Sunday, June 23

McDonald’s Running its Indian Business Amid all The Losses

The world’s largest fast-food chain McDonald’s is reportedly facing a huge amount of loss in India. McDonald’s India has announced its biggest loss amounting to INR 305 crore in the financial year ending in March 2017, after canceling the investments in Connaught Plaza Restaurants (CPRL) which ought to be its licensee partner. All this was because of a five-year-old official disagreement with CPRL.

In this regard, McDonald’s India said, “Considering that CPRL is having significant accumulated losses as of date and considering that the company has terminated all its franchise arrangements in favour of CPRL, the management feels that its investments in CPRL are impaired and accordingly a provision of Rs 198.20 crore has been considered in the financial statements of the company for diminution in value of investments in CPRL.”

The eastern & northern business of McDonald’s India was handled by Vikram Bakshi who also is the managing director of CPRL. The Indian unit of the US company had suffered a net loss of INR 2.8 crore in fiscal 2015-16. And, at present, the company is still burdened with the accumulated net loss of INR 422 crore.

The food chain discontinued its joint undertaking with CPRL this year in August, canceling Vikram Bakshi’s appointment and notifying him to stop using McDonald’s brand system, designs, trademark, and associated inherited property.  However, 164 stores of CPRL are functioning across north and east India.

The competitive fight between McDonald’s and CPRL got enraged after Bakshi was fired from the position of managing director of the joint undertaking. Bakshi at the National Company Law Tribunal (NCLT) accused McDonald’s India of maltreatment and mismanagement. This led to the issue of a show cause notice by NCLT to McDonald’s Corp, which the US chain challenged in the National Company Law Tribunal (NCLT).

“To finance losses arising from these one-time adjustments, the company proposes to seek infusion of fresh capital from its shareholders to support the company,” said McDonald’s in a filing.

After all that is happening, McDonald’s is still in process of getting back to what it was. It is still running its stores in India amid all the losses. The company is trying to get the support of its shareholders and invest new capital to get back to the pace.