Devyani International Ltd Q4 FY2026 Concall Summary

Key Takeaways

• KFC delivers breakout quarter: SSSG hit +4.9%, the strongest in 14 quarters, as a deliberate shift toward dine-in customers lifted both transactions and average order value.
• Pizza Hut remains the drag: SSSG stayed negative at -3.7% and brand contribution slipped into the red; a back-to-basics product and quality reset is underway but will take months to reach the market.
• International business crosses a threshold: Quarterly revenue passed ₹500 crore for the first time, growing 20% YoY, with Nepal up 46% and Thailand up 19%.
• The Sapphire merger is the structural story: Filings are complete, CCI application is next, and management expects the deal to close by end of FY27, setting up a scaled, complementary platform.
• What to watch next quarter: Whether KFC sustains its SSSG momentum through the full quarter, any early signs from Pizza Hut's product reset, and progress on the new leadership team build-out.

KFC Turnaround: The Dine-In Pivot

• Strategy reset worked: Management treated dine-in and online as two distinct businesses, tailoring offers and price points specifically to attract dine-in customers. Offline gains materially exceeded any online losses.
• SSSG composition: Growth came from both higher average order value and higher incremental transactions, addressing new customer recruitment and lapsed customer reactivation simultaneously.
• Gross margin tailwind: Favourable raw material and packing material costs combined with deal structures tilted toward dine-in customers, where DIL had been underweight, expanding gross margins alongside SSSG.
• Early read on sustainability: Nearly 45 days into the current quarter, SSSG trends have held in line with Q4. Management wants another couple of quarters before declaring the worst definitively behind.
• Digital kiosk penetration crossed 80% across the KFC network, supporting operational efficiency and throughput.

Dawar: "So, the offline gains are much more than the online losses."

Pizza Hut: Back to Basics

• Current state: SSSG of -3.7% improved sequentially but stayed negative; ADS was stable at roughly ₹30,000. Brand contribution turned slightly negative on operating deleverage from lower same-store sales.
• The reset plan: Management is reassessing the portfolio from scratch: identifying product gaps, missing pricing layers, and re-evaluating quality on a de novo basis across dough, cheese and toppings. All store staff are being retrained on product quality and customer experience.
• No net new stores in CY26: The plan is to consolidate and realign the existing portfolio rather than expand, while Pizza Hut marketing will eventually shift to DIL as part of the Sapphire merger.
• Timeline is measured in months: Management estimates it will take a couple of months before the new approach actually launches in the market, making this a second-half story at best.

Dawar: "So basically, we are going back to basics as far as Pizza Hut is concerned, in terms of identifying the gaps in the portfolio from a product standpoint, identifying the pricing layers that are missing in our portfolio, and reassessing quality on a de novo basis for Pizza Hut pizzas."

International & Own Brands: The Growth Engines

• International business crossed ₹500 crore in quarterly revenue for the first time, growing 20% YoY. Nepal surged 46% YoY and Thailand 19% YoY, with improved gross margins and operating leverage driving brand contribution margins to 17.7%.
• Own brands turned a corner: Vaango and Biryani By Kilo both posted mid-single-digit positive SSSG. Biryani By Kilo achieved positive brand contribution, enabling a test launch of smaller Express formats in offline food courts that have been profitable.
• Franchise brands held steady: Revenue grew nearly 3% YoY, but elevated coffee and cocoa prices compressed gross margins by 1.2% YoY. Brand contribution margin remained healthy at 16.1%.
• Tea Live discontinued: After testing in India and Thailand, management decided to exit the brand; the wind-down happens next quarter.

The Sapphire Merger & DIL 2.0

• Merger mechanics: The proposed combination with Sapphire Foods is described as a strategic union of two scaled, complementary platforms. Filings are complete with stock exchanges, and management expects necessary approval shortly, followed by a CCI application. Completion is targeted by end of FY27.
• DIL 2.0 blueprint: A new strategy built around reimagining how DIL works: expanding brand reach, driving efficiency, and focusing on digital transformation. Core pillars include cross-brand collaboration, shared infrastructure, common consumer insights, and best-practice sharing.
• Leadership rebuild: A new CTO (Neeraj Tiwari), CMO (Sandeep Anand, who will also oversee Pizza Hut operations), and a COO (joining shortly, background from Unilever and Amazon) have been hired. Robinder will lead Costa Coffee and smaller brands. Management expects the new team largely in place by next quarter.
• Technology stack in-sourcing: DIL has partnered with a leading IT company and is building its own apps and entire technology stack, developing in-house capability to manage technology rather than relying on brand franchisor systems.

Jaipuria: "Our proposed merger with Sapphire Foods is a strategic combination of two scaled up and complementary platforms, united by a shared vision for long-term growth."

Dawar: "So, when we drew the blueprint in terms of where we want to go as a company, we analysed and the skill sets that were missing."

Costs, Margins & the Gas Situation

• Consolidated margins improved: Gross margin reached 68.8% and brand contribution 14.1%, both up YoY. Operating EBITDA was ₹123 crore at 8.6% of sales, growing 13.8% YoY.
• KFC brand contribution grew nearly 20% YoY to ₹99 crore, with margins improving to 17.0%, driven by the SSSG recovery and favourable input costs.
• Gas crisis managed with minimal impact: A significant gas shortage linked to the Middle East war was navigated effectively, though the crisis persists in some parts of the country and is being closely monitored. Management declined to quantify gas cost as a percentage of sales, calling it a small cost.
• Mitigation underway: DIL is evaluating electrical equipment across the portfolio and exploring dual-fuel equipment that can run on both gas and electricity to reduce future exposure.
• Debt increase was temporary: Raised for an equity infusion required in Thailand and squared off by the second week of April.

Demand & Store Expansion

• Demand sentiment stable to improving: Management cited favourable policy stimulus, GST rate rationalization, and volume-led growth in adjacent FMCG categories as positive signals. Consumption trends for DIL's brands continue to improve.
• Store additions for FY27: DIL plans approximately 200-225 net new stores, with KFC contributing 100-110 and the balance from Costa Coffee, Biryani By Kilo, and international businesses. Pizza Hut gets zero net new stores in CY26.
• Biryani By Kilo expansion: Measured offline expansion via smaller Express formats is underway now that the brand has turned profitable. Management is bullish, saying the brand can do wonders once performance is stabilized.
• On pricing power: When asked about future price increases given the inflationary macro, management deflected, saying it cannot foresee inflation and therefore cannot commit to pricing actions.

Dawar: "If you can help me foresee the inflation in the near future, I will be able to tell you that."

Guidance & Commitments

Key Metrics