Sapphire Foods India Limited — Q4 FY26 earnings call

Call held 28 Apr 2026

Management summary

Sapphire Foods reported a strong Q4 FY26, with consolidated revenue up 11% and KFC India showing robust 15% revenue growth and 6% SSSG (ex-Navratri). Consolidated restaurant EBITDA margin expanded by 100 bps. However, Pizza Hut India continued to face challenges with a 6% revenue decline. The company is navigating LPG availability issues and inflation while progressing with the Devyani International merger, expected to complete by FY27 end.

Highlights

  • Consolidated revenue of ₹790 crores, up 11% YoY, marking the best quarter in 12 quarters for SSSG and adjusted EBITDA growth.

  • KFC India revenue grew 15% YoY, the highest in 8 quarters, driven by strong consumer recruitment and value initiatives.

  • KFC India SSSG was 4% (6% excluding Navratri impact), the highest in 14 quarters.

  • Consolidated restaurant EBITDA grew 21% YoY, with margin expanding 100 bps to 13%.

  • Sri Lanka business showed healthy performance with 15% revenue growth in LKR terms and 11% SSSG.

Concerns

  • Pizza Hut India revenue declined 6% YoY in Q4 FY26, with full-year restaurant EBITDA at -3.3%, 570 bps below last year.

  • Consolidated PBT before exception was negative ₹2.7 crores (-0.3%), and with exceptional items, it was negative ₹15.5 crores (-2%).

  • LPG-related availability challenges and inflationary pressures persisted in India and Sri Lanka, impacting operations and potentially margins.

Key financials

  1. Consolidated Revenue ₹790 Cr +11%YoY
  2. Consolidated EBITDA (post Ind AS) ₹125 Cr +15.8%YoY
  3. Consolidated EBITDA (post Ind AS) Margin — -0.2%YoY
  4. Consolidated Restaurant EBITDA Margin 13% +1%YoY
  5. Total Restaurant Count 1,052 units
  6. Consolidated PBT before exception ₹8 Cr

What they filed

Q1 FY27: revenue up 14.5%, net profit up 533.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue591 638 605 660 616 +4%680 +7%668 +10%756 +15%
EBITDA98 115 90 98 82 −16%112 −3%105 +17%125 +28%
Net profit-15 3 -4 -3 -17 −13%-11 −467%-17 −325%13 +533%
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

SegmentRestaurant EBITDA MarginSSSG
KFC India16.8%—
Pizza Hut India—-7%
Sri Lanka14.6%11%

Capital allocation

high confidence
  • Capex ₹320 Cr
    • New store opening (KFC) ₹2.1 Cr
    • New store opening (Pizza Hut) ₹1.35 Cr
    • Refurbishment capex (every 5-10 years)
    • Renewal fee component (after 10 years of operation)
    So, the capex has three components, which are a material components. One is, of course, the new store opening. It also has a component on the refurb capex, which every 5 years and 10 years, the store needs to be refurbished as per the agreement. There's also a renewal fee, which comes into the picture now apart from the initial. So, renewal fee because now as a Sapphire, we have completed 10 years. So, there's a renewal fee component which kicks in every year. So, it's not just the capex on the stores. These are the several components which adds up to the overall capex. When I look at the coming year, we see a similar number of capex, similar number in terms of the capex spend for FY '27 as well.
  • M&A Devyani International Merger · Pending regulatory

    Enable a unified brand strategy and future growth.

    Plus, with the merger announcement with Devyani International, we think that this will enable a unified brand strategy on both the brands and this future proves the growth in the coming years.

Guidance & targets

Profitability

  • KFC Gross Margin Impact (if vendor support changes) Profitability · future · Medium confidence 50-70 basis points reduction
    Having said that, if I look into the future and if the vendor partner support goes away, we expect the gross margin impact of anywhere or a gross margin investment of anywhere between 50 to 70 basis points. That's our estimate.

    — Vijay Jain

Sales Growth

  • KFC SSSG Sales Growth · next couple of years · Medium confidence mid-single digit
    So, I don't think the confidence comes from the low base. If that was the case, I think for last 3 years, we will be still struggling, right? Every year, we think the base has gone low. And yet, it was now 3 years for us to get a 4% SSSG. So, the confidence does not come from the low base. It comes from the strategy, which is right now working at the ground which has been now in operation for last 4 months or so.

    — Vijay Jain

Store Expansion

  • Sri Lanka Store Expansion Pace Store Expansion · next 2 to 3 years · Medium confidence high single digit or low early double digits
    So that's possible for the next 2 to 3 years.

    — Vijay Jain

Capex

  • FY27 Capex Capex · FY27 · Medium confidence similar number
    When I look at the coming year, we see a similar number of capex, similar number in terms of the capex spend for FY '27 as well.

    — Vijay Jain

M&A

  • Devyani International Merger Completion M&A · FY27 · High confidence by the end of this financial year
    So, I would say it looks like by the end of this financial year, we should be in a position to consume the merger. That's the likely scenario by the end of this financial year.

    — Vijay Jain

What to watch in Q1 FY27

KFC SSSG Performance

next couple of years
Current 6% (ex-Navratri) in Q4 FY26
Target Mid-single digit growth

Why it matters

Sustained SSSG is crucial for margin improvement and overall business growth in KFC India.

So, I don't think the confidence comes from the low base... It comes from the strategy, which is right now working at the ground which has been now in operation for last 4 months or so. We have been quite cautious of expanding from 150 stores to 220 now to 400-plus stores. So, I think that the traction at the ground gives us the confidence and the way April has also gone so far gives us the confidence that we should be able to deliver a reasonable SSSG as we move forward.

Risks & concerns

  • Challenging performance of Pizza Hut India

    high

    Pizza Hut India's business performance continues to be challenging, with revenue decline and negative restaurant EBITDA.

    Management acknowledged

  • LPG availability and inflationary pressures

    medium

    LPG-related availability challenges and inflationary pressures faced in India and Sri Lanka, with potential 25-40% cost increase impacting EBITDA by 30-50 bps.

    Management acknowledged

  • High minimum wages in Sri Lanka

    medium

    High minimum wages in Sri Lanka impacted restaurant EBITDA margin, offsetting operating leverage benefits from SSSG.

    Management acknowledged

  • Potential loss of vendor partner support for value offers

    medium

    Current gross margins on value offers are supported by vendor partners; if this support goes away, it could impact gross margin by 50-70 basis points.

    Management acknowledged

Q&A highlights

8 direct
KFC Value Initiatives Rollout and Same-Store Transaction Growth (SSTG) Direct
So, we started it, Saurabh, in about 150-odd stores in the month of November, December, then rolled it out to perhaps 200 stores in January, February, March. And as of April, all our stores, except our Tamil Nadu stores are running this new consumer recruitment value offer. So, it's not a promotion. I want to underline that this is not a promotion. This is a permanent value layer that we are building. ... So, we have not given out the numbers, but yes, our SSTG has been closer to the SSSG performance in the previous quarter. It follows a similar trend line. It's closer to our SSSG performance.

Clarifies the widespread implementation of KFC's value offers and their positive impact on transaction growth, aligning with SSSG.

Asked by Saurabh Kundan

KFC Marketing Spend and Margin Impact Direct
So, while I'm not giving the exact number, anywhere between 75 basis points to a 100-bps additional marketing spend we have put behind the brand.

Quantifies the additional marketing investment made for KFC, indicating a strategic shift to drive consumer recruitment.

Asked by Saurabh Kundan

Operating Environment and LPG Shortage Impact Direct
Yes. So, March was also good. I would say, while there was a disruption on LPG and indeed, there's significant inflation that has happened on LPG, we were still able to manage to keep our stores alive. ... So, KFC had zero closures, okay? So, while availability was a challenge. I think we've been able to manage the situation quite well. So, there was a zero closure on KFC, and there continues to be zero closure on KFC, few stores would have been impacted by truncated menu, few stores would have been impacted by truncated timings, but those are a handful of the stores. Hence, March went very well from that perspective. In Pizza Hut, we had closures, which I would say for 10 days, 15 days, but the number of stores would be less than 5% of the overall brand for Pizza Hut. ... So, the bigger challenge right now is the LPG price where the impact could be anywhere between 25% to 40% increase in terms of the cost, which could impact the EBITDA by 30 to 50 basis point. But as long as we're able to keep the store open, I think that 30 to 50 basis points impact right now in relative theory, it's not so material.

Provides an update on the operational impact of LPG shortages and inflation, confirming minimal store closures for KFC and manageable impact for Pizza Hut.

Asked by Tejash Shah

Price Hike Strategy Amidst Inflation Direct
So currently for KFC, the price hike has happened in the range of 1-odd percent. And in March, also a small amount of price hike happened. If I add up both the price hikes, it's in the range of 1.5% to 2% price hike for KFC. Similar price hike has been taking place for Pizza Hut or has taken place for Pizza Hut as well in the month of April, around about 2%. We don't see any further price hike in the immediate future, unless we see the situation at the ground going dramatically southwards whether raw material prices or for that matter, specifically oil prices go out of the whack. Unless that happens, we don't see any other price hike happening in the near future.

Details recent price adjustments for KFC and Pizza Hut and outlines the conditions for future price increases, indicating a cautious approach to pricing.

Asked by Tejash Shah

KFC Margins Bottoming Out and Recovery Outlook Direct
Yes. So as long as we're able to hold on to the SSSG, we feel confident that we should be able to hold or improve the margins. So, the SSSG is the key, and that's what we've been saying for the last 2 years. So, the drop of margin has been a direct result of lack of SSSG for last 2 years. So yes, the Q3 and Q4 the moment we hit the SSSG, it has helped us improve the margins.

Connects margin recovery directly to sustained SSSG, highlighting SSSG as the critical driver for future profitability.

Asked by Gaurav Jogani

Drivers of KFC Recovery (Strategy vs. Consumer Sentiment) Direct
It's a combination of 2 things. Certainly, we believe the consumer environment from a demand perspective is certainly improved in Q4, and this is what we were alluding to when we had a Q3 con call as well. But that backed by our specific strategy in terms of driving consumer recruitment, the twofold strategy which is INR99 Chicken Krisper Burger Meal, for driving customers or recruitment in North and West, which is the more or less developed or less evolved markets in terms of chicken eating pattern. And then another which is abundant and disruptive value. I think has clicked and it has not been easy to be fair. Over the last 1.5 years, we did several experiments, several pilots.

Explains that KFC's improved performance is due to both a better consumer environment and effective, targeted strategies like the INR99 meal and disruptive value offers.

Asked by Gaurav Jogani

Gross Margin Impact of Value Offers and Vendor Support Direct
So, the primary reason is that this particular offer has been also supported by our vendor partners as well. As a result, we've been able to hold on to the gross margin. That's the reason. Having said that, if I look into the future and if the vendor partner support goes away, we expect the gross margin impact of anywhere or a gross margin investment of anywhere between 50 to 70 basis points. That's our estimate.

Reveals the reliance on vendor support for current gross margins on value offers and quantifies the potential margin impact (50-70 bps) if this support diminishes.

Asked by Percy

Devyani International Merger Timeline Direct
So, from a process point of view, when we announced it on first of Jan, we called it out, it's a 12 to 15 months process. In that process where we are currently, our registered office change got approved by shareholders. Initially, Subsequently, we have received an approval from the authority also for the registered office change. The formalities will get completed in the next 2-odd weeks. So that's one agenda which we have done. The second big ticket item is getting approval from SEBI. We have already had a few round of queries from NSE and BSE. That's got cleared now. It's moved to the SEBI. We expect that clearance probably to happen over the next 30 to 45 days. Once that happens, with the register office change in place and the SEBI approval in place, we should be able to go to NCLT and make an application. And NCLT approval process can be anywhere between 7 months to 10 months from approval process. Parallelly, we will make a CCI application as well. So, I would say it looks like by the end of this financial year, we should be in a position to consume the merger. That's the likely scenario by the end of this financial year.

Provides a detailed roadmap and timeline for the merger with Devyani International, indicating expected completion by the end of FY27.

Asked by Kevin Gandhi

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Detailed narrative

Q4 FY26 Performance Overview

Sapphire Foods delivered a strong Q4 FY26, with consolidated revenue growing 11% year-on-year to ₹790 crores. This marks the best quarter in the last 12 quarters in terms of both SSSG and adjusted EBITDA growth. Consolidated restaurant EBITDA grew 21% year-on-year, with its margin expanding 100 basis points to 13%. However, consolidated PBT before exceptional items was negative ₹2.7 crores, and negative ₹15.5 crores including exceptional items related to Labour Code changes and merger costs.

KFC India: Strong Growth and Strategic Initiatives

KFC India was a key growth driver, with revenue increasing 15% year-on-year, the highest in the last 8 quarters. Same-store sales growth (SSSG) for KFC was 4%, or 6% excluding the Navratri impact, marking the highest in 14 quarters. This performance is attributed to a two-pronged consumer recruitment strategy, including entry-level burger meals and disruptive value offers like BOGO. The company has also implemented digital kiosks in 73% of restaurants, contributing to an APC (Average Per Customer) upside.

Pizza Hut India: Continued Challenges

The Pizza Hut India business continues to face challenges, with revenue declining 6% in Q4 FY26. For the full year, Pizza Hut's restaurant EBITDA was negative 3.3%, a decrease of 570 basis points from the previous year. Despite these challenges, the company's strategy of focusing on dine-in and omni-channel experience in Tamil Nadu, its exclusive market, has delivered double-digit SSSG and EBITDA delta.

Sri Lanka Business: Healthy Performance

The Sri Lanka operations demonstrated very healthy performance, achieving 15% revenue growth in LKR terms and 11% SSSG in Q4 FY26. This marks the sixth consecutive quarter of double-digit SSSG for the region. The company added 19 KFC restaurants and 3 Pizza Huts in Sri Lanka during the quarter, bringing the total to 136 Pizza Hut restaurants. Restaurant EBITDA margin for Sri Lanka was 14.6% in Q4, though down 20 basis points year-on-year due to high minimum wage increases.

Capital Expenditure and Store Expansion

Sapphire Foods opened 19 KFC restaurants and 2 Pizza Huts in India, and 3 Pizza Huts in Sri Lanka during Q4 FY26, bringing the total restaurant count to 1,052. The total capital expenditure for FY26 was approximately ₹320 crores. The company expects a similar level of capex for FY27, with new KFC stores costing ₹2.1-2.2 crores and Pizza Hut stores ₹1.35-1.4 crores, excluding refurbishment and renewal fees.

Devyani International Merger Update

The merger with Devyani International is progressing, with a projected timeline of 12 to 15 months from its announcement on January 1, 2026. The company has received approval for its registered office change. SEBI approval is anticipated within the next 30 to 45 days, followed by NCLT approval, which could take 7 to 10 months. Management expects the merger to be completed by the end of the current financial year (FY27).

Operational Environment and Margin Outlook

The company faced LPG-related availability challenges and inflationary pressures in both India and Sri Lanka, with LPG prices potentially increasing costs by 25-40%. Despite this, KFC maintained zero store closures, and Pizza Hut closures were less than 3% in April. Recent price hikes of 1.5-2% for KFC and around 2% for Pizza Hut were implemented. Management noted that current gross margins on value offers are supported by vendor partners, but a potential loss of this support could impact gross margins by 50-70 basis points in the future.

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