McDonald’s India posts US$45m loss with write-offs in the full year

INDIA – McDonald’s India, the fast food restaurant and company has reported a US$45.50m loss in full year results ended March 2017, following several write-offs in investments in its joint venture with Connaught Plaza Restaurants (CPRL).

ET Retail reported that the burger and fries chain is still operating its outlets at a loss in India.

It continues to dip into losses compared to the financial year 2015/16 when it had a net loss of US$ 417,480 bringing it to an accumulated loss of US$62.94 million over the years.

The loss was also attributed to one-time provisions of nearly US$15.67m made for the discharge of the tax liability arising from the prolonged litigation with the Indian tax authorities as well as the Mutual Agreement Procedure (MAP) proceedings.

“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 the company in a filing.

Westlife Development is the master franchisee of McDonald’s restaurants in the eastern and southern markets, operated by Vikram Bakshi, who is also managing director of CPRL.

McDonald’s India Pvt (MIPL) which runs McDonald’s outlets in north and east India, terminated its franchise agreement with Connaught Plaza Restaurants Pvt. Ltd (CPRL) in August 2017.

The move directed CPRL to stop using the McDonald’s proprietary rights in McDonald’s names, trademarks, designs, branding, operational and marketing practice and policies, and food recipes and specifications.

The termination was a result of a breach, a violation of certain essential obligations that were a part of the agreement typically the default of payment of royalties to MIPL for two years.

“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 US$29.53m has been considered in the financial statements of the company for diminution in value of investments in CPRL,” McDonald’s India said in its latest regulatory filing.

McDonald’s has also increased its authorised share capital to US$60.75m during the year by infusing new equity shares worth US$13.4m.

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