Devyani International : Can it be a repeat of Jubilant Foodworks?

Hi Everyone,
The company IPOed recently and it operates Pizza Hut, KFC and Costa Coffee under non-exclusive arrangement in India, Nepal and Nigeria. It has its own brand South Indian Food brand Vaango. Pizza Hut and KFC are brands of Yum, Yum also has Taco bell which as of now the company does not has. Non exclusive rights means other than DIL, Sapphire Foods (IPO open next week) and one other company also has rights to operate Yum brands in India but the territory are exclusive and there are defined rules around it. The company mentioned till now they have not faced any issue related to territorial expansion. The company is promoted by a well seasoned entreprenuer Mr. Ravi Jaipuria who is promoter of Varun beverages as well. Earlier Yum foods was part of Pepsico group and their relation started from those times.
It opened first Pizza Hut store in Jaipur wayback in 1997. Below is the store count and sales contribution:

Brand Stores Sales Contribution
KFC 264 57%
Pizza Hut 297 26%
Costa 44 2%
International 35 10%
Vaango 50 5%

It is very clear that KFC is the star brand and somehow they have been a laggard in Pizza market compared to Dominos. They are reworking their strategy with smaller and more delivery oriented stores, reducing capex and opex and drive menu innovation. Costa has been a roller coaster ride, initially it showed lots of promise but the performance slowed down and they closed lot many stores recently and reworked the terms of trade at airports etc. Vaango is more airport/food court oriented brand and will remain so with no large investments going in there.

The management mentioned they have rights for East and South market which has 93% non veg population compared to North and West which has 50% and hence they have large addressable market.
In North they have rights for Delhi NCR, Lucknow, Agra, J&K, Ladakh. In west they have rights for Rajasthan, Goa and Mumbai airport. Store count has doubled from 134 in FY19 to 264 in Q4FY21.

Pizza Hut & Costa
For PH they have rights for entire India except TN. Store count has remain largely stagnant from 268 in FY19 to 297 in Q4FY21, however company has guided for aggressive expansion going ahead. For Costa they are present in 8 states and 1 UT. Store count has shrunk from 67 stores in FY19 to 44 in Q4FY21.

In total 54% of the stores are in top 10 cities. Region wise contribution is 42% in North,31% in South, 19% in East and 8% in West.

Business Mix and profitability

Brand GM % Brand Contribution Margin Avg Daily Sale
KFC 70% 23% Rs. 1.2 Lacs
Pizza Hut 76% 15% Rs. 0.42 Lacs
Costa 79% 30% Rs. 0.27 Lacs
International 65% 10% NA

As we see KFC is the biggest contributor to profitability at EBITDA level, hence higher the KFC sales/stores better will be the profitability of the company. PH GM % is comparable to Jubilant but the ADS is nearly half implying peoples’ preference for Dominos compared to PH or the restaurant are yet to achieve desired maturity profile. I expect this to improve significantly in future and should lend a big boost to topline. Costa is a highly profitable segment, but there are challenges in business model and now the parent owners have also changed, so will have to see how this pans out in future.

If we listen to management they have guided for 200 stores addition every year, no split at franchisee level but it will largely be KFC and Pizza Hut. I have not put SSSG since it has been all over the place for all QSR player due to Covid. The management mentioned they will be in line with industry for PH which i assume should be between 3-5%. Both KFC and PH has 6.3% as royalty fee payout and Costa has 6% and they are bound to spend 6% on marketing. I am not sure but i guess it is close to 5.5% for Jubilant, pls correct me if i am wrong. There is some initial fee of 50K USD for each store of KFC and 27K USD for PH and post 10 years a renewal fee at half rate. Similar to other QSR operators the company is net working capital negative which is a big positive for this otherwise capex heavy industry. The management also guided they will not need any debt or equity funding for next 4-5 years of growth and internal accruals should be sufficient. Post IPO proceeds company is net debt free.

The company is heavily dependent on Zomato and Swiggy for delivery since they do not have their own fleet and do not plan to have the same in near future as well which is quite opposite of what JF,BK and McD are focussing on. The management rationale is they intend to first build significant density of stores before investing in delivery ecosystem. I am not sure about this since BK also has similar number of stores and they are ramping up their delievry ecosystem heavily. To me this is a big risk and provides aggregators undue advantage to bargain on margins and commision. One standout point is company tries to open a KFC and PH in near vicinity to ensure supply chain efficiency and better rental negotiation. Also company has moved to revenue sharing rental agreements for many of its new stores , rate is around 10-12% of revenue, this in my opinion is a very good deal, if i remember correctly rent is around 12% of revenue for a store so until a store matures the rental outflow will be low which will help preserve capital till business scales up specially for DIL where they are planning to open 200 new stores every year and it will take some time for these stores to generate sufficient sales.

Q2FY22 Update
The company demonstrated solid performance and posted revenue of 516 Cr with 71% GM and 25% EBITDA margin and turned PAT positive. Just to give the growth perspective company did 1500 Cr sales in FY2020 (pre Covid). The company also added 68 stores in the quarter, 25 for KFC and 34 for PH and has added 178 stores in last 12 month, so they are executing as guided. ADS for PH has increased to 0.45 lacs which is encouraging.

Investment Rationale
KFC and PH are large recognized brands in QSR space which itself it growing and has huge market size. The promoter group has experienced and seasoned professional in foods business. The expansion plan is quite elaborate and mostly be funded through internal accruals with good profitability.
With modest SSSG projection and expansion plan, 5000 Cr revenue is a good possibility by FY25 and at 10X P/S it can be a 50000 mcap company which is a 3X from current price.


  • Issues with Swiggy/Zomato on delivery sales
  • Competition with Sapphire food on territorial expansion
  • Scale up of Pizza hut is critical which has been a laggard compared to Jubilant
  • Absense of own delivery network and app which provides brilliant consumer data analytics

Disclosure - Not invested, plan to do as soon pending points in research are completed.


@Akshat_PI Can you please share the source for the same.

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This i guess was called out in conversation with BQuint


Does anyone know the difference between the two figures?

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Refer this -

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Very good pre IPO analysis of sapphire foods, with comparison with devyani international and the other QSR players like jubilant foods, Westlife, burger King

Q3 results highlights iro Devyani International -

  1. Total store additions in Q3 at 81 stores. Total stores addition in 9M FY 22 at 192 stores. New KFC stores at 75, Pizza Hut at 94, Costa Coffee at 6, Others at 6 stores. Current store strength post expansion stands at -

KFC - 339 stores
Pizza Hut - 391 stores
Costa Coffee - 50 stores
Own brands ( like Vaango etc) - 58 stores

Stores in Nepal and Nigeria -

Nigeria - KFC - 28
Nepal - KFC + Pizza Hut - 18

  1. Omicron led third wave in Jan led to lower footfalls in stores and delivery channels reporting greater share of sales.
  2. Q3 sales at 624 cr, up 65 pc vs last yr. KFC and Pizza Hut revenues were up 64 pc each. Same store growth for KFC @ 24 pc, Pizza Hut @ 25 pc.EBITDA at 147 cr, up 67 pc. EBITDA margins at healthy 23.7 pc. **Gross margins at 71.4 pc.**Overall business performance was higher than pre pandemic levels. Pizza Hut continues to show strong operational turn around.
  3. IPO proceeds fully utilised towards reducing loans and funding growth.
  4. Percentage of stores in Metros - 49 pc
    Percentage of non Metro stores - 51 pc
  5. Brand wise revenues in Q3 -

KFC - 362 cr, up 20 pc
Pizza Hut - 155 cr, up 17 pc
Costa Coffee - 14 cr, up 52 pc

  1. Brand wise avg daily same store sales in Q3-

KFC - Rs 1.24 lakh vs 1.16 lakh
Pizza Hut - Rs 47000 vs 45000 LY
Costa Coffee - Rs 37000 vs 27000 LY

  1. Brand wise EBITDA contribution -

KFC - 83 cr vs 67 cr, Margins at 23 pc
Pizza Hut - 26 cr vs 21 cr, Margins at 16.8 pc
Costa Coffee - 4.6 cr vs 3.1 cr, Margins at 32 pc

Disc : Not invested, Planning to take up a tracking position

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I personally was just interested in kfc buisness as i don’t consider pizza hut and Costa coffee buisness to even be any good.

When we see pizza hut or even divyani past they have actually have advantage of being first and capturing the market and then loosing everything to Domino’s as now currently most people have choosen there preference.

The overall market is not winners takes all but if a bigger player can grow faster then you then the real problem start to occur in my opinion.

I personally have eaten at pizza hut way before as in jaipur alone first pizza hut was open and atleast here I have seen them having some stores but all of them are just there old stores and overall I see Dominos was able to offer lower end at better experience to the consumer before pizza hut and looking at that even now there lowest end is not to same price parity in a price sensitive market either they are same priced or higher that make me very hard to believe will they ever be able to gain significant dent in marketshare or not.

As a vegetarian kfc buisness is not easy to see that is there any advantage or not in price but have heard a lot but just by looking how it have looser market share in us and other countries over time other then china as new player enters like Chick-fil-A, Popeye (now in india with a more profitable owner that make them easy to take looses more easily) will be looking how they might have some difficult or not over time.

In case of other like Costa coffee with increasing Starbucks stores and more focus by Tata group and also now CCD have started to gear up I don’t see them loosing more market share overtime.

They have traditionally been the one that grow the slowest and until valuation difference is massive and industry growth may support growth and they will grow is true but just by using market cap to sales multiple it is trading 2x that of Jubliant foodworks and even 2x of Westlife.

I really don’t see much opportunity when a slow grower shall be trading at higher multiple then fast growers.


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Good growth and profitability.

Need expert inputs, who did research on Devyani and Jubilant Foodworks, on following -

  • If someone would like to pick one of these two, for long-term investment, which one will have higher longevity and possible good return ?
  • Kindly share investment case comparison between Devyani and Jubilant Foodworks.

Devyani International Q3 concall highlights -

Added 81 new stores in Q3. Store count now at 1177. Store count in Mar 20 was 600.

Costa coffee stores at 103. KFC, Pizza Hut store count at 512 and 487 respectively

Milk and cheese inflation still high

Sales at 791 vs 624 cr

EBITDA at 174 cr, margin at 22 pc

Gross margins lower at 69 pc due inflationary pressures

Costa Coffee added 15 new stores. ADS at 37k

Same store growth for KFC, Pizza Hut at +3 pc and -6 pc. SSG for Pizza Hut de grew because of higher competition and new intro of lower priced fun flavoured pizzas

Aim to open 250-300 stores in FY 24 with bias towards KFC

PAT at 71 vs 57 cr yoy

KFC added 38 new stores. Avg daily sales at 1.16lakh

Pizza Hut added 17 new stores. ADS at 43k

Going fwd, KFC stores to be bigger with expanded menu

Costa Coffee’s same store growth at 20 pc, largely volume driven (that’s super cool!!!). Company focusing on small format Costa stores with a few exceptions

Aim to open stores in 20 new cities in next FY

Disc : invested, biased



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We should QSR space as per Market cap,
Jubilent on top, followed by devyani, Westlife and SAPPHIRE.

Valuations gal between devyani and SAPPHIRE is because of strong promoters and aggressive store expansion by devyani as compared to SAPPHIRE. One should hold both to drive the KFC.

Disc: invested in both.


I will bet on devyani and SAPPHIRE as compared to jubilent.

Rather than pizza business, I will bet on KFC which has very big potential as compared to pizza business.

Devyani has very aggressive store expansion plans, now Costa coffee stores expansion also going to aggressively. This vertical has better margins as compared to KFC & PH.

Over a period of 10-15 years devyani and SAPPHIRE can deliver 20-30% CAGR growth


Jubilant is no longer just about Pizza anymore. They recently started Popeyes in Bengaluru and Chennai and have aggressive expansions plans for Popeyes

Their stores are doing well if google reviews and social media are used as early indicators. So I would not completely discount Jubilant foodworks right now given their strong execution capabilities and clean management. Would be also interesting to see how it might eat into KFC business

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A worrisome trend in the QSR segment…prices being driven down to ground to gain / retain market share.

Earlier, EVD was @ Rs.99 and now most of the QSR players have brought the EVD offerings to Rs. 49-50…how sustainable is it? Reminds me of the low tariff game by telecom players in India and we know what happened there…

On a lighter note it seems that in the QSR segment also going the pvt. banks way as far as expectations of the investors are concerned…who willbe the next HDFC ???


Slowdown in the QSR segement


Competition is heating up


Opening 650 restaurants by 2033 doesn’t sound like aggressive expansion. Its like opening 65 stores per year for 10 yrs. Compare this to Jubilant Foodworks, who open 250 odd stores/year.

In India, white spaces exist when it comes to penetration of QSR / Fine-dine branded restaurants. It should not be such a great deal to manage competition …IMO.

Everyone has to find their own niche and their loyal customers. Keep innovating on the menu, offer good value to the customer. Rising per capita incomes shall take of the rest.

Disc : holding Jubilant, Devyani. Biased


Just a feedback from my side. I have visited all the major malls of hyderabad in past few weeks and what i observed was no one going to pista house. This could be only a regional trend as i dont have overall data from different regions. However, the kfc could be ranked in top 3 among the various brands. But reading from above that they expanded more of pista house in the past few years and recently changing to more kfc stores, maybe considered as management is not good enough. These are just my opinions and i could be wrong.

Stayed invested from a year. Looking to hold for considerable amount of time.