Devyani International (NSE:DEVYANI) Q1 2027 Earnings Call

0:01 Ladies and gentlemen, good day, and welcome to the Devyani International Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Anup Bujjari from CDR India. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and thank you for joining us on Devyani International's Q1 FY 'twenty seven earnings conference call.

0:47 We have with us Mr. Ravi Jayapuria, Non Executive Chairman of the company Mr. Raj Gandhi, nonexecutive director Mr. Manish Daur, president and group CEO and Mr. Anupam Kumar, CFO of the company. We'll initiate the call with opening remarks from the chairman, followed by key business and financial highlights from the CEO. Thereafter, we'll 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 forward looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier. I would now request Mr. Ravi Jayapuriya to make his opening remarks. Good afternoon, everyone, and thank you for joining us today.

1:39 It gives me great pleasure to welcome you to Devyani International's post results earnings conference call to discuss our performance for the quarter of FY twenty twenty six, twenty twenty seven. We begin the new financial year on a strong note. The momentum we built through the second half of FY 'twenty six, anchored by KFC's strong same store sales performance, has continued into quarter one full year twenty seven. I'm pleased that most of our brand portfolio delivered positive SSSG during the quarter. KFC continues to post double digit sales growth and delivered another positive SSSG of 3.3% during the quarter.

2:32 Our brands in the portfolio like Biryani by Kilo, Costa and Vango maintained a seven plus SSSG growth trajectory. Pizza Hut also delivered sequentially better SSSG numbers. The business has improved profitability and posted its highest ever EBITDA of INR $2.55 crores at 16.1% of the revenues. This is testament to our capability and commitment to deliver sustainable profitable growth despite the cost inflation on LPG and wage hike. Let me briefly touch upon the broader economic backdrop.

3:19 The quarter presented a mixed macro picture. The external environment became more challenging. The conflict in The Middle East pushed crude oil to elevated levels through April and May, feeding into LPG and fuel costs. While the rupee remained under pressure, the RBI in its June policy held the repo rate steady but moderated its FY 'twenty seven growth outlook to 6.6% and raised its inflation projection to 5.1%. Reflecting these very pressures, as a result of the macro, the operating environment has remained volatile along with the usual seasonal complexities.

4:07 While the demand has remained stable so far, the forecast of a below normal season, combined with El Nino risk, is a reminder that consumption recovery in India rarely moves in a straight line. The merger process with Saphyr continues to progress along expected time lines. We received approvals from both NSE and the BSE in June, bringing us closer to the next phase of regulatory filing. The time lines are broadly on track with our slated target on completion by the end of FY twenty twenty seven.

4:54 I want to once again thank Yum! Brands and for their continued confidence in DIL and RJ Corp as their long term partners. As the industry, Indian QSR continues to mature and the interplay between aggregator platforms and the dine in led brands like ours is an evolving dynamic that we are navigating thoroughly. Brand by brand, our own priority remains unchanged. Disciplined profitable growth, a sharper consumer proposition, both in store and online and continued preparation for a stronger combined DIL Sapphire platform.

5:44 I remain confident that the steps we have taken over the past several quarters position us well for the year end ahead. Under Manish's leadership, we have continued to strengthen our management team. The new team is fully in place now and settling in well in their respective roles. I am encouraged by the early cultural and operational shifts that I see across the organization as we build that theme has called DIL 2.0. With this, I will hand over to Manish for the detailed business and financial highlights. Thank you very much. Thank you, Mr. Jayapuriya.

6:30 Good evening, everyone, and thank you for your time today for our earnings call of FY 'twenty seven. I am pleased to state that the new leadership team at DAL is fully in place and is settling in well. We are trying to build DIL with the ambition to build great brands and win markets with distinct customer experience and market first regional operating structure without diluting any focus on the brands that we operate and own. The turnaround strategy at DAL has started to show results, and we are confident that as the new team settles down, we will gain momentum in our journey. The key priorities for the remainder part of the year for the new team are number one, opening new stores as per the guidance given earlier number two, maintain positive SSSC for our brand portfolio number three, improve efficiency and margin structure by way of technology adoption and cost control Number four, build the next level of team and organization structure with right processes and get ready for the merged entity.

7:31 Coming to Q1 results. Our business remains firmly on a turnaround and growth track. On a consolidated basis, we delivered a 16.5% year on year growth in revenues, reaching INR $15.01 crores. Gross margin at 69.1% saw an improvement of 0.9 Y on Y. Brand contribution expanded 1.1% to reach 14.2% with consolidated brand contribution of INR $2.24 crores being nearly 26% higher Y on Y. The improvement in brand contribution and effective management of G and A costs helped us post our highest ever operating EBITDA at INR 151 crores. Our consolidated operating EBITDA grew nearly 38% Y on Y and represents an EBITDA margin of 9.6%.

8:22 I would like to thank my team for all their efforts in achieving this milestone. We have seen some food commodity inflation along with the hike in minimum wages and annual increments. LPG prices have significantly gone up in the last few months. Our teams have effectively managed the availability of LPG during this period. We have taken slight price increases in KFC and Pizza Hut to mitigate the cost impact, and we are monitoring the raw material and packaging prices as we go forward. Seasonal factors led to higher utility costs during the quarter and higher wage costs. On the marketing side, our brands were active and visible throughout the quarter. At KFC, our media investments focused on positioning the brand at the center of consumption and celebration moments, both in store and on delivery.

9:12 Importantly, our marketing spends at KFC have been deliberately rebalanced towards driving dine in visits rather than deep online discounting. At Pizza Hut, marketing activity remained measured and purposeful as the brand works on its back to basics reset. The focus this quarter was on communicating improved product quality and everyday value, building the foundation for a stronger brand. Costa Coffee leaned into the peak summer season with its cold beverage and frappe range, which drove footfalls and trials through the April to June 8, while the brand continued to expand its presence in high visibility travel and transit locations. At Biryani by Kilo, our marketing efforts were centered on occasion led demand. The brand saw strong traction around the festive and celebration occasions during the quarter.

9:59 Across all of our brands, the common thread is discipline, spending where the consumer occasion is genuine, getting the return on spends and building the brand equity. As mentioned earlier by the Chairman, at KFC building on previous quarters momentum, our strategy of rebalancing investment towards dine in channel shows some good results. Triple SG came in at positive 3.3% with offline saliency improving to 57%, more than three percentage points higher than the corresponding quarter of the last year. Revenue grew nearly 12% year on year to INR684 crores. Judicious use of discounting helped restore gross margins to 69.4%, broadly flat sequentially and 2.3% higher than Q1 of last year. The brand contribution margin expanded by 1.4% and delivered brand contribution of INR115 crores, nearly 22% higher year on year.

10:55 At Pizza Hut, our efforts on building a sustainable growth foundation for the brand continues. SSSG came in at minus 2.2%, improving sequentially. With an uptick in ADS to INR 32.4 ks per store per day, revenues came in at INR 184 crores. Gross margin improved to 76.3% during the quarter, but higher costs and operating deleverage led to brand contribution margin eroding slightly. Accordingly, Pizza Hut posted a brand contribution loss of INR 4 crores. We ended the quarter with six twenty six stores as we continue to rightsize the brand. Our own brands portfolio comprising Vango and Biryani by Kilo continue to deliver healthy performance with Biryani by Kilo delivering 7.2% and Vango delivering plus 7.1% SSE, respectively, during the quarter.

11:50 BBK continues to progress well on both top line as well as bottom line and we are on track to realize the acquisition case turnaround of BBK. Led by BBK, our own brand portfolio posted revenues of INR 8 crores. Gross margins improved slightly on a sequential basis to 65.9%. Brand contribution came in at approximately INR 10 crores, representing a margin of 10.2%. Our own brand stores network reached two eighteen stores with 23 BBK Express stores. Post acquisition, we've been evaluating expanding BBK in newer formats. The BBK Express format is a small box, lower CapEx format, and we've seen initial good response by opening these formats in our food courts.

12:36 Within our Franchise Brands portfolio, which includes Costa Coffee, revenue growth remained steady at nearly 6% year on year. However, higher input costs led to lower gross margin at 74.6%. Brand contribution margin came in at 15.1% higher than last year on better cost management. Our international business maintains its impressive run off delivering strong and consistent growth by posting another quarter of 20% plus year on year and delivered INR $5.23 crores in quarterly revenues. Gross margins remained stable on a sequential basis. Effective cost management and operating leverage helped improve the brand contribution margin by 1.5% compared to last year and posted brand contribution of INR 18.2% for the quarter.

13:21 As part of DIL two, we have decided to consolidate the entire BD activity of DIL under one leader. This is unlike in the past where the individual brands used to focus on their own BD activity. This led to some rethinking on the store opening strategy and the way we approach the landlords. We opened 11 net new KFC stores in India and added three net new Biryani by kilo stores in India. We have also begun testing BBK's performance in a dine in format. We are confident that BBK's expansion into offline channel will provide DL with a durable long term growth factor. We ended the period with eighteen fifty five stores in India and 2,255 stores globally as of 06/30/2026. Our plan for opening new units remains in line with the guidance given earlier.

14:09 As Mr. Geoffroya mentioned, our proposed merger with Saphyr Foods remain on track, and we continue to expect completion of the merger by end of the current financial year. With this, I would like to request the moderator to open the forum for any questions or suggestions that you may have. Thank you so The first question is from Sureshi Pataki from IISL Securities. Please go ahead.

15:03 Hi, sir. Just wanted to understand margin drivers for KFC for the coming couple of years. So you already increased margins on a Y o Y basis by, let's say, 130,140 basis points, now stands at about 17%. Was the same in Q4 also. So there is one step up which has happened. Wanted to understand what would be the drivers for increase from this current 17% level into the future? Two sub questions to this. One is in terms of drivers, what is it apart from SSSG? Assuming that SSSG remains at a 3%, 4% level, I am assuming that you might not get much of a leverage from that.

15:51 So are there any drivers apart from the SSSG in case that doesn't kick in over and above what we are seeing right now? And second is, what kind of sort of basis points can you shave off through these other initiatives over the next couple of years? Thanks, Pasi. So, Pasi, as I've mentioned in the past, the key driver for improving the brand contribution margin remains the ADS number, right? And I've also indicated in the past that, let's say, once we cross a threshold of 105,000 to 110,000, we will be able to cross 20% brand contribution margins in KFC as we've demonstrated that in the past.

16:42 So the key lever for ADS as you know is a combination of SSSC in the existing stores and as well as the quality of new stores that we are opening so that we are able to start the new stores at a higher radius number. So that's a combination that can give you the higher radius and therefore the better margins. At the same time, we are also focusing that our dine in channel needs to be pushed much more strongly versus our delivery channel and therefore we've taken steps, we've experimented in the quarter that we've declared the results and we've seen some positive results on the dine in channel. So that will be another lever that will push the margins up. So these are few of the margins and then obviously as the ADS goes up, you get the leverage benefit because of the higher fixed cost of expenses in the business and therefore that automatically helps with the margins as well.

17:42 Understood. So this 105 to 110 ADS that might also be a moving target, right? Right now, if you reach that number, you will make 20% margin. But supposing if you take a few more quarters to reach that, in the meanwhile, your cost structure will also inflate at the same time. So maybe if this is delayed beyond a few quarters, then even at that ADS, which you are talking about, the 20% margins may not come through. So how are you looking at that time frame in that sense, what I'm asking is? So Parsi, you're right because all of our discussions is based on the current environment. What happens tomorrow by way of inflation, who knows? But you're right and your observation is right that this is in the current context. And again, it's not that we've not seen inflation in the past. It's not that we've not seen the whatever the wage increases or the resets in the past, but we've managed to bring in the efficiency in the business and that's a continuous process.

18:41 And therefore, I mean, we have to be at it. So therefore, I mean, it's not that the ideas are finished. The ideas are always there and we continue to improve business and manage the business much more efficiently. The other leverage point that we've just started is this whole technology adoption, which is where we've been weak and that will take a few quarters by the time we start to realize the benefits. When I say few quarters, I'm saying few quarters after the merger, because right now we are building the technology platforms. Understood. And sorry to belabor this point, but just because this is biggest part of your business, just wanted to understand this better. This 600 to 110 kind of ADS, I mean, how many quarters down the line or how soon do you think you can achieve that given the macroeconomic construct, assuming that everything I mean, not assuming that, let's say, crude goes haywire and consumer demand falls or anything, just in the current context, how long do you think you can achieve that?

19:51 But see, as I said, I mean, we are looking at SCC of about 5% to 6% for KFC. And therefore, if I were to take that, obviously, it will be almost like one point five, two years kind of scenario. But again, I mean, you're saying, I mean, the macros also play a very important role. And we've also seen in this business that there could be some cycles where, let's say, on an average, you get better SSSCs and then there are some quarters where it is kind of depressed. So that's but in general, we look at about 5% to 6%. Understood. And on Pizza Hut, before the merger happens, is there anything else that can be done to accelerate the ADS on Pizza Hut further?

20:41 See, Pizza Hut, as I said earlier and even in my commentary today, Pizza Hut is all about going back to basics. And therefore, we are working on the product, we are working on the ingredients, are working on some innovative ideas and so on and so forth. So that will take some time and obviously that will help us to stand in good stead over the long term. Understood, sir. That's all from me. Thanks and all the best. I'll come back and Thank ask you if I have more you very much. Before we take the next question, a request to participants to please limit your questions to two per participant. For follow-up questions, we request you to rejoin the queue. The next question is from Vivek from Jefferies.

21:30 Please go ahead. Hi, good afternoon, Manish and team. Continuing with what Parsi asked, first on the KFC bit, you did mention about dine in, sales going up. So in the last few quarters, have seen this number, like, creeping up a bit. We are at about, we have seen you at about 57. Do you think you'll go back to, 60, 65? Is that what your target is in coming quarters? Vivek, see, it is difficult to fight the consumer point of view on convenience. And we've seen that, let's say, for example, by regions, I mean, typically is a market where convenience plays a very important role and consumers prefer delivery.

22:19 So I don't think that we'll be able to get to 65 in near future, but our target remains to get to a number of 50 nine-sixty. Interesting. And Manish, just maybe a very basic or a nice question, but see, a lot of your dishes are pre prepared, and I know there is some activity at the store level. So even if, let's say, delivery margins are low... And delivery margins are lower for two reasons. Right? One is the coupons and the discounts, and the other is the delivery cost. But as long as at an outlet level, it is adding incremental rupee or dollar to to store, you should try to maximize on both. Is their understanding correct? Or there are capacity constraints, which is why you have to choose one over the other? So Vivek, this hypothesis used to play when delivery was new and I'm talking about, let's say, COVID because that was giving us net addition in terms of top line. So even though that's on an incremental basis, it makes sense. It was whereas today, delivery as it stands today, it is actually eating into the dine in sales.

23:26 And that's the reason we are making concerted effort to make sure that the consumers come back to dine in because that is where you can have the best customer experience, that is where your food tastes the best, that is where you can get the full flavors and everything. And therefore, our endeavor is that people should come back to dine in stores and enjoy food better there. Thank you. The next question is from Avi Mehta from Macquarie Capital. Please go ahead. Yes. Hi, Nish. Thanks for this opportunity. I just wanted to check with you on the stable demand trends and better understand that. Does that also we do have does that mean that the basis will also be factored in the same store sales growth? Or you're implying that sales same store sales growth should remain at current levels of formats?

24:15 So just if you could explain that first. And the second bit, just on the delivery versus dine in now, we've now done this focus on dine in and getting it as the key driver of growth. Wanted to just get your thoughts on, you know, in your opinion, say, a couple of years down the line, does this entail that we should be able to see this sales across point out or does in terms of timing savings across formats or is this more a KFC specific phenomenon because pizza has a lot more time. So any format related nuances that one should be aware of? These two questions. Thank you. Okay. Hi, Avi. Let me address your second question first. See, the point is, as I said, I mean, is very important for a consumer, and hence, that is where delivery comes in.

25:11 Now at the same time, as brand owners, as operators, we have to give good reasons to consumers for them to come to the store. And if, for example, as I've mentioned in the past, if, let's say, the consumer is getting the same offering sitting at home at times at a cheaper price, why would they want to come to the stores, right? And whereas you've kind of you've invested and you're operating a complete infrastructure, and hence, we need to kind of make sure that our offerings are available for dine in customers in a different manner versus our delivery customer. Our pricing proposition remains in sync that a dine in customer gets the best deals. And obviously, along with the best deals, they get a better experience.

25:57 So that is how we've kind of focused on and that is how we are repositioning the entire piece. And we've seen that as long as you give a good reason to the consumer to come into the stores, they do come into the stores. Obviously, region, every state, every city, we've seen behaves differently. But in general, we've seen consumers responding to it. Okay, Manish. And this is not format specific, it's a broader principle that make it encourage the consumer to come in and get a better deal. That's how or Okay, at least there is got it. Got it. That's the fundamental hypothesis. Got it. Clear. Clear, Puneet. And the first bit, Puneet, how should I look at that? Just in... That's just a clarification on... When you say stable demand trends, do you mean that the basis have to be factored in when you look at the environment? Just basically, you know, is it reflecting in the 2Q till late performance?

26:53 Yes, it does. So I'll tell you what we mean by fundamental stable demand trends. One, obviously, you would have seen in the past, let's say, when we were undergoing the negative triple SG trends, there used to be big days which were becoming bigger. And therefore and then suddenly after those big days, the demand would suddenly drop very significantly. Whereas from that point of view, we've seen the drop is not happening so significantly, although big days are becoming bigger. So that is one distinct. Obviously, the other indicator is SSSE. Third, as I said, we've taken initiatives, and we've seen customers respond to that. So that is another indicator. At the same time, we are also measuring in terms of how the new stores in the new geographies are performing.

27:45 So that's the other vector which is available to measure whether how the trend is kind of moving. So these are some of the levers that we use to kind of figure out whether the demand is fine or not. Sorry, but it's a does it mean SSG similar ish into Q till date what we are witnessing or has seen an improvement? That's where I'm just trying to better understand this. See, obviously Q2, it's too early to say because we are in the month of July. And Q2 also, there is a different lag effect from a Shaven perspective also. So because last year, the Shaven was at a different timing, this time it is kind of starting I think tomorrow or day after.

28:31 So obviously that all that lap effect is also there. But otherwise broadly in terms of trends, we've seen a positive trend in the month of July and we are on track. Got it, Manish. That's all from my side. Thank you very much for this. Yes. Thanks. Thank you. The next question is from Vivek from Jefferies. Please go ahead. Sorry, Manish. I think some issue with my line. I hope I'm audible. My question on KFC also on the SSS bit is if you leave aside this quarter and the previous quarter, your SSS number has been negative for a long time. What is holding you back in giving a very positive outlook on SSS in terms of, let's say, even above mid single digit?

29:20 Is it the macro that you worry still worry about? Or is it the aggregator concern? Or what exactly why shouldn't with such a low base for almost 13 quarter that you were in negative, the commentary should be why is it not more positive than what it is? Vivek, yes, you're audible. So Vivek, fundamentally, as you know, macro seems to be tough. You know what is happening on the rupee dollar, you know what is happening on the oil pricing, you know and we've seen the result of all of that in LPG. LPG availability was a big constraint, although we've kind of managed to mitigate. But we've seen huge availability issues as we kind of went through the cycle. And even now also, it's not that macros are behind us.

30:08 There is some news or the other, which kind of keeps coming in. So it's very important for a very, very bullish kind of view that it should be a stable situation, which we are not seeing. And therefore, in the middle of all of this, whatever efforts we are making, we are seeing the results and hence, I would say a little bit of kind of the approach that we've taken. Perfect. That helps. And second and last on the Pizza Hut base, what do you think is the issue, whatever let's say Yum! The action that they have taken, is it the brand issue or the execution issue probably at your end or it's the market context? I mean, when I look at your margins, for example, are at 76. I know pizza has far higher margins than, let's say, burgers and KFC. But is there a case to offer more value to the customer so while your entry price points are very attractive? As we go up, the prices actually go up and if you look at aggregators, there are options available at lower prices or better prices. What exactly so is it execution, market context, higher margins, competition? What do you think on on Pizza Hut? And is it, like, you know, really worth putting energy behind this brand?

31:20 Vivek, the way we look at Pizza Hut as a brand, and to be honest, I have maintained this for the last many years. There is nothing wrong with Pizza Hut as a brand. When I say nothing wrong means that despite whatever has happened or whatever has not happened, I mean Pizza Hut has continued to remain the number two pizza brand in the country on a national basis, right? Domino's is number one and Pizza Hut is number two. We've seen multiple brands coming in, scaling up and then kind of dying down quietly. Pizza Hut, the biggest issue was the structure, which is what we've discussed in the past, the entire three way structure between us, Sapphire and Yum! In terms of decision making, in terms of the initiatives, in terms of innovation and so on and so forth.

32:07 So obviously, that will get corrected as the structure kind of eases out when we get the merger approvals. But at the same time, because of that, there were issues on decision making, there were issues on innovation. So we've started to correct the innovation piece. We've started to correct the basics by the time the merger takes place, at least we are in that readiness position to push Pizza Hut. But having said that, to your other challenge in terms of the margins are high and therefore why not, Pizza Hut, the fundamental problem remains the ADS. The ADS is very low versus the competition. And the ADS cannot be improved unless we give a differentiated offering in terms of innovation and at every price point. So entry price point is just not the only means. You need to be available at all the price points. You need to have the right price laundering and so on and so forth.

33:03 And that is something that we're already working on. So basically FY twenty eight is when you will put all your energy behind the Pizza Hut once the two entities come together? That's right. Got it. Thank you, Manish. All the very best. Thank you. The next question is from Devyani Chu Bansal from MK Global. Please go ahead. Hi, Manish. Congratulations on strong performance. Sir, I had one question related to your Sir, your voice is very feeble. Can you come closer to you, Mike? Yes. Is it better now? Slightly. Yeah. Yeah.

33:48 So, Manish, I wanted to check. There is a renewed global trust for KFC brand. So there is lot of new strategy around boneless snacking sauces, beverages, as well as store refurbishments. Right? So wanted to check if some of it is due to happen in India. Are we already working on some of these initiatives? So all of that will happen in India also, Devyanshu. So broadly, they've taken three initiatives globally. One is on the beverages, which is there's a sub brand called Quench, and we're already discussing in India in to experiment with Quench. And if that experiment is successful, we will roll it out nationally. The second one is around sauces.

34:35 And the third one, as you said, is around the boneless piece. So one after the other, all of those initiatives will come to India. India is part of the pipeline. So therefore, I mean, so that is the Any maturity level for them, Manish, if you would like to highlight, as in where are we in terms of implementing this? See, as I said, we're already in discussions with Quench because we have to make sure that the product gets optimized for the Indian condition for the Indian taste and all. So Quench has already done that. At the same time, you also have to look at the CapEx which gets involved in the new rollout because obviously the western markets look at CapEx very differently versus the way we look at it. So Quench, I would say is most of the homework is done from a CapEx perspective and from product optimization perspective.

35:31 And out of the three, this was the most difficult piece. So therefore, we are planning in terms of when the test launch will start. But the other pieces are relatively simple. Let's see once Quench gets established, that's where we'll start with the other two. Got it. Sir, second question I wanted to understand on Thailand business, right? So how has been the experience so far? And currently, we are one of the three franchisee partners there. Are you open for further territory expansion in the geographies? So we've been very happy with the Thailand results, Devyanshu. And you can see the way the numbers have evolved for the international piece, both from top line as well as bottom line perspective.

36:20 And therefore, we are keen on the current offering, which is there in Thailand. Let's see how it progresses because right now, there is no formal process which has been launched. No one has approached us, but we will be keen to look at it. Understood. And sir, lastly, owned brands VANGO and BILIANI by Kilo are seeing very healthy ramp up. So wanted to check if you could provide some outlook on expected growth and profitability for these two segments? So Birani by Kilo, Devyanju, as I said, we've managed to achieve the turnaround. The brand contribution is positive from a negative case when we acquired the brand.

37:06 We are also testing Biryani by Kilo in a dine in format through our food courts. We've seen good response. We've also launched Biryani by Kilo at couple of our airport locations, again to test it out. So there are these multiple tests which are going on. During this whole Shawan and Navaratra season, we are also planning to test Satric vegetarian portfolio for Biryani by Kilo. So there are multiple initiatives which are on. We are very bullish on Biryani by Kilo, and our objective is to make sure that this brand gets to INR 1,000 crore brand in the next few years. Coming to Vango, again, as I've said in the past, we are very bullish on the South Indian space.

37:56 It's the most healthy food works across day parts of the year. We need to stabilize the product a little bit. So that process is currently on. And but otherwise, Vango continues to do well. Thank you, Manish. That's very encouraging. Thanks for taking the questions. Okay. Thanks so much. Thank you. The next question is from Praful Kumar from Diamond Asia. Please go ahead. Hi, Manish. I'm audible? First of you'll have to speak a little louder. Am I audible now? Yes. Hello? Yes. You are. So many congratulations. Yes, sir, many congratulations.

38:42 In a tough macro delivering us two quarters. Couple of things. One, Manish starting a new slate. Can you talk about in terms of what's the mandate from the promoters? What are you trying to build for the next three, five years in India? And talk about the leadership team that you have built for the last three, six months. So what are the key roles that have been assigned to people and the gaps that you see, the skill set, the management, how you intend to fill those gaps over the medium term? That's the first question. Okay. So let me talk about the yes, go ahead, Praful. Sorry. Yes. Secondly, the merger, what are the key time lines and what are the milestones we are looking at? And in the backdrop, what are the preparations we are doing to ensure that you deliver on the synergies and how the sustainability of the brand is built, checking it on the timelines and what's the strategy?

39:49 Sure. Okay, let me give you the promoters view first. They are very bullish on the business. And you know that Devyani comes from a very, very strong promoter background and therefore investment has never been an issue. It's a matter of how well we are able to perform and therefore how well we are able to convert the opportunity on the ground. You've seen the success with Varun Beverages already, which is the another listed entity from the same group and that Modus feel Devyani can be another Varun over a period of time. So that is how we approach it from a promoters perspective. Coming to the team, as I said, we've hired a new COO, we've hired a new CTO, the new Chief Marketing Officer and so on and so forth. The entire leadership team is in place now. They are settling in well. Obviously, the joining has been anywhere from about, let's say, whatever, two, three weeks to about two months.

40:52 It will take time for the new team to kind of come settle, gel together and start to perform. But we are very happy with the initial results that we've seen. Obviously, it brings in a very different view. It brings in a new energy in the business and that is helping us and that is also getting translated into the numbers. Coming to the merger piece, we are on track. We had indicated that the merger will be through by FY twenty twenty seven end. As of now, I think we are on track and therefore it should happen. Merger synergies, again, we don't see any issue in terms of readiness. It was very important for us that the new team joins in, the new team settles in so that the integration becomes easier and that we've demonstrated because the new team is already in place.

41:43 The other big lever that we need to sort out before the merger is this entire technology piece, which again we've talked about in the past, and we are making progress as per the plans, and we are hopeful that, that piece also should happen before we get the merger approvals and the integration starts post that. So, so far so good, we are on track and we are making good progress. Okay. Thank you, Vams. Just last one thing, any key hires on the tech side because you mentioned that this is some area of and maybe some background if you can share of the key people have joined for the tech build out? Hired a new Chief Technology Officer. I don't know whether you've seen the announcement or not.

42:29 So this person comes with a very strong background from the QSR industry, having worked in India as well as overseas, and he's demonstrated those capabilities and deliveries elsewhere. At the same time, rather than building our completely new in house tech team, we've decided to build a core team in house and then outsource the entire build up to Cognizant Technologies. So therefore, as a combination of these two, we are very confident that we'll be able to achieve a faster rollout and we should be on track before the merger. Thank you.

43:17 The next question is from Navan from Sangvi Family Office. Please go ahead. Hi. Am I audible? You are. Yes. Great. So majority of the questions are answered. Just wanted to get some more sense on our own brand portfolio. Right? Like, Vango and Devyani by kilo. Right? This thousand aspiration that you just mentioned. So what are the what are the step by step outlook that we have? You know, what are some near term measurable around it? And, you know, how do we how do we keep on seeing that the execution is on same line? Secondly, on the own and franchisee brands, including Costa, there is a very sharp SSSP increase. So is it majorly because of the price increases that we are seeing or we are taking in the menu, or is it something else?

44:12 So these are the two questions. Okay. Sure. So let me first address the Birani by Kilo question or our own brands. See, the way we look at the entire Indian food category or the Indian food space or the QSR or the food services industry, however you may call it, if you look at the per capita consumption or the incidences of consuming food outside the home is very low in India. And today, the consumers are coming to experience something that they are not able to kind of go can experience at home. And therefore, the entire push towards the Western brands because the consumers give us a feedback that for them the most healthy food is at home, the Indian food is at home and so on and so forth.

45:04 But as the country grows, the per capita income grows, there are more women coming into the working population, we will see that the Indian food categories will also start to explode. And if at all, we believe that in a matured market like India, maybe whatever, I'm talking about fifteen, twenty years from now, the Indian food category outside home will be a far bigger category than the Western food category. And therefore, we've started to prepare ourselves from that point of view. Coming to biryani specifically, if you look at the overall biryani market today, and I'm talking about the organized as well as unorganized market, this category is stated at anywhere between a INR 30,000 crore to a INR 40,000 crore number, just the biryani category. It is the largest ordered online item on all of the platforms that we've seen in India.

46:00 Yet if you look at the big brands in the biryani space, the biggest brand would be about INR 300 crores, $3.50 odd crores. And amongst the bigger brands, it is biryani by kilo and there will be one or two more competitors. And therefore, it offers a huge space for consolidation, for standardized product offering, addressing the right consumer need there. And that's how we are so bullish on biryani. Similarly, South Indian space also, South Indian food category is a very large category, again, split between organized, unorganized. But from an organized play perspective, overall, it's small. And therefore, I mean, similarly, there are other opportunities available in terms of North Indian food and so on and so forth. And hence, we are working on a strategy to expand the Indian food portfolio as well.

46:53 Next question is from Chetan Thakkar from M3 Investment Private Limited. Go ahead. So just wanted to understand, since we are seeing some bit of shift towards dine in, does that necessarily change the CapEx intensity of the business? Because we had earlier moved from larger format stores to add with smaller format stores. And now that DINE is again getting repositioned, has the CapEx intensity changed in the business? Not at all. See, remember, when we talked about the shift that we spoke earlier, and let me give you some numbers so that you're able to understand the context. If you look at pre COVID or let's say around the COVID time, KFC delivery used to be less than ten percent.

47:39 And it has gone up to almost at about forty five percent, 46% level today. So therefore, the numbers that we are talking about are relatively very, very small in terms of the changes that we are seeing. So the fundamental correction in terms of reducing the store sizes, but driven by the fact that versus, let's say, virtually a no delivery brand to almost a 50% delivery, that is where the entire format changed and so on and so forth. So today, we have excess capacity available in our stores, whereby we can easily make the shift without incurring the CapEx. And at the same time, from a basic brand standard perspective, whatever minimums that are there from Yum! Side or our side, they are enough to kind of take care of the immediate numbers that we are seeing.

48:29 At the same time, again, you go back and dial back the numbers earlier, the number of stores were less. Today, the number of stores on KFC or Pizza Hut for that matter are multiple of what we used to be around the COVID time. So obviously, the overall throughputs are also smaller from that point of view. So even the incremental store opening will not necessarily mean incremental higher sizes of store, it will relatively be optimization of the store between dine in and delivery. That is how we should look at it. Absolutely. No additional CapEx. So whatever formats we are opening currently, that is what is going to be happening for future And sir, from a Pizza Hut perspective, how are we strategically now looking at that business in terms of menu refreshes and getting people back to Pizza Hut or getting Pizza Hut on mind share of people?

49:18 So as I said, we are working on setting the product right, working on some new product propositions, innovations and so on and so forth. So obviously, this has some lead time. Sandeep, who is our Chief Marketing Officer, and he also looks after Pizza Hut brand is working on these things. We are making good progress. So therefore, by the time, let's say, the merger happens, we will be ready with the entire recipe. And then once the fundamental structure is sorted, that's where we'll really push for Pizza Hut as a brand. Understood. And sir, from an integration perspective between Saphyr and Devyani in terms of the back end, is it largely in sync and shouldn't be that big and issue or are they on two separate systems and can take some more time?

50:08 Should not be a big challenge because the IT systems because largely if I don't know whether you are aware or not, technology used to be controlled by Yum, and both of us were on the same stack. The processes on both sides are very similar. So therefore, integration will not be a big challenge. Got it, sir. Sure. Thank you so much for this and all the best. Thank you. Thank you very much. That would be the last question for today. I would now like to hand the conference over to the management team 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.

50:56 Thank you once again for your interest in Sport and for taking the time out to join us on this call. Thank you very much. Thanks. Thank you very much. With that, we conclude today's conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.