Sapphire Foods India Limited (SAPPHIRE) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Sapphire Foods Q1FY27 conference call. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Sanjay Purohit from Sapphire Foods. Thank you and over to you, Mr. Sanjay.

Welcome to the Sapphire Foods Q1 F527 business performance highlights. Let me jump in. You should have the presentation already available with you. Q1 F527 was our second consecutive quarter of strong performance with 15% revenue growth, best in the last 11 quarters, and 32% adjusted EBITDA growth best in the last 15 quarters. This was led by positive SSSG across all three brand verticals, KFC India, Pizza Hut India, and Sri Lanka businesses. A quarter one revenue was 888 crores. Up 15%, as I said. We added 16 KFC restaurants, 5 Pizza Hut in India, 1 Pizza Hut in Sri Lanka. A total restaurant count was 1074 as of 30th June 2026. Consolidated restaurant EBITDA was up 23% year-on-year. Margin was 13%, up 80 basis points. Consolidated adjusted EBITDA came in at 75 crores, up 37% year-on-year, and margin was 8.4%. Consol EBITDA, which is post-Indias, was 146 crores, or 15.8%, up by 24% year-on-year, or up by 120 basis points. Consolidated adjusted PBT was to 27.3 crores or 3.1% and consolidated PBT was 16.2 crores or 1.8% up 200 basis points. Now to take you straight to the KFC highlights. KFC delivered 5% SSSG and 17% system growth with very strong dine-in and take-away contribution, largely because of our two-pronged strategy to drive consumer recruitment. I have called this out in my last investor presentation also. At one level, we've got strong everyday value, the 99 rupee chicken crisper burger meal, accompanied by advertising that enables new consumer recruitment. And we had also shared a YouTube clip of... So, we believe that it's a combination of advertising and this everyday value that is driving change of consumer behavior and moving people to start, moving new consumers to start considering KFC as part of their repertoire. Apart from that, in more evolved chicken markets, we are also... A disruptive, abundant value strategy on select days, ideally perhaps once a month, where we offer a... Hot and crispy buckets backed by localized advertising. These offers are only present on the Dine-In and Take-Away channel and this has enabled very strong growth on these channels. Innovations for the quarter include KFC Shawarma, this is slide number 21, and the double chicken dynamite, which is really a, both products are fantastic products. Double chicken dynamite is two filets of chicken, and in between, you've got a layer of noodles and cheese. Digital kiosks are implemented on about 75% of stores. We launched 16 new stores last year. Vijay, could you take the numbers, please?

I'm on slide number 24, channel-wise sales mix. Dining and takeaway sales for KFC improved from 57% to 59%. This is on basis of the strong dining takeaway value. Camping. KFC, SSHG came at 5% for the quarter, and the overall revenue grew by 17%. Gross margin improved by 160 basis points over last quarter. This was a combination of lower discounts compared to last year as well as price increase of 2% during the quarter. This, combined with improved dining and takeaway mix, better operating leverage, Meant that the restaurant EBITDA improved by 120 basis points over last year. And this is despite the challenges in terms of the and the pricing pressures which we faced on the energy cost, especially in the in terms of gas cost. The overall restaurant EBITDA came at very healthy 16.9 percent. Slide number 27 gives you the four year and five quarter trend. As can be seen from the last three quarters, the performance on the brand is improving, and this is quite encouraging as we move into the next quarter.

From Pizza Hut perspective, we had 1% SSSG after five quarters. Both dine-in and delivery channels were similar SSSG. The new crafted flats product, baked chicken wings, a new line of masala beverages, and our TN continues to do well, especially the dine-in business, and really that, I've said this now for the last 10, 12, 8 quarters at least, that this gives us the template that a... That a clear strategy that is differentiated from the number one, from first the customer experience rooted in line-in with strong omni-channel execution, great product backed by innovations, and then heightened marketing spends allow us to be a strong number two in the market and for the brand to do well.

Number 34, channel wise sales mix. Dining and takeaway mix remained same as the previous year at 50%. Pizza Hut had a SSG of 1% as mentioned by Sanjay after 5 quarters a positive SSG. In terms of revenue growth overall 3% and gross margin improved by 80 basis points. Again here as well on basis of lower discount and a price increase of 2% taken towards the end of the quarter. However, higher energy cost impacted the restaurant debita, which came at loss of 3.6 percent, down by 110 basis points. Flight 37 gives you a 4-year and 5-quarter trend. Positive 1 percent SSSG, including more importantly dining and takeaway positive SSSG, is encouraging as we move forward.

Our Sri Lanka business had another quarter of strong SSSG. However, profitability remained an issue because of inflationary pressures and all around inflationary pressures, so cost of sales because of the depreciation of the Sri Lankan rupee, minimum wage increase and cost of utilities and fuel increasing because of the geopolitical crisis in the Middle East.

Thank you. Slide 46 gives four-year and five-quarter trend. The current quarter has been challenging in terms of profitability. However, just like previous challenges, whether in terms of COVID or the political turmoil experienced by the country, our business has been resilient and we have always bounced back strongly. We expect this impact to also be short-term in nature and in the long-term we remain quite positive about the business.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1 on the touchtone telephone. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Avi Mehta from Macquarie Capital. Please go ahead.

Yeah, hi team. I just wanted to check two things. One, wanted to get your thoughts on how should we look at the demand environment. You know, we've seen in KFC, same-store sales growth is, like, similar-ish. We saw 6% in last quarter, I remember, adjusted for the festive in 4Q, and now we've seen 5%, while Pizza Hut has moved to positive. So, wanted to get your thoughts on, you know, how things are, how do you see demand in the last quarter and trending as we speak? Would be useful to get your comments on that.

Yes, sir. I don't think there's been any material improvement in the demand environment. I would say it has remained similar. Some of the KFC upside that we are seeing is as a direct... We have done to improve data sales. I think the same thing is with Pizza Hut. Also, Pizza Hut, as dine-in sales has improved, the overall brand has done well.

Okay. And has this changed as we exited the quarter or any kind of comments that you would like to make about how things are trending as we speak?

So, it's really tough to trend. A month-on-month basis. April, May were good. June was not so good. July is good because of the difference of Shravan starting in north earlier last year to this year. So, I think it's a little tough to say.

Okay. Got it, sir. Got it. And the second bit was, I mean, I understand the profitability performance and it's kind of kudos to you on that. But on Sri Lanka, how should we look at the equation now? Is there, you know, what measures can be taken to move that up? And that would be the only thing because on the other businesses, I think you're on the path to improving profitability or maintaining profitability. But here I'm not very clear. So any clarity on that would be helpful.

So, again, first of all, on India, if SSSD comes, then profitability improves. So, that's a simple adage. On KFC, SSHG improved, we were able to deliver better profitability. I mean, even in spite of pressures on fuel costs, which actually hit everyone quite hard. In Sri Lanka, I think it's a little more susceptible to... Having said that, our business there is absolutely, incredibly strong. Our team there is incredibly strong. The way that we execute is head and shoulders above everyone else. So, through COVID, through when the earlier protests had happened in the country, I think we put our head down and we said, We've got to continue to drive transaction growth. And if we do that, over a period of time, we will get back profitability because we'll be able to either take pricing or input costs will come down and so on and so forth. So that continues to remain our focus that drive transactions. If there is a short term impact on, say, because of cost of sales. Grin and bear it, but don't lose out on momentum in driving sales and revenue, because everything else we can recover.

Got it. So, would it be fair to say that the movement to normalization in Sri Lanka might be a few quarters away? Is that how I should read this? Sorry.

At least a couple of quarters away, yeah.

Got it. I'll get back in the queue for the other question. Thank you very much.

Thank you. Thank you. Reminder, anyone who wishes to ask a question may press star and one on the touchstone telephone. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on the touchstone telephone. The next question is from the line of Shubhi Gupta from Trinetta Asset Managers. Please go ahead.

Good afternoon, sir. So, my question is that we are seeing some operating leverage in play with our numbers. Wanted to understand at what SSG threshold does this leverage kick in, specifically with brand like Pizza Hut, which is struggling.

Well, irrespective of the brand, typically at a 3 to 5% SSHG, when you start comparing with the last year's number, it takes care of the inflation in terms of the wage cost, the other costs in the P&L. So that's normally neutral for the P&L. Having said that, because we were able to get efficiencies this year on various cost lines, that has helped us create leverage even at 3 to 5% SSHG. But the general matchbox is... In the range of three to five percent, if you are below that, you will typically end up losing restaurant percentage margin. And if you are above that, you will start gaining the percentage margin. I think what has helped us over the last one year in terms of generating leverage is also on the gross margin front. The reduction in the discounts, which happened, especially starting October of last year, has helped us greatly, and we have taken a small amount of price increase in this particular quarter, which has helped gross margin, and thereby it has helped bottom line as well.

Okay, so thank you.

Thank you. Reminder, anyone who wishes to ask a question, may pesta and one on the touchstone telephone. Ladies and gentlemen, anyone who wishes to ask a question, may pesta and one on the touchstone telephone. The next question is from the line of Manjit Buraya from Samaya Advisors LLP. Please go ahead.

Hi, this is Manjit. Thanks for taking my question. Sir, I had three questions. One was, you know, with Yum looking to sell Pizza Hut globally, how does that impact our master franchise agreement with Yum related to Pizza Hut, if you could share some light there?

Go ahead. Go ahead. Go ahead.

Okay. Second question was, you know, you alluded to SSSG being a key driver for margins and, you know, that's quite intuitive. If you could also give us some sense on, you know, where the ADS needs to be for us to come back to that about 18-20% restaurant level margins because, you know, we had two and a half years of soft SSSG. So, I'm not able to sort of, you know, reconcile the SSSG and ADS both at what levels they need to be. And the final question again was, you know, from your perspective, despite driving a strong value sort of offering, you know, our SSSG at 5%, you know, seems low in context of two, two and a half years of very low base quarters. So if you could share some light on whether, you know, you know, why is that the case? Or maybe, you know, that is what you had expected when you launched the value offering. Thank you. Those were my questions.

On the first part, we mentioned in the previous call as well that the global sale at a parent level of the Pizzart brand doesn't really impact us. Our current agreements in terms of the franchisee arrangement continues. In fact, if anything, we consider this as positive because the new franchise, the new brand owner who comes in will come with a renewed focus because that person is putting money on the table, and I'm sure they would work towards the upliftment of the brand, and it augurs only well for the brand as we move forward. On the second question on ADS levels for KFC. In a typical year, the ADS level would actually remain constant. How does it work is when you are trying to grow restaurants by 10-15% in terms of new store count, those new restaurants come in at 80-85% of ADS levels of the brand average. At the same time, you are looking for a 5-6% SSSG, which will improve the ADS level by 5-6%. These two lines actually neutralize each other. What has happened over the last two, two and a half years is that we kept adding new restaurants, which brought the ADS levels down. Unfortunately, at the same time, we were not getting positive SSHG. So that is what has happened. Currently, the focus is not to get back to right now on an immediate basis the 18%, 17%, 19% margin. I think the entire focus over the last few quarters has been to get the SSHG back. As long as we are able to get the SSHG back, the first thing it helps is not help us slip further on terms of restaurant EBITDA margin. Even a 16% margin right now for the brand or a 16.9% margin is a very strong and healthy margin. And the focus in the near term would be to drive SSHG and not try and take the margin towards 18%. The third point was on the value offering. That value offering in terms of giving you still a SSHG of 5%. I think SSHG of 5% in really tough conditions, we are quite happy with. Of course, we would love to have a higher SSHG. But it's a start. Three quarters ago, we were not able to generate SSHG. In fact, we were on negative SSHG. And we tried various campaigns, but things were not clicking. I think we finally found a solution. We are using a two-pronged strategy in terms of value, both on everyday value and selective day disruptive value, we are able to drive SSHG. Even currently, the inflationary pressure continues. We don't really think the external or macro environment is favoring demand from a consumer sentiment point of view. We are barely out of our negative SSHG over those last two quarters. So, I think getting a 5% SSSG is quite positive, and if we are able to hold on to that incoming quarters, we will be quite happy.

Got it. Sir, can you ask one follow-up question, please?

Go ahead.

Sir, if you could also give some sense of whether the recovery on SSSG is broad-based across all our geographies, or are there certain states which are lagging meaningfully from demand perspective?

So, over the last two quarters, we have seen a broad-based recovery. Having said that, we called out even in the previous quarter, we believe the SSHG is a combination of two things. Certainly some amount of consumer sentiment recovery which we saw in the last two quarters. But having said that, I think we are able to generate higher SSHG for the specific measures and the reasons, the measures which we took, which is again what I called out the two-pronged strategy in case of Pizza Hut, even in case of KFC. Even in case of Pizza Hut, our four-course meal, our buy one, get one, has helped us really, really drive dining and take away transactions, and that's the most heartening part. So it's a combination of, I think, slight improvement in the external factors, but a lot of work which we have done over the last few quarters.

Thank you so for taking my questions.

Thank you. The next question is from the line of Anuj from Antic Stoke Broking. Please go ahead.

Hi, Tim. Good afternoon. These two questions from my end. So, firstly, how are you looking at, say, the CRT network expansion for the full years? And secondly, given that they're starting to see inflationary pressure and our operating costs, they were mentioned about price highs that are starting to be taken. How is broadly the on-ground, I mean, sensibility to these price highs? Are we seeing any sort of depression in terms of SSG on account of the price highs? Or, I mean, transaction growth, how is that pairing?

I was not able to clearly understand your first query. If you can come again, the voice was echoing.

The first question is on how are you using a KFC store expansion for the failure? I think earlier guidance is around 60 to 80 stores. So what is the plan for the failure in KFC?

The earlier guidance for KFC in terms of 60-80 stores in a year remains the same. That continues. No change in that particular guidance. On Pizza Hut, we have called out that we will be quite cautious in terms of store expansion. That was the case for calendar year 25. That will remain the case for even calendar year 26. And I'm calling out calendar year because that's how we operate with YUM in terms of store expansion plans. That's on calendar year basis. The second query in terms of price hike and how that's impacting the on-ground customer sentiment and the demand, we have been quite careful in terms of how we have approached this particular price hike. We have taken it over two installments. One percent was taken in April. 0.5 to 1% was taken in June. Same thing for Pizza Hut, it was taken across 1.1% into installments. So we have been quite cautious on how to approach the price hike. And again, when we do a price hike, it's not a flat price hike across the entire menu. We try and see which are the lines which will be, where the demand will be slightly more inelastic in terms of price hike. And so far, we have not seen any major impact. Because of the price hike on our customer, on our SSHG or the consumer demand.

Thank you. Thank you.

The next question is from the line of Pratik. Pratik from M3 Investments. Please go ahead.

Hi. So I just wanted to understand how the demand environment is in the new stores of KFC, the ones that you may have opened in the smaller cities in India. So you and Divyani together would be having around 1,300 KFC stores. So you would have expanded into some of the smaller cities. Could you give us an idea how the unit economics work in the smaller cities?

So, from a profitability point of view, the smaller city stores versus, let's say, a tier one metro stores and the payback point of view, it works similarly. However, what's different is the EDS levels and the cost of operating that store. So while the ADS are lower, let's say the ADS will be 20 percent lower in a smaller town compared to a tier 1 metro, but the cost will also be significantly lower. As a result, from a profitability perspective, as well as the payback perspective, it works similar to my tier 1 stores. So there is no difference. And in terms of the performance, Over the last one year, the stores which we have opened continues to perform reasonably well, and that's the reason we continue with our expansion plan of 60 to 80 stores. We have always called out that our expansion is based on looking at the metrics in terms of how the new store performs on a continuous basis, and if we feel those strike rates are dropping, we would immediately drop our store expansion or reduce our store expansion plan, but the last two years, three years for KFC, we continue to perform reasonably well. As a result, we continue to expand 6280 stores per year.

Thank you. Also, I would like to understand if you think that KFC has the potential to have about 4,000 or 5,000 stores in a very long period of time, maybe let's say 10, 15 years or so, and does that depend on how the smaller cities are doing and if you think that those cities can have so many stores?

So actually, we would try and right now look at a three-year, a five-year horizon, and we have always called out from a five-year horizon, we would love to double our store count. Looking at 4,000, 5,000 stores in India, eventually, of course, possible, because we have always called out both KFC and Pizza Hut, and in terms of QSR, it's a multi-decade opportunity, and in terms of KFC, there are two things going in its favor. First, it's the protein, and the second, once the per capita income increases, of course, that kind of opportunity is possible, but it will be very foolish right now to think of 4,000, 5,000 stores in the near future. I think we'll keep our focus on the next five years, where we plan to double the store count.

Sure. And my last question, please. I would just like to know what steps you have taken in Pizza Hut recently and if you saw any changes in demand environment for Pizza Hut due to the steps that you took or how the response has been and how you and Devyani maybe are looking to change, turn this brand around.

So I think there are no new steps taken for Pizza Hut. What we have been doing over the last, I think, two years, and Sapphire in particular, where we believe in dining forward omni-channel strategy, that continues for us. Tamil Nadu being an exclusive territory is where the focus has been for last one year where we have been able to put additional money behind the brand and the results have been quite encouraging and significantly different compared to the rest of India. Last year we called out that while Pizzad as a brand struggled, the Tamil Nadu territory delivered double-digit delta performance in terms of SSHG, in terms of restaurant debita as well. Even in the current quarter, the Tamil Nadu performance continues. The dining performance in Tamil Nadu, dining takeaway, even currently delivers significantly superior performance compared to the rest of India. So, we believe that we have a blueprint ready. It's just that once, I guess, the CCI approval comes in, both the franchisee will be able to sit across the table and decide on a common way forward for Pizzar brand. Until then, I think we continue to focus on the brand, in Kamilnadu in particular and Dining and Takeaway channel as well.

Sure. Thank you so much.

Thank you. Thank you. The next question is from the line of Hari Shadwani from Axis Capital. Please go ahead.

Hi, sir. Thank you for the opportunity. I just wanted you to give a breakdown of the AAAG number in terms of how was the transaction growth versus ticket growth, if you could share that.

We don't really give out those numbers to be fair. Having said that, the SSTG is positive for KFC, it's positive for Pizza Hut, and in particularly, it's positive for Dining and Takeaway. And Dining and Takeaway is running ahead of delivery.

Got it, got it. And just to get a sense on the dynamics between the two aggregators that you work with, are they calling out any increased competition on that side or that has been relatively benign this time in terms of the discounting that some of the other brands might be doing on those platforms?

We haven't heard about any heightened competition on these two categories, at least for the last few quarters.

Perfect, sir. And last question from my side, given the way the RM situation is kind of evolving, are we left with any more price hikes that we may need to take or we are able to manage it with the current level of price hikes that we may have taken?

Right now, quite happy with the current price hikes. And again, just to refresh the strategy on price hikes, we have always called out that we never take price hikes, which is exactly the same as inflation. We would typically restrict our price hikes to 50 to 60 percent of the inflation and the rest of the impact we would try and manage through inefficiencies, through efficiencies on our supply chain and efficiencies through other lines on the P&L. Even if we are not able to manage, we might as well like to take the impact on the rest of the EBITDA, but we would never take price hike in line with the inflation, because in the long run, that would impact the customer sentiment and the transactions thereby.

Perfect, sir. Thank you.

Currently, this is good enough, but we really never know with the wars coming back what will be the scenario in the next two quarters, but currently quite happy with the price hike we have taken.

Perfect, sir. Thank you. Those are my questions. All the best.

Thank you. The next question is from the Ryan of Gautam Ratti from CWC. Please go ahead.

Hey, hi. Thanks for taking my question. Sir, I wanted to understand two things. One, when you said you have reduced some discounts on the Pizza Hut side as well as taken up 2% of price. Can you help me? What would be the total impact on the customer bill value combined for these two changes?

So the price hike has been taken is in the range of 2% to 3% as we call Pizza Hut and that 2% in Franches. KFC is 2% or slightly less for that, lesser than that. Typically, when the price hike happens, in the immediate term, what happens is the customer readjusts the bill, and you really never see the price hike coming through in terms of increase in APC. So, that's what happens. Price hikes are a way to manage gross margins. It's not really a way to get revenue going up by 2% or 3%. So, the customer bills have remained largely similar pre- and post-price hikes. Thank you.

Discount would have been reduced, if you can help me with that. I understand the ticket value because a customer would have downgraded, but approximately what was the kind of reduction in discount, plus like this 2-3%, I'm just trying to understand that part.

So, Gautam, you're still there on the line?

Can you hear me?

So, between the price hike, where we said 2%, 3%, and in terms of discount reduction, it could be anywhere between 50 bps to 1%. So, that's the total impact you can see that would have on the consumer. But as I said, finally, the APC does not go up by that kind of amount. The APC remains in the same range. Finally, the customer balances the basket.

Understood. And the second thing was, just wanted to understand something fundamentally for this industry, specifically on the pizza category side. For the last two, three years, we have been seeing that, um, Broadly, pricing in this industry has become damn difficult. Across the two top players, which I'm talking about, both of you and Domino's have been talking about not taking price hike, giving more and more value. Has something structurally changed for this industry or this category, which is leading to this kind of strain? I understand the strain on the consumer, right? But how long would you, you know, subsidize from your P&L, the customer? Because I understand if it's transitory, it's three months, six months, 12 months. But for the last two to three years, we have been, you know, hearing this thing again and again. We'll be right back.

The journey for Pizza Hut has been quite different in terms of the pricing. I think few years, several years ago, we were considered quite expensive when we compared our prices to Domino's specially. And 2020, 2021, we said, finally, we have to tick mark that value bucket. And we were considerably behind. And hence, we took a call that in terms of price hikes, we won't take too many or large price hikes. Also, we introduced a flavorful range of pizzas. And I think today we have reduced our gap with dominoes considerably. In fact, we are probably as competitive as dominoes in terms of our pricing. So that was a strategy to make sure that your customer proposition goes strong. It was not a strategy that we were trying to subsidize or do anything of that sort. And while doing that in the process, we were anyways giving discounts to the customers. Those discounts to the customers were in form of a day-wise discount on a particular day or a particular channel. All those discounts got rolled and actually were baked into the everyday low pricing. So that was a strategy. We didn't really lose on our gross margin. So if you look at our gross margin percentages over the year, they still remain quite healthy. I think the challenge is to drive transactions, and if you are able to drive transactions, Especially dining and take-away transactions, the business would come back. So I don't think really the challenge is in terms of not being able to pass on the inflation. In fact, if anything, our value strategy is finally helping us drive the customers back in. And after a very long period of time, both dining and take-away transactions across both the brands, we are able to grow the transaction vis-a-vis delivery. So, the problem is not the pricing. The problem is, are you able to generate enough demand out there, and are you able to get enough customers in your store to get the SSHG, to get the desired unit economics?

Understood. That's quite helpful. If I may follow up on this. So, structurally, is it just that it has become… Quite more difficult to get the customers to the store. Delivery, I understand there are two players who are pushing the throttle there, right, the aggregators. But is it also structurally become difficult to get the customer to the store?

I think now both KFC and Pizza has been demonstrating, especially over the last two, three quarters, that if we are able to deliver the right value to the customer, backed by a right marketing message to drive customer recruitment, It's not impossible or impossible to get customers back into the stores. Now, it's now the last three quarters, we have been able to drive transactions in our dining and takeaway channel. Also, initially, the delivery had a great run in terms of the benefit, the convenience which customers to get also came at a greatly discounted prices. I think over the period of time, finally, the pricing has caught up. Today, the convenience does not come at a really great discounted prices. Hence, I think today, and increasingly, we are getting a level playing field between dining, takeaway, and delivery. And with the right value proposition backed by marketing, we have already shown that we can get dining and takeaway transactions.

Very interesting. Thanks a lot and all the best.

Thank you. Thank you. The next question is from the line of Avi Mehta from Acquire Capital. Please go ahead.

Hi, thanks for the follow-up opportunity. I just wanted to kind of check with you on one conceptual bit, saying for this quarter and for the last few quarters, we've seen a divergence emerge between your headline sales growth and that of aggregators. Now, you've obviously taken measures for some time to rekindle the dine-in and takeaway formats. But how would you, Sanjay, look at this, that is this growth rate like that divergence likely to continue given the way the number of restaurants are or the industry growth is likely to be? So your thoughts on that would be very useful.

Just for clarification, when you say divergence, you are looking at the two different growth numbers, what Sapphire is delivering versus the growth delivered by the aggregators. That's what you are referring to divergence?

That is correct, Vijay. I'm just essentially looking at headline order value growth for one versus your headline, even if I take any of the formats. That is where I'm coming from.

If I look at the last year where KFC struggled in terms of SSHG, I think last year we delivered 11% growth and the SSHG was quite challenging for last year. But if I just flip out that last year, I think the KFC growth was going almost in hand in hand with the aggregator growth, delivery growth as well, the food service business, which was in the range of 18%, 20%. KFC was growing at 17%, 18%. We are back to 17% growth on KFC because SSHG is back. Also, a component of a growth which aggregator has been seeing over the last 3-4 years has been also in terms of the take rates. And take rates not just on the commission. I think the various charges, platform charges which have been increasing. So if you strip that off, as long as we get SSHG of 5%, 6%, I think KFC should be able to match that kind of a growth rate which will be anywhere between 15% to 20%. Pizza Hut, the challenge has been different. Pizza Hut, we are not expanding. And unless we are able to finally fix the overall brand challenge and the brand proposition and have a unified strategy between both the franchises, and that happens, we cannot expand. And until that expansion happens, it will be difficult to drive the double-digit growth or 15% growth. So, I think... Those are two different issues for KFC and Bizarre. KFC can be right up there in terms of matching the growth, which could be in the range of 15% to 20%.

Got it. Very clear. Just a follow-up. I mean, again, strategy question in a way. But, you know, looking at just the KFC format or looking at both the formats, from a demand point of view, we've seen a period where growth momentum has been more or less flattish. You know, now at least it's flattish. It was declining for some time. Would that entail a different thought process in terms of either store additions, in terms of what you focus on at the store, and any thoughts on that? Because clearly, then you are essentially looking at a shrinking pie, and then you would like to kind of conserve your bullets to some extent. So how do you look at this demand environment and kind of responding based on that in terms of the therapies?

So undoubtedly, the SSSG is a factor which will always be there in the back of mind and in a calculation when it comes to store expansion. And if you see, we have slightly moderated. If you compare our numbers with, let's say, two years ago, three years ago, when we were even added 80 stores, 90 stores in a year, compared to that 60 to 80 on a higher base, there is some amount of moderation. And this moderation takes into account the slow or negative SSSG which we had over the last one or two years. Having said that, we have also called out that our news for expansion is based on the metrics of strike rates which we track internally. One is whenever we launch, let's say, X number of stores in a year, at the end of one year, what level of ADS they are delivering and what are the strike rates compared to what we have taken in payback. If that's healthy, that's a tick mark for us. Within that cohort of stores, we try and see whether 75%, 80% of stores are actually achieving those strike rates or not. Even if that's another second tick mark for us. And as long as we have those two ticks, we are quite comfortable to go out there and open stores. And SSHG is undoubtedly a benchmark, but that will automatically reflect in our poorer strike rates. If the strike rate goes poor, we are happy to moderate our store expansion even further, as has been demonstrated in case of Pizza Hut, where we were opening 50 stores, 60 stores at one period of time, which came down to 30, 20, and now in our last calendar year, it was next to zero, or actually zero. So those strike rates will be the guiding factor for us, and SSHG is one of the factors, but primarily the strike rates.

Yeah. Got it. Perfectly. Very clear. Thank you very much for this. That's all.

Thank you. The next question is from the line of Ashutosh from MIT. Please go ahead.

Thanks for the opportunity. Just a couple of questions. First would be since this quarter, we have seen the trending dining improving. So just wanted to get some color on how has the new customer acquisition been. And typically, when you see this number accelerating, what's the kind of order frequency do these customers have given the context of very attractive value offers that we are currently having? So, any color on that? And secondly, on Sri Lanka, given the inflationary pressure currently, would there be any change in the guidance of high single digits or addition 8 to 10 that we target?

So, it's tough to give you quarter on quarter absolute numbers on… Thank you. Same store transaction growth has been higher than our same store sales growth. So that's the positive part. On Sri Lanka, we should be in that same...

So, we won't react. We have said this previously also, our quarter's performance is not, whether good performance or bad performance, that's not good enough for us to react in terms of the store opening plan for the immediate future. So, one quarter of challenging performance on profitability. And just mind you, we still had a really good quarter in terms of the SSLG for the brand. So, the guidance remains for this particular year.

Got it. Thanks. Thank you so much.

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the comments over to Mr. Sanjay Purohit for closing comments.

Thank you, everybody, for your patience and participation in the quarter one business performance highlights. I want to emphasize this was a really strong quarter for us. KFC, SSSG growth, KFC, EBITDA growth, 15% consolidated growth, which was the best in our 11 quarters, 37% adjusted EBITDA growth. Which is the best in our last fifteen quarters. So, a really good quarter. The fact that SSHG on KFC, Pizza Hut and Sri Lanka, all three were positive is the heartening part. It is the reason why both growth and EBITDA have come the way they are. Thank you so much. We will see you another in a quarter's time. Good day. Have a good weekend.

On behalf of Sapphire Foods, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.