IPO-Bound Curefoods Faces Criminal Cases, Child Labour Allegations

IPO-bound cloud kitchen major Curefoods, known for brands like EatFit and CakeZone, is facing multiple criminal and regulatory cases following inspections at its outlets in Delhi and Noida, according to its draft red herring prospectus (DRHP). 

Notices from municipal and food safety authorities have alleged serious lapses in hygiene, operations, and food safety at some of the outlets operated by the company.

The details of these cases are available in the company’s DRHP filed with SEBI for its initial public offering (IPO). The IPO will comprise a fresh issue of shares worth up to INR 800 Cr ($304 Mn) and an offer for sale (OFS) of up to 4.85 Cr equity shares.

As per the draft papers, between January and May 2025, the Municipal Corporation of Delhi (MCD) served four criminal notices to Curefoods after inspections of its outlets in Okhla and Dilshad Garden. These notices were issued by judicial magistrates and municipal courts under various sections of the erstwhile Indian Penal Code (IPC) and Delhi Municipal Act. 

In Noida, the company received a notice from the Additional District Magistrate on November 11, 2024 after a food safety officer found that a red velvet sponge sample taken from one of its outlets exceeded allowed acidity levels. 

Under the Food Safety and Standards Act, this classifies the product as substandard. Curefoods now faces possible penalties under Sections 26(2)(ii), 3(1)(zx), and 51 of the Act, which prohibit the sale of unsafe food and allow fines up to INR 5 Lakh.

Subsidiary Fan Hospitality Under Fire In South India

Meanwhile, Curefoods’ subsidiary, Fan Hospitality Services Pvt Ltd, which operates restaurant chain Sharief Bhai, has also received multiple regulatory notices and legal warnings from food safety, labour, and municipal authorities in Tamil Nadu and Karnataka. 

The entity has been pulled up for unhygienic food practices, use of expired ingredients, poor workplace safety, licensing issues and non-compliance with labour laws.

In Chennai, a notice dated February 3, 2025 from the Tamil Nadu Food Safety and Drug Administration flagged serious hygiene lapses at Sharief Bhai’s outlet. Inspectors found expired chilli and pepper powder in the kitchen, a visible rat hole on the floor, and failure to display the required FSSAI licence. 

Further, a sample of mutton dum biryani collected by a food analyst in Coimbatore on February 20 this year was declared unsafe for consumption. The company was directed to fix the violations or face action under Section 55 of the Food Safety and Standards Act, 2006, which allows penalties for failing to comply with food safety standards.

Fan Hospitality was also served a separate notice on March 6, 2025, again in Chennai, for not having a valid food licence, storing pre-cooked mutton in a chiller for reuse, and failing to show proof of pest control. 

A besan flour sample from the same outlet was also found unfit for consumption.

In Bengaluru, Fan Hospitality received a notice in January this year from the city’s health department under the Bruhat Bengaluru Mahanagara Palike (BBMP). The inspection found missing fire extinguishers, failure to implement safety measures, and non-renewal of licences. Officials warned that the outlet could lose its licence or face prosecution.

A March 14, 2025 inspection at the company’s J.P. Nagar outlet in Bengaluru resulted in another penalty. The BBMP imposed a fine of INR 25,000 for issues including poor hygiene, failure to provide hot drinking water, and not renewing the trade licence. 

Separately, Fan Hospitality is also under scrutiny from the labour department of Karnataka. A show-cause notice dated March 7, 2025 alleged that the company violated the following laws:

• Minimum Wages Act, 1948 
• Shops and Commercial Establishment Act, 1961 
• Payment of Wages Act, 1936 
• Child Labour (Prohibition and Regulation) Act, 1986 
• Payment of Gratuity Act, 1972

The findings stemmed from a January 18, 2025 inspection of Fan Hospitality’s Bengaluru office. Another notice dated February 22, 2025 echoed these concerns, citing continued non-compliance and demanding a written explanation to avoid legal action.

A Quick Glance At Curefood’s IPO

Curefood’s IPO will facilitate partial exits to several early investors, including Iron Pillar PCC, Crimson Winter, Accel India V, among others.

Notably, the company plans to use INR 152.5 Cr of the proceeds from the fresh issue to expand its operations and purchase new equipment. Further, about INR 126.9 Cr will be used for payment of debt, while INR 91.9 Cr will be invested in Fan Hospitality. 

On the financial front, the company’s operating revenue rose 27.4% to INR 745.8 Cr in the year ended March 2025 from INR 585.2 Cr in FY24. Its net loss declined by a marginal 1.6% to INR 170 Cr in FY25 from INR 172.6 Cr in the previous fiscal year.