Burger and fries chain McDonald’s India posted its biggest loss of Rs 305 crore in the year to March 17 after writing off investments with licensee partner Connaught Plaza Restaurants (CPRL) due to a five-year-old legal dispute.
McDonald’s India’s northern and eastern business is operated by partner Vikram Bakshi, also managing director of CPRL and Westlife operated in south and west part of the country.
McDonald’s posts its first profit in India after 22 years of Rs 65.2 lakh during FY17-18, compared with previous a net loss of Rs 305 crore a year ago, according to its latest filings with the Registrar of Companies.
Trouble between Bakshi-led CPRL and the 50-50 partnership with JV between him and McDonald’s India escalated when Bakshi challenged that his removal at the Company Law Board (now National Company Law Tribunal or NCLT), accusing McDonald’s India for mismanagement and mental pressure.
This legal battle gained momentum after Bakhshi’s expulsion from a position turned ugly as McDonald’s India terminated the franchise agreement of 169 outlets in August 2017. Both the parties are now fighting out their case in various legal forums including NCLT, NCLAT and Delhi high court.
National Company Law Tribunal or NCLT had appointed Bakshi as managing director in its former position in July 2017. Bakshi’s allegation was that the termination of the JV by McDonald’s violated an earlier NCLT order which asked McDonald’s Corp to refrain from interfering in the smooth functioning of CPRL. This resulted in NCLT issuing a show cause notice to McDonald’s Corp, which the US chain challenged in the National Company Law Appel.
The company has not only been able to stem any further erosion of its net worth but has also been able to successfully reverse the trend of erosion through the infusion of fresh capital,” McDonald’s India said in its latest regulatory filing. Total income which it earned mostly through royalty, grew 8% to Rs 119.6 crore.
There was a strong revival last fiscal when most quick-service restaurants posted high sales growth, helped by a surge in discount-driven footfalls at malls and a greater presence in new markets.
During the year, the company allotted shares worth Rs 71 crore to the parent company and also increased authorized capital by Rs 50 crore to Rs 458 crore.