Devyani International Limited (DEVYANI) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Devyani International's earnings conference call. As a reminder, all participant lines will be in the listen-only mode and anyone who wishes to ask a question may enter star and one on the touchstone phone. To remove yourself from the queue, please enter star and two. Should you need assistance during the conference call, please signal an operator by pressing star and zero on the touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anupu Pujari from CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us for Devyani International's Q4 and FY26 earnings conference call. We have with us Mr. Ravi Jaipuriya, non-executive chairman of the company, Mr. Raj Gandhi, non-executive director, Mr. Anupu Stavar, president and CEO, and Mr. Anupu Kumar, CEO of the company. We initiate the call with opening remarks from the chairman, followed by key business and financial highlights from the CEO. Thereafter, we will have the forum open for a question and answer session. Before we begin, I would like to point out that some statements made in today's call may be followed by nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier. I would now request Mr. Abhijapuria to make his opening remarks.

And thank you for joining us today. It's my pleasure to welcome you all to Devyani International's post-results, earning conference call to discuss our performance for the fourth quarter and full year

25-26. This year has been a defining one for Devyani International, a year in which

we navigated a challenging operational environment while taking transformational steps that position the company strongly for the future. Our proposed merger with Sapphire Foods is a strategic combination of two scaled-up and complementary platforms, united by a shared vision for long-term growth upon completion. The Merged Entity will emerge as one of the largest QSR platforms globally and as one of the largest partners for YUM, with a diversified portfolio of leading brands, expanded geography reach, and enhanced operational capabilities. The merger is expected to unlock meaningful synergies, strengthen execution, and create a more agile and efficient organization, capable of accelerating growth, confident, have the new team in focuses to bring in, prepare for the next phase, or will also play a key role in enhancing efficiency, scalability, and customer experience. The new management team is being formed, keeping in sync with our aspiration for DIL to become one of the largest and most admired global QSR companies. Demand sentiment during the quarter remained broadly stable, and she delivered its strongest performance in the last 14 quarters,

posting 4.9% positive, as

continues to anchor our growth momentum and network expansion. Our own and franchise brands also mendrained positive Thank you, Mr. Jaipuriya.

Good evening, everyone. Thank you for your valuable time for attending our Q4 FI26 earnings conference call. Our performance in Q4 provides a good foundation as we plan and build DIL2, a journey of transformation led by the new leadership team and enabled by digital technology, automation, and AI. DIL has always been a brand and employee-centric organization, and our vision is to leverage The combination of deep institutional knowledge within the organization and the fresh perspective being brought by the new leadership team is helping shape a clear and ambitious roadmap for the future, one aimed at strengthening DIL's position amongst leading food services players globally. While we'll share more details on DIL2's strategy and transformation roadmap over the course of the year, let me briefly outline its core pillars. It's all about reimagining how we work, expanding the reach of our brands, making the organization more efficient, and focus on digital transformation. We also see significant opportunities in driving greater collaboration across brands, enabling the sharing of capabilities, common infrastructure, strategic thinking at middle management level, consumer insights, and best practices across the portfolio. Together, these initiatives will help us build a leaner, more agile, and significantly more productive growth-oriented organization. With technology and digital capabilities, customer recruitment and increasing in-store traffic will remain one of the core strategic priorities, serving as important growth enabler. We have now achieved more than 80% digital chaos penetration across our KFC store network, enhancing customer experience, convenience, and engagement across physical formats. In parallel, we are making strong progress on DL Commerce, our unified technology platform designed to strengthen operational execution, deepen customer engagement, and create a scalable digital backbone for future growth. On to the business updates. We ended FY26 on a good note. KFC delivered a positive SSSG of 4.9% for the quarter, the strongest performance in the last 14 quarters, reaffirming both the resilience of the brand and the long-term opportunity in the market. This momentum translated into nearly 15% year-on-year growth for KFC, with Q4 revenues of INR 586 crores. Brand contribution grew nearly 20% Y&Y to reach INR 99 crores with brand contribution margins improving to 17% for the quarter. We ended the year with 783 KFC stores across India. KFC continues to execute effectively on the dual priorities of innovation and delivering disruptive value along with higher footfalls in the stores. At Pizza Hut, our focus remains on portfolio consolidation and operational discipline. While Kipple SG was at minus 3.7%, the performance improved on a sequential basis, with ADS remaining stable at approximately INR 30,000 rupees per store per day. Brand contribution for the quarter was slightly negative, primarily due to operating leverage arising from lower same-store sales. We ended the year with 639 stores with no net additions during the quarter. Our own brand's portfolio, comprising of Vango and Biryani by Kilo, continue to deliver healthy performance, with both brands reporting mid-single-digit positive SSSCs. With Biryani by Kilo now achieving positive brand contribution, we have initiated measured Thank you. I feel very happy to report that our teams managed the same very closely and effectively, and we could come out of it with minimal impact on the business. The gas crisis continues to be an issue in some parts of the country, and we are still not fully out of it, but we are able to manage the same very, very closely. Our international business continues to deliver strong and consistent growth. Nepal, while still is a relatively small contributor, recorded an impressive 46% year-on-year increase in sales, while Thailand grew revenues by 19%. As a result, the international business grew 20% year-on-year and crossed INR 500 crores in quarterly revenues for the first time. Improved gross margins and operating leverage drove brand contribution margins to 17.7%, with brand contribution reaching INR 89 crores. On a consolidated basis, we delivered 18.5% year-on-year growth in revenues for the quarter, reaching INR 1,437 crores. For the full year, we crossed INR 5,500 crores revenue milestone, reaching INR 5,611 crores. Both gross margin at 68.8% and grand contribution at 14.1% were better on a Y-on-Y basis. Operating EBITDA came in at INR 123 crores, representing 8.6% of sales, and grew 13.8% Y-on-Y. Over the past year, our priority has been to consolidate the portfolio and strengthen the foundation for the next phase of growth. We ended FY26 with a system store count of 2,256 stores, representing a net addition of 217 stores over the last 12 months. We expect to add approximately 200 to 225 net new stores in FY27. As DIL, KFC is expected to contribute 100 to 110 stores of these additions, with the balance being driven by Costa Coffee, Biryani by Kilo, and International Businesses. Having tested T-Live in India and Thailand, we've decided to discontinue the brand, and the same will happen in the next quarter. Before I conclude, I would also like to briefly update you on the proposed merger with Sapphire Foods. The process remains on track. We have completed filings with the stock exchanges, and we are expecting to receive the necessary approval shortly, following which we will proceed with the CCI application. We continue to expect completion of the merger by end of the current financial year. With this, I would request the moderator to open the forum for any questions or suggestions that you may have.

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. Participants are requested to use answers 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 Devanshu Bansal from MK Global. Please go ahead.

Yes, hi. Good afternoon to everyone, and congratulations on a strong pick-up in KST. Manish, we've made multiple leadership announcements in the recent time. Maybe if you could highlight how these leadership changes across some of the key roles can help us in growth augmentation in the subsequent quarters would be helpful.

Thanks, Ivanshu. So, when we drew the blueprint in terms of where we want to go as a company, we kind of analyzed and saw what were the skill sets that were missing. So, that was one piece, and the other piece was this whole impending merger with Sapphire Foods, because if you put the two companies together, we are going to be almost a $1 billion top line by the time we complete the merger. And hence, the exercise was to kind of evaluate what are the skill gaps, where is that we need to go, and how is that we need to go there. As part of the entire exercise, what we thought that we lacked was one strong technology leader, and we've hired a gentleman by the name of Neeraj Tiwari, who's going to be the CTO for the company going forward. We've already made this announcement, as you know. We also identified that with our own brands coming in and with some of the other franchise brands where we take the lead on marketing, and at the same time, as we've announced in the past that Pizza Hut marketing will come to us as part of the merger, we wanted to enhance our marketing overall portfolio, and hence we've hired a gentleman by the name of Sandeep Anand. So Sandeep has joined us as Chief Marketing Officer, and he will be also looking after the Pizza Hut operations. Sandeep's background is a combination of QSR and technology, and therefore, all of the relevant experience will help us as we move forward in our journey. We've also made a couple of other announcements, like Rob Inder, who's going to be leading our portfolio on the Costa side, and some of the smaller brands that we have, like New York Fries and Sanu Kitchen. We've also made an announcement for the COO today. I don't know whether you've seen that or not. So, therefore, this gentleman also will be joining us in the next couple of weeks. Comes with a very strong background from FMCG and technology with the companies like Unilever and Amazon. So, with that, we are becoming a future-forward organization, and we want to transform ourselves not only from people practices point of view. We want to bring in much more automation and technology-led operations transformation and technology-driven operations so that we are able to ride the next wave. So that has been the broad hypothesis in terms of the people changes that we are looking at.

So, majorly, if we have to summarize this, so one is from a marketing perspective, right, and the other one is from maybe the own delivery capabilities as well as from a customer acquisition perspective. And thirdly, from a CEO perspective, obviously, that will be an on-round software focus, right? So, is that a right way to look at it, Manish?

Yeah, absolutely. Because if you remember, we announced in the last call that we've kind of tied up with one of the leading IT companies as a technology partner. And therefore, we will be developing our own apps, we will be developing our entire technology stack. And therefore, we wanted to build that capability also in-house because we'll have to manage the technology as we go along inside the company.

Good. Now, secondly, Manish, the broader commentary that we have come across CSR players post Q4, the dining footballs have definitely improved after a fairly long period of time. So, wanted to check if you could share your thought process on the sustainability of this trend, right? So, what all initiatives, company-specific, we have taken, and what is the confidence on sustainability of these trends?

See, Devanchu, as I mentioned in the past, we need to give a reason to the consumer to come into the store, right? And because, for example, if you're able to give the same offering to a consumer inside the home with zero incentives to come to the store, nobody will walk into the store. And therefore, that meant that you have to kind of reimagine the business from the point of view of what is your pricing in the two channels, what is the innovation, and so on and so forth. So we've done some experiments to treat the two channels as two different businesses, which is what, again, I have alluded in the past, and therefore that is showing some results. It is just the start of the journey. We have to cover a lot of gaps from there, but we are encouraged with what we've done and the response that we've seen from the consumers. So therefore, it kind of, again, reiterates our belief that if you give a reason to the consumer to come into the store, they will come into the store. And that's how we are kind of now approaching the entire business.

So this trend, at least we can assume, right? So obviously, your political tensions, et cetera, sort of some uncertainties remain. But so far, so good, right?

See, macro levels, Devanshu, none of us can control, right? And we've seen a number of macro issues over the last three, four years. So it started from COVID. And since the time of COVID, there has been some event or the other, which is regularly kind of coming along. So I think the way we look at it, I mean, we have to accept this as a reality. And therefore, we continue to chug along in terms of whatever we need to do, whatever is under our control, do that to the best of your capability and carry the business along. Because remember that any of such geopolitical situations, they put more pressure on the small-scale players, which kind of helps us consolidate further on whatever we are doing.

Great. Thank you, Manish. I have just two couple of bookkeeping questions, but I will come back in the queue.

Thank you.

Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, We would request you to please restrict your question to one per participant. If you have a follow-up question, you may rejoin the queue. The next question is from the line of Gaurav Joghani from JVM Financial. Please go ahead.

Thank you. Since I can ask only one question.

My question is regards to the store opening, basically. The store opening this quarter around, we have noted that across the corner, we have closed tables.

I am sorry to interrupt you, Mr. Joghani, but you are not clearly audible, sir.

Is this better?

Yes, but it is sounding a little muffled.

Is this better now?

Yes, please go ahead.

Yeah. So, my question is with regards to the store openings. Basically, we have seen that, you know, there have been store closures across formats. So, is this a deliberate strategy wherein as a part of this exercise of reorganization, We are kind of, you know, chugging out the loss-making or the non-profitable stores and then start on a cleaner state for the next year. And if so, is there any change in the guidance for the store expansion?

So, Gaurav, on the guidance, first, as I said in my address that we are planning to open about 200 to 225 new stores during the year, of which KFC will account for about 100 to 110, 120 kind of store levels. At the same time, we've communicated in the past that for 26, I'm talking about calendar year 26 here, we are not planning to add any net new stores for Pizza Hut. The idea is to consolidate and realign the portfolio for Pizza Hut. So, therefore, the remainder addition up to 200 to 25 will come from Costa, Vango, Biryani by Kilo, and so on and so forth. Having said that, I know that you've seen negative numbers in quarter four, which is primarily because we are resetting our strategy from a BD perspective in terms of better quality stores and therefore a better pipeline. That's the reason first quarter was a negative store. And the focus, as you said, is to kind of shut the loss-making stores which are there in the portfolio and open better quality stores. While, let's say, our new strategy is kind of build the pipeline as per our new guidelines and what we've discussed internally, that's the reason the store count is looking negative. But again, as I said, for the entire year, you will be able to see 110 to 120 new KFC stores and with an overall store count of about 200 to 225 stores.

Manish, thanks for this. This follow-up, you know, also, you know, you've been highlighting that you'll be doing a lot more tech-driven initiatives. So, would that in any case, you know, you would be tinkering with at least the store size or any changes in the capex per store? Any changes that you see here on this one?

Not so much, Gaurav. As I said, around the call that we announced the merger, that we will be able to manage all the tech changes within the existing budgets that we have, and whatever charges we pay to the YAM and so on and so forth. So, therefore, that is how we've tailored ourselves in terms of the new investments also. And plus, given the current optionalities on AI and all of that, we will be able to use our current infrastructure better with the help of some overlaying AI technology, and that is what we are focusing on.

Just one last question from Manish is regarding the KFC revival that you have seen. So, you know, we have also seen the macroeconomic situation also kind of improving. Plus, we have also taken initiatives in terms of the interventions we have done. So, for the SSG that you have reported, how much you would accord to the overall macro changes and how much would be your own initiative and how sustainable this is going ahead?

It is difficult to quantify factor by factor, as I've said in the past, but again, we feel confident that we'll be able to sustain the initiatives that you've seen. If at all, I mean, if you look at, let's say, in the quarter, almost 45 days have gone by, we have seen that we are able to maintain the current SSSG trends in line with the previous quarter. So, therefore, that is encouraging. We are monitoring it. Obviously, it will take another couple of quarters by the time we are firmly able to say that the worst is behind us, and we are not too sure about the macroeconomic situation as well. But as per the current actual numbers, we think we will be able to maintain the SSC trends that you've seen.

Sure. Thank you. Thank you, Manish. That's all for me.

Thank you. The next question is from the line of Parsi Pantaki from ISL Securities. Please go ahead.

Hi, Manish. I just wanted to understand the gross margin expansion on KFC. It's a pretty big number. What has really driven that?

See, Parsi, there are many things that would go into the gross margin line. So one is the whatever raw materials and packing materials that we buy. At the same time, how we handle the promotions and discounting structures and the multiple deals that we offer, what are the timings of the deal. So it's a combination of all of that. The raw material and packing material environment has been pretty stable. So therefore, that has not been an issue. And at the same time, we tweaked the deals in favor of the dine-in customers more, where we were lacking initially. And that has helped us to kind of improve the gross margins a little bit and drive the customers in the stores to deliver the SSG.

Sorry, for the in-store part of the business, you have reduced your promotions. Is that what you're saying?

No, I've reduced the promotions on online. Okay.

Understood. Understood. Also, just wanted to understand, I mean, in light of the fact that promotions have been actually reduced, what is really driving this SSSG? I mean, we've seen it across both Sapphire and yourself. So, is it just that, I mean, beyond the point after two, three years of sort of negative SSG, the sort of only the loyal customers are left and they are now sort of seeing a normal growth and whoever had to leave has left? Or is there any, can you just tell me if there are any two, three very specific actions which you have taken, which in your opinion have driven the SSG for KFC?

So, Percy, as I mentioned to Devanshu, that end of the day, you need to give a reason to the consumers to come into the stores. And that is what we've increased the intensity, which is where we were not kind of as active. Our entire focus used to be online. And we've shifted the focus now more to dine-in and more to the dine-in customers. And therefore, we are tailoring the offers and the price points and the promotions to make sure that the dining customers are attracted. And that is what has predominantly helped us.

But at the same time, the reduction in the offline promotions, hasn't that had a negative effect on that part of the business?

No, I'm not saying that we've reduced the offline. I said we've reduced the online promotions.

Yeah, online, I'm saying.

The online promotion reduction, which is the offline used.

I see. I see. Understood. Also, have you taken any menu price increases in KFC either in the past quarter or very recently?

There was a very small correction. So, on a portfolio basis, I would say it was maybe less than half a percentage point. It was only to kind of tweak some bits of mismatches which were here and there. That's a continuous process. Yes.

And given the inflationary sort of macro scenario that we are seeing, do you foresee any price increases in the near future?

If you can help me foresee the inflation in the near future, I'll be able to tell you that.

Got it. Got it. Okay. That's all from me. Thank you.

Yeah. Thank you so much.

Thank you. The next question is from the line of Jai Ganshagul from Bernstein. Please go ahead. Hi.

Hi, Manish. Congratulations on sort of revival in KFC. I wanted to double click on KFC and had a very quick question. I'll pose both questions together so you can answer them. On KFC, would you help us understand this SSFG that you've seen? What part of it is higher AOV or higher average value orders and higher incremental transactions? I think this is a bigger share, and what gives you the confidence of sort of sustaining that, irrespective of what happens in micro. And I think on Pizza Hut, the last time you mentioned that, we will have a more detailed answer to what's your approach going to be, right, to revise the brand. So when should we expect to see that? Thanks.

Sure, thanks, Jekanchu. So, let me answer your question on the KFC first. So, in terms of, again, I think it's basically going down to the online and offline. So, if you see our past trend when we were losing SSSGs, we were losing more on dine-in versus the online channels. If at all, while, let's say, the SSSG was negative, in the same quarter we had seen that the online channel was positive and the offline channel was negative. And that negativity was kind of overlapping the positivity on the online channel. And that is what we've tried to reverse in the last quarter by focusing more on the offline channel. And so let's say online SSSG has come down, but the offline has taken over more. And again, it's basically, as I said, I mean, you need to give right reasons for the consumers to come into the stores because it cannot happen that, let's say, for example, if a consumer is ordering at home and at times they are able to get cheaper pricing sitting at home rather than coming into the store, where the expense is higher and at the same time where the customer gets the convenience. So that is what we've started to monitor much more closely, And we've taken steps that for any customer, the best deals will always be at the store level, and that is basically where you experience the brand at its best, not only from a freshness point of view, but also from a customer experience point of view. And we've seen that the customers have responded very positively to that, and that is kind of helping us. Thanks to your other sub-question in terms of the tickets versus the AOV. It's a combination of both. We've seen the tickets also grow because what we've seen over a period of time that there were a lot of new consumers who were coming in, but there were a lot of lapses also which were happening. So the new consumers were coming in, the olds were lapsing out. So we've tried to address through multiple ways in terms of how do we get back the consumers who've lapsed out and why we continue to recruit the new consumers. So therefore, that strategy we've seen has played out well in the current quarter. We need to ensure that we are able to run with it for the next few quarters to be able to call out that our strategy is working. So the start has been good. Let's see how it shapes up. On the Pizza Hut, to your other question, as I said, we've hired a new gentleman by the name of Sandeep. He's going to be focusing on Pizza Hut. He's basically a marketeer all through his career with a strong FMCG background, QSR background, and technology background. And so basically, we are going back to basics as far as Pizza Hut is concerned in terms of identifying the gaps on the portfolio from a product point of view, We are identifying the pricing layers which are kind of missing in our portfolio, looking at the quality on a de novo basis as far as Pizza Hut pizzas are concerned, and not only from just – because, as you know, in a pizza, typically you have to look at the dough, cheese, and toppings. So we are trying to revisit all of those things. Internally, we've seen some good work which is happening, and I think it will take maybe a couple of months by the time we actually launch that in the market. We are seeing how the technology is working. We are actually starting to retrain all of our store staff, both from a product quality perspective as well as the CX training. So Pizza Hut is back to basics. Thanks. So maybe during the course of the year, as I said in my comments, that we will come back to you with a complete strategy in terms of how we are trying to approach various brands. Maybe we can fix an analyst day in the next couple of quarters, and we can take you guys through in detail on what our brands are and what is that we are trying to do brand by brand once the entire new management team or the leadership team is in place.

Perfect. Thank you for the answer. All of us.

Thank you.

Thank you. The next question is from the line of Naman from Sanghi Family Office. Please go ahead.

Hi, just one quick clarification. So, we mentioned about 225 new store additions. That is taking into account the merger scenario or is it on standalone basis at DIL level?

It's on a standalone basis, standalone basis, but considering all of our brands. So, therefore, that would include KFC, Costa, Vango, Biryani by Kelo, all the brands put together.

And just second clarification, you know, in Mumbai, I think you've started with this new KFC around the metros. So, do you think that that channel as a whole is giving us a very good visibility and showing encouraging trends?

See, Mumbai territory is with Sapphire, not with us. And therefore, your specific question on Mumbai will have to be addressed by Sapphire. But in general, I've mentioned, I think, probably a few quarters back that we see a big momentum on the travel side. And that's the reason we were focusing on multiple brands. That was the reason we were focusing on opening food courts at the highways and the malls and the food courts and so on and so forth. So, that is part of that overall strategy. So, we are bullish on the travel segment, but Mumbai question, you need to check with the fire.

Sure, sure. I'm so sorry. Thanks.

No issues. Thanks.

Thank you. Participants who wishes to ask a question, please press star and 1. Anyone who wishes to ask a question, you may press star and 1 now. The next question is from the line of Devansha Bansal from MK Global. Please go ahead.

Yes, Manish, thanks for the follow-up. Just a couple of bookkeeping questions. This gas cost, is this a small 1.52% of sales, or is it a sizable part of your portfolio, if you could just specify this?

So, I will not be able to give you the exact number, Devanchu, but it's a small cost.

And lastly, Manish, on the…

And at the same time, for example, Devanchu, just to give you, because in our portfolio, as a result of gas crisis, we started evaluating electrical equipments. For example, in Biryani by Kilo, we've managed to switch our equipments to electrical. At the same time, we are also exploring whereby the equipments can work on both gas as well as electricity. So there are multiple initiatives which we've taken so that in future we are able to mitigate the impact better.

Sure, sure. And secondly, sir, Biryani by Kilo, we don't get the individual brand-wise profitability, but this India portion, excluding the KFC and Pizza Hut, has done well, right, from a profitability perspective. So, anything if you could highlight from next year perspective, how we should begin for this particular brand?

So, Biryani by Killua, as I said, we've managed to turn the brand around. As you know, it was a loss-making brand. There is a further potential because right now we've basically brought the negative to positive, and we have to grow from a profitability perspective. At the same time, we've started experimenting with the brand on an offline basis. So, we've opened a few express outlets in our food courts to see how the brand performs. It's a profitable store wherever we've opened. So, therefore, we are very bullish on Biryani by Kilo, and it can do wonders once we're able to stabilize the entire situation.

Understood. One last from balance sheet perspective, Manish, there is some increase in debt as well as some increase in intangible assets as well. So, anything to sort of look into it, or how should we read these two numbers?

So, it's predominantly Biryani by Kilo consolidation, Devanshu, because the consideration that we paid obviously will go and sit predominantly on the intangible side. So, if you want details, we can connect on an offline, and we'll be able to. But it's predominantly Biryani by Kilo going and sitting in the Goodwill, as well as the brands.

Okay, and anything why the debt has increased, Nanish, for FY269?

So, that was only a temporary because we were trying to, we raised some debt because there was some injection required in Thailand, and because of the local Thailand regulatory issues, so that has got squared off in the first week or the second week of April already.

Okay.

Understood, sir.

Thanks.

Okay, thank you.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments.

Thank you very much. We hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our investor relations team. Thank you once again for your interest in support and for taking the time out to join us on this call. Thank you very much once again.

Thank you. Ladies and gentlemen, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.