# 1. Financial Performance ## A. Key Figures * **Q3 FY26 Revenue:** **₹811 Cr** (+7%) * **KFC Revenue:** +11% · **Pizza Hut Revenue:** -11% · **Sri Lanka Revenue:** +15% * Consolidated Adjusted EBITDA: ₹77 Cr (-5%) · Post Ind AS EBITDA: ₹136 Cr (-3%) * Adjusted PBT: ₹24 Cr (2.9% of revenue) ## B. Revenue Growth * **Diverging Brand Trends:** KFC delivered strong double-digit growth while Pizza Hut faced significant revenue decline, resulting in moderate regional expansion. * **Geographic Strength:** Sri Lanka operations showed robust momentum with double-digit revenue growth, contributing meaningfully to regional performance. ## C. Profit Margins * **KFC Margin Resilience:** KFC achieved a healthy 8% restaurant EBITDA margin, supporting overall profitability despite system-wide headwinds. * **Margin Pressure from Promotions:** The INR 99 initiative is expected to dilute gross margins by **50–60 bps**, though management anticipates this will be more than offset by **higher SSSG and long-term profitability gains**. * **Underlying Margin Stability:** Despite reported EBITDA margin contraction, gross margin improved **50 bps YoY**, indicating operational strength even as promotional activity increased. --- # 2. Store Expansion & Capacity ## A. Key Figures * **New Stores Added:** **31** in Q4 (27 KFC, 1 Pizza Hut India, 3 Pizza Hut Sri Lanka) · Total store count: **1,028** as of Dec 31 * **Sri Lanka Expansion:** **7 stores** opened in CY 2025, pace to continue into CY 2026 ## B. New Store Additions * **Robust Net Additions:** Strong quarterly store rollout driven by KFC expansion and continued international growth in Sri Lanka. * **Pizza Hut India Stalled:** Zero net store growth in India for the calendar year due to closures offsetting new openings. ## C. Geographic Expansion * **Tamil Nadu Advantage:** Exclusive operational presence enables unified brand experience and targeted investments in estate and marketing. --- # 3. Sales & Customer Trends ## A. Key Figures * **KFC SSSG:** **1%** for Q3 (+Jan trending above) * **KFC Delivery Mix:** **44%** (up 300 bps YoY) * **Sri Lanka Revenue Growth:** **15%** in INR terms * **Sri Lanka SSSG:** **11%** ## B. SSSG Performance * **Modest System-Wide Growth:** KFC delivered 1% SSSG, supported by the **INR 99 Krisper Meal** and targeted marketing, with January showing improved momentum. * **Diverging Channel Trends:** Despite overall delivery decline, KFC’s delivery outperformed dine-in, with **dine-in growing low to mid-single digits** and delivery declining at a similar pace—though delivery mix expanded significantly. * **Regional Strength:** Tamil Nadu posted **double-digit delta gains** in SSSG and EBITDA, driven by innovation, value offerings, and sustained marketing. * **No SSTG Divergence:** KFC’s total sales growth remains aligned with same-store trends, indicating broad-based performance without outlier store impacts. ## C. Channel Mix Shift * **Delivery Maturation:** Delivery growth has plateaued after prior surges, with normalization of post-COVID dynamics—reduced structural advantages for delivery enable fairer dine-in vs. delivery comparison. * **Consumer Behavior Evolution:** Shift to delivery continues, with KFC’s delivery mix rising to **44%**, but at a slowing rate, signaling market saturation in incremental delivery adoption. * **Digital Infrastructure Payoff:** Digital kiosks deployed in **70% of stores**, boosting **average per-customer spend** and enhancing data capabilities for personalized engagement. * **Pizza Hut Resilience:** Dine-in decline moderated relative to delivery, suggesting early stabilization in on-premise demand despite sector-wide headwinds. --- # 4. Product & Promotion Strategy ## A. Key Figures * **Gross Margin:** +40 bps (driven by reduced discounts and value offer rationalization) * **Digital Kiosk Coverage:** **70%** of stores ## B. Key Product Launches * **Targeted Value Pilots:** Launch of the **INR 99 Chicken Krisper Meal** in dine-in/takeaway channels showing initial traction, signaling strategic focus on traffic-driving value offers. * **Mixed Innovation Performance:** While KFC’s **Saucy Dunked** concept gained traction, Pizza Hut’s **INR 99 four-course meal** underperformed due to **low awareness and weak marketing support**. * **Channel-Focused Promotions:** Marketing push increasingly centered on **dine-in and takeaway**, with bundled offers like **buy 1 get 3** and **INR 99 meals** aimed at reversing traffic trends. * **Digital Experience Upgrade:** Rollout of digital kiosks to **70% of stores** reflects ongoing investment in customer experience modernization. ## C. Value Offer Impact * **Margin Recovery via Offer Rationalization:** Gross margin improved 40 bps post-adjustment of the **Epic Saver (INR 299)** campaign, which previously pressured margins despite contributing **double-digit menu mix**. * **Traffic-First Pivot:** Despite rolling back the Epic Saver, KFC shifted to **more aggressive promotions** like the **INR 99 Chicken Krisper Burger Meal** to reignite transaction growth. ## D. Marketing Effectiveness * **Regional Marketing Disparities:** Tamil Nadu outperforms due to **cohesive communication alignment**, now limited to **Sapphire and Yum! investment**; replication in other markets hindered by partnership misalignment. * **Delivery Quality Enhancement:** Adoption of the **Dragontail tool** strengthens delivery experience by ensuring pizzas arrive **hot and fresh**, reinforcing brand credibility in off-premise channels. --- # 5. Brand & Segment Performance ## A. Key Figures * **KFC SSSG:** **1%** YoY · **Revenue:** **+11%** YoY · **Gross Margin:** **+40 bps** YoY * KFC Restaurant EBITDA: 18.8% (+60 bps YoY) * **Pizza Hut Sapphire Estate:** **SSSG: -12%** · **Revenue: -11%** · **Dine-in/TA: 53%** · **Delivery: 47%** * **Sri Lanka Operations:** **SSSG: 11%** · **Sales Growth: 15%** ## B. KFC Performance * **Profitability Milestone:** Q3 FY26 marked the brand’s best recent quarter, with margin expansion driven by **value offer rationalization** and early success of the **Chicken Krisper Meal**. * **Operational Efficiency:** Margin gains supported by cost discipline, including **reductions in labour and store operating costs** (electricity, R&M). * **Brand Leadership & ESG:** Maintains #1 QSR position in India and top 3 globally; only Indian QSR to publish **four consecutive ESG reports** under GRI, SASB, and BRSR. * **Growth Execution:** Successfully opened **60 new stores** in 2025, in line with annual guidance, while expanding reach via the **"Pehla Nasha"** campaign in Maharashtra. ## C. Pizza Hut Performance * **Challenged Core Business:** Dine-in focused model under pressure, with **double-digit declines** in SSSG and revenue, and no new store additions in 2025. * **Turnaround Foundations Set:** Brand now competes on **value with superior experience**, backed by improved delivery ratings (**above 4 on Swiggy/Zomato**) and standardized formats. * **Regional Strengths Emerge:** **Tamil Nadu stores** demonstrate high performance, validating a potential revival playbook also seen in Sri Lanka. ## D. Sri Lanka Operations * **Strong Growth Trajectory:** Delivered **15% sales growth** and **11% SSSG**, fueled by successful product launch of **Ultimate Cheese Pizza**. * **Revival Model Validated:** Outperformance in Sri Lanka and Tamil Nadu highlights a **differentiated, replicable turnaround strategy** under Yum! guidance. --- # 6. Operational & Partnership Risks ## A. Franchisee Alignment * **Critical Collaboration Needed:** Pizza Hut’s recovery hinges on aligned franchisee partners adopting a unified strategy, pending **CCI approval**. * **Interim Support Mechanism:** Yum! system coordination continues to stabilize Pizza Hut operations during the transition. * **Investment Deadlock in Key Markets:** Franchisee misalignment persists, with Devyani withholding additional marketing spend due to **overlapping operations** and limited incremental returns. ## B. Territory Overlap * **Operational Complexity from Overlap:** Territory conflicts create execution challenges, especially for Pizza Hut, while **Tamil Nadu’s exclusive model under Sapphire** enables seamless brand control. * **Format Flexibility vs. Structural Friction:** Sapphire’s dining-forward omnichannel model works well in non-overlapping markets, but **franchisee conflicts arise where territories overlap**. * **Sri Lanka Resilience Confirmed:** Despite cyclone-related costs in Q3, the market delivered **five consecutive quarters of strong performance**, maintaining its position as the **#1 QSR brand**. ## C. Merger Timeline * **Merger Execution on Track:** Process remains on schedule with an estimated **~12-month timeline** to completion, subject to **Board, exchange, CCI, and NCLT approvals**. * **Post-Approval Integration Planning:** Integration may take up to **12 months**, with meaningful coordination feasible only after **CCI clearance**, expected in **3–6 months**. * **No Forced Rollout of Tamil Nadu Model:** Post-merger strategy will be co-developed; **no unilateral replication** of the Tamil Nadu exclusivity model is planned. --- # 7. Guidance & Outlook ## A. Store Growth Outlook * **Headline:** Management expects store growth in Sri Lanka to reach **high-single-digit percentages**, with potential to approach **10%** in the coming year. ## B. Strategic Execution * **Headline:** New strategies can be piloted in a single state or small territory and, if successful, rapidly scaled **Pan-India** leveraging QSR model flexibility.