Devyani International Limited — Q3 FY26 earnings call

Call held 4 Feb 2026

Management summary

Devyani International delivered a resilient Q3 FY26 performance characterized by steady revenue growth and a significant strategic pivot. The company is focusing on a major merger with Sapphire Foods while simultaneously initiating a turnaround for Pizza Hut by halting net new store additions for 2026. Profitability showed sequential improvement, particularly in the 'Own Brands' portfolio, and early signs of consumption recovery were noted in January 2026.

Highlights

  • Consolidated revenue reached ₹1,441 crore, growing 11.3% YoY.

  • Pre-Ind AS EBITDA stood at ₹124 crore with a margin of 8.6%, up from 6.8% in Q2.

  • Total store network expanded to 2,279 stores, including 1,174 KFC and 648 Pizza Hut outlets.

  • Biryani by Kilo (Sky Gate) achieved brand EBITDA break-even ahead of management guidance.

  • Announced a transformative merger with Sapphire Foods to create a platform with 3,000+ stores and ~$1B turnover.

  • KFC India added 54 net new stores; Pizza Hut India added 18 net new stores during the quarter.

  • Management reported positive SSSG across all brands in January 2026, except for Pizza Hut.

  • Leadership transition announced: Manish Dawar elevated to CEO effective April 1, 2026; Anupam Kumar to become CFO.

Concerns

  • Pizza Hut structural underperformance

Key financials

  1. Consolidated Revenue ₹1,441 Cr +11.3%YoY
  2. Gross Profit ₹993 Cr +11.7%YoY
  3. Pre-Ind AS EBITDA ₹124 Cr
  4. Brand Contribution ₹200 Cr +8.1%YoY
  5. EBITDA Margin (Reported) 15.7%

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
₹1,348 Cr Total
  • KFC India ₹603 Cr 44.7%
  • International Business ₹473 Cr 35.1%
  • Pizza Hut India ₹178 Cr 13.2%
  • Own Brands (Vaango/Sky Gate) ₹94 Cr 7.0%

Guidance & targets

Volume

  • KFC Store Additions Volume · every year · High confidence 110-120
    we plan to add about 110 to 120 stores every year for KFC. That stays.

    — Manish Dawar, CFO

  • Pizza Hut Net New Units (NNU) Volume · calendar year 2026 · High confidence 0
    for 2025 there were zero NNUs, 2026 again there are going to be zero NNUs. So therefore Pizza Hut, we have recognized that and the focus is turnaround

    — Manish Dawar, CFO

Profitability

  • Annual Merger Synergies Profitability · Annual · Medium confidence ₹210-225 crore
    the estimated annual merger synergies of approximately INR 210 crore to INR 225 crore will allow us a greater headroom to invest in India

    — Manish Dawar, CFO

Other

  • Corporate G&A as % of Revenue Other · FY27 · Medium confidence 5%
    For let us say for 2026-27, you can take a 5% G&A.

    — Manish Dawar, CFO

Risks & concerns

  • Pizza Hut structural underperformance

    high

    Brand contribution margin is near zero (0.8%); requires shutting loss-making stores and a multi-year turnaround.

    Both acknowledged

  • Cannibalization of KFC sales

    medium

    Rapid store expansion (3-4x in 5 years) is leading to internal competition between outlets.

    Both acknowledged

  • Lagging technology infrastructure

    medium

    Management admitted Devyani is lagging behind peers on technology, which is a top priority for the new leadership.

    Management acknowledged

Areas of evasion (3)

  • Specific SKU-level performance
  • Marketing mix details for January turnaround
  • Peer group comparison for demand trends

Q&A highlights

2 direct
SSSG Turnaround and Sustainability Partial
We experimented, Devanshu with some ideas on the promotions, on the deals. We have changed a little bit of our strategy in terms of how we deal with the online business and offline business.

Investors are looking for proof that the negative SSSG trend has bottomed out; management attributes the Jan 2026 uptick to tactical experiments.

Asked by Devanshu Bansal, Emkay Global

KFC Cannibalization and Store Expansion Direct
If you look at the last five years, we have gone to almost three to four times of what the base store count used to be. And obviously, if you are opening stores at that pace, there will be some amount of cannibalization which will seep in.

Confirms that aggressive expansion is hurting per-store metrics (SSSG), but management remains committed to the growth pace to compete with larger peers.

Asked by Jaykumar Doshi, Kotak

Pizza Hut Turnaround Timeline Direct
It will take a couple of years to finally sort it out, but we have absolutely started this exercise... we will sit jointly [with Sapphire] and draw out a merged company strategy plan for Pizza Hut.

Sets a realistic multi-year expectation for the Pizza Hut recovery and highlights the importance of the Sapphire merger in fixing the brand.

Asked by Saaksha Mantoo, Old Bridge Capital

2 min read 5 chapters

Detailed narrative

Strategic Merger with Sapphire Foods

The proposed merger with Sapphire Foods is the central theme of the company's future growth strategy. Management expects the combined entity to operate over 3,000 stores globally with a turnover approaching USD 1 billion. The merger is anticipated to generate annual synergies between ₹210 crore and ₹225 crore, providing significant headroom for reinvestment in the Indian market. Applications for exchange and CCI approvals are underway with no material deviations expected in the timeline.

Pizza Hut Turnaround and Store Freeze

Devyani has initiated a rigorous turnaround for its Pizza Hut business, which currently operates at a marginal 0.8% brand contribution. The company has committed to zero net new units (NNU) for the calendar year 2026, opening new stores only to compensate for the closure of loss-making ones. This strategy aims to utilize existing assets to reduce capex while focusing on improving technology, innovation pipelines, and marketing effectiveness over a projected two-year recovery period.

KFC Resilience and Expansion Strategy

KFC remains the core growth engine, contributing ₹603 crore in revenue for the quarter with a stable ADS of ₹90,000. Despite negative SSSG during the quarter, brand contribution margins improved sequentially to 16.8%. Management plans to continue adding 110 to 120 stores annually, believing that a differentiated online/offline strategy and improved technology will mitigate the impact of cannibalization seen from rapid expansion.

Leadership Transition for the Next Phase

A significant leadership change was announced with Virag Joshi set to superannuate on March 31, 2026. Manish Dawar, the current CFO who has been instrumental in the Thailand acquisition and the Sapphire merger, will take over as President and CEO on April 1, 2026. Anupam Kumar will be elevated to the CFO role. This transition is designed to prepare the organization for the increased complexity of the post-merger entity.

Own Brands and International Performance

The 'Own Brands' portfolio, including Vaango and Biryani by Kilo, recorded ₹94 crore in revenue with a 9% brand contribution margin. Notably, Biryani by Kilo achieved brand EBITDA break-even ahead of schedule. The international business (Thailand, Nepal, Nigeria) showed resilience with ₹473 crore in revenue and a strong 17.1% brand contribution margin, benefiting from improved gross margins and steady store additions.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Consumer Services earnings calls