Devyani International Limited — Q1 FY26 earnings call

Call held 13 Aug 2025

Management summary

Devyani International reported a quarter of resilient top-line growth despite a challenging macro environment and soft consumer demand in the Indian QSR sector. While KFC showed signs of SSSG stabilization driven by online channels, Pizza Hut remains in a rationalization phase. The company is aggressively diversifying its portfolio through the acquisition of Sky Gate Hospitality and the upcoming launch of three new international brands.

Highlights

  • Consolidated Revenue reached ₹1,357 crore, representing 11.1% YoY growth.

  • Reported EBITDA stood at ₹205 crore with a margin of 15.1%; Pre-INDAS EBITDA margin was 8.1%.

  • KFC India SSSG stabilized at -0.7%, showing significant improvement from previous quarters of deeper decline.

  • Pizza Hut India continued to struggle with SSSG at -4.2%, leading to a net closure of 12 non-performing stores.

  • Concluded acquisition of Sky Gate Hospitality (Biryani by Kilo, Goila Butter Chicken), increasing stake to 86.13%.

  • Total store count reached 2,145 stores across all brands and geographies as of June 30, 2025.

  • International business (Thailand) grew 11.2% YoY with improved brand contribution margins of 16.7%.

Concerns

  • Dine-in Cannibalization

Key financials

  1. Consolidated Revenue ₹1,357 Cr +11.1%YoY
  2. Reported EBITDA ₹205 Cr
  3. Pre-INDAS EBITDA Margin 8.1% -0.8%QoQ
  4. Gross Margin (Consolidated) 68.2%
  5. Total Store Count 2,145 stores

What they filed

Q1 FY27: revenue up 8.9%, net profit up 36.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue836 873 801 917 871 +4%906 +4%879 +10%999 +9%
EBITDA146 146 137 151 131 −10%158 +8%144 +5%169 +12%
Net profit1 4 -13 6 -14 −1505%-12 −385%-13 +4%9 +37%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹1,268 Cr Total
  • KFC India ₹613 Cr 48.3%
  • International (Thailand) ₹433 Cr 34.1%
  • Pizza Hut India ₹187 Cr 14.7%
  • Own Brands (Vaango/Sky Gate) ₹35 Cr 2.8%

Guidance & targets

Capacity

  • KFC India Net New Store Additions Capacity · FY26 · High confidence 100-110
    we are on track to open approximately 100-110 net new stores [for KFC].

    — Manish Dawar, CFO

Profitability

  • Sky Gate Hospitality Turnaround Profitability · Next 12 months · Medium confidence Positive Brand Contribution & EBITDA
    We are hoping that in the next 12 months we will have a positive brand contribution and brand EBITDA [for Sky Gate].

    — Manish Dawar, CFO

Revenue

  • KFC Normalized ADS Target Revenue · Immediate basis / Full Year · Medium confidence ₹100,000
    our normalized KFC target is about INR 100,000 of ADS on a consistent basis for the full year.

    — Manish Dawar, CFO

Other

  • New Brand Launches Other · Q2 FY26 · High confidence 3 brands (New York Fries, Tealive, Sanook Kitchen)
    We are also in the process of launching our three new international brands i.e. New York Fries, Tealive and Sanook Kitchen in the next quarter.

    — Ravi Jaipuria, Chairman

Risks & concerns

  • Dine-in Cannibalization

    high

    Aggressive online promotions are diverting customers from dine-in, where store capacity utilization is already low.

    Analyst acknowledged

  • Structural Cost Increases

    medium

    GST on rent (no input credit) and rising aggregator/delivery expenses are impacting the bottom line on a structural basis.

    Management acknowledged

  • Soft Consumer Demand

    medium

    Near-term macro factors have led to a phase of soft demand across the QSR industry.

    Management acknowledged

  • Input Cost Inflation

    low

    Increase in raw material prices for cheese, flour, and edible oil impacted gross margins by 2.3% in India.

    Management acknowledged

Areas of evasion (2)

  • Specific transaction growth numbers (only gave '10% plus' range)
  • Specific details of which promotions are being scaled back

Q&A highlights

2 direct
KFC Dine-in Sales Decline vs. Online Growth Direct
when we focused more on online, there are some consumers who shifted, because they were able to get the value proposition sitting at home... we will now be balancing out in terms of what is happening in the online and dine-in to ensure minimal cannibalization.

Reveals that aggressive online discounting is cannibalizing high-margin dine-in traffic, leading to a 14% YoY decline in KFC dine-in sales.

Asked by Percy Panthaki

Gross Margin Impact of Promotions Partial
our plan is to continue with the same model for another 1 or 2 months, get our learnings, and then start to optimize... within the next quarter, basically Q3, we will start to see the gross margin improving.

Confirms that current margin pressure is a deliberate tactical choice to drive transactions, with recovery expected only in the second half of the year.

Asked by Gaurav Jogani

Sky Gate Hospitality (Biryani by Kilo) Drag Direct
the negative brand contribution for the first 20 days that we have consolidated is about INR 1.2 crore from the portfolio.

Quantifies the immediate financial drag of the new acquisition on the 'Own Brands' segment profitability.

Asked by Gaurav Jogani

2 min read 5 chapters

Detailed narrative

KFC India: A Tale of Two Channels

KFC India saw revenue growth of 10.5% YoY to ₹613 crore, with SSSG stabilizing at -0.7%. However, this stability masks a significant divergence between channels: online delivery saw positive SSSG and 10%+ transaction growth due to aggressive promotions, while dine-in sales fell 14% YoY. Management acknowledged that the 'Epic Savers' dine-in offer (9 for ₹299) was outperformed by even more compelling online value propositions, leading to channel cannibalization. The company aims to return to a normalized ADS of ₹100,000 by balancing these channel strategies.

Pizza Hut: Strategic Retrenchment

Pizza Hut continues to be the laggard in the portfolio, with SSSG at -4.2% and a sequential ADS recovery to only ₹33,000. In response, Devyani is rationalizing its footprint, closing 12 non-performing stores in Q1 and planning to slow down organic expansion for the brand. The focus has shifted to a 'delivery-focused format' and menu innovations like the 'Juicylicious' range to stem the decline, though brand contribution remained slightly negative this quarter.

Sky Gate Acquisition and Portfolio Diversification

The acquisition of Sky Gate Hospitality (Biryani by Kilo and Goila Butter Chicken) was completed on June 10, 2025. For the 20 days of consolidation in Q1, the portfolio contributed ₹1.2 crore in negative brand contribution. Management's immediate priority is a 12-month turnaround plan to achieve positive EBITDA by optimizing recipes, kitchen preparation times, and expanding into high-traffic channels like airports and food courts.

Cost Headwinds and Margin Compression

Consolidated Pre-INDAS EBITDA margins dipped to 8.1% from 8.9% in the previous quarter. This compression was driven by a 2.3% decline in Indian gross margins due to promotional investments and raw material inflation (cheese, flour, oil). Additionally, structural increases in rental costs due to GST changes (where QSRs get no input credit) and rising aggregator commissions for delivery have created a higher floor for operating expenses.

International Business as a Growth Engine

The Thailand business remains a bright spot, contributing ₹433 crore to revenue with a healthy 11.2% YoY growth. Brand contribution margins improved to 16.7%, driven by better gross margin performance. This segment provides a critical buffer to the soft demand and margin pressures currently being experienced in the domestic Indian market.

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