-growing clientele for the restaurant. Within five years of the investment the average number of customers per month grew from 250,000 to 570,000.

Abraaj’s initial investment allowed Hot Pot to introduce a state-of-the art central kitchen and cold storage facility, which transformed the business’s health and safety record as well as dramatically increased productivity. Those operational improvements have allowed Hot Pot to fully establish its reputation for delivering both value and quality to its customers.

Omar Lodhi, senior partner at the Abraaj Group, says: “Achieving such a heavily oversubscribed share offering in what has been a globally weak IPO market is a great result. It is also a good measure of the strength of the Hot Pot business that the Abraaj team helped to build. We made this investment on the basis that growth in South East Asia would be fast, sustainable and lead to a dramatic increase in domestic spending – not least in categories such as casual dining.

“Working with Hot Pot’s management, our team realized that there was a very profitable opportunity to create branded restaurant chains that could take significant market share within this rapidly expanding niche. Six years on, the success of this IPO validates that strategy and execution plan.”

Sakuna Baicharoen, deputy chief executive officer at Hot Pot, says: “Abraaj ensured that we adopted an advanced governance structure that has helped to drive the business forward – for example, we put in place strong internal controls and management information systems so that we could make all our decisions based on robust information.

“The Abraaj team also helped steer us towards establishing our central food preparation factory. That has allowed us to scale up the business quickly and profitably, whilst also introducing the kind of health and safety practices comparable with any highly rated international restaurant group.”

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