Food Service Industry (QSR) Thematic

December 2021
Retail | QSR
Sector: Retail
hfy
Food Service Industry
Finger Order
lickin’ karna
good Safe hai
Dil khol Hungry

ke
Delivering kya?
Kyu nahi,
I’m lovin’ it
Barbeque!
Dhairya Dhruv – Research analyst (Dhairya.Dhruv@motilaloswal.com)

Research analyst: Krishnan Sambamoorthy (Krishnan.Sambamoorthy@MotilalOswal.com) / Kaiwan Jal Olia (Kaiwan.O@MotilalOswal.com)
Investors
December are
2021 advised to refer through important disclosures made at the last page of the Research Report.
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
QSR: Bon Appétit
Summary ..................................................................................................................... 3
Large opportunity in India’s Food Services industry ................................................. 6
Jubilant FoodWorks
Bagging a large slice of the growth pie .................................................................... 13
Opportunity getting even better post–-COVID ....................................................... 13
Largest among peers, with a long runway for growth ............................................ 13
Value moat has emerged in recent years ................................................................ 13
Technology moat is also becoming considerable .................................................... 14
New business has the potential to be future growth engines................................ 14
Valuation and view................................................................................................... 14
Westlife Development
Strong value proposition to tap the vast opportunity ............................................ 19
On track to deliver its Vision CY22 targets .............................................................. 19
Value platform remains strong ................................................................................ 19
Convenience platform seeing strong momentum................................................... 20
McCafé offers multiple benefits .............................................................................. 20
Putting in efforts on premiumization, though not fully efficacious ....................... 20
Getting aggressive on store additions ..................................................................... 20
Devyani International – Initiating coverage
Rapid network expansion to drive aggressive growth............................................ 25
KFC India: Strong brand equity in niche category ................................................... 29
Pizza Hut: Headed for a turnaround ........................................................................ 34
Costa Coffee: Profitable café business .................................................................... 42
International business and other businesses .......................................................... 43
Additional key points ............................................................................................... 44
Financial assumptions: Poised for strong growth ................................................... 45
SWOT Analysis .......................................................................................................... 50
Financials and valuations ......................................................................................... 52
Barbeque Nation Hospitality – Initiating coverage
Delivery driving a pivotal change ............................................................................ 54
Chain CDRs to see robust growth ............................................................................ 57
Three pronged value proposition to delight customers ......................................... 59
Peer comparison ...................................................................................................... 65
Financial assumptions .............................................................................................. 69
Valuation and view .................................................................................................. 71
Risks to our investment case ................................................................................... 71
SWOT Analysis.......................................................................................................... 72
Financials and valuations ......................................................................................... 74
Annexures................................................................................................................. 77
Retail | QSR
Food Service Industry

Companies covered Bon Appétit
in the report
Strong tailwinds for organized FSI players
Jubilant FoodWorks (JUBI)
Huge opportunity in FSI with organized players growing faster
 The INR4.2t (USD58b) Indian Food Service Industry (FSI) is expected to grow by
Westlife Development (WLDL)
~9% CAGR over FY20-25E. Its drivers include: a) rising income levels,
urbanization, and nuclearization, b) innovative offerings that appeal to the youth,
Devyani International (DEVYANI)
and c) the changing dynamics of the space, with the growth of online food
delivery and food tech.
Barbeque Nation Hospitality
(BARBEQUE)  Within FSI, organized players are growing faster than the industry, with the
companies covered in this report growing even faster. Over FY20-25E, the
organized industry is expected to deliver 15.4% CAGR, while the companies in
this report are expected to deliver an aggregate sales CAGR of 18.5%.
 The contribution of organized FSI players has increased to 38% in FY20 from 29%
in FY15 and is expected see its share increase to 50% by FY25E.
JUBI upgrade to Buy note

Improved prospects post-COVID
 The organized Indian FSI is witnessing enhanced growth prospects post-COVID,
led by: a) sustained high delivery levels compared to the past aided by increased
technology adoption by consumers; b) incrementally strong gains from
unorganized peers, led by closures of 30-40% the restaurants; c) evident move
towards more trusted brands, with better hygiene standards; d) accelerated
store expansion by organized players; e) favorable cost outlook (especially on
fixed costs – lease rental and employee expenses) by variablizing them; and f)
increased supply of real estate, due to closures of restaurants and other retail
players, making it attractive for the survivors to expand their store networks.
 With the improved opportunity, several players like JUBI and WLDL have raised
their potential number of stores and annual store addition targets.
Well placed to recover rapidly

 Once the impact of the lockdown on the dine-in channel recedes, increased focus
WLDL initiating coverage note on the value segment by the leading Quick Service Restaurants (QSRs) and Casual
Dining Restaurants (CDRs) would precipitate faster conversion from smaller and
unorganized peers.
 While dine-in was affected by the restrictions on operations, branded players,
with a strong delivery presence and supported by their investments in
technology, were far more resilient compared to smaller and unorganized
players as the delivery channel continues to drive sales.
 With enhanced prospects and recovery in momentum, organized FSI players are
likely to witness robust earnings growth prospects going forward.
Jubilant FoodWorks is our preferred largecap pick in this space

 JUBI has historically had the best business model for QSRs in India, with its
emphasis on success in delivery (70% of sales prior to the COVID-19 outbreak).
This gives it a huge advantage over peers in this market, where lease rental and
December 2021 3
Retail | QSR
overhead costs are high. With the addition of technology and ‘value’ moats in
recent years, the business has strengthened further.
 Sales per square foot, despite competition from aggregators and other QSRs
gradually getting their act together, is likely to remain the best among F&B Retail
peers in India. SSSG is likely to remain robust, driven by tailwinds towards
delivery-based and organized players once the pandemic ends.
 With the most efficient business model, JUBI has the best Balance Sheet, with a
RoCE of over 20% for many years now (barring a blip in FY21 due to the COVID-
19 outbreak). This helps fund its profitable store expansion as well.
 We maintain our Buy rating with a TP of INR4,850/share (33x FY24E EV/EBITDA).
Maintain our Neutral rating on Westlife Development

 The longer term opportunity remains extremely exciting for WLDL as highlighted
in our initiating coverage note in Dec’20.
 With an entry price point of INR45, McDonald’s offers highly affordable products.
A strong value platform means it would continue to significantly gain from the
conversion from unorganized to organized players in the FSI market. Innovations
and brand extensions are being executed well, leading to an improvement in long
term profitability.
 Despite the COVID-19 blip, the company seems to be on track to achieve its
Vision CY22 (FY23) goal of all-round growth, driven by store network expansion,
double-digit SSSG, and improving unit economics with a slight lag.
 However, the competition is intensifying for WLDL on: a) its value moat,
particularly after BURGERKI launched its Stunner menu; b) faster store expansion
by QSR peers (despite WLDL’s own acceleration), which increases the
competitive intensity; and c) the limited success that McDonald’s in India has had
in premium burgers, which limits gross margin expansion. The staggered increase
in royalty rates, eventually increasing to 8% in FY27, is also a concern. Valuations
are fair at ~32x FY23E EV/EBITDA. We maintain our Neutral rating with a TP of
INR575 (24x FY24E EV/EBITDA).
Initiating coverage on Devyani International

 DEVYANI’s KFC business enjoys strong brand equity due to its unique offerings.
This has led to robust Average Daily Sales (ADS) and profitability. The business is
expected to deliver 41% sales CAGR over FY20-24E, led by rapid store network
expansion from 264 to 574 over the same period.
 Its Pizza Hut business is focusing on its underperforming delivery channel
through the rapid addition of delivery-focused small format stores. These will
reduce the distance to the consumer and consequently, lower delivery time.
 DEVYANI’s pan-India rights (except in Tamil Nadu) for small format stores of
Pizza Hut lends it an advantage over SAPPHIRE (Yum’s other franchise) due to its
: a) access to SAPPHIRE’s territories, and b) faster addition due to lower capex
and higher profitability of small format stores.
 The company is set to record an aggressive sales growth and margin expansion.
We expect sales to grow at 28% CAGR to INR40.8b and EBITDA margin to
expand by 690bp to 23.8% over FY20-24E.
December 2021 4
Retail | QSR
 We arrive at a SoTP-based TP of INR190 per share after assigning 27x/20x FY24E

EV/EBITDA to the KFC/Pizza Hut business. We are bullish about DEVYANI’s long-
term business prospects and initiate coverage with a Buy rating.
Initiating coverage on Barbeque Nation

 BARBEQUE’s ‘all you can eat’ concept, with live grills, is a unique offering in the
Indian Casual Dining Restaurant (CDR) space. Its three pronged value proposition
(experience, value for money, and service) enables strong turnover and
operating margin metrics, despite having a relatively large outlet size compared
to QSRs.
 Its impressive success in delivery through ‘Barbeque in a box’ and UBQ enables
the company to participate in the tailwinds that favor organized FSI players. SSSG
growth in pre-COVID years has been tepid, but has the potential to improve if
delivery sustains once the pandemic ends.
 Extremely strong store operating metrics, despite being a CDR business, is
worthy of attention.
 The current valuations are in line with QSRs and therefore seem fair. We initiate
coverage with a Neutral rating and a TP of INR1,560 per share, based on 22x
FY24E EV/EBITDA.
Exhibit 1: Retail: Comparative valuations of QSRs

CAGR RoE
CMP TP MCap EV/Sales (x) EV/EBITDA (x)*
Company Rating FY20-24E (%) (%)
(INR) (INR) Upside (%) INR b Sales EBITDA FY21 FY22E FY23E FY24E FY21 FY22E FY23E FY24E FY24E
JUBI Buy 3,792 4,850 28 500 16.3 21.0 14.8 10.7 8.4 6.6 63.5 41.4 32.4 25.2 32
DEVYANI Buy 161 190 18 193 28.0 39.5 16.6 9.5 6.0 4.6 83.0 41.9 25.7 19.4 31
WLDL Neutral 564 575 2 88 11.1 15.1 9.1 6.2 4.7 3.8 191.3 58.3 32.5 23.6 19
BARBEQUE Neutral 1,447 1,560 8 56 15.4 12.5 9.5 6.3 4.3 3.6 103.9 45.7 28.0 20.4 7
*post-Ind AS 116 Source: Company, MOFSL
December 2021 5
Retail | QSR
Large opportunity in India’s Food Services industry

 According to industry estimates, the Indian FSI market was pegged at INR4.2t in
FY20 and is expected to touch INR6.5t by FY25 (registering 9% CAGR).
 The organized space in India’s FSI consists of players that possess three
19% characteristics: a) accounting transparency, b) organized operations with quality

control and sourcing norms, and c) outlet penetration. It has been growing faster
The Chain Restaurant than the industry and has seen its contribution increase to 38% in FY20 from 29% in
market is expected to FY15. It is expected to deliver 15.4% CAGR over FY20-25E. Consequently, its share is
see the highest CAGR expected to increase to 50% by FY25E.
over FY20-25E  These estimates were prior to the COVID-19 outbreak. After the initial blip due
to temporary store closures and a gradual recovery in dine-in, we expect the
shift towards the organized sector to intensify further in the post-COVID world
due to: a) faster growth rates v/s unorganized players, and b) permanent
shutting down of weaker FSI peers. According to industry estimates, 30-40% of
restaurants across India shut down permanently in FY21.
Exhibit 2: Organized market to grow faster than

the industry (%)… Exhibit 3: …leading to increasing share in the FSI (%)
CAGR CAGR
FY15-20 FY20-25E Organised Unorganised
Unorganized market 5 4
Organized standalone market 13 14
Chain market 18 19 50
71 62
Restaurants in Hotels 8 6
Source: MOFSL, Technopak
50
29 38
FY15 FY20 FY25E
 Within FSI, QSRs and CDRs are expected to witness the highest CAGR at 23% and
19%, respectively, over FY20-25E.
 Accordingly, the QSRs are expected to see their market share increase to 54% in
FY25E from 47% in FY20 within the organized space.
Exhibit 4: QSR and CDRs to see the fastest growth among various FSI segments
CAGR (%) Market Share (%)
FY10-15 FY15-20 FY20-25E FY10 FY15 FY20 FY25E
Quick Service Restaurants (QSRs) 29 19 23 33 45 47 54
Casual Dining Restaurants (CDRs) 18 19 19 37 32 34 32
Frozen Dessert/Ice Cream 15 16 17 7 6 5 5
Pub, Bar, Café and Lounge (PBCL) 25 22 16 4 5 6 5
Café 16 8 10 12 10 6 4
Fine Dining Restaurants (FDR) 5 3 2 6 3 2 1
December 2021 6
Retail | QSR
Multiple growth drivers for FSI

65% The growth drivers for Indian FSI include:
a) Increasing population of youth: According to the Economic Survey of India
Population in India
below the age 2019-20, 62% of India’s population are in the 15-60 years age bracket, with 30%
of 35 under the age of 15 years. India is poised to enjoy the benefits of a substantial
working age population for a long period of time. India’s median age is much
lower than that of China and other large economies.
Exhibit 5: India’s median age in CY22 is pegged at 28 years v/s 37 years for China
Median age of population CY22E (years)
Japan 49
350m Western Europe
US 37
45
Size of India’s
middle class China 37
India 28
Source: MOFSL, Media
b) Rising income levels: India’s middle class population has increased to 350m in
Frequency of eating
CY19 from 160m in CY11. While COVID-19 has disrupted India’s growth
out in Mumbai is 12
momentum, the middle class population is set to swell further, once the
times per month,
economy reverts to mid-single digits or a higher growth trajectory. The
much below its
aspirational middle class seeks better services and experiences, thereby driving
benchmark Asian city
consumption.
at 20 per month
c) Changing lifestyles with increased frequency of eating out: Informal eating out
is now a growing trend among Indians, and it is becoming more acceptable and
affordable. There is also an increasing preference for ordering-in due to higher
convenience and busy lifestyles. With a low monthly eating out frequency,
India’s per capita expenditure on meals outside the home is significantly lower
than that of other developing countries.
Exhibit 6: Mumbai’s eating out frequency is improving, but Exhibit 7: India’s per capita expenditure on meals outside
remains behind that of the benchmark Asian city the home remains lower than other developing countries
2003 2013 2018 Per capita expenditure on meals outside home in 2018 (USD)
US 1870
20
18
China 750
12
9 10
Brazil 745
3
India 110
Mumbai Benchmark Asian City
Source: MOFSL, WLDL Source: MOFSL, JUBI
December 2021 7
Retail | QSR
d) Higher internet penetration: Internet penetration in India is rising at a faster
639m pace, aided by cheap mobile data. According to Kantar, the world's leading data,
insights, and consulting company, the number of monthly active internet users
Number of monthly in India grew 24% YoY to 574m in CY19, with internet penetration at 41%. The
active internet users in same is estimated to have touched 639m in CY20. Internet access increases
CY20 consumer awareness of brands, trends, and new cuisines, and also connects
them to food aggregators and delivery apps. This is accentuated by the rise of
social media, which allows brands to directly communicate and engage with
consumers.
Exhibit 8: Cost of 1GB mobile data (USD) in India is among the cheapest in the world
Nov'18 Feb'20 12.4
9.9
8.0
6.7 7.2
4.3
3.5
1.0 1.4
0.3 0.09 0.6
India China Brazil UK South Africa US
Source: MOFSL, cable.co.uk
e) Increasing availability of Retail space: In view of the huge success witnessed by

food courts in Malls, it is estimated that 20-25% of the total mall space was
leased to FSI players in FY18. Besides malls and high streets, FSI players have
expanded to locations such as office complexes, educational institutes,
highways, hospitals, etc. In the pre-COVID period, more than 2m sq ft of Retail
space was estimated to be added to the FSI in the top seven cities over FY19-21.
f) The growth of online food delivery and food tech: There are two business
models in India, namely:
i) Direct restaurant-to-consumer, with orders placed on Restaurant
apps/websites (e.g. Domino’s), and
ii) Platform-to-consumer, with orders placed on third-party platforms and
also delivered by them (e.g. Swiggy/Zomato), barring a few exceptions.
India’s overall Food Delivery market is pegged to grow at 12.2% CAGR to
USD18.1b by FY25E, led by a robust growth in platform-to-consumer. Growth
12% estimates got enhanced from 10% CAGR prior to the COVID-19 outbreak, due to
consumers' preference for food delivery over dine-in during the pandemic.
Expected CAGR of The online delivery market significantly adds to consumer convenience, while
India’s Food Delivery providing better reach, visibility, and consumer engagement for restaurants. In
market over order to develop the market, aggregator platforms offer deep discounts, further
FY20-25E pleasing consumers. During the COVID-19 outbreak and once the pandemic
ends, the role of online delivery has become crucial as it offers assured safety,
while aiding consumer convenience.
December 2021 8
Retail | QSR
Exhibit 9: Delivery market’s prospects improve due to the COVID-19 outbreak
Total delivery market post COVID-19
18.1
16.4
10.2
4.7
2016 2020 2025E
g) Urbanization and nuclear families: India’s urban population comprised 28% of
34% its total population in FY05. It increased to 34% in FY18 and is estimated to
touch 40% by CY30. At the same time, there has been an increase in
India’s urban independent households and nuclear families. Urbanization and nuclearization
population have led to a shift in consumption patterns. There is greater consumption of
outside food by these consumers on account of higher convenience and
changing lifestyles.
FSI is highly urban centric

 India’s mega metros (Delhi and Mumbai) contributed 21.9%, while the top 29
cities constituted 53.5% of total FSI revenue in FY20. In the case of Chain
Restaurants, the contribution of urban areas is sharply higher.
 For Chain Restaurants, the revenue contribution of smaller cities and towns is
increasing as players are expanding to these geographies in order to usher in the
next phase of growth.
Exhibit 10: Chain Restaurants are extensively urban centric
4.5
21.9 8.3
Mega Metros
Next 6 cities 42.4
46.5 Chain
FSI Next 21 cities restaurants
20.8 Rest of India
44.7
10.9
Channel mix is getting optimized for a higher throughput

 QSR market leaders such as Domino’s and McDonald’s have increased takeaway
and delivery services of their own apps. Other players such as Pizza Hut have
also recognized the importance of activating their own app and takeaway
services.
December 2021 9
Retail | QSR
Exhibit 11: Leading QSR players are increasing focus on delivery and takeaways while reducing dine-in contribution in order
to increase their throughputs (%)
Dine-in Aggregator Own App Takeaway
23 23 25 15 20 25 25 16 22 21
3 26 30
3 8 5 4
15 12 5
20 12 16
23 25 15 24 22 26 56
15 15 3 11
15
67 65 59 61 60
55 46 50
42 39 35 42
FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20
DOMINO'S MCDONALD'S PIZZA HUT KFC
Burgers and Sandwiches dominate the QSR segment

 Domino’s is the market leader among chain QSRs, both in terms of number of
outlets as well as by revenue. In FY20, Domino’s market share by outlet count
stood at 19%, while its market share by revenue was higher at 21%.
 In terms of revenue, McDonald’s came in second, with a market share of 11%,
despite lower (7%) share by outlet count.
Exhibit 12: Chain QSR segment is dominated by Domino’s… Exhibit 13: …both in terms of outlet count and revenue
Market Share by Outlet Count (%) Market Share by Revenue (%)
Domino's 19 Domino's 21
Subway 8 McDonald's 11
McDonald's 7 KFC 10
KFC 6 Subway 6
Burger King 4 Burger King 5
Others 56 Others 48
Source: MOFSL, BKI Source: MOFSL, BKI
 Of the INR188b chain QSR market in FY20, burgers and sandwiches contributed
INR58b (31% market share), followed by pizza and chicken (fried chicken).
Exhibit 14: Burgers & sandwiches dominate chain QSRs with Exhibit 15: …and are expected to grow at 22% CAGR over
a market share of 31%… FY20-25E
FY20 Market share (%) FY20-25E CAGR (%)
Burgers & Sandwiches 30.9 Burgers & Sandwich 22
Pizza 26.6 Pizza 18
Chicken 14.9 Chicken 10
Indian Ethnic 14.9 Indian Ethnic 36
Others 12.8 Others 30
Only QSR, does not include other formats like CDR Source: MOFSL, Technopak
December 2021 10
Retail | QSR
COVID offers multiple tailwinds for organized players

 The organized players in the Indian FSI are witnessing enhanced growth
prospects post-COVID, led by:
a) Closures of 30-40% the restaurants, especially unorganized players, lead to
market share gains for the incumbents. Even if some of the unorganized
players return eventually, there was a wide window for customer
acquisition for organized players.
b) Sustained high delivery levels compared to the past aided by increased
technology adoption: With mobility restrictions during COVID lockdowns,
consumers opted for food delivery. This was aided by increased adoption of
mobile and online ordering by consumers. Further, the discretionary
As COVID improves consumption options were also limited in this period as categories such as
the opportunity for cinema, traveling, and outdoor socializing were restricted. Consequently,
organized players in food delivery gained in this scenario. In addition, this proved to be
multiple ways, advantageous for customer acquisition in smaller towns where all large
incumbents like JUBI players now see enhanced opportunity for expansion. Notably, even post
and WLDL are withdrawal of dine-in restriction, delivery has largely sustained its elevated
getting aggressive levels. While there is expected to be some correction once full normalcy
on store network returns, it is unlikely to revert to pre-COVID levels.
expansion c) Shift towards trusted players: Branded players benefited as consumers
preferred players with better hygiene standards and higher trust factor.
d) Cost optimization: COVID offered an opportunity for large players to
optimize their costs, especially high fixed costs of lease rentals and
employee expenses. Most players variablized lease rental and employee
expenses by shifting to a revenue sharing model in case of former and by
shifting to part-time model in case of the latter.
e) Attractive terms for expansion: With the closure of several restaurants and
other retail players, there is an increased supply of real estate with
attractive terms available to incumbents for store network expansion.
f) Accelerated store expansion by organized players: In view of these
tailwinds, organized players are seeing an improved opportunity in the
market and are accelerating their store network expansion targets. For
example, JUBI increased its guidance for potential number of Domino’s
stores from 2,000 to 3,000 and WLDL increased from 800 to 1,000. Both the
players have also guided for faster store addition compared to their
respective past performance.
December 2021 11
Retail | QSR
Companies covered in the report
Jubilant FoodWorks .................................... Pg13
Westlife Development ................................ Pg19
Devyani International ................................. Pg25
Barbeque Nation ......................................... Pg54
December 2021 12
Retail |2021
December QSR
Update | Sector: Consumer
Jubilant FoodWorks
BSE SENSEX S&P CNX
57,634 17,177
CMP: INR3,792 TP: INR4,850 (+28%) Buy
Bagging a large slice of the growth pie
Jubilant FoodWorks (JUBI) is our top pick in the QSR space owing to the following reasons:
 Enhanced opportunity for QSRs in India due to COVID, driven by three shifts towards
Stock Info trusted brands, delivery, and technology. JUBI’s raising of potential stores target to
Bloomberg JUBI IN 3,000 from 2,000 is a testament to this improved opportunity.
Equity Shares (m) 132
 It has added the ‘value’ moat through a) ‘Everyday Value’, and b) no price hikes. This
M.Cap.(INRb)/(USDb) 500.4 / 6.6
has helped drive SSSG and created an opportunity for seamless absorption of future
52-Week Range (INR) 4577 / 2510
1, 6, 12 Rel. Per (%) 4/10/22 price hikes.
12M Avg Val (INR M) 2666  It has also strengthened its technology and delivery moats by efforts on its own app
Free float (%) 58.1 and ensuring its own last-mile delivery, including for orders generated via aggregators.
Financials Snapshot (INR b)
Its three moats of value, delivery, and technology have helped it scale up profitably
Y/E March 2021 2022E 2023E even in smaller towns.
Sales 33.1 45.2 57.1  JUBI’s new ventures in Chinese, Biryani, and Fried Chicken categories have the
Sales Gr. (%) -15.7 36.4 26.4 potential to be future growth engines.
EBITDA 7.7 11.7 14.8  As highlighted in our FY21 ARA, JUBI is the most efficient player in the Indian QSR
Margins (%) 23.3 25.9 26.0
space and is well placed to seize the enhanced QSR growth opportunity. It has the
Adj. PAT 2.3 4.8 6.8
Adj. EPS (INR) 17.5 36.7 51.6 best Balance Sheet and a consistently high RoCE of over 20%. We maintain our Buy
EPS Gr. (%) -22.5 110.3 40.6 rating with a TP of INR4,850/share (33x FY24E EV/EBITDA).
BV/Sh.(INR) 108.1 143.6 177.3
Ratios
 Opportunity getting even better post–-COVID: QSRs have seen the biggest
RoE (%) 16.2 25.6 29.1 expansion in their structural opportunity post COVID-19. Three key reasons for
RoCE (%) 12.1 18.8 22.2 this are: a) a result of the shift towards trusted brands, b) an evident move
Payout (%) 34.3 32.7 34.9 towards delivery, and c) significant adoption of technology by consumers. The
Valuations
management’s upward revision of potential Domino’s stores in India to ~3,000,
P/E (x) 217.1 103.2 73.4
P/BV (x) 35.1 26.4 21.4 after maintaining its guidance of ~2,000 for several years before that, is a
EV/EBITDA (x) 63.5 41.4 32.4 testament to the significantly increased opportunity going forward. It has also
Div. Yield (%) 0.2 0.3 0.5 raised its FY22 store addition targets to 150-175 (from ~135 earlier). This
Shareholding pattern (%)
heralds a store addition of 12-13% to its existing base annually compared to 8-
As On Sep-21 Jun-21 Sep-20 9% in recent years.
Promoter 41.9 41.9 41.9  Largest among peers, with a long runway for growth: Despite JUBI being the
DII 11.0 10.8 14.8 largest among QSRs – both in terms of the number of stores (1,435 Domino’s
FII 41.6 41.9 38.1
Others 5.5 5.4 5.2
stores and ~1,485 stores across all brands at the end of 2QFY22) and overall
FII Includes depository receipts sales (higher than the next three QSRs put together), the opportunity for growth
is humungous. Its revenue stood at ~1% of the FSI in India and ~2.5% of the
Stock performance (one-year)
organized FSI market. With an accelerating shift from unorganized and small
peers, the chain restaurants market is expected to grow by more than 19%
CAGR over the next few years. JUBI is expected to outperform the market.
 Value moat has emerged in recent years: JUBI’s efforts on delivering value,
through the successful introduction of ‘Everyday Value’ in recent years, has
enabled strong SSSG growth in a category that had previously been perceived by
consumers as ‘expensive’. From a store economics perspective, ‘value’ added is
another key defense to its considerably massive ‘delivery’ moat. Absence of
price hikes in recent years has resonated with customers in terms of further
improving the perception of value.
December 2021 13
Retail | QSR
 The ‘value’ moat, created in recent years, enables faster conversion from other
non-QSR FSI players, who have historically focused on this price point. Unlike
the sharp price hikes taken in the preceding half of the last decade, the
successful tilt towards value also creates space for potential moderate price
increases going forward. The seamless absorption of the INR20 delivery charge
introduced last year also increases confidence on eventual price hikes being
absorbed, thereby increasing profitability further.
 Technology moat is also becoming considerable: Domino’s parent has
reinvented itself as a ‘technology company selling pizzas’ for several years now.
The other big achievement of JUBI in the last five years has been the adaptation
of this mantra in India. This led to: a) considerable upgradation of their India app
experience; and, b) facilitating far better analytics, aided by triumvirate moats of
71.3m technology, value, and delivery, across a wide store network. Critically, it also
Cumulative downloads of retained its last-mile delivery edge, even on orders emanating from aggregator
Domino’s app as of Sep’21 platforms. All these efforts enabled JUBI to meet and overcome the challenge
posed by aggregators in India. Even as they partner with aggregator apps in
India, their dependence on the latter is far lower than QSR peers, and thus the
commission rates are far lower as well.
 New business has the potential to be future growth engines: In recent years,
New business: Future growth
engines JUBI has ventured into new food categories. These include Hong’s Kitchen
(Chinese), Ekdum! (Biryani), and acquisition of the franchise rights for Popeye’s
(fried chicken). Chinese and Biryani categories have a vast market in India, with
no strong market leader. In the case of Fried Chicken, KFC dominates the
market, but there is a space for a second player. If executed well, these brands
have significant growth potential and could be future growth engines. Having
burnt its hands with Dunkin Donuts, JUBI would be much more cautious in
scaling these up. The only point of debate among JUBI’s new ventures is its right
to win in the recently acquired Eurasia NV business (Domino’s franchisee in
Turkey, Russia, Georgia, and Azerbaijan). As long as it does not prove to be a
capital guzzler, it is not a source of significant worry and does not detract from
the immense opportunity of other segments.
 Back-end and commissary provide another scalable moat for newer businesses
too: Unlike peers, JUBI didn’t depend significantly on its global franchise partner
to set up its supply chain and commissary operations in India, it set up its own
infrastructure instead. This gives JUBI far greater flexibility in Domino’s India
operations and to use the same back-end for new ventures. Learnings from
India can be adapted to their Domino’s franchise operations in Sri Lanka and
Bangladesh, which now appear poised for growth after initial hiccups.
Valuation and view

 JUBI has historically had the best business model for QSRs in India, with its
emphasis on delivery (70% of sales prior to the COVID-19 outbreak). With the
addition of technology and ‘value’ moats, the business has only strengthened
further. Sales per square foot, despite competition from aggregators and other
QSRs gradually getting their act together is likely to remain the best among F&B
Retail peers in India. SSSG is likely to remain robust, driven by tailwinds towards
delivery-based and organized players once the pandemic ends.
December 2021 14
Retail | QSR
 JUBI also has the best Balance Sheet, with a RoCE of over 20% for many years
now (barring a blip in FY21 due to the COVID-19 outbreak). This helps fund its
profitable store expansion as well, which is supported by its triumvirate moats
of delivery, ‘value’, and technology. These moats make the business profitably
scalable in smaller towns as well. QSRs are in a sweet spot for rapid growth over
the next 5-10 years in India. Operating profit is expected to grow, with 25-30%
CAGR for several players. Domino’s is the most efficient among them. We
maintain our Buy rating with a TP of INR4,850/share (33x FY24E EV/EBITDA).
Exhibit 16: Contribution of online orders (OLO) to delivery Exhibit 17: Contribution of mobile ordering to OLO is now
sales is now almost near to 100% almost near to 100%
Average OLO contribution to delivery sales (%) Mobile Ordering sales contribution to overall OLO (%)
100 100
80 80
60 60
40 40
20 20
0 0
4QFY16
2QFY21
2QFY15
4QFY15
2QFY16
2QFY17
4QFY17
2QFY18
4QFY18
2QFY19
4QFY19
2QFY20
4QFY20
4QFY21
2QFY22
2QFY15
4QFY15
2QFY16
4QFY16
2QFY17
4QFY17
2QFY18
4QFY18
2QFY19
4QFY19
2QFY20
4QFY20
2QFY21
4QFY21
2QFY22
Source: Company, MOFSL Source: Company, MOFSL
Exhibit 18: Domino’s mobile app downloads continue to grow rapidly
71.3
64.1
Cumulative downloads of mobile ordering app (in mn)
57.3
51.2
43.8
37.5
33.1
29.4
25.3
21.6
17.8
15.3
12.6
10.9
9.6
9.0
7.8
7.5
6.4
5.3
5.0
4.4
3.9
3.7
3.5
3.1
2.6
2.3
2.0
2QFY21
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
3QFY21
4QFY21
1QFY22
2QFY22
Source: Company, MOFSL
Exhibit 19: While JUBI opened net 243 stores over FY17-21, Exhibit 20: Annual store addition expected to be 10-12%
we expect 945 stores to be opened over FY21-26E going forward compared to ~8-9% in the past
Domino's Store Count YoY net addition (%)

11.8 11.5 11.2
10.6 10.6
2,305
8.9 8.8
2,085
8.2
1,885
1,695
1,520
1,360
1,335
1,227
1,134
1.9
1,117
1.5
FY21
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
FY25E
FY26E
FY17
FY18
FY19
FY20
FY22E
FY23E
FY24E
FY25E
FY26E
December 2021 15
Retail | QSR
Exhibit 21: Expect SSSG to remain healthy
SSSG YoY (%) 30.0

24.0
16.4 18.0
13.9 15.0 12.0
3.2
(2.4)
(17.7)
FY17
FY18
FY19
FY20
FY21
FY25E
FY22E
FY23E
FY24E
FY26E
Exhibit 22: Sales to grow at 26% CAGR over FY21-26E Exhibit 23: EBITDA to grow at 28% CAGR over FY21-26E
Sales (INR b) Sales growth (%) EBITDA (INR b) EBITDA growth (%)
82.5
36.4
26.4 25.7 51.9
16.8 18.0 20.7 19.2 46.0
10.2 36.3
6.0 26.6 26.8
18.6 20.8
(15.7)
(8.5) (11.9)
26 30 36 39 33 45 57 72 87 103 2.4 4.4 6.0 8.8 7.7 11.7 14.8 18.8 22.3 26.9
FY25E
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
FY26E
FY17
FY18
FY19
FY20
FY21
FY23E
FY22E
FY24E
FY25E
FY26E
Source: MOFSL, Company Figures as per Ind AS 116 FY20 onwards Source: MOFSL, Company
Exhibit 24: Expect EBITDA margin expansion through Exhibit 25: …with an even more impressive PAT CAGR of
operational leverage… 44% over the same period
EBITDA Margin (%) 180.5 PAT (INR b) PAT growth (%)

25.9 26.0 26.2 25.7 26.1
22.3 23.3 110.3
16.8 62.0
14.6 40.6 38.4
20.5 25.0
9.3 (6.5)
(27.8) (22.5)
0.7 2.0 3.2 3.0 2.3 4.8 6.8 9.4 11.4 14.2
FY23E
FY17
FY18
FY19
FY20
FY21
FY22E
FY24E
FY25E
FY26E
FY17
FY18
FY19
FY20
FY21
FY26E
FY22E
FY23E
FY24E
FY25E
Figures as per Ind AS 116 FY20 onwards Source: Company, MOFSL Source: Company, MOFSL
Exhibit 26: Strong return ratios to continue… Exhibit 27: …along with robust cash flows
RoE (%) RoCE (%)
CFO (INR b) FCF (INR b)
32.2 31.6 32.1
28.5
16.2
29.1
26.5 25.6
13.5
11.3
22.1
28.6
25.2 16.2 26.0 26.9
8.6
22.2
6.4
20.3 20.3
5.1
18.8
4.4
8.9
2.9
2.6
11.0
13.7
17.1
19.9
23.4
8.7 12.1
0.0
2.0
4.1
4.3
7.3
7.5
FY20
FY22E
FY24E
FY26E
FY17
FY18
FY19
FY21
FY23E
FY25E
FY22E
FY17
FY18
FY19
FY20
FY21
FY23E
FY24E
FY25E
FY26E
December 2021 16
Retail | QSR
JUBI Financials and valuations

Income Statement (INR m)
Y/E March FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Net Sales 25,834 30,184 35,631 39,273 33,119 45,170 57,100 71,759
Change (%) 6.0 16.8 18.0 10.2 -15.7 36.4 26.4 25.7
Material Consumed 6,308 7,660 8,861 9,835 7,262 10,072 12,726 15,828
Gross Profit 19,526 22,524 26,770 29,438 25,856 35,098 44,374 55,931
Gross Margin (%) 75.6 74.6 75.1 75.0 78.1 77.7 77.7 77.9
Operating expenses 17,115 18,123 20,773 20,682 18,144 23,384 29,547 37,136
EBITDA 2,411 4,401 5,998 8,756 7,712 11,714 14,827 18,795
Change (%) -8.5 82.5 36.3 46.0 -11.9 51.9 26.6 26.8
Margin (%) 9.3 14.6 16.8 22.3 23.3 25.9 26.0 26.2
Depreciation 1,554 1,601 1,575 3,523 3,754 4,000 4,328 4,770
Int. and Fin. Ch. 0 0 0 1,652 1,627 1,805 2,054 2,298
Other Non-recurring Inc. 147 231 474 696 731 572 666 881
PBT 1,004 3,031 4,897 4,277 3,062 6,481 9,111 12,608
Change (%) -31.7 201.7 61.6 -12.7 -28.4 111.7 40.6 38.4
Margin (%) 3.9 10.0 13.7 10.9 9.2 14.3 16.0 17.6
Tax 305 1,068 1,717 1,303 757 1,633 2,296 3,177
Tax Rate (%) 30.4 35.3 35.1 30.5 24.7 25.2 25.2 25.2
Adjusted PAT 699 1,962 3,180 2,974 2,305 4,848 6,815 9,430
Change (%) -27.8 180.5 62.0 -6.5 -22.5 110.3 40.6 38.4
Margin (%) 2.7 6.5 8.9 7.6 7.0 10.7 11.9 13.1
Non-rec. (Exp.)/Inc. -122 0 0 -186 0 0 0 0
Reported PAT 578 1,962 3,180 2,788 2,305 4,848 6,815 9,430
Figures as per Ind AS 116 FY20 onwards
Balance Sheet (INR m)

Share Capital 1,319 1,320 1,320 1,320 1,320 1,320 1,320 1,320
Reserves 6,734 8,358 11,277 9,901 12,949 17,633 22,073 27,940
Net Worth 8,053 9,677 12,596 11,220 14,268 18,953 23,392 29,260
Loans 18 30 9 16,711 16,205 16,367 16,530 16,696
Capital Employed 8,071 9,708 12,631 28,038 30,567 35,414 40,017 46,049
Gross Block 10,604 11,748 13,107 37,507 38,954 43,528 48,659 54,407
Less: Accum. Depn. 2,603 3,838 5,007 15,619 17,499 21,499 25,828 30,598
Net Fixed Assets 8,001 7,910 8,100 21,887 21,455 22,029 22,831 23,809
Lease Deposits 1,822 1,776 2,056 1,719 2,086 2,448 2,866 3,347
Capital WIP 608 124 152 412 286 328 378 434
Investments 936 2,631 1,808 512 5,167 6,209 7,431 8,508
Deferred tax assets -693 -550 -500 751 831 831 831 831
Curr. Assets, L&A 1,539 2,525 6,441 8,417 7,843 11,625 15,615 21,402
Inventory 607 642 771 947 1,331 966 1,220 1,518
Account Receivables 161 157 274 166 168 307 388 488
Cash and Bank Balance 354 1,290 4,943 6,559 5,392 9,124 12,447 17,396
Others 417 437 454 745 952 1,228 1,559 2,000
Curr. Liab. and Prov. 4,143 4,710 5,426 5,661 7,101 8,056 9,934 12,282
Other Current Liabilities 798 656 915 868 1,299 1,495 1,645 1,974
Creditors 3,142 3,890 4,209 4,470 5,330 5,991 7,607 9,488
Provisions 202 164 303 322 471 569 683 820
Net Curr. Assets -2,604 -2,184 1,015 2,757 743 3,569 5,680 9,120
Appl. of Funds 8,071 9,708 12,631 28,038 30,567 35,414 40,017 46,050
E: MOFSL estimates
December 2021 17
Retail | QSR
JUBI: Financials and valuations

Ratios
Basic (INR)
EPS 5.3 14.9 24.1 22.5 17.5 36.7 51.6 71.5
BV/Share 61.1 73.3 95.4 85.0 108.1 143.6 177.3 221.7
DPS 1.2 2.5 5.0 6.0 6.0 12.0 18.0 27.0
Payout (%) 23.4 16.8 20.8 26.6 34.3 32.7 34.9 37.8
Valuation (x)
P/E 715.1 255.0 157.4 168.2 217.1 103.2 73.4 53.1
EV/Sales 19.3 16.5 13.9 12.6 14.8 10.7 8.4 6.6
EV/EBITDA 206.9 112.8 82.3 56.3 63.5 41.4 32.4 25.2
P/BV 62.1 51.7 39.7 44.6 35.1 26.4 21.4 17.1
Return Ratios (%)

RoE 8.7 20.3 25.2 26.5 16.2 25.6 29.1 32.2
RoCE 8.9 22.1 28.5 20.3 12.1 18.8 22.2 26.0
RoIC 9.7 30.6 50.4 27.7 14.8 29.2 39.7 53.2
Working Capital Ratios
Debtor (Days) 2 2 3 2 2 2 2 2
Inventory (Days) 9 8 8 9 15 8 8 8
Creditor (Days) 44 47 43 42 59 48 49 48
Asset Turnover (x) 3.2 3.1 2.8 1.4 1.1 1.3 1.4 1.6
Leverage Ratio
Net debt/Equity (x) 0.0 0.0 0.0 0.9 0.4 0.0 0.0 0.0
Cash Flow Statement (INR m)

OP/(loss) before Tax 883 3,031 4,897 4,028 3,062 6,481 9,111 12,608
Int./Div. Received -34 -120 -165 1,665 1,465 -572 -666 -881
Depreciation and Amort. 1,554 1,601 1,575 3,523 3,754 4,000 4,328 4,770
Interest Paid 58 71 256 454 414 -1,805 -2,054 -2,298
Direct Taxes Paid 366 1,262 1,779 1,402 869 1,633 2,296 3,177
Incr. in WC -57 -912 14 82 -509 -905 -1,212 -1,509
CF from Operations 2,036 4,091 4,256 7,278 7,506 10,987 13,744 17,127
Incr. in FA -1,996 -1,160 -1,657 -2,830 -2,427 -4,617 -5,180 -5,805

Free Cash Flow 40 2,931 2,600 4,448 5,080 6,370 8,564 11,322
Others 102 48 262 281 -2,850 1,705 322 475
Pur. of Investments 28 -1,695 958 1,502 -510 -1,041 -1,222 -1,077
CF from Invest. -1,866 -2,808 -437 -1,047 -5,786 -3,954 -6,080 -6,408
Issue of Shares 50 210 230 108 31 0 0 0

Incr. in Debt 0 0 0 -1,323 -2,843 162 164 165
Dividend Paid 165 164 329 1,448 0 1,584 2,375 3,563
Others -34 -393 -68 -1,951 -75 -1,879 -2,128 -2,372
CF from Fin. Activity -148 -347 -167 -4,614 -2,887 -3,301 -4,340 -5,770
Incr./Decr. in Cash 22 936 3,652 1,616 -1,167 3,732 3,324 4,949

Add: Opening Balance 332 354 1,290 4,943 6,559 5,392 9,124 12,447
Closing Balance 354 1,290 4,943 6,559 5,392 9,124 12,447 17,396
E: MOFSL estimates
December 2021 18
Retail |2021
December QSR
Update | Sector: Retail
Westlife Development
BSE SENSEX S&P CNX
57,634 17,177 CMP: INR564 TP: INR575 (+2%) Neutral
Strong value proposition to tap the vast opportunity
WLDL has strong prospects going forward on account of:
 The longer term opportunity is extremely exciting for WLDL as is the case with other
Stock Info
QSRs. Given McDonald’s strong value proposition, it would continue to be a
Bloomberg WLDL IN
significant beneficiary of consumers shifting from unorganized to organized FSI
Equity Shares (m) 156
M.Cap.(INRb)/(USDb) 87.7 / 1.2 players.
52-Week Range (INR) 684 / 388  The convenience platform, which includes delivery, drive through, and on-the-go has
1, 6, 12 Rel. Per (%) 0/3/1 received a boost due to the COVID-19 outbreak. The strong momentum on this
12M Avg Val (INR M) 127 platform is driving the recovery in sales for WLDL. Its elevated performance is likely
Free float (%) 42.9 to continue once normalcy returns.
 McCafé offers multiple benefits and has significantly helped improve WLDL’s SSSG
Financials Snapshot (INR b)
and margin. As WLDL adds McCafé to its stores, it would result in further gains.
Y/E March 2021 2022E 2023E
 With an enhanced market opportunity, the management has raised its potential
Net Sales 9.9 14.3 18.9
Net Sales Gr. (%) -36.3 45.5 31.5 store network target to 1,000 from 800. It plans to accelerate store additions, with
EBITDA 0.5 1.5 2.7 30-40 annual openings in FY23, up from 20-25 in recent years.
Margins (%) 4.8 10.7 14.5  Despite the COVID-19 blip, the company seems to be on track to achieve its Vision
Adj. PAT -1.0 -0.5 0.4 CY22 (FY23) goal with a slight lag.
Adj. EPS (INR) -6.7 -3.2 2.8
 We see competition intensifying for WLDL in light of: a) the Stunner menu launch by
EPS Gr. (%) P/L - L/P
BV/Sh. (INR) 30.9 27.7 30.5 BURGERKI competing with WLDL’s value moat; b) faster store expansion by QSR peers
Ratios (despite WLDL’s own acceleration), and c) lower contribution from premium Burgers,
RoE (%) -19.6 -11.0 9.6 limiting gross margin expansion. Its scheduled royalty increase to 8% in FY27 is also a
RoCE (%) -2.5 2.5 8.8 concern. Accordingly, valuations are fair with ~32x FY23E EV/EBITDA. We maintain our
Valuations
Neutral rating.
P/E (x) N/M N/M 201.4
P/BV (x) 18.2 20.3 18.5  On track to deliver its Vision CY22 targets: With Vision CY22 (FY23), WLDL had
EV/EBITDA (x) 191.3 58.3 32.5 set out to achieve all-round growth, driven by store network expansion,
EV/Sales (x) 9.1 6.2 4.7
double-digit SSSG, and improving unit economics. WLDL’s strengths include: a)
Shareholding pattern (%) offering an affordable value proposition, which helps consumers to shift from
As On Sep-21 Jun-21 Sep-20 the unorganized segment, b) continuous innovation in the menu to cater to
Promoter 57.1 56.4 59.1 local tastes and drive acceptability, c) successful brand extensions
DII 22.0 20.9 19.4 (McBreakfast, McDelivery, and McCafé), which increase consumption
FII 11.0 11.6 10.0 occasions, while simultaneously driving premiumization, SSSG, and margin
Others 9.8 11.2 11.5
improvement, and d) a robust supply chain that was built from scratch, thus
FII Includes depository receipts creating a ‘farm-to-fork’ model. Despite a massive disruption, led by the first
and second COVID wave, it remains on track to deliver its Vision CY22 targets
with a few months lag.
 Value platform remains strong: In CY04, McDonald’s took the market by storm
when it introduced its McAloo Tikki and other products at an extremely
affordable price (INR20). The affordable price was meant to be competitive to
‘vada pav’, a popular street-food. The value platform continues to remain
strong, with McAloo Tikki currently retailing at INR45, a price point competitive
to the unorganized sector. The value platform is key to the success of the QSR
business as it is a critical driver of volumes and SSSG. WLDL would, thus,
continue to be a significant beneficiary of the shift from unorganized to the
organized market.
December 2021 19
Retail | QSR
 Convenience platform seeing strong momentum: WLDL’s convenience platform

includes delivery, drive through, and on-the-go channels. It contributed ~50% of
sales prior to the COVID-19 outbreak. With COVID-related restrictions on dine-
in, it was the convenience platform which drove a recovery in sales. Aided by
WLDL’s efforts on the McDelivery app, momentum continues to remain strong
and was unaffected even in periods when dine-in recovered. COVID-19 created
a structural opportunity for the convenience platform. The latter will continue
to see elevated performance and be a significant growth driver once normalcy
returns.
Convenience platform  McCafé offers multiple benefits: In line with McDonald’s global success with
(McDelivery, Drive Thru, McCafé, WLDL started introducing it in its stores from FY14 onwards. As of
On The Go) seeing strong 1QFY22, it has 231 McCafés out of a store network of 305 stores (~75% of its
momentum store network). Under McCafé, WLDL offers over 45 hot and cold beverages and
desserts. With a capex of just INR2.5-3m, McCafé kiosks come with multiple
benefits: a) it adds a complementary product, which increases volumes and
SSSG; b) the price points for coffee are upward of INR100, which improves
realizations and drives SSSG; c) gross margin for beverages are 75-80%, making
it gross margin accretive; and d) the coffee consumption comes in between
lunch and dinner, thereby improving restaurant capacity utilization and in turn
1,000 improving restaurant operating margin (ROM). With the gradual ramping up of
McCafés, WLDL has seen elevated SSSG and gross margin performance. SSSG,
which was negative for eight quarters ended 1QFY16, did not turn negative until
Potential number of
McDonald’s stores 4QFY20 when the COVID-led lockdowns affected it. At the same time, its gross
estimated by WLDL in margin improved to 65.2% in FY20 from 57.4% in FY14. As WLDL continues to
West and South India add McCafé to its stores, it would stand to make further gains.
 Putting in efforts on premiumization, though not fully efficacious: WLDL has
launched several products at the premium end of its portfolio, but has seen
limited success. Its Maharaja Mac introduced in competition to BURGERKI’s
Whopper hasn’t seen much success. Recently, WLDL introduced Gourmet
burgers in select restaurants in Mumbai and Bengaluru. These have received
good initial consumer response, and the management aims to ramp it up across
the entire store network. The jury is still out there on whether this product can
have a meaningful impact on WLDL’s performance. WLDL has forayed into the
INR50b Fried Chicken category with McSpicy Fried Chicken. The management
feels it can derive sales of INR5m per store from this product. It needs to be
seen if WLDL can mark its presence in this category, which is strongly dominated
by KFC.
 Getting aggressive on store additions: Recently, the management said it sees
enhanced opportunities for organized FSI players due to COVID-19. It sees
potential for 1,000 McDonald’s stores, up from 800 previously. It intends to add
30-40 new stores annually, up from 20-25 that it has been adding over the past
few years. In our initiating coverage note, we had indicated that its potential
store network is 3x at 900-1,100 stores.
Launched premium burgers
 Proven performance; promising prospects: Over FY15-20, WLDL delivered
under the Gourmet Burger
Collection 15.2%/48% CAGR in sales/EBITDA (pre-Ind AS 116), with a major improvement
in PAT. SSSG saw a significant improvement over this period, partially supported
by tailwinds from GST implementation. EBITDA margin (pre-Ind AS 116)
improved to 9.4% in FY20 from 2.7% in FY15. The opportunity for WLDL in West
December 2021 20
Retail | QSR
and South India remains high. The trend of improving profitability, better RoCE,
30-40
Increased annual store
operating cash flows, and free cash flows are likely to continue over the medium
term. We expect ~28%/66% CAGR in sales/EBITDA (post-Ind AS 116) over FY21-
26E, aided by a soft base of FY21, which was affected by COVID-led restrictions.
addition targets, up from
20-25 in recent years Valuation and view
 WLDL is an attractive long term investment from a potential topline and
earnings growth perspective. It has already demonstrated strong performance
in recent years in terms of both sustained robust SSSG as well as significant
EBITDA margin improvement before the COVID-19 disruption. Once the
company emerges out of the COVID-led disruptions, this is one of the few
businesses among Consumer/Retail peers that can compound earnings at 20%
or higher. This is reflected in our forecasts of ~66% CAGR in EBITDA (over a low
base for the latter) over FY21-26E, despite COVID-led disruptions in both FY21
and FY22 significantly affecting the dine-in business.
 However, with the competition intensifying for WLDL on: a) its value moat,
particularly after BURGERKI launching its Stunner menu; b) faster store addition
by QSR peers (despite WLDL’s own acceleration), which escalates the
competitive intensity; and c) the limited success seen by McDonald’s in India in
premium burgers, which limits gross margin expansion. Its staggered increase in
royalty rates, eventually increasing to 8% in FY27, is also a concern because of
lower outgo for peers: 5% for BURGERKI (capped until CY39) and 3% of JUBI.
Given these concerns, valuations are fair at ~32x FY23E EV/EBITDA. We maintain
our Neutral rating with a TP of INR575 per share (24x FY24E EV/EBITDA).
Exhibit 28: WLDL starts adding McCafés to its store
network… Exhibit 29: …which increased its gross margin…
McCafé stores 73.4 Gross margin (%)
69.9
% of total stores 64.2 65.2 64.7
53.8 62.6 63.5
43.0 60.0 60.6
31.8 57.4 58.4
17.7 54.7
2.7
5 37 75 111 149 190 223 224
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Exhibit 30: …and elevated its SSSG profile out of the negative zone
SSS Growth (%) 25.1 24.1 25.7

20.7
14.5
8.4 8.7 8.4 9.2
3.4 6.5 5.1 1.0 5.6 6.7 7.0
0.5 (0.3) 1.7 3.1
(5.5) (9.0) (8.1) (5.1) (4.9)
(9.8)
(10.5)
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
.
December 2021 21
Retail | QSR
Exhibit 31: WLDL to accelerate store additions Exhibit 32: WLDL well placed to deliver double-digit SSSG
SSSG (%)
Stores YoY Addition (%)
9.3 10.6 11.0 9.9

7.8 8.2 9.0 40.5
7.4 6.9
25.5
15.8 17.0 15.0 12.0 10.0
4.0 4.0
-4.4
258 277 296 319 305 330 365 405 445 485
-27.1
FY18
FY25E
FY17
FY19
FY20
FY21
FY22E
FY23E
FY24E
FY26E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY25E
FY26E
Exhibit 34: …and 66% EBITDA CAGR over FY21-26E on a soft
Exhibit 33: Expect 28% sales CAGR over FY21-26E… base
Sales (INR b) Sales growth (%) EBITDA (INR b) EBITDA growth %
45.5
31.5 226.9
21.9 23.5 25.0 21.5
18.0
11.7 10.4
64.8 53.8 79.9 78.8
36.7 29.6 20.2
(36.3) 10.2
0.5
(78.1)
9 11 14 15 10 14 19 24 29 34 0.5 0.8 1.2 2.1 1.5 2.7 3.8 4.9 5.8
FY25E
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
FY26E
FY23E
FY17
FY18
FY19
FY20
FY21
FY22E
FY24E
FY25E
FY26E
Exhibit 35: Expect a gradual improvement in margin through Exhibit 36: Expect WLDL to become profitable at the net level
operating leverage and increase in McCafé penetration in FY23E
PAT (INR b)
EBITDA margin (%)
17.3
15.9 17.0
13.8 14.5
10.7
8.5 0.1 0.2 0.1 0.4 1.0 1.7 2.2
6.8
5.0 4.8
-0.1 -1.0 -0.5
FY26E
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
FY25E
FY17
FY18
FY19
FY20
FY21
FY23E
FY22E
FY24E
FY25E
FY26E
Exhibit 37: Return ratios to improve in the years ahead… Exhibit 38: …with improvements in cash flows as well
OCF (INR b) FCF (INR b)
RoE (%) RoCE (%) 13.4 14.4
10.7 2.3 2.4
2.0
8.8 1.7
6.3 1.4 1.1 1.3 1.3
3.9 4.2 2.5
0.5 0.7 0.7 0.8
(2.5) 25.3 26.2 0.3
9.6 18.6 0.2 0.0 0.1
2.4 3.8 1.6
(2.3)
(11.0) -0.3 -0.3 -0.2 -0.2
(19.6) -0.9
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
FY25E
FY26E
FY23E
FY17
FY18
FY19
FY20
FY21
FY22E
FY24E
FY25E
FY26E
December 2021 22
Retail | QSR
WLDL: Financials and valuations

Consolidated Income Statement (INR m)
Total Income from Operations 9,308 11,349 14,020 15,478 9,860 14,347 18,866 23,582
Change (%) 11.7 21.9 23.5 10.4 -36.3 45.5 31.5 25.0
Materials Consumed 3,663 4,250 5,116 5,382 3,483 4,950 6,414 7,829
Gross profit 5,645 7,099 8,905 10,095 6,377 9,397 12,452 15,753
Margin (%) 60.6 62.6 63.5 65.2 64.7 65.5 66.0 66.8
Operating Expenses 5,175 6,325 7,715 7,955 5,908 7,862 9,707 12,000
EBITDA 469 774 1,190 2,140 469 1,535 2,745 3,753
Change (%) 10.2 64.8 53.8 79.9 -78.1 226.9 78.8 36.7
Margin (%) 5.0 6.8 8.5 13.8 4.8 10.7 14.5 15.9
Depreciation 637 673 797 1,384 1,396 1,392 1,575 1,730
EBIT -168 101 393 757 -927 142 1,169 2,022
Int. and Finance Charges 154 150 177 808 845 858 987 1,096
Other Income 200 178 136 130 443 215 302 377
PBT bef. EO Exp. -121 129 352 79 -1,329 -501 484 1,303
Total Tax 0 0 139 -14 -293 0 48 328
Tax Rate (%) 0.0 0.0 39.5 16.2 22.8 0.0 10.0 25.2
Reported PAT -121 129 213 -73 -994 -501 435 975
Adjusted PAT -121 129 213 93 -1,036 -501 435 975
Change (%) P/L L/P 65.7 -56.4 P/L - L/P 123.9
Margin (%) -1.3 1.1 1.5 0.6 -10.5 -3.5 2.3 4.1
Consolidated Balance Sheet (INR m)

Equity Share Capital 311 311 311 311 312 312 312 312
Total Reserves 4,964 5,111 5,525 5,459 4,501 4,000 4,435 5,410
Net Worth 5,275 5,422 5,837 5,770 4,812 4,312 4,747 5,722
Minority Interest 0 0 0 0 0 0 0 0
Total Loans 1,904 1,835 2,339 1,837 2,152 1,952 1,602 1,102
Lease Liabilities 0 0 0 7,822 7,528 8,100 9,428 10,944
Deferred Tax Liabilities 0 0 -63 -214 -510 -510 -510 -510
Gross Block 7,984 8,795 7,242 8,439 9,303 10,403 11,903 13,803
Less: Accum. Deprn. 3,143 3,722 1,761 2,538 3,935 5,327 6,903 8,633
Net Fixed Assets 4,842 5,073 5,480 5,900 5,368 5,076 5,000 5,170
Goodwill on Consolidation 466 466 466 466 466 466 466 466
Capital WIP 172 197 284 226 256 226 226 226
Total Investments 1,700 1,843 2,046 1,576 1,984 794 873 917
Curr. Assets, Loans, and Adv. 1,623 1,712 1,901 9,249 8,651 9,542 11,660 14,177
Inventory 302 337 410 411 465 550 724 905
Cash and Bank Balance 71 109 92 30 110 152 171 206
Loans and Advances 1,201 1,201 1,301 8,760 7,988 8,712 10,598 12,857
Curr. Liability and Prov. 1,624 2,034 2,065 2,201 2,744 2,250 2,959 3,699
Account Payables 1,114 1,397 1,487 1,594 1,851 1,769 2,326 2,907
Other Current Liabilities 442 565 498 507 789 330 434 542
Provisions 68 72 80 100 104 151 199 249
Net Current Assets 0 -322 -164 7,048 5,907 7,292 8,701 10,479
Appl. of Funds 7,179 7,258 8,112 15,216 13,982 13,853 15,267 17,257
E: MOFSL estimates
December 2021 23
Retail | QSR
WLDL: Financials and valuations

Ratios
Basic (INR)
Adj. EPS -0.8 0.8 1.4 0.6 -6.7 -3.2 2.8 6.3
Cash EPS 3.3 5.2 6.5 9.5 2.3 5.7 12.9 17.4
BV/Share 33.9 34.9 37.5 37.1 30.9 27.7 30.5 36.8
DPS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Valuation (x)
P/E N/M 682.0 411.5 944.7 N/M N/M 201.4 89.9
Cash P/E 170.0 109.4 86.8 59.4 243.3 98.3 43.6 32.4
P/BV 16.6 16.2 15.0 15.2 18.2 20.3 18.5 15.3
EV/Sales 9.6 7.9 6.4 5.8 9.1 6.2 4.7 3.8
EV/EBITDA 190.8 115.7 75.6 41.8 191.3 58.3 32.5 23.6
Return Ratios (%)
RoE -2.3 2.4 3.8 1.6 -19.6 -11.0 9.6 18.6
RoCE 0.5 3.9 4.2 6.3 -2.5 2.5 8.8 10.7
RoIC -3.3 2.0 4.4 6.6 -5.7 1.2 7.9 10.1
Fixed Asset Turnover (x) 1.2 1.3 1.9 1.8 1.1 1.4 1.6 1.7
Asset Turnover (x) 1.3 1.6 1.7 1.0 0.7 1.0 1.2 1.4
Inventory (Days) 12 11 11 10 17 14 14 14
Debtor (Days) 2 2 3 1 3 3 3 3
Creditor (Days) 44 45 39 38 69 45 45 45
Leverage Ratio (x)
Current Ratio 1.0 0.8 0.9 4.2 3.2 4.2 3.9 3.8
Interest Coverage Ratio -1.1 0.7 2.2 0.9 -1.1 0.2 1.2 1.8
Net Debt/Equity 0.0 0.0 0.0 0.0 0.0 0.2 0.1 0.0
Consolidated Cash Flow Statement (INR m)

OP/(Loss) before Tax -121 129 393 -88 -1,287 -501 484 1,303
Depreciation 637 673 797 1,384 1,396 1,392 1,575 1,730
Interest and Finance Charges 148 145 175 780 791 643 685 719
Direct Taxes Paid 3 -23 -26 -163 32 0 -48 -328
(Inc.)/Dec. in WC 120 508 -110 164 691 -1,343 -1,390 -1,743
CF from Operations 786 1,432 1,229 2,076 1,623 192 1,306 1,682
Others -130 -60 -80 -80 -331 0 0 0
CF from Operating incl. EO 657 1,371 1,148 1,996 1,292 192 1,306 1,682
(Inc.)/Dec. in FA -908 -1,059 -1,426 -1,259 -491 -1,070 -1,500 -1,900
Free Cash Flow -251 312 -278 737 801 -878 -194 -218
(Pur.)/Sale of Investments 34 -59 -73 569 -252 1,191 -79 -44
Others -42 4 4 18 -16 215 302 377
CF from Investments -915 -1,115 -1,495 -672 -759 336 -1,278 -1,566
Issue of Shares 1 2 2 10 28 0 0 0
Inc./(Dec.) in Debt 409 -69 504 -508 332 -200 -350 -500
Interest Paid -150 -151 -177 -152 -170 -858 -987 -1,096
Dividend Paid 0 0 0 0 0 0 0 0
Others 0 0 0 -737 -643 572 1,328 1,516
CF from Fin. Activity 260 -217 330 -1,387 -453 -486 -9 -81
Inc./Dec. in Cash 1 39 -17 -62 80 42 19 35
Opening Balance 69 71 109 92 30 110 152 171
Closing Balance 71 109 92 30 110 152 171 206
E: MOFSL estimates 0 0 0 0 0 0 0 0
December 2021 24
Retail |2021
December QSR
Initiating Coverage | Sector: Restaurants
Devyani International
BSE SENSEX S&P CNX
57,634 17,177 CMP: INR161 TP: INR190 (+18%) Buy
Devyani International (DEVYANI) is the largest franchisee of Yum! Brands Inc. (Yum) in
India. Yum operates brands such as KFC, Pizza Hut and Taco Bell and has a global
presence with more than 52,000 restaurants in over 150 countries. DEVYANI develops
and operates KFC and Pizza Hut stores in India and in territories for which it holds the
Stock Info rights. It also has an international presence in Nigeria and Nepal where it operates the
Bloomberg DEVYANI IN same brands. In addition, DEVYANI is a franchisee for the Costa Coffee brand of stores in
Equity Shares (m) 1202.5 India. Having started its first store in Jaipur in 1997, DEVYANI operates 800+ stores
M.Cap.(INRb)/(USDb) 193.4 / 2.6 across all the above brands, as of 30 Sep’21. DEVYANI’s corporate promoter, RJ Corp, is a
52-Week Range (INR) 171 / 108
1, 6, 12 Rel. Per (%) 14/-/-
diversified conglomerate that is focused on the food and beverage (F&B) sector.
12M Avg Val (INR M) 1356
Free float (%) 37.1
Rapid network expansion to drive aggressive growth
Financials Snapshot (INR b) Initiate coverage with Buy
Y/E MAR 2021 2022E 2023E
Sales 11.3 20.1 31.7
We are optimistic about DEVYANI on account of the following factors:
Sales Gr. (%) -25.2 77.0 58.0
 DEVYANI’s KFC business enjoys strong brand equity due to its unique offerings. This
EBITDA 2.3 4.6 7.4
Margins (%) 20.0 22.8 23.3 has led to robust Average Daily Sales (ADS) and profitability. The business is
Adj. PAT -0.7 1.2 3.2 expected to deliver 41% sales CAGR over FY20-24E, led by rapid store network
Adj. EPS (INR) -0.6 1.0 2.7 expansion from 264 to 574 over the same period.
EPS Gr. (%) N/M L/P 173.6  Its Pizza Hut business is focusing on its underperforming delivery channel through the
BV/Sh.(INR) 1.0 5.7 8.5 rapid addition of delivery-focused small format stores. These will reduce the distance to
Ratios
the consumer and consequently, lower delivery time.
RoE (%) N/M 29.3 37.8
 DEVYANI’s pan-India rights (except in Tamil Nadu) for small format stores of Pizza Hut
RoCE (%) 4.3 16.4 22.8
Valuations lends it an advantage over SAPPHIRE (Yum’s other franchise) due to its : a) access to
P/E (x) N/M 163.7 59.8 SAPPHIRE’s territories, and b) faster addition due to lower capex and higher profitability
P/BV (x) 163.0 28.0 19.0 of small format stores.
EV/Sales (x) 16.6 9.5 6.0  The company is set to record an aggressive sales growth and margin expansion. We
EV/EBITDA (x) 83.0 41.9 25.7 expect its sales to grow at a CAGR of 28% to INR40.8b and EBITDA margin to expand by
690bp to 23.8% over FY20-24E.
 We arrive at a SoTP-based TP of INR190 per share after assigning 27x/20x FY24E
As On Sep-21
Promoter 62.9 EV/EBITDA to the KFC/Pizza Hut business. We are bullish about DEVYANI’s long-term
DII 4.8 business prospects and initiate coverage with a Buy rating.
FII 7.9
Others 24.4 KFC India: Unique offerings lead to strong fundamentals
FII Includes depository receipts  KFC’s core offering of fried chicken products are a unique offering in the India
QSR market and it enjoys strong customer loyalty.
 DEVYANI’s territorial rights for KFC in India are spread across the South, East
and North East regions (and a few key cities in the North), which are high non-
vegetarian consumption zones. With poultry being the preferred choice of
meat for most non-vegetarian consumers in India, DEVYANI is at an advantage.
 The KFC business has strong fundamentals. Its ADS stood at INR116.7k in FY20,
and the business is recovering well post-COVID. Its profitability is also high with
brand contribution margins of ~18% in FY21 that have improved to more than
22% in the recent quarters.
December 2021 25
Retail | QSR
 DEVYANI is focusing on the small store size of 1,500-1,800 sq. ft. to rapidly add
new stores. Its store network is expected to increase from 264 in FY21 to 574 in
FY24, marking a ~30% CAGR.
 Even with a modest SSSG assumption in the mid-to-high single digit, we expect
sales to grow at a CAGR of 41% over FY20-24E. We expect its brand contribution
margins to expand by 410bp to 22.5% over FY21-24E, on a conservative basis.
 However, the competition is beginning to intensify in the fried chicken category
with WLDL recently introducing fried chicken products at its McDonald’s outlets.
Additionally, JUBI has acquired the rights for Popeye’s whose stores are
expected to be launched by the end of FY22. Nevertheless, we believe that KFC
is well-placed to compete in the market due to its robust brand equity.
Pizza Hut India: Headed for a turnaround

 JUBI, the market leader, has shifted its focus in the pizza category on delivery
while Pizza Hut’s extensive focus on the dine-in business in the past has led it to
underperform in the delivery channel.
INR45k  However, in the last two years, DEVYANI has introduced small format delivery-
focused stores with a size of 600-1,200 sq. ft. It is now rapidly adding such stores
Record high ADS of
to increase its network density and thereby, reduce distance to the consumer. Its
Pizza Hut in 2QFY22
store network is expected to increase to 607 in FY24E from 297 as of FY21,
despite sharp addition
marking a ~27% CAGR. This will narrow the gap gradually over JUBI, which had
of new stores
1,435 Domino’s stores as of Sep’21.
 Such initiatives are welcome, although we believe that the company also needs to
strengthen its kitchen operations and technological backend to improve consumer
experience. Considering Yum’s recent technological acquisitions globally, there is
hope that material technology improvements will be implemented in India as
well.
 DEVYANI’s territorial rights for large-format stores are limited to the North, East,
and North East regions of India, although it holds the rights for small format
stores across the country (except in Tamil Nadu). This lends DEVYANI a dual
advantage over SAPPHIRE (Yum’s other franchisee in India) in terms of: a) access
to SAPPHIRE’s territories, and b) faster pace of network expansion as small
format stores require lower capex and deliver better profitability.
 Pizza Hut’s ADS of ~40-45k is considerably lower than INR80-85k for Domino’s,
due to the weak contribution of its delivery channel. Pizza Hut is witnessing an
improvement in ADS despite the sharp addition of new stores which are generally
ADS dilutive, due to its focus on improving the delivery channel. Pizza Hut’s weak
ADS had pulled down its profitability in the past due to poor absorption of fixed
costs.
 We expect Pizza Hut’s sales to grow at a CAGR of 24.7% over FY20-24E, led by
rapid network expansion, even as we assume a modest improvement in its ADS.
We expect its brand contribution margins to expand by 330bp to 16.2% over
FY21-24E, on a conservative basis.
December 2021 26
Retail | QSR
Poised for strong growth due to improving profitability

 Given its rapid network expansion, we expect DEVYANI’s total stores to increase
to 1,447 in FY24E from 692 in FY21.
 This will lead to high sales CAGR of 28% over the same period to INR40.8b in
FY24E. As highlighted previously, there is considerable potential for an upside to
our estimates if Pizza Hut turns around handsomely.
 DEVYANI’s profitability has improved due to a) addition of small format stores, b)
variabalisation of employee expenses, c) operational leverage, and d) exit from
loss-making ventures. The EBITDA margin came in at 23.9% in 2QFY22 as against
16.8%/20% in FY20/FY21 and stood at 15.3% on a pre-Ind AS 116 basis in 2QFY22
as against 3.8%/7.4% in FY20/FY21.
 Post-IPO, DEVYANI has become a net cash company.
Valuation and view

 With COVID enhancing the opportunity for QSRs in India, large brands are well-
placed to register aggressive growth.
 DEVYANI’s KFC and Pizza Hut are both poised for growth due to their rapid
network expansion and expected to record modest mid-to-high single digit SSSG
in the next few years. We expect sales of KFC and Pizza Hut to grow at a CAGR of
41% and 24.7%, respectively over FY20-24E. There is considerable potential for an
upside to our conservative forecasts as we have estimated a modest SSSG in the
mid-to-high single digit.
 DEVYANI’s operational profitability also improved in 2QFY22 due to its multi-
pronged efforts and is expected to sustain. However, we expect a modest
expansion in EBITDA margin and estimate it to reach the 2QFY22 levels in FY24E.
 Rapid network expansion can drive strong growth but also create execution risks
which need to be monitored. There are chances of DEVYANI selecting sub-optimal
locations for its stores which could affect their unit economics. In addition, a sharp
increase in new stores could have a bearing on its ADS and SSSG due to store
splitting. This risk is particularly high for KFC as its sharp increase in store additions
could dilute its robust metrics.
 We have assigned an FY24E EV/EBITDA multiple of 27x to the KFC business on
account of its robust metrics (ADS and brand contribution margin), and 20x to the
Pizza Hut business that is at a discount of ~40% to JUBI’s target multiple.
Consequently, we have arrived at a TP of INR190 on a sum of the parts basis. We
remain bullish on DEVYANI’s growth prospects and assign a Buy rating.
Exhibit 39: TP of INR190 per share based on SoTP valuation
EBITDA (INR b) FY24E Multiple EV
KFC 6.2 27x 168.7
Pizza Hut 2.0 20x 39.9
Costa Coffee 0.2 10x 2.4
Other Brands 0.2 8x 1.8
International 0.9 15x 13.4
Total 9.6 24x 226.1
Net Debt -3.2
Equity value 229.4
TP (INR) 190
Upside (%) 18%
December 2021 27
Retail | QSR
Company overview
Largest franchisee of Yum Brands in India

DEVYANI is the largest franchisee* of Yum in India that operates brands such as KFC,
Pizza Hut and Taco Bell and has a global presence with more than 52,000
restaurants in over 150 countries. These include more than 26,000/18,000/7,600
restaurants of KFC/Pizza Hut/ Taco Bell. DEVYANI develops and operates KFC and
Pizza Hut stores in India and in territories for which it holds the rights. It also has an
international presence in Nigeria and Nepal where it operates KFC brand in both the
countries and Pizza Hut brand in Nepal. In addition, DEVYANI is a franchisee for the
Costa Coffee brand and stores in India. Having started its first store in Jaipur in 1997,
DEVYANI operates 800+ stores, as of 30 Sep’21. DEVYANI’s corporate promoter, RJ
Corp, is a diversified conglomerate that is focused on the F&B sector.
*The only other franchisee of Yum in India is Sapphire Foods (SAPPHIRE).
Business divided broadly into three main verticals

DEVYANI’s business is broadly classified into three verticals, namely:
a) Core Brands Business: Stores of KFC, Pizza Hut and Costa Coffee operated in
India
b) International Business: Stores operated outside India, primarily comprising KFC
stores in Nepal and Nigeria and Pizza Hut stores in Nepal; and
c) Other Business: Certain other operations in the F&B industry, including stores of
DEVYANI’s own brands such as Vaango and Food Street
Exhibit 40: Revenue mix (FY21) Exhibit 41: No. of stores as of 30 Sep’21
KFC Pizza Hut 351

10.2
5.3 Pizza Hut KFC 309
1.9
Costa Coffee
Costa Coffee 45
25.5 57.1 Other Brands
International 44
International
Others 54
Source: Company Source: Company
December 2021 28
Retail | QSR
KFC contribution to FY20 sales, % KFC India: Strong brand equity in niche category
40.3 Unique value proposition with aspirational brand
KFC offers an extensive menu featuring fried chicken buckets and allied chicken
products, grilled chicken, burgers, rice bowls, and beverages. KFC’s core offering of
fried chicken products with select herbs and spices is a unique offering in the Indian
QSR industry, although the competition is intensifying in this space due to its
attractive business opportunity. Nevertheless, KFC enjoys strong brand equity and
loyalty among consumers, making it well-placed to compete and grow.
KFC operates mainly two store formats
In India, KFC operates Omni-channel stores with dine-in, delivery and takeaways. In
order to optimize its operations, it has shrunk the size of stores over the years to an
average area of 1,500-1,800 sq. ft. from ~2,500-3,000 sq. ft. earlier. Going forward, a
majority of the store additions by the company will be in the small size due to their
better unit economics. Small size stores offer better profitability and returns due to
their lower operating expenses and capex requirement. Furthermore, the small size
also allows for faster store additions.
Territorial rights in high non-vegetarian consumption zones
For KFC, DEVYANI holds the rights for open stores in South, East and North-East
India along with other territories, including the key cities like NCR (except Delhi),
Lucknow, Agra and others. The territorial rights for KFC stores in the remaining areas
are held by SAPPHIRE. Notably, DEVYANI’s territories are largely in high non-
vegetarian consumption zones with poultry being the preferred choice of meat for
Indian consumers. As can be seen in the charts below, most of the southern and
eastern states have less than 10% vegetarian population. This bodes well for
DEVYANI’s growth as the KFC brand is essentially positioned to target non-
vegetarian consumers.
Exhibit 42: DEVYANI holds territorial rights for KFC stores… Exhibit 43: …mostly in high non-veg consumption zones
Source: Company, MOFSL Source: India in Pixels, MOFSL
December 2021 29
Retail | QSR
Rapid store addition to continue

DEVYANI has been rapidly adding KFC stores across its network. With its focus on
the small store size, it has been adding ~25 stores per quarter for the past six
quarters. We expect this pace of store addition to continue as the company is
focusing on rapidly expanding its footprint. Given the marginal competition in the
chicken space, the opportunity for store expansion in its existing franchise regions is
immense.
Notably, the pace of DEVYANI’s network expansion at 25-30% of its existing store
base is the highest among QSRs. Other players such as JUBI and WLDL are expanding
their network at 10-12%. The number of stores for DEVYANI is set to increase from
264 as of FY21 to 574 in FY24, marking a ~30% CAGR (the company acquired
13/9/51 KFC stores from Yum in FY19/20/21).
Exhibit 44: Rapid store addition expected to continue… Exhibit 45: …with ~25 net additions per quarter
KFC - No. of stores Net addition YoY KFC - No. of stores Net addition QoQ
110 30
100 100 26
92 24 25 25
20
334 364
38 574 309
264 284
464 214 240
364
264
134 172
FY19 FY20 FY21 FY22E FY23E FY24E 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22 3QFY22E 4QFY22E
*FY19/FY20/FY21 includes stores acquired from Yum Source: Company, MOFSL

Exhibit 46: KFC and Pizza Hut to witness fastest network expansion among QSR peers
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
No. of stores - - - - 134 172 264 364 464 574
Net stores added - - - - - 38 92 100 100 110
Stores added (%) - - - - - 28.4 53.5 37.9 27.5 23.7
No. of stores - - - - 268 269 297 397 497 607
Net stores added - - - - - 1 28 100 100 110
Stores added (%) - - - - - 0.4 10.4 33.7 25.2 22.1
No. of stores 209 236 258 277 296 319 305 330 365 405
Net stores added - 27 22 19 19 23 -14 25 35 40
Stores added (%) - 12.9 9.3 7.4 6.9 7.8 -4.4 8.2 10.6 11.0
No. of stores 876 1,026 1,117 1,134 1,227 1,335 1,360 1,520 1,695 1,885
Net stores added - 150 91 17 93 108 25 160 175 190
Stores added (%) - 17.1 8.9 1.5 8.2 8.8 1.9 11.8 11.5 11.2
KFC and Pizza Hut pertain to DEVYANI only, McDonald’s pertains to WLDL only Source: Company, MOFSL
Strong sales growth expected on back of rapid store network expansion

Sales in FY21 and 1QFY22 were affected by COVID, although KFC is witnessing a
strong recovery in ADS and sales per average store. We have assumed conservative
sales per average store for the next few quarters and estimate it to remain flattish.
December 2021 30
Retail | QSR
Our annual assumptions are also very conservative as we estimate only 4% CAGR in
sales per store over FY20-24E. The sharp increase assumed in FY23E is mainly due to
the weak base of 1QFY22 on account of the second COVID wave.
Despite the modest growth in sales assumed per average store, KFC’s overall sales
are expected to grow strongly due to its rapid store expansion. We expect KFC’s
sales to grow at a CAGR of 41% over FY20-24E.
Exhibit 47: ADS recovering well as COVID impact diminishes
113.9 116.7 118.5 116.4

112.2
100.3
92.1
68.5
FY19 FY20 FY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
Exhibit 48: Modest growth expected in sales per average

store Exhibit 49: …both on annual as well as quarterly basis
KFC - Sales per average store (INR m) KFC - Sales per average store (INR m)
45.4 46.4 10.1 10.2 10.1 10.1

9.7
39.8 37.7
7.4
29.6
FY20 FY21 FY22E FY23E FY24E 3QFY21 4QFY21 1QFY22 2QFY22 3QFY22E 4QFY22E

Exhibit 50: However, strong sales growth expected… Exhibit 51: …led by rapid store additions
KFC - Sales (INR m) YoY change (%) KFC - Sales (INR m) YoY change (%)
83.5 140.9 3,532

3,250
59.0
2,540
31.2 27.9 2,211 3,014
2,029
5.8 47.0
1,251
39.0
4,641 6,091 6,443 11,825 18,807 24,063

SSSG expected to be in mid-to-high single digit

KFC’s SSSG performance has remained weak for the last three years. The weakness
in FY21 was understandably due to COVID, although the SSSG for the previous two
years was also in the single digit. Even after accounting for 15 days lockdown impact
December 2021 31
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in FY20, the SSSG for that year is unlikely to have been in double-digits. We believe
that KFC’s weak SSSG is due to: a) weak value platform on account of limited
products below the INR100 price point, b) lower contribution of the delivery channel
in the past, and c) relatively weaker tech platform. KFC’s delivery channel has
improved post-COVID, although we continue to maintain conservative SSSG
estimates, going forward. Nevertheless, a rapid improvement in its own tech
platform and the introduction of value offerings below INR100 could lead to the
SSSG coming in higher than our estimates.
Exhibit 52: SSSG expected to sustain in mid-to-high single digit
KFC - SSSG (%) 28.5
4.7 8.0 7.7

3.2
-33.7
FY19 FY20 FY21 FY22E FY23E FY24E

COVID elevates significance of delivery channel

The contribution of the delivery channel improved during COVID as consumers
shifted to in-home consumption. This is now normalizing due to a recovery in dine-
in, although its contribution still remains elevated as compared to the pre-COVID
levels. Even for the quarters where dine-in witnessed a good recovery (3Q/4QFY21
and 2QFY22), the contribution of the delivery channel remained above the 30%
level. Upon normalization, the contribution of the delivery channel is unlikely to
return to the pre-COVID levels of below 20% as consumer behavior has shifted
considerably towards this channel.
Exhibit 53: Delivery (off-premise) channel contribution remains elevated even in quarters
when dine-in recovered
COVID significantly
increased the Off-Premise On-Premise
contribution of the
delivery channel.
35%
While it normalized to 63% 56% 67% 56%
68%
some extent as dine-in 89% 84%
recovered, it is 65%
37% 44% 33% 32% 44%
expected to stay 11% 16%
elevated compared to FY19 FY20 FY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
pre-COVID levels
Margin performance improving simultaneously

The company follows a strategy of introducing new products which are margin
accretive to the brand margins. In addition, efforts to improve sourcing efficiencies
have driven KFC’s gross margin on an upward trajectory. On the other hand, the
recent commodity inflation trends could play spoilsport. Hence, we estimate the
December 2021 32
Retail | QSR
gross margin to remain flat despite the company recording higher margins in the last
two quarters.
Exhibit 54: Gross margin expected to remain flat… Exhibit 55: …despite recent margin improvement
KFC - Gross Margin (%) KFC - Gross Margin (%) 69.6

69.1 69.1 69.1 69.4 69.1
67.7
67.1
66.0
65.9
64.8
FY19 FY20 FY21 FY22E FY23E FY24E 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
KFC’s strong topline growth has allowed it to benefit from operational leverage. In
addition, its shift to small size stores has also aided profitability. These factors have
led to an improvement in its brand contribution margin. Nevertheless, our brand
contribution margin estimates still remain conservative and considerably below the
levels achieved by the company in the recent past.
Exhibit 56: Brand contribution margins expected to improve Exhibit 57: …due to strong topline-led operational leverage
KFC - Brand Contribution Margin (%) KFC - Brand Contribution Margin (%)
22.0 22.5 22.6 22.4

21.5
19.1
18.4 18.3
16.0 16.0
12.9

Brand Contribution is calculated as revenue from operations at the store less: i) cost of materials consumed at the store; ii) employee benefit
expenses of employees at the store; and iii) other expenses incurred at the store level. Brand Contribution Margins is Brand Contribution as a
percentage of revenue from operations.
Competition intensifies, but KFC remains well-placed

WLDL – the franchisee for McDonald's in West and South India – has recently
introduced fried chicken at its stores. WLDL’s management had initially guided for
annual sales of INR5m per store from this product. However, considering the strong
consumer response, the management now believes that the sales opportunity
would be much higher.
JUBI has acquired the franchise rights for Popeye’s for India, Bangladesh, Nepal and
Bhutan. Popeye’s product portfolio includes chicken sandwich, spicy chicken,
chicken tenders, fried shrimp, and other regional items. JUBI plans to introduce its
first Popeye’s store by the end of FY22.
We believe that increasing competition will help the market expanding at a faster
pace. KFC enjoys high brand awareness and loyalty among consumers, making it
well-placed to grow and compete in the market.
December 2021 33
Retail | QSR
PH contribution to FY20 sales, % Pizza Hut: Headed for a turnaround

27.6
Extensive menu with regular innovations
In addition to its original pan pizza offerings, Pizza Hut stores have an extensive
menu featuring pizzas, pasta, sides, beverages and desserts. Pizza Hut regularly adds
innovative products to its menu. For example, it recently introduced Momo Mia
Pizzas and Baked Cheesy Momos (side). At the same time, it offers customers a
superior value proposition, such as combo meals and ‘Funtastic 4 Pizza’ (set of four
pizzas). Pizza Hut is the second-largest Pizza QSR in India where Domino’s is the
market leader.
Pizza Hut operates its stores mainly in two formats

DEVYANI operates mainly two formats of Pizza Hut stores:
a) Larger format stores with full service dine-in capacities, and
b) Small format stores to cater to delivery/take-away orders with limited seating.
Small format stores have an average area of 600-1,200 sq. ft. as compared to 2,500-
3,000 sq. ft. for large format stores. The small-format store size is in line with that of
the market leader Domino’s and has worked extremely well for them in India. Both
these formats are Omni-channel formats with dine-in, delivery and takeaways.
However, the small format is the most optimal as the pizza category has shifted
significantly towards delivery. This also ensures that the under-utilized dine-in
channel does not block capital. The small format, therefore, leads to better returns.
Further, the availability of stores for small format is also higher than the large
format, making it relatively easier to add stores.
DEVYANI enjoys advantage over SAPPHIRE in terms of territorial rights

In the case of large format, DEVYANI’s territorial rights are spread for regions across
North and East India. However, for small format, also referred to as the delivery
format, it holds rights for regions across the country (except in Tamil Nadu). This
offers it a huge dual advantage over SAPPHIRE (the only other Yum Franchisee in
India) by way of:
a) Small format stores require at least 20% less capex than large format stores.
This means that these stores will have better unit economics and the pace of
store addition can be faster.
b) DEVYANI can add stores even in territories where SAPPHIRE holds the rights for
large format stores.
Pizza Hut underperforming significantly in delivery

When it comes to the dine-in channel, Pizza Hut offers a considerably better
experience than Domino’s with its impressive ambience and service. In the past,
Pizza Hut focused extensively on the dine-in channel, although the market has
shifted significantly to the delivery channel due to efforts made by the market
leader, Domino’s. Domino’s guarantee delivery within 30 minutes has allowed it to
dominate the dine-in channel. The delivery contribution of the dine-in channel to its
pre-COVID sales stood at 60-70%.
December 2021 34
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Thus, Pizza Hut has been a laggard in the delivery channel with its contribution to
pre-COVID sales at only 30-40%, as shown in the chart below. Post-COVID, the
contribution of the delivery channel increased significantly as in-home consumption
dominated due to restrictions on dine-in.
Exhibit 58: Low contribution by off-premise (delivery) channel boosted by COVID
Off-Premise On-Premise
43%
69% 63%
57%
31% 37%
Pizza Hut’s delivery
channel has FY19 FY20 FY21
underperformed
compared to Domino’s *pertains to DEVYANI PH stores only Source: Company, MOFSL
leading to
underperformance in Pizza Hut’s underperformance in the delivery channel is reflected in its ADS
ADS as well. performance. Its ADS pre-COVID stood at INR40-45k as against INR80-85k for
Domino’s.
Exhibit 59: Pizza Hut’s ADS significantly lower than Domino’s
PH* - ADS (INR '000) JUBI^ - ADS (INR '000)
82.7 84.0
67.3
44.7 43.9
34.9
FY19 FY20 FY21

*PH pertains only to DEVYANI’s Pizza Hut stores and is as reported by company
^JUBI is calculated assuming all sales pertaining to Domino’s as contribution of Dunkin Donuts and
International business is very low Source: Companies, MOFSL
Pizza Hut turnaround hinges on success in delivery channel

The task for DEVYANI in the case of Pizza Hut is clearly cut out: drive growth in the
delivery channel to improve ADS. Historically, the challenge for Pizza Hut has been
its high delivery time of 40-45 minutes, as compared to within 30 minutes
guaranteed by Domino’s. This has led to consumers preferring Domino’s over Pizza
Hut for delivery.
While JUBI has 1,400+ Domino’s stores across India, the count for Pizza Hut is
considerably lower at 500+ stores (including SAPPHIRE stores). The management is
focusing on rapidly adding stores to develop a closer presence to the consumer and
consequently, reduce delivery time. This is where the small format is useful as such
stores require lower capex, allowing for faster store addition. The company has
December 2021 35
Retail | QSR
been relying on this format since the last two years or so. Going forward, more than
90% of its new stores will be in the small format. This could solve a part of the
problem, although we believe that Pizza Hut also needs to improve its kitchen
operations to reduce its turnaround time.
In the past few quarters, DEVYANI has added an average of ~25 net new Pizza Hut
stores. We expect this pace of expansion to continue and estimate its store network
to grow at a CAGR of ~27% to 607 in FY24E from 297, as of FY21.
Exhibit 60: Rapid store additions expected to continue… Exhibit 61: …with ~25 net additions per quarter
PH - No. of stores Net addition YoY PH - No. of stores Net addition QoQ
100 100 110
34
28
24 23 23
1 20
15
268 269 297 397 497 607 258 273 297 317 351 374 397
Increasing focus on technology

Driving growth in the delivery channel will also require a strong technological
backend. This is an area where JUBI has been investing significantly over the past
several years. In the case of KFC and Pizza Hut, the technology aspect is managed by
Yum for both DEVYANI and SAPPHIRE.
Yum has been increasing its focus on technology globally amidst COVID as the
delivery channel gained significance during the pandemic, led by in-home
consumption. The company recently acquired Australia-based Dragontail Systems,
an innovator in kitchen order management and delivery technology, for AUD93.5M
in cash. This will give Yum the ability to scale Dragontail’s artificial intelligence (AI)
kitchen order management and delivery technology globally. The acquisition is
hyper-focused on improving delivery operations and pizza delivery in particular.
Dragontail’s platform is currently deployed across nearly 1,500 Pizza Hut restaurants
in over 10 countries. This was Yum’s third major technology acquisition in 2021. In
March, Yum had acquired AI firm Kvantum to assist with its marketing campaign
analytics, and Tictuk, which develops Omni-channel ordering software that allows
consumers to place orders via social media, SMS, email, and other formats.
December 2021 36
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Exhibit 62: Dragontail’s operations focused on optimizing kitchen and delivery operations
through AI technology
New campaign to drive awareness of delivery channel

Furthermore, the company has also recently launched a new campaign called “Dil
Khol Ke Delivering” to drive awareness of the delivery channel.
Exhibit 63: Pizza Hut’s new campaign to push delivery channel
December 2021 37
Retail | QSR
Concerted efforts yielding results, but close monitoring required

COVID did provide a fillip to the delivery channel, although DEVYANI’s focus on the
channel through the addition of small format stores has also been driving the
channel’s performance. Notably, in recent quarters, when dine-in picked up to
return to near normal levels, the contribution of the delivery channel still remained
elevated at the ~50-60% levels, which was considerably higher than the pre-COVID
levels.
Exhibit 64: Delivery channel contribution remains elevated even for quarters when dine-in
returns to near normal levels
Off-Premise On-Premise
Even as dine-in
returned to near 20%
43% 39% 38%
normalcy in recent 63%
46% 48%
69%
quarters, Pizza Hut’s
delivery channel has 80%
57% 61% 54% 62%
not normalized to pre- 37%
52%
31%
COVID levels.
At the same time, there has been an improvement in Pizza Hut’s ADS as well that
stood at an all-time high of INR45k in 2QFY22. This is commendable, considering
that there has been a sharp increase in store additions over the past few quarters
and new stores are generally ADS dilutive. Despite this, Pizza Hut’s ADS has been on
an improving trajectory over the past quarters, barring 1QFY22 when it was affected
by the second COVID wave.
Exhibit 65: Pizza Hut’s ADS (INR’000) improving for the past few quarters, despite a sharp
increase in new stores
44.7 43.9 45.1
40.5 41.8
38.4
34.9
26.5
The improving trend in the delivery channel and ADS is heartening but needs to be
monitored, going forward. The company still needs to make efforts to improve the
delivery experience for its consumers. Permanently changing consumer perception
of Pizza Hut as a timely delivery brand will act as the key to unlock its growth.
December 2021 38
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Rapid store additions to drive strong sales

Pizza Hut’s sales per average store are expected to improve significantly in FY23E,
led by the improvement in its ADS. Nevertheless, we still remain conservative in our
estimates and do not expect a significant jump in its sales per average store. FY21
and FY22 are muted due to the COVID impact.
We will monitor its ADS performance before making any upward revision to our
estimates. Nevertheless, if DEVYANI is successful in narrowing the ADS gap with
JUBI, there could be a strong upside to Pizza Hut’s expected performance. We
expect Pizza Hut’s sales to grow at a CAGR of 24.7% over FY20-24E.
Exhibit 66: Sales per average store expected to be flattish… Exhibit 67: …both on annual as well as quarterly basis…
PH - Sales per average store (INR m) PH - Sales per average store (INR m)
17.7 18.3
15.5 4.0 3.8 3.8
14.8 3.6 3.6
3.1
10.2
FY20 FY21 FY22E FY23E FY24E 3QFY21 4QFY21 1QFY22 2QFY22 3QFY22E 4QFY22E
Exhibit 68: …but PH expected to deliver strong sales… Exhibit 69: …led by rapid store additions
PH - Sales (INR m) YoY change (%) PH - Sales (INR m) YoY change (%)
78.5 111.6 1,462

1,379
54.2 1,333
27.4 1,036
951 965
-1.4
-31.0 630 45.0 41.1
4,233 4,174 2,879 5,139 7,923 10,095
December 2021 39
Retail | QSR
Exhibit 70: Pizza Hut’s new small format store located in a mall in East India
Source: MOFSL
Modest SSSG expectations, but outperformance likely

We estimate SSSG to be in the mid-to-high single digit on a conservative basis.
However, there is a likelihood of an outperformance if Pizza Hut successfully ramps
up delivery and narrows the ADS gap with JUBI.
Exhibit 71: SSSG performance expected to be modest, but outperformance likely
PH - SSSG (%) 45.0
4.7 5.0 7.9

-3.7
-30.3
High gross margin in line with JUBI

Pizza is a high gross margin category with a ~75% gross margin. JUBI also enjoyed a
~75% gross margin until it introduced delivery charges last year which elevated its
gross margin to the ~78% levels. Pizza Hut cannot levy delivery charges as it relies on
aggregators for delivery, unlike JUBI which has its own fleet and riders. We estimate
a 75% gross margin for Pizza Hut in line with its FY20 levels, despite it achieving
higher levels in recent quarters.
December 2021 40
Retail | QSR
Exhibit 72: Gross margin estimated at ~75%… Exhibit 73: …despite higher levels in recent quarters
PH - Gross Margin (%) PH - Gross Margin (%)
75.2 75.2 75.2 76.2 75.9 75.5

74.9
74.0
74.1
74.0 71.6
Weak ADS leads to poor brand contribution margins, but improvement

likely
Pizza Hut has been unable to absorb fixed costs well due to its weak ADS, leading to
suboptimal brand contribution margins. As its ADS improves, we expect an
improvement in its margins as well. However, we currently estimate a modest
margin expansion to 16.2% in FY24, which it has already achieved in 3QFY21. The
recent improvement in margins, despite the sharp increase in store additions –
which generally pull down the ADS and are margin dilutive – lends further support
to our belief that margin expansion is achievable for Pizza Hut.
Exhibit 74: Brand contribution margins to improve… Exhibit 75: …along with improvement in ADS
PH - Brand Contribution Margin (%) PH - Brand Contribution Margin (%)
15.5 15.7 15.9 16.2 16.2 15.8

15.2
14.1
12.9
10.5 10.3
December 2021 41
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CC contribution to FY20 sales, %

Costa Coffee: Profitable café business
5.4
Pan-India franchisee rights for Costa Coffee
Costa Coffee stores have an extensive menu featuring coffee, sandwiches, wraps,
Indian snacks, desserts, and other beverages. DEVYANI holds the pan-India rights for
this brand. Pre-COVID, this business used to contribute 5-7% of DEVYANI’s total
sales. It currently operates Costa Coffee stores in two formats:
a) Full retail stores at high-street locations and malls, and
b) Branded kiosks at airports, hospitals and food courts at highways
COVID affects performance

Costa Coffee was significantly affected during COVID by restrictions on dine-in as
coffee consumption is more of an in-store experience. Accordingly, DEVYANI closed
down several of its stores during the pandemic. Consequently, its sales declined by
74% in FY21 but are expected to improve going forward as store addition resumes
along with a recovery in dine-in. Going forward, the store openings will be gradual
and we expect the business to contribute 1.5-2% of DEVYANI’s total sales.
Pre-COVID Costa Coffee’s brand contribution margins stood at ~20% levels. This is
commendable as the café business has been a low margin business for most players
in the industry.
Exhibit 76: High number of Costa Coffee stores closed down Exhibit 77: COVID drastically affects Costa Coffee’s
by DEVYANI during the pandemic performance
CC - No. of Stores 74 CC - Sales (INR m) YoY change (%)

67
63 54.6 52.1
59
32.8
49
44 -9.1
-73.9
902 820 214 331 503 668
FY19 FY20 FY21 FY22E FY23E FY24E FY19 FY20 FY21 FY22E FY23E FY24E
Exhibit 78: Strong brand contribution margins in café business commendable
CC - Brand Contribution Margin (%)

32.2 32.5 33.0
20.1 21.2
15.5
December 2021 42
Retail | QSR
International contribution to
FY20 sales, %
International business and other businesses
9.9 KFC and Pizza Hut stores in Nigeria and Nepal

As of 30 Sep’21, DEVYANI operated the following stores outside India:
a) 27 stores in Nigeria, and
b) 17 stores in Nepal
It mainly operates KFC and Pizza Hut stores in Nepal, and KFC stores in Nigeria. It is
the sole franchisee in these markets but on a non-exclusive basis.
Exhibit 79: International business snapshot

No. of Stores 33 35 37 52 72 97
Sales (INR m) 1,104 1,491 1,154 1,664 2,911 4,054
YoY change (%) 35.1 -22.6 44.2 75.0 39.3
Brand Contribution Margin (%) 13.0 15.1 14.2 18.0 18.2 18.6
Other brands operated by DEVYANI

Other brands' contribution
to FY20 sales, % DEVYANI also operates stores of other brands such as Vaango, The Food Street, Ile
Bar, AMRELI and Ckrussh Juice Bar, among others. As of 30 Sep’21, DEVYANI
16.8
operated 54 outlets of these Other brands. Out of these, Vaango is the main brand
with 27 outlets, as of Jun’21. Vaango stores offer staple South Indian snacks such as
dosas, idlis and vadas.
With its strong KFC and Pizza Hut business, DEVYANI is able to negotiate better deals
with its suppliers and landlords for Other brands.
Exhibit 80: Other brands snapshot

No. of Stores 64 71 50 60 75 95
Sales (INR m) 2,178 2,535 599 1,062 1,526 1,796
YoY change (%) 16.4 -76.4 77.4 43.7 17.7
Brand Contribution Margin (%) -2.1 -4.5 -29.8 4.5 7.5 8.7
December 2021 43
Retail | QSR
Additional key points

Royalty rates
DEVYANI is required to pay a royalty fee of 6.3% of sales to Yum for both KFC and
Pizza Hut. This is higher than the royalty rates paid by Domino’s and Burger King at
3% and 5% of sales, respectively. McDonald’s currently has a royalty rate of 4% of
sales, but is scheduled to increase it gradually to 8% in FY27 and thereafter. For
Costa Coffee, the royalty rate stands at 6% of sales.
Exhibit 81: Royalty rates paid by industry players
Royalty rates (% of sales)

Subway 8.0
McDonald's* 8.0
Pizza Hut 6.3
KFC 6.3
Costa Coffee 6.0
Burger King 5.0
Domino's 3.0
*scheduled to increase from 4% in FY22 to 8% in FY27 Source: Company, MOFSL
Marketing spend
DEVYANI is expected to incur a marketing spend of 6% of sales for both KFC and
Pizza Hut. Out of this, 5% will be allocated to Yum for common marketing activities
with the other franchisee SAPPHIRE. The balance 1% will be allocated by DEVYANI
for localized/store-based promotion and marketing activities. For Costa Coffee, the
marketing spend is mandated at 2% of sales.
December 2021 44
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Financial assumptions: Poised for strong growth
As indicated previously, DEVYANI is adding ~100 stores each of KFC and Pizza Hut
annually, leading to rapid store network expansion that is considerably higher than
~10-12% annually for JUBI and WLDL.
Exhibit 82: Rapid store network expansion led by KFC and Pizza Hut
Total no. of stores 566 610 692 922 1,167 1,447
Net additions YoY - 44 82 230 245 280
Addition (%) - 7.8 13.4 33.2 26.6 24.0
*FY19/20/21 includes stores acquired from Yum Source: Company, MOFSL
Going forward, DEVYANI’s sales are set to register a strong growth, led by improving
sales per store and rapid network expansion. The company’s elevated delivery levels
will further aid its topline growth. However, our estimates remain conservative as
we expect a modest growth in sales per store. Nevertheless, we expect DEVYANI to
register a 28% CAGR in sales over FY20-24E. The sharp growth in KFC/Pizza Hut is
expected to increase their sales contribution from 40.3%/27.6% in FY20 to
59.2%/24.8% in FY24E.
Exhibit 83: Sales CAGR of ~28% estimated over FY20-24E
Net sales YoY change (%)

77.0
58.0
28.4
15.7
-25.2
13,106 15,164 11,348 20,086 31,743 40,756
Exhibit 84: Sharp growth in KFC and Pizza Hut to drive higher sales contribution
KFC Pizza Hut Costa Coffee Other Brands International
8.5 9.9 10.2 8.3 9.2 4.8 10.0

16.7 16.8 1.95.3 1.7 5.3 1.6 1.6 4.4
6.9 5.4 25.5 25.7 25.0 24.8
32.4 27.6
57.1 59.1 59.4 59.2

35.5 40.3
December 2021 45
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DEVYANI is expected to witness an improvement in its operational profitability, led

by:
a) Focus on smaller format stores which have better profitability
b) Strong sales growth leading to operational leverage
c) Variabalisation of employee expenses during COVID
d) Exit from loss-making TWG tea business and airport stores
Accordingly, we estimate an EBITDA CAGR of ~40% and margin improvement of

690bp over FY20-24E.
On a pre-Ind AS 116 basis, the company reported an EBITDA margin of 15.3% and
15.4% for 2QFY22 and 4QFY21 which were relatively normal quarters. We expect a
gradual expansion to those levels in FY24E.
As DEVYANI has repaid most of its debt from its IPO proceeds, its interest payments
are currently very low. As a result, the company reported a profit in 2QFY22 after
recording a net loss in recent years. We expect DEVYANI to remain profitable at the
PAT level going forward as well.
Exhibit 85: Strong sales to be accompanied by improvement in margins and net profit
(INR m) FY19 FY20 FY21 FY22E FY23E FY24E
Net sales 13,106 15,164 11,348 20,086 31,743 40,756
YoY change (%) 15.7 -25.2 77.0 58.0 28.4
Gross profit 9,217 10,560 7,902 14,222 22,435 28,780
Gross margin (%) 70.3 69.6 69.6 70.8 70.7 70.6
EBITDA (post Ind AS 116) 2,790 2,555 2,269 4,573 7,388 9,684
YoY change (%) - -8.4 -11.2 101.5 61.6 31.1
EBITDA margin (%) 21.3 16.8 20.0 22.8 23.3 23.8
EBITDA (pre-Ind AS 116) 961 576 842 2,765 4,562 6,098
YoY change (%) - -40.1 46.3 228.3 65.0 33.6
EBITDA margin (%) 7.3 3.8 7.4 13.8 14.4 15.0
Profit before tax -464 -1,076 -913 1,251 3,590 4,949
Adjusted PAT -825 -1,521 -719 1,181 3,231 3,702
YoY change (%) - N/M N/M L/P 173.6 14.6
PAT margin (%) -6.3 -10.0 -6.3 5.9 10.2 9.1
KFC’s contribution to brand contribution margins is the highest due to its scale and
high profitability, while Pizza Hut’s contribution is lower on account of its weaker
margin profile.
December 2021 46
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Exhibit 86: KFC and Pizza Hut dominate brand contribution margins mix
KFC Pizza Hut Costa Coffee Other Brands International
8.0 2.1 7.9 8.5 9.2

1.8 1.9
10.2 10.3 23.7 2.81.3 2.6 2.7
21.3 20.4 20.1
36.6 25.9
75.1 66.8 66.6 66.1

47.7 57.3
-2.5 -6.7 -11.4
DEVYANI has repaid its debt in line with its IPO objects and is now a net cash
company.
Exhibit 87: DEVYANI becomes a net cash company post IPO

Debt 4,002 4,307 3,805 0 0 0
Cash 271 160 405 624 2,443 3,562
Investments 471 414 456 956 1,256 1,956
Net debt 3,260 3,732 2,944 -1,580 -3,699 -5,518
DEVYANI’s working capital cycle in FY21 is likely to be distorted due to the

pandemic, although we expect it to return to the pre-COVID levels.
Exhibit 88: Expect working capital cycle to normalize

Inventory 549 721 622 1,101 1,740 2,234
Receivables 230 173 169 299 472 606
Payables 1,368 1,632 1,619 2,201 3,479 4,466
Days (average basis)
Inventory days 15 15 22 16 16 18
Receivables days 6 5 5 4 4 5
Payables days 38 36 52 35 33 36
Cash conversion cycle -16 -16 -25 -15 -12 -13
Days (year-end basis)
Inventory days 15 17 20 20 20 20
Receivables days 6 4 5 5 5 5
Payables days 38 39 52 40 40 40
Cash conversion cycle -16 -18 -27 -15 -15 -15
DEVYANI’s RoCE has remained muted in recent years due to several factors such as
larger format stores, pandemic impact, and lower contribution of the delivery
channel. However, given the expected improvement in all these factors, going
forward, we expect the RoCE to reach the double-digits from FY22E onwards.
Similarly, DEVYANI’s RoE has not been meaningful due to net losses reported in
recent years. However, we expect its RoE to also reach the double-digits, going
forward.
December 2021 47
Retail | QSR
Exhibit 89: Return ratios to reach double-digits from FY22E onwards

(%) FY19 FY20 FY21 FY22E FY23E FY24E
RoE - N/M N/M 29.3 37.8 30.6
RoCE - 3.4 4.3 16.4 22.8 19.5
DEVYANI is poised to deliver a strong OCF on the back of its strong topline growth
and improving profitability. We expect the company to register 30% CAGR in OCF
over FY20-24E., DEVYANI’s capex is lower due to its focus on small format stores and
hence, it remains FCF positive. We expect the company to register 24% CAGR in FCF
over FY20-24E.
Exhibit 90: Poised to register robust cash flows

OCF 2,778 3,007 2,396 4,522 7,355 8,617
Capex -1,407 -988 -1,329 -3,025 -3,177 -3,852
FCF 1,371 2,019 1,066 1,497 4,178 4,765
Key risks
 COVID-19: A third COVID wave in India could adversely affect DEVYANI’s
performance due to its higher dependence on the dine-in channel as compared
to its peers.
 Inability to turnaround Pizza Hut: Its sub-optimal consumer experience with a
higher delivery time as compared to Domino’s has affected Pizza Hut’s delivery
performance. Its inability to fix this could derail its current turnaround efforts
and, in turn, affect Pizza Hut’s ADS, SSSG and brand contribution margins.
 Rapid store expansion could pose an execution risk if the company chooses sub-
optimal locations in a bid to meet its targets. This could affect ADS, SSSG and
brand contribution margins. This risk is particularly high for KFC due to its robust
metrics.
 Health concerns: Real and perceived health concerns arising from food-borne
illnesses, epidemics, quality, nutrition or other negative food-related incidents
could materially affect DEVYANI’s performance.
December 2021 48
Retail | QSR
Valuation and view
 DEVYANI’s KFC and Pizza Hut are both poised for growth due to their rapid
network expansion and expected to record modest mid-to-high single digit SSSG
in the next few years. We expect sales of KFC and Pizza Hut to grow at a CAGR of
41% and 24.7%, respectively over FY20-24E. There is considerable potential for
an upside to our conservative forecasts as we have estimated a modest SSSG in
the mid-to-high single digit.
 DEVYANI’s operational profitability also improved in 2QFY22 due to its multi-
pronged efforts and is expected to sustain. However, we expect a modest
expansion in EBITDA margin and estimate it to reach the 2QFY22 levels in FY24E.
 Rapid network expansion can drive strong growth but also create execution risks
which need to be monitored. There are chances of DEVYANI selecting sub-
optimal locations for its stores which could affect their unit economics. In
addition, a sharp increase in new stores could have a bearing on its ADS and
SSSG due to store splitting. This risk is particularly high for KFC as its sharp
increase in store additions could dilute its robust metrics.
 We have assigned an FY24E EV/EBITDA multiple of 27x to the KFC business on
account of its robust metrics (ADS and brand contribution margin), and 20x to
the Pizza Hut business that is at a discount of ~40% to JUBI’s target multiple.
Consequently, we have arrived at a TP of INR190 on a sum of the parts basis. We
remain bullish on DEVYANI’s growth prospects and assign a Buy rating.
Exhibit 91: TP of INR190 per share based on SOTP valuation

EBITDA (INR b) FY24E Multiple EV
KFC 6.2 27x 168.7
Pizza Hut 2.0 20x 39.9
Costa Coffee 0.2 10x 2.4
Other Brands 0.2 8x 1.8
International 0.9 15x 13.4
Total 9.6 24x 226.1
Net Debt -3.2
Equity value 229.4
TP (INR) 190
Upside (%) 18%
Source: MOFSL
December 2021 49
Retail | QSR
SWOT analysis
 KFC and Pizza Hut are  Weak value and  Post-COVID, the  Increasing competitive
both well-recognized technology platform opportunity for intensity in the fried
aspirational QSR brands have led to muted branded QSR players chicken category could
 Small format stores SSSG performance by has grown along with affect KFC’s SSSG
offer better unit KFC several tailwinds  Inability to improve
economics and scope  Pizza Hut’s higher  The QSR market is delivery experience for
for faster unit
. delivery time as considerably under- consumers could affect
economics. In the case compared to penetrated and offers Pizza Hut’s turnaround
of Pizza Hut, DEVYANI’s Domino’s has led to scope for rapid
pan-India rights (except its weak performance network expansion
TN) lend it a in the delivery 
competitive advantage channel
over SAPPHIRE 
December 2021 50
Retail | QSR
Key management personnel
Mr. Ravi Kant Jaipuria, Non-Executive Director and Promoter

Mr. Jaipuria has over three decades of experience in conceptualising, executing,
developing and expanding the food, beverages and dairy businesses in South Asia
and Africa. He completed his higher secondary education from Delhi Public School
Mathura Road, New Delhi. He has an established reputation as an entrepreneur and
business leader and received PepsiCo’s award for International Bottler of the Year in
1997.
Mr. Varun Jaipuria, Non-Executive Director and Promoter

Mr. Jaipuria has 12 years of experience in the soft drinks industry and has been a
director on DEVYANI’s board since 13 Nov’09. He attended Millfield School,
Somerset, England and holds a Bachelor’s Degree in International Business from the
Regent’s University, London. He has also completed a program in Leadership
Development from the Harvard Business School.
Mr. Virag Joshi, Whole-time Director (President and CEO)

Mr. Joshi has been a key strategist in the expansion of Pizza Hut, KFC, Costa Coffee
outlets over the last 19 years. He was earlier associated with Domino’s Pizza India,
Indian Hotels, Milkfood, and Priya Village Roadshow. He has been a director on
DEVYANI’s board since 10 Nov’04. He holds a Diploma in Hotel Management and
Catering from the State Institute of Hotel Management and Catering, Lucknow.
Mr. Manish Dawar, Whole-Time Director and CFO

Mr. Dawar has wide experience across various industry domains and geographies in
the world. He previously worked with Reebok India, Reckitt Benckiser, Vedanta, DEN
Networks, and Vodafone India. He has been a director on DEVYANI’s Board since 17
Feb’21. He is a CA and a member of the Institute of Company Secretaries of India.
He holds a Bachelor’s Degree in Commerce with Honours from the Punjab
University, Chandigarh.
Mr. Rajat Luthra, CEO of KFC franchisee of DEVYANI

Mr. Luthra has been associated with DEVYANI since 7 Nov’11. Previously, he was
associated with Hindustan Lever, Barista Coffee, Celio Future Fashion, Domino’s
Pizza India, and Essar Telecom Retail, among others. He holds a Post Graduate
Certificate in Business Management from XLRI.
Mr. Amitabh Negi, CEO of Pizza Hut franchisee of DEVYANI

Mr. Negi has been associated with DEVYANI since 1 Oct’20. Previously, he was
associated with Specialty Restaurants, Dominos Pizza India, Amalgamated Holdings,
Sbarro Restaurants (India), and Yum! Restaurants (India), among others. He has
completed senior management programmes from IIM, Calcutta and IIM, Indore.
December 2021 51
Retail | QSR
Financials and valuations

Income Statement Consol. (INR m)
Y/E March FY19 FY20 FY21 FY22E FY23E FY24E
Net Sales 13,106 15,164 11,348 20,086 31,743 40,756
Change (%) 15.7 -25.2 77.0 58.0 28.4
Raw Materials 3,889 4,604 3,447 5,864 9,308 11,976
Gross Profit 9,217 10,560 7,902 14,222 22,435 28,780
Margin (%) 70.3 69.6 69.6 70.8 70.7 70.6
Operating Expenses 6,428 8,005 5,633 9,650 15,047 19,096
EBITDA 2,790 2,555 2,269 4,573 7,388 9,684
Change (%) -8.4 -11.2 101.5 61.6 31.1
Margin (%) 21.3 16.8 20.0 22.8 23.3 23.8
Depreciation 2,028 2,233 2,295 2,189 2,777 3,553
Int. and Fin. Charges 1,356 1,584 1,528 1,364 1,327 1,546
Other Income 131 187 641 231 306 363
Profit before Taxes -464 -1,076 -913 1,251 3,590 4,949
Change (%) 132.0 -15.2 -237.1 186.9 37.9
Margin (%) -3.5 -7.1 -8.0 6.2 11.3 12.1
Total tax 13 18 -11 70 359 1,247
Tax Rate (%) -2.8 -1.7 1.2 5.6 10.0 25.2
PAT before Minority and Exceptional -477 -1,095 -902 1,181 3,231 3,702
Gain/(Loss) from Discontinued Operations -349 -427 183 0 0 0
Adjusted PAT -825 -1,521 -719 1,181 3,231 3,702
Change (%) N/M N/M L/P 173.6 14.6
Margin (%) -6.3 -10.0 -6.3 5.9 10.2 9.1
Minority Interest -149 3 -78 -43 -56 -65
Exceptional items 116 -307 -89 -152 0 0
Reported PAT -792 -1,217 -552 1,375 3,287 3,766

Share Capital 1,062 1,062 1,154 5,554 5,554 5,554
Reserves -1,764 -2,953 -16 1,359 4,646 8,412
Net Worth -702 -1,891 1,138 6,913 10,200 13,966
Loans 4,002 4,307 3,805 0 0 0
Other Liability 12,347 12,882 8,724 10,471 12,202 14,640
Minority Interest -510 -391 -419 -462 -518 -582
Capital Employed 15,136 14,906 13,248 16,922 21,884 28,023
Gross Block 7,233 9,625 12,718 15,743 18,920 22,771
Less: Accum. Depn. 2,028 4,261 6,556 8,745 11,522 15,075
Net Fixed Assets 5,204 5,364 6,162 6,998 7,398 7,697
Capital WIP 115 135 143 143 143 143
Goodwill 161 224 644 644 644 644
Right to Use Assets 9,947 10,351 6,660 8,647 11,416 15,618
Investments 471 414 456 956 1,256 1,956
Current 0 0 0 500 800 1,500
Non-current 471 414 456 456 456 456
Curr. Assets, L&A 2,177 2,347 2,619 3,702 6,636 8,740
Inventory 549 721 622 1,101 1,740 2,234
Account Receivables 230 173 169 299 472 606
Cash and Bank Balance 271 160 405 624 2,443 3,562
Others 1,127 1,293 1,423 1,679 1,981 2,338
Curr. Liab. and Prov. 2,938 3,929 3,436 4,169 5,609 6,774
Account Payables 1,368 1,632 1,619 2,201 3,479 4,466
Other Liabilities 1,400 2,138 1,565 1,691 1,826 1,972
Provisions 170 160 252 277 305 336
Net Current Assets -762 -1,582 -818 -467 1,027 1,966
Application of Funds 15,136 14,906 13,248 16,922 21,884 28,023
E: MOFSL estimates
December 2021 52
Retail | QSR

Ratios
Basic (INR)
EPS -0.8 -1.4 -0.6 1.0 2.7 3.1
Cash EPS 1.1 0.7 1.4 2.8 5.0 6.0
BV/Share -0.7 -1.8 1.0 5.7 8.5 11.6
Valuation (x)
P/E N/M N/M N/M 163.7 59.8 52.2
Cash P/E 141.9 239.8 117.7 57.4 32.2 26.7
EV/Sales 13.3 11.5 16.6 9.5 6.0 4.6
EV/EBITDA 62.4 68.3 83.0 41.9 25.7 19.4
P/BV N/M N/M 163.0 28.0 19.0 13.8
Return Ratios (%)

RoE N/M N/M 29.3 37.8 30.6
RoCE 3.4 4.3 16.4 22.8 19.5
RoIC 2.2 -0.2 15.6 23.4 21.0

Debtor (Days) 6 4 5 5 5 5
Asset Turnover (x) 0.9 1.0 0.9 1.2 1.5 1.5
Leverage Ratio
Debt/Equity (x) -5.7 -2.3 3.3 0.0 0.0 0.0

OP/(loss) before Tax -928 -1,196 -641 1,403 3,590 4,949
Depreciation 2,257 2,467 2,357 2,189 2,777 3,553
Net interest 1,348 1,594 1,518 1,133 1,021 1,183
Others 86 -74 -1,240 0 0 0
Direct Taxes Paid -3 -8 5 -70 -359 -1,247
(Incr.)/Decr. in WC 17 223 397 -132 326 180
CF from Operations 2,778 3,007 2,396 4,522 7,355 8,617
Incr. in FA -1,407 -988 -1,329 -3,025 -3,177 -3,852

Free Cash Flow 1,371 2,019 1,066 1,497 4,178 4,765
Pur. of Investments 3 -2 22 -500 -300 -700
Others -273 98 -2,263 -198 18 -699
CF from Invest. -1,677 -892 -3,570 -3,723 -3,459 -5,250
Issue of Shares 0 0 3,476 4,400 0 0

Incr. in Debt -967 -1,791 -1,564 -3,805 -1,000 -1,000
Dividend Paid 0 0 0 0 0 0
Net interest Paid -338 -435 -492 -1,133 -1,021 -1,183
Others 0 0 0 -43 -56 -65
CF from Fin. Activity -1,305 -2,226 1,420 -580 -2,077 -2,247
Incr./Decr. in Cash -204 -111 245 219 1,819 1,119

Add: Opening Balance 475 271 160 405 624 2,443
Closing Balance 271 160 405 624 2,443 3,562
E: MOFSL estimates
December 2021 53
Retail |2021
December QSR
Initiating Coverage | Sector: Retail
Barbeque Nation Hospitality

BSE SENSEX S&P CNX
57,634 17,177 CMP: INR1,447 TP: INR1,560 (+8%) Neutral
Barbeque Nation Hospitality (BARBEQUE) runs a chain of Casual Dining Restaurants
(CDRs) in India and abroad. Barbeque Nation offers North Indian cuisine, with live grills,
in an ‘all you can eat’ format. The company acquired Toscano chain of restaurants, which
offer Italian cuisine. Along with dine-in, BARBQUE also operates through the delivery
channel. Its ‘UBQ by Barbeque Nation’ is an à-la-carte delivery offering. It recently
Stock Info launched ‘Barbeque in a box’ and its variants, offering wholesome meals with its
Bloomberg BARBEQUE IN signature barbeque starters at affordable price points.
Equity Shares (m) 38.7
M.Cap.(INRb)/(USDb) 56.2 / 0.7
52-Week Range (INR) 1950 / 481
Delivery driving a pivotal change
1, 6, 12 Rel. Per (%) -7/59/- Current valuations limit upside – initiate coverage with a Neutral rating
12M Avg Val (INR M) 309
Free float (%) 65.4 BARBEQUE offers an exciting investment opportunity in the Indian CDR space on account
of the following factors:
Financials Snapshot (INR b)  The Indian Food Service Industry (FSI) is expected to deliver 9% CAGR in coming
Y/E DEC 2021 2022E 2023E years, with CDRs poised for robust growth (18% CAGR) over FY20-25E.
Sales 5.1 8.3 12.5
 The COVID-19 outbreak has offered a tailwind to organized FSI players. Focus on the
Sales Gr. (%) -40.1 64.4 50.1
delivery channel has caused a pivotal change in business models, which would persist
EBITDA 0.5 1.2 1.9
Margins (%) 9.1 13.8 15.2 long after the pandemic ends.
Adj. PAT -0.9 -0.3 -0.2  BARBEQUE’s value proposition to delight consumers includes: a) unique experience, b)
Adj. EPS (INR) -27.7 -7.9 -6.2 value-for-money, and c) prompt service in a casual environment.
EPS Gr. (%) N/M N/M N/M  Its delivery channel received a boost, amid the pandemic, with the introduction of
BV/Sh.(INR) 71.9 127.3 121.1 ‘Barbeque in a box’ – wholesome meals at an attractive pricing. This is likely to sustain
Ratios
post-normalization, thereby generating an additional and sustainable revenue stream.
RoE (%) -38.5 -6.2 -5.1
 Despite its premium pricing, there is significant scope to expand its store network. The
RoCE (%) -3.0 1.6 4.0
Valuations management sees potential for 450-500 stores.
P/E (x) N/M N/M N/M  Valuation of BARBEQUE in-line with QSRs. With the advantages that QSRs possess,
P/BV (x) 20.1 11.4 11.9 BARBEQUE is unlikely to see a relative multiple expansion v/s QSRs. We initiate coverage
EV/EBITDA (x) 103.9 45.7 28.0 with a Neutral rating and TP of INR1,560/share (22x FY24E EV/EBITDA).
EV/Sales (x) 9.5 6.3 4.3
Large opportunity in FSI with chain CDRs poised for robust growth
As On Sep-21 Jun-21
 The INR4.2t Indian FSI is expected to grow by ~9% CAGR over FY20-25E. Within
Promoter 34.6 35.7 FSI, the INR134b CDR segment is expected to grow at 18% CAGR over FY20-
DII 16.8 16.4 25E. In FY20, this segment constituted 34% of the chain restaurants market.
FII 11.3 9.3  CDRs offer: a) exhaustive menus, b) quality food, c) greater emphasis on
Others 37.3 38.6 presentation, and d) the presence of specific cuisines or themes.
Stock performance (one-year)  The drivers for growth of CDRs include: a) increasing experimentation and
Barbeque-Nation spending capacity of the Indian consumer, b) continuous innovation, c) a multi-
Sensex - Rebased brand strategy, d) increased demand in Tier II and III cities, e) cost-efficiencies,
2,075
f) focus on staff training, g) digital interventions, and h) high hygiene standards.
1,650  The pandemic has offered organized FSI players tailwinds in the form of: a)
1,225 consumers shifting to branded players, b) shutting down of 30-40%
800 Restaurants, leading to gains for survivors, c) increased availability of Real
375 Estate at attractive terms, and d) variablizing of overhead expenses. The
Apr-21
Jun-21
Sep-21
Dec-21
introduction and focus on the delivery channel has caused a pivotal change in
the business models, which would persist post-COVID as well.
December 2021 54
Retail | QSR
BARBEQUE’s three pronged proposition to delight consumers

 BARBEQUE delivers a three pronged value proposition to consumers by offering:
a) a unique experience through ‘over the table barbeque’, b) value-for-money
through ‘all you can eat’ concept at a fixed price, and c) prompt service in a
pleasant and casual dining environment.
 With its unique proposition, it is seeing huge footfalls, with a higher contribution
of weekday and lunch covers. This improves capacity utilization and drives cost
efficiencies.
 It is seeing improved performance in in-dining covers, APC (average per cover),
and average bill size.
Sharp growth in delivery Delivery gets a boost due to COVID-19; business model under transformation
revenues
 With the pandemic leading to a rethink on delivery, BARBEQUE introduced
‘Barbeque in a box’ – a wholesome meal. With highly affordable pricing, the
Delivery sales (INR m)
brand became accessible to a wider set of consumers. The product has seen a
1,069 huge success and generates ~70% of delivery revenue.
 In order to faster capture the delivery opportunity, BARBEQUE recently
770
launched extension kitchens (similar to cloud kitchens). It has eight extension
kitchens as of Oct’21.
261  The delivery channel continued to see strong performance even in periods when
dine-in has recovered. The channel is likely to sustain at elevated levels, even
after the pandemic ends, as its target consumers do not fully overlap with dine-
FY20 FY21 1HFY22
in. The management expects delivery to contribute INR15m of sales per store
(~20% of total sales) in a normalized environment.
Store network expansion does not seem to be a challenge

 Its current network of 169 stores includes: a) 153 Barbeque Nation stores in
India, b) six Barbeque Nation stores abroad, and c) 10 Toscano stores.
 Despite its premium pricing, there is considerable opportunity to scale up its
store network. Its network is extremely thin, even in metros.
 The management sees potential for 450-500 stores.
Financial metrics are similar to QSRs

450-500
Potential number of
 Despite the difference in business models, BARBEQUE’s financial metrics are
quite similar to those of QSRs.
Barbeque Nation  Its sales per store are the highest among JUBI, WLDL, and DEVYANI’s KFC and
stores Pizza Hut. Despite incurring store capex similar to WLDL, BARBEQUE’s sales per
store is considerably higher than the former.
 Similarly, its gross and EBITDA margin are also not materially different.
Valuation and view

 BARBEQUE is well placed to deliver growth through: a) a recovery in dine-in, b)
strong and sustainable delivery channel, generating an additional revenue
stream, c) considerable opportunity for store network expansion, and d) margin
expansion through a delivery-led operational leverage.
 We expect BARBEQUE to deliver sales/EBITDA CAGR of ~57%/103% over FY21-
23E. With a higher contribution of dine-in, BARBEQUE witnessed a much sharper
December 2021 55
Retail | QSR
sales and EBITDA decline in FY21, leading to a soft base for growth. We expect a
sales/EBITDA CAGR of 31%/51% over FY21-26E.
 BARBEQUE trades at an EV/EBITDA multiple of ~28x FY23E, which is in line with
QSRs (which trade at 25-33x FY23E EV/EBITDA). With the advantages of QSRs
over CDRs (higher affordability, high scalability, strong delivery platform, and
robust technological backend), we do not believe that BARBEQUE has the
potential to trade at a relative premium to QSRs. Accordingly, BARBEQUE’s
current valuations seem fair and limit upside from a one year perspective.
 We initiate coverage on BARBEQUE with a Neutral rating and TP of INR1,560,
valuing it at 22x FY24E EV/EBITDA.
December 2021 56
Retail | QSR
Chain CDRs to see robust growth

 CDRs offer: a) exhaustive menus, b) quality food, c) greater emphasis on
18% 
presentation, and d) the presence of specific cuisines or themes.
The chain CDR segment of FSI caters to the various needs of consumers by
Expected CAGR of offering different service styles, cuisines, ambiance, and price points.
Indian Chain CDR  In FY20, the size of the chain CDR market was estimated at INR134b and is
expected to grow at a healthy CAGR (18%) to touch INR302b in FY25. Its share in
the chain market is expected to decline to 31% in FY25 from 34% in FY20 as
QSRs (quick service restaurants) are expected to witness faster growth.
Exhibit 92: Expect the Indian Chain CDR market to grow at 18% CAGR over FY20-25E
302
Indian Chain CDR Market Size (INR b)
251
209
174
134
118
98
81
56 67 55
47
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E FY24E FY25E
Source: Technopak, MOFSL
Multiple drivers for Chain CDR growth

Factors that may help in scaling up of Chain CDRs in India include:
 Increasing experimentation and spending capacity of the Indian consumer,
especially in Tier II and III cities.
 Continuous innovation in formats, themes, and cuisines to attract and retain
consumers.
 Opting for a multi-brand strategy to capture a bigger audience.
 Taking advantage of the increased demand in Tier II and III cities.
 Building efficiencies in terms of food cost, manpower cost, etc.
 Focus on developing strong SOPs and training programs to attract and retain
quality staff.
 Developing mechanisms to interact with the consumer in real time using digital
platforms.
 Extreme hygiene to be maintained in the kitchen as well as the dining area.
December 2021 57
Retail | QSR
COVID-19 causes a pivotal shift in business models

Introduction and
 It offers a tailwind to organized FSI players in the form of:
focus on the delivery
a) Consumers shifting to branded players, with better hygiene standards.
channel during the
b) Shutting down of 30-40% restaurants of smaller and unorganized players,
pandemic is causing
leading to market share gains for larger organized players.
a pivotal shift in
c) In addition to restaurants, shutting down of other retail businesses have led
business models of
to higher availability of Real Estate, with attractive terms for incumbents to
CDRs
expand their store networks.
d) Cost optimization through variablizing of employee and rental expenses.
 While many branded CDR players have managed to survive the COVID-19
impact, business has been severely affected due to the stringent lockdown
guidelines (50% seating capacity and restricted operating hours/days).
 Consequently, many CDR players introduced and focused on the delivery
channel to survive these challenging times. This led to a pivotal shift in the
business model as delivery created an incremental revenue stream for them. It
did not cannibalize the dine-in business as was observed in 3Q/4QFY21 when
the lockdown restrictions were lifted.
 Once the pandemic ends, CDRs would stand to benefit as dine-in would be
completely allowed, while delivery would add on to their sales per store.
Strong growth for Indian ethnic cuisine

 As highlighted previously, Indian ethnic cuisine is expected to grow the fastest
with a CAGR of 36% over FY20-25E. While this number pertains to QSR segment,
it is unlikely that the growth for CDR players in Indian ethnic cuisine segment
would be materially different, if they too participate in the delivery and
takeaway channels.
Exhibit 93: Indian ethnic cuisine to grow at the fastest pace (CAGR FY20-25E)
Indian Ethnic 36
Others 30
Burgers & Sandwich 22
Pizza 18
Chicken 10
*data pertains to QSR segments Source: Technopak, MOFSL
December 2021 58
Retail | QSR
The ‘all you can eat’ menu Three pronged value proposition to delight customers
with live grills  BARBEQUE delivers a three pronged value proposition of: a) experience, b)
value-for-money, and c) service.
 It pioneered the format of ‘over the table barbeque’ in Indian restaurants. It has
live grills embedded in dining tables, which allow its guests to grill their own
barbeques. While there are other similar barbeque players, this is a unique
experience as compared to other CDRs.
 The ‘all you can eat’ concept, with a decently widespread, at a fixed price, offers
a value-for-money proposition to its target consumers. This concept is more
popular with larger groups as it leads to comfort with regard to the bill amount.
 BARBEQUE offers prompt service in a pleasant and casual dining environment. It
inculcates a service-oriented mindset in its staff and trains them to be attentive
to customer needs.
Well diversified footfalls lead to higher capacity utilization

 BARBEQUE’s weekday (Mon-Thurs) and lunch covers have been consistently
high. These are higher than the industry average. Differential pricing on dinners/
weekends encourages diversified footfalls (refer Annexure I on page 76).
 This higher proportion of total revenue is from weekday and lunch covers, due
to Barbeque Nation being a popular choice for corporate lunches on weekdays
and for families during the weekends.
 The well diversified footfalls lead to better restaurant capacity utilization, which
in turn leads to higher cost efficiency.
Exhibit 94: Higher proportion of weekday and… Exhibit 95: …lunch covers seen consistently
Lunch covers (%)
Weekday covers (%)
53.4 45.0 45.5 46.1
48.7 48.4 48.6 44.4
FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

BARBEQUE regularly runs Food festivals offer freshness to the menu and aid in customer retention
food festivals  BARBEQUE periodically runs popular food festivals at both Barbeque Nation and
Toscano restaurants. These festivals offer a range of Indian, international, and
fusion cuisines, which adds freshness to the menu at regular intervals.
 Coupled with branding initiatives, these festivals help in increasing awareness.
They also aid in customer retention as experimental consumers keep seeking
new dishes to indulge.
 Some of Barbeque Nation’s popular festivals include: Hakuna Matata (African
cuisine), Jewels of the Sea, and Mango Mania.
December 2021 59
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Improving covers, APC, and average bill size over the years
 BARBEQUE’s in-dining covers have been growing at double-digits over FY17-20,
both in India and on a consolidated basis.
 At the same time, there has been an increase in APC (average per cover) and the
average bill size. These were impacted in FY20 due to: a) promotional offers
introduced on Monday and Tuesday to increase affordability and footfalls, and
b) COVID-led lockdowns imposed in Mar’20.
Exhibit 96: Double-digit growth in in-dining covers in India… Exhibit 97: …as well as on a consolidated basis
In-dining covers (mn) YoY growth (%) In-dining covers (mn) YoY growth (%)
21 21
19
17
12 13 12
11
6.86 7.66 8.96 9.92 6.90 7.79 9.23 10.38
Exhibit 98: APC has been improving… Exhibit 99: …along with the average bill size
India Consolidated Average bill size (INR)
793 789 3,249
3,215
750 3,026
777
764
710 2,757
741
707
*excluding revenues from UBQ and taxes Source: Company, MOFSL Source: Company, MOFSL
Dine-in recovered after the lifting of lockdown restrictions in 3QFY21, but

was affected by the second COVID wave
 With the gradual lifting of lockdown restrictions in 3QFY21, BARBEQUE’s dine-in
channel recovered well. However, the momentum has slowed down in 1QFY22
as the second COVID wave led to another round of lockdowns and restrictions
across the country. With the lifting of the lockdown restricts, BARBEQUE
witnessed a strong recovery in 2QFY22 dine-in performance. However, it should
be noted that should a third wave eventuate, it could again materially affect
dine-in sales.
December 2021 60
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Exhibit 100: Dine-in sales bounce back after the lifting of lockdown restrictions
Barbeque in a box
1,975
1,661 1,687
596
455
56
1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
Grills in a box Delivery gets a boost due to COVID-19; business model under
transformation
 Prior to the COVID-19 outbreak, BARBEQUE already had an à-la-carte delivery
business under the ‘UBQ by Barbeque Nation’ brand. As of 31st Jul’21, it was
providing delivery services in 78 Indian cities from its existing kitchens.
 With the onset of COVID-19, leading to dine-in restrictions, the delivery channel
was the business to fall back on for all FSI players. The channel received a strong
boost, especially for branded players, as in-home consumption picked up during
the lockdowns and consumers preferred players with better hygiene standards.
 In addition to UBQ, BARBEQUE launched a new product – ‘Barbeque in a box’,
which comprises a wholesome meal consisting of its signature barbeques, Indian
gravies, and desserts. It introduced other variants such as ‘Grills in a box’, ‘Meals
in a box’, among others (refer Annexure II on page 76).
 This product has seen strong success in the market and contributes ~70% to
Biryani and kebabs in a box BARBEQUE’s delivery sales, with the rest coming from UBQ.
 Its vegetarian/non-vegetarian products are priced in the INR499-799/INR629-
1,099 range and can be satisfying for two consumers. On a per person basis,
these price points are less than 50% of its dine-in prices. Pricing per person is at
a discount to both organized and unorganized CDR players (refer Annexure III on
page 77 for details). It is positioned as a higher value-for-money product,
offering a premium quality and a wide spread. A strong value for money
platform is critical to drive SSSG in the FSI space.
 With higher affordability, this product makes Barbeque Nation accessible to a
wider set of consumers, without diluting brand equity. It also acts as a customer
acquisition tool for the dine-in business.
 Consequently, BARBEQUE saw its delivery sales jump to INR770m in FY21
(15.2% of sales) from INR261m in FY20 (3% of sales). Contribution seems
optically high due to restrictions on dine-in in 1Q and 2QFY21. It must be noted
that even when dine-in recovered in 3Q and 4QFY21, delivery sales were not
impacted.
December 2021 61
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Exhibit 101: Delivery business on a strong footing (Sales INR m)
FY20 261m FY21 770m 1HFY22 1,069m

557
511
261 283 285

160
41
FY20 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
Extension kitchens to seize the delivery opportunity faster

 Seeing the higher traction in the delivery business, the management recently
launched extension kitchens to cater to this market. It currently has eight
extension kitchens across three cities. These would be complimentary to its
physical store network.
 There is a clear opportunity to ramp up here, since its network of 153 Barbeque
Nation stores is rather thin. For example, BARBEQUE has 14 stores in Mumbai,
which is second only to Delhi (including Gurugram and Noida), with 17
restaurants. To put this in perspective, Domino’s/McDonald’s – which have a
strong delivery business – have over 100/90 stores in Mumbai.
‘Barbeque in a box’ Delivery is here to stay

makes the Barbeque  COVID-19 has provided a structural boost to the delivery channel as consumers
Nation affordable and have adopted and gotten acquainted with the digital ecosystem of shopping.
accessible to the  As mentioned previously, ‘Barbeque in a box’ makes the brand affordable to the
consumers without consumers without diluting its brand equity. It has made the brand accessible to
diluting its brand equity. a wider set of consumers.
On a sustainable basis,  BARBEQUE’s target consumers for dine-in and delivery are not completely
BARBEQUE is targeting overlapping. The delivery channel is an additional as well as a sustainable
~20% of sales from the revenue stream for the company and it is unlikely to cannibalize its dine-in
delivery channel. business. The delivery channel did not witness a slowdown in 3Q/4QFY21 when
dine-in was close to normalcy.
 However, margin in the delivery channel was lower due to additional packaging
costs and delivery commissions.
 As mentioned in our initiating coverage note on Westlife Development (WLDL),
the delivery channel is crucial to the success of the retail business in India. Faced
with higher fixed costs (rentals and employees), the Retail businesses can
significantly improve their unit economics through delivery as a strategic lever.
 In its 4QFY21 earnings call, the management guided at a delivery revenue of
INR1.5b for FY22. With a revenue of ~INR1.1b in 1HFY22, the company is well
placed to outperform on this target. On a sustainable basis, it is targeting
delivery revenues of INR15m per store annually (~20% of total sales).
December 2021 62
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Channel checks
We reviewed several of BARBEQUE’s boxes and feel:
 The portion size is large and can comfortably suffice for 2-3 people.
 It provides high value-for-money as the cost per person is extremely affordable.
 In its 1QFY22 earnings call, the management said there were some negative
reviews for the product due to customer dissatisfaction with the temperature of
the food. This is due to its thin network density, which means that the food has
to travel a longer distance. We also faced this issue, and some of the items had
turned partially cold by the time it reached us. Taking cognizance of the
problem, the management seems to have introduced a flyer recommending
reheating of food for a better experience. Rapid penetration of extension
kitchens and determining the serviceable delivery radius can help mitigate this
problem.
 The taste is similar to that of dine-in and the food was also fresh.
 The packaging was neat and there were practically no spillovers, despite the
long distance travelled and the high number of items in the box.
 Overall experience: The product performed well on all parameters, except for
food temperature, which is a critical factor. The company can determine its
delivery radius and expand its store/extension kitchen network to reach
consumers faster.
Tech initiatives and loyalty program strengthen the business

 BBQ App offers features such as store locators, reservation, and placing of
delivery orders. BARBEQUE has seen strong customer traffic growth and
conversion on the app and its website.
 As per management, the app has seen ~3m downloads as of 31st Jul’21 as
against ~1.3m as of 29th Feb’20. To put things in perspective, downloads for
JUBI stood at 71m as of 30th Sep’21. The same for BURGERKI/WLDL (McDelivery)
app stood ~1.5m/13m downloads as of Nov’21. While JUBI has been way ahead
of peers on the technology front, BARBEQUE’s app downloads are
commendable compared to BURGERKI and WLDL, considering that its store
network is significantly lower.
 BARBEQUE has launched its loyalty program ‘SMILES’, which converts 5% of the
bill value into loyalty points. These are redeemable against the next store visit or
orders via the BBQN app/website.
 The percentage of transactions with SMILES redemptions increased to 9.6% in
Dec’20 from 0.8% in Feb’20, indicating significant customer loyalty.
 Both these initiatives offer strong support to the business, and are especially
important in current COVID-19 times, where consumers have adopted
~3m
Barbeque Nation app
technology in a big way.
downloads
December 2021 63
Retail | QSR
Exhibit 102: Own digital and non-digital assets contribute Exhibit 103: Contribution from its own digital platform has
~80% of revenue in FY21 been consistently high in recent quarters
Own digital platform contribution

Own Non-Digital (BBQ
reservation 27.0% 27.3%
20.5% 25.1% 24.7%
system & walk-in) 21.2%
20.1% 19.5%
Own Digital
(app and web bookings)
53.9%
25.6% Third Party Digital
(aggregators)
4QFY20 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
Store network expansion does not seem to be a challenge

 In the five years ended FY20, BARBEQUE added 119 stores (at an average of ~24
stores per annum). It can accelerate store additions from FY23E onwards.
 Its current network of 169 stores including: a) 153 Barbeque Nation stores in
India, b) six Barbeque Nation stores overseas, and c) 10 Toscano stores.
Exhibit 104: BARBEQUE’s store network is low and the runway for growth is considerable
Stores 314
279
244
214
184
164 164
133
104
66 80
45
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E
The number of BARBEQUE stores

 The pricing of its premium dine-in has raised concerns that its network growth
in metros itself is still very low opportunity is limited. However, we believe:
a) Its store network is thin, even in metros, which offers considerable
No. of stores opportunity to scale up. While we do not make a case that its network can
New Delhi 17 be scaled to the levels of JUBI/WLDL, BARBEQUE’s current network is far
Mumbai 14 from saturation.
Bengaluru 13 b) Recently, JUBI raised its potential target for Domino’s stores to 3,000 from
Chennai 8 2,000. As disposable incomes of Indian consumers continue to grow,
Hyderabad 8 branded FSI players will continue to see potential network expansion.
Pune 6
BARBEQUE is present in ~80 cities, while JUBI is present in ~300 cities. It
Kolkata
may not make sense for BARBEQUE to enter the last 100 of these cities
5
yet, but the presence of JUBI in these cities indicates vast consumer
aspirations that are waiting to be tapped.
c) The company can evaluate new formats to penetrate smaller towns faster.
 The management sees a potential for 450-500 stores.
December 2021 64
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Peer comparison: BARBEQUE’s financial metrics are

similar to its QSR peers
 As we compare BARBEQUE with other FSI players, it should be noted that the
peers considered are QSRs, while it is a CDR. Hence, the difference in business
models has to be borne in mind before drawing conclusions.
 Prior to the COVID-19 outbreak, BARBEQUE had the highest average daily sales
per store (ADS) among its listed peers. Its ADS would receive a boost from a
recovery in dine-in, while the delivery business continues to be an additional
revenue stream.
 BARBEQUE’s capex per store, at INR27-30m, is similar to that of WLDL (INR25-
30m), but its sales per store is considerably higher than that of the latter.
 It is important to note that our estimates are conservative as our FY24E ADS
estimate is below that of FY17. The management expects sales per store to
touch INR75m in a normalized scenario (most likely FY23E), with the
contribution from dine-in/delivery at INR60m/INR15m.
Exhibit 105: BARBEQUE saw the highest ADS prior to the COVID-19 outbreak
ADS (INR '000) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 183.7 174.6 170.9 156.3 84.7 131.3 172.3 180.0
WLDL 103.2 116.2 134.1 137.9 86.6 123.8 148.7 167.8
JUBI 66.1 73.5 82.7 84.0 67.3 85.9 97.3 109.8
KFC (Devyani) - - 113.9 116.7 100.3 103.2 124.5 127.0
Pizza Hut (Devyani) - - 44.7 43.9 34.9 40.6 48.6 50.1
Source: Companies, MOFSL
 Given the high contribution from dine-in, BARBEQUE’s recovery is expected to

be delayed v/s QSRs. Despite witnessing the sharpest decline in SSSG in FY21,
we expect its recovery to be delayed to FY23E as against a sharp recovery
expected in QSRs in FY22E.
 We expect BARBEQUE to have among the sharpest SSSG in FY23E as its dine-in
business normalizes, while delivery continues to hold up.
Exhibit 106: Recovery for BARBEQUE to be delayed compared to QSRs

SSSG (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 1.9 7.2 5.6 -2.2 -44.3 58.8 45.0 16.6
WLDL 4.0 15.8 17.0 4.0 -27.1 40.5 25.5 15.0
JUBI -2.4 13.9 16.4 3.2 -17.7 30.0 24.0 18.0
KFC (Devyani) - - 4.7 3.2 -33.7 28.5 8.0 7.7
Pizza Hut (Devyani) - - 4.7 -3.7 -30.3 45.0 5.0 7.9
 We expect BARBEQUE’s store network expansion to be muted at 20 openings in

FY22. We expect the pace to accelerate thereafter as normalcy returns.
 It is important to note that BARBEQUE has historically not closed any stores
except for FY21, when it closed three stores (out of 164) during the COVID-19
pandemic. This is considerably lower than the closures undertaken by QSRs like
JUBI (100 of 1,335) and WLDL (19 of 319), which indicates BARBEQUE’s strong
store selection and execution capabilities.
December 2021 65
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Exhibit 107: BARBEQUE’s store expansion to be gradual in FY22E and FY23E, but accelerate thereafter
No. of stores at the end of FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE^ 80 104 133 164 164 184 214 244
WLDL 258 277 296 319 305 330 365 405
JUBI (Domino's) 1,117 1,134 1,227 1,335 1,360 1,520 1,695 1,885
KFC (Devyani)* - - 134 172 264 364 464 574
Pizza Hut (Devyani) - - 268 269 297 397 497 607
încludes international and Toscano stores also; *includes stores acquired from Yum! Brands Source: Companies, MOFSL
Exhibit 108: As a percentage of existing stores, our store addition estimates for BARBEQUE are conservative given its past
performance and management guidance of 35-40 stores to be added in FY23E
Net store additions (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 21.2 30.0 27.9 23.3 0.0 12.2 16.3 14.0
WLDL 9.3 7.4 6.9 7.8 -4.4 8.2 10.6 11.0
JUBI (Domino's) 8.9 1.5 8.2 8.8 1.9 11.8 11.5 11.2
KFC (Devyani) - - - 28.4 53.5 37.9 27.5 23.7
Pizza Hut (Devyani) - - - 0.4 10.4 33.7 25.2 22.1
încludes international and Toscano stores also; *includes stores acquired from Yum! Brands Source: Companies, MOFSL
 With a sharp recovery and store network expansion, we expect BARBEQUE to

deliver strong sales growth over FY22-24E.
Exhibit 109: Expect BARBEQUE to deliver strong sales growth, led by sharp SSSG and network expansion
Sales (INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 4,895 5,863 7,390 8,470 5,071 8,339 12,518 15,043
WLDL 9,308 11,349 14,020 15,478 9,860 14,347 18,866 23,582
JUBI 25,834 30,184 35,631 39,273 33,119 45,170 57,100 71,759
KFC (Devyani) - - 4,641 6,091 6,443 11,825 18,807 24,063
Pizza Hut (Devyani) - - 4,233 4,174 2,879 5,139 7,923 10,095
*includes stores acquired from Yum! Brands Source: Companies, MOFSL
Exhibit 110: Expect BARBEQUE to witness a delayed sales recovery compared to peers due to its higher salience on dine-in
Sales growth (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 21.4 19.8 26.0 14.6 -40.1 64.4 50.1 20.2
WLDL 11.7 21.9 23.5 10.4 -36.3 45.5 31.5 25.0
JUBI 6.0 16.8 18.0 10.2 -15.7 36.4 26.4 25.7
KFC (Devyani) - - - 31.2 5.8 83.5 59.0 27.9
Pizza Hut (Devyani) - - - -1.4 -31.0 78.5 54.2 27.4
*includes growth due to stores acquired from Yum! Brands Source: Companies, MOFSL
 While the EBITDA decline for BARBEQUE is among the highest in its peer set in
FY21, its recovery in FY22E is unlikely to be as sharp as that of QSRs due to the
gradual recovery in dine-in. It is expected to be in-line with peers FY23 onwards.
 BARBEQUE’s EBITDA margin has compressed in recent years, due to: a) price
cuts introduced on Monday and Tuesday to increase affordability, which also
cannibalized weekend sales, and b) expansion to smaller towns, which have
lower price points. However, its EBITDA margin is comparable to that of WLDL,
but lower than JUBI. We expect margin to improve as dine-in recovers, leading
to better fixed cost absorption.
December 2021 66
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Exhibit 111: EBITDA decline for BARBEQUE is among the highest in its peer set in FY21…
EBITDA* (INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 1,176 1,363 1,459 1,642 464 1,155 1,907 2,630
WLDL 469 774 1,190 2,140 469 1,535 2,745 3,753
JUBI 2,411 4,401 5,998 8,756 7,712 11,714 14,827 18,795
KFC (Devyani)^ - - 1,189 1,295 1,540 2,952 4,789 6,247
Pizza Hut (Devyani) - - 962 660 533 989 1,540 1,993
*post Ind AS 116 except FY17 to FY19 for WLDL and JUBI; Source: Companies, MOFSL
încludes growth due to stores acquired from Yum! Brands
EBITDA for KFC and Pizza Hut is calculated by apportioning company level overheads and Ind AS 116 adjustment
Exhibit 112: …but it is expected to bounce back in FY22E and FY23E

EBITDA growth* (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE - 15.9 7.0 12.6 -71.8 149.0 65.1 37.9
WLDL 10.2 64.8 53.8 79.9 -78.1 226.9 78.8 36.7
JUBI -8.5 82.5 36.3 46.0 -11.9 51.9 26.6 26.8
KFC (Devyani)^ - - - 8.9 18.9 91.6 62.2 30.5
Pizza Hut (Devyani) - - - -31.4 -19.3 85.6 55.8 29.4
încludes growth due to stores acquired from Yum! Brands
Exhibit 113: BARBEQUE’s EBITDA margin is higher than WLDL, but lower than others
EBITDA margin* (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 24.0 23.2 19.7 19.4 9.1 13.8 15.2 17.5
WLDL 5.0 6.8 8.5 13.8 4.8 10.7 14.5 15.9
JUBI 9.3 14.6 16.8 22.3 23.3 25.9 26.0 26.2
KFC (Devyani) - - 25.6 21.3 23.9 25.0 25.5 26.0
Pizza Hut (Devyani) - - 22.7 15.8 18.5 19.2 19.4 19.7
 JUBI is the most profitable player in the industry. It posted a net profit even in
FY21 when others were significantly affected by the pandemic.
 BARBEQUE incurred a significant loss in recent years, due to losses in Johnny
Rockets, a decline in APC, and the COVID-19 outbreak. However, profitability
should improve going forward, with a recovery in dine-in and the sustaining of
delivery.
 Devyani is also loss making, while WLDL has been seeing a volatile performance
on this front. We expect BARBEQUE to turn profitable at the PAT level in FY24E.
Exhibit 114: Expect BARBEQUE’s profitability to improve, with a recovery in dine-in and the sustaining of delivery
PAT (INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 66 41 -109 -493 -940 -307 -240 346
WLDL -121 129 213 93 -1,036 -501 435 975
JUBI 699 1,962 3,180 2,974 2,305 4,848 6,815 9,430
DEVYANI - - -942 -1,214 -630 1,332 3,231 3,702
December 2021 67
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 Being the most efficient QSR, JUBI has the best return ratios in the industry.
 We expect BARBEQUE’s return ratios to improve in the years ahead, led by
improving profitability.
Exhibit 115: JUBI has the highest RoE; expect the same to improve for BARBEQUE in the years ahead
RoE (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 6.3 2.9 -8.3 -833.5 -38.5 -6.2 -5.1 6.9
WLDL -2.3 2.4 3.8 1.6 -19.6 -11.0 9.6 18.6
JUBI 8.7 20.3 25.2 26.5 16.2 25.6 29.1 32.2
DEVYANI - - N/M N/M N/M 29.3 37.8 30.6
Exhibit 116: JUBI has the highest RoCE; expect BARBEQUE to deliver positive RoCE from FY22E onwards
RoCE (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
BARBEQUE 9.1 3.2 -28.5 5.6 -3.0 1.6 4.0 9.0
WLDL 0.5 3.9 4.2 6.3 -2.5 2.5 8.8 10.7
JUBI 8.9 22.1 28.5 20.3 12.1 18.8 22.2 26.0
DEVYANI - - - 3.4 4.3 16.4 22.8 19.5
December 2021 68
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Financial assumptions – Business model transformation

to raise performance
 We expect a gradual increase in stores, with 20 stores to be added in FY22E. We
expect it to accelerate thereafter as normalcy returns. While the management
has guided for 35-40 stores addition in FY23E, we build in a conservative
estimate of 30 stores addition in the year.
 BARBEQUE has not closed any stores historically, except in FY21, when it closed
three stores during the COVID-19 pandemic. This is considerably lower than that
of its FSI peers like JUBI (109 stores) and WLDL (19 stores), which indicates
BARBEQUE’s strong stores selection and execution capabilities.
 While BARBEQUE’s SSSG performance was in single-digits in the recent years,
the shift in its business model, through a focus on delivery and value-for-money,
has the potential to significantly elevate its SSSG profile. Our SSSG estimates are
on the conservative side. We expect sales per average store to breach the
INR75m mark in FY25E. The management expects to reach this sales level
sooner, but in a normalized scenario. It expects dine-in to contribute INR60m
(similar to pre-COVID levels) and delivery to contribute INR15m, which would be
an incremental revenue stream.
 Due to higher contribution of dine-in, the recovery in sales has also been
delayed vis-à-vis its peers.
Exhibit 117: Expect a pick-up in the pace of store additions from FY23E onwards along with a bounce back in SSSG
(INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E
No. of stores 80 104 133 164 164 184 214 244 279 314
Net additions YoY 14 24 29 31 0 20 30 30 35 35
Addition (%) 21.2 30.0 27.9 23.3 0.0 12.2 16.3 14.0 14.3 12.5
ADS (INR'000) 183.7 174.6 170.9 156.3 84.7 131.3 172.3 180.0 178.9 177.7
Sales per average store (INR m) 67.1 63.7 62.4 57.0 30.9 47.9 62.9 65.7 65.3 64.9
SSSG (%) 1.9 7.2 5.6 -2.2 -44.3 58.8 45.0 16.6 10.0 9.6
 We expect gross margin to expand to 66-67% levels, which was achieved in

FY18/FY19. This will be driven through a recovery in dine-in, leading to better
utilization of food through buffets.
 With the addition of the delivery business, sales per store would see a
significant boost, leading to better absorption of fixed costs and higher EBITDA
margin. Our estimates are on the conservative side again, as the company
delivered 20-21% margin (post Ind AS) in 3Q and 4QFY21.
 With the impact of COVID-19 continuing, we expect it to post a net loss in the
FY22E as well, turn profitable in FY24E, and remain profitable thereafter.
Exhibit 118: Summary financials
Net sales 4,895 5,863 7,390 8,470 5,071 8,339 12,518 15,043 17,078 19,234
YoY change (%) 21.4 19.8 26.0 14.6 -40.1 64.4 50.1 20.2 13.5 12.6
Gross profit 3,153 3,885 4,914 5,548 3,288 5,378 8,200 10,079 11,442 12,887
Gross margin (%) 64.4 66.3 66.5 65.5 64.8 64.5 65.5 67.0 67.0 67.0
EBITDA (post-Ind AS 116) 1,176 1,363 1,459 1,642 464 1,155 1,907 2,630 3,113 3,651
YoY change (%) 139.8 15.9 7.0 12.6 -71.8 149.0 65.1 37.9 18.4 17.3
EBITDA margin (%) 24.0 23.2 19.7 19.4 9.1 13.8 15.2 17.5 18.2 19.0
Profit before tax 131 165 35 -415 -1,136 -417 -240 364 493 985
Adjusted PAT 66 41 -109 -493 -940 -307 -240 346 404 737
YoY change (%) 12.8 -37.5 P/L - - - - L/P 16.8 82.3
PAT margin (%) 1.4 0.7 -1.5 -5.8 -18.5 -3.7 -1.9 2.3 2.4 3.8
December 2021 69
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Post receipt of the IPO proceeds in Apr’21 and the recent preferential issue,
BARBEQUE became a net cash company. We expect it to remain so in the years
ahead.
Exhibit 119: BARBEQUE became a net cash company after its IPO. We expect it to remain a net cash company in the future
Debt 854 1,277 1,579 2,450 1,528 400 400 400 400 400
Cash 53 436 120 147 2,455 1,251 1,210 1,270 1,023 829
Investments 28 0 0 0 0 2,459 1,921 1,600 1,410 1,140
Net debt 774 840 1,459 2,303 -927 -3,310 -2,731 -2,469 -2,033 -1,570
BARBEQUE has a negative working capital. While FY21/FY22 numbers seem inflated
due to lower sales, we expect the cash conversion cycle to normalize from FY23E.
Exhibit 120: BARBEQUE has a strong working capital cycle with negative working capital days
Inventory 161 190 193 149 202 228 377 495 561 632
Receivables 41 56 49 22 26 46 79 82 94 105
Payables 417 673 768 1,125 1,468 914 1,200 1,443 1,638 1,844
Days (average basis)
Inventory days 11 11 9 7 13 9 9 11 11 11
Receivables days 3 3 3 2 2 2 2 2 2 2
Payables days 27 34 36 41 93 52 31 32 33 33
Cash conversion cycle -13 -20 -24 -32 -79 -41 -20 -20 -20 -20
Days (year-end basis)
Inventory days 12 12 10 6 15 10 11 12 12 12
Receivables days 3 3 2 1 2 2 2 2 2 2
Payables days 31 42 38 48 106 40 35 35 35 35
Cash conversion cycle -13 -27 -26 -41 -89 -28 -22 -21 -21 -21
 After incurring losses, BARBEQUE has had a negative RoE in the recent years.
But the same will turn around when it turns profitable in FY24E.
 While RoCE was negative in FY21, due to the severe impact of COVID-19, it is
expected to turn positive in FY22E.
Exhibit 121: Expect significant improvement in return ratios going forward
(%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E
RoE 6.3 2.9 -8.3 -833.5 -38.5 -6.2 -5.1 6.9 7.4 11.9
RoCE 9.1 3.2 -28.5 5.6 -3.0 1.6 4.0 9.0 8.4 10.1
 BARBEQUE has been delivering a positive CFO. We expect the same to continue
in the years ahead, with a significant improvement from FY24E onwards, as
dine-in recovers, once normalcy returns after the pandemic ends.
 FCF too has been positive in most of the recent years. With a relatively lower
OCF in FY22-24E, FCF is expected to remain negative, as it incurs capex for its
store expansion. We expect it to turn positive once normalcy returns after the
pandemic ends.
Exhibit 122: Expect strong cash flow generation from FY23E onwards
CFO 1,077 1,275 1,223 1,811 679 297 1,568 2,094 2,303 2,428
Capex -716 -1,010 -1,299 -840 -143 -1,395 -2,126 -2,187 -2,603 -2,675
FCF 361 266 -76 971 536 -1,098 -558 -93 -300 -247
December 2021 70
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Valuation and view
 BARBEQUE is well placed to deliver growth through: a) a recovery in dine-in, b)

strong and sustainable delivery channel, generating an additional revenue
stream, c) considerable opportunity for store network expansion, and d) margin
expansion through a delivery-led operational leverage.
 We expect BARBEQUE to deliver sales/EBITDA CAGR of ~57%/103% over FY21-
23E. With a higher contribution of dine-in, BARBEQUE witnessed a much sharper
sales and EBITDA decline in FY21, leading to a soft base for growth. We expect a
sales/EBITDA CAGR of 31%/51% over FY21-26E.
 BARBEQUE trades at an EV/EBITDA multiple of ~28x FY23E which is in line with
QSRs (which trade at 25-33x FY23E EV/EBITDA). With the advantages of QSRs
over CDRs (higher affordability, high scalability, strong delivery platform, and
robust technological backend), we do not believe that BARBEQUE has the
potential to trade at a relative premium to QSRs. Accordingly, BARBEQUE’s
current valuations seem fair and limit upside from a one year perspective.
 We initiate coverage on BARBEQUE with a Neutral rating and TP of INR1,560,
valuing it at 22x FY24E EV/EBITDA.
Risks to our investment case
 A delay in a recovery in dine-in, once COVID-19 ends, could affect SSSG and
margin as the channel constitutes 85-90% of sales. While the delivery business is
ramping up, it will be unable to offset the impact on dine-in, if the latter is
majorly affected.
 Failure of the delivery channel to sustain once the pandemic ends could impact
our estimates. The management expects the delivery channel to constitute
~20% of sales on a sustainable basis. The channel got a boost during COVID-19,
with a jump in in-home consumption. If it fails to hold up in a normalized
scenario, when dine-in recovers, it would impact BARBEQUE’s expected
performance in the years ahead.
 Increase in the bargaining power of aggregators could affect delivery
economics: If the bargaining power shifts to aggregators like Swiggy, Zomato,
and Amazon Eats, companies like BARBEQUE, which lack their own delivery
system, could get affected. BARBEQUE can mitigate this risk by: a) continuing to
build its own digital assets, b) scaling up of its store network which would also
drive app adoption, and c) launching its own delivery service.
 Delays in an economic recovery could impact discretionary consumption as
consumers may stick to only essential consumption. While the Indian economy
has taken a big hit, amid the COVID-19 pandemic, the signs of economic
recovery are promising and offer comfort. The lower ticket size of food expenses
means that FSI players would still get higher preference in consumers’
discretionary spends as compared to other discretionary categories like
electronics and jewelry.
December 2021 71
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SWOT Analysis
 BARBEQUE delights  The COVID-led  BARBEQUE’s store  Aggression by
consumers through its lockdowns affected network is currently competition could
strategy of offering the dine-in channel, very thin, offering affect SSSG
value-for-money, a which constitutes 85- runway to scale up  If the management
unique experience, and 90% of sales.  The focus on delivery, doesn’t resolve the
prompt service Recovery was via product innovation issue of lukewarm food
 ‘Barbeque in a box’ delayed v/s QSRs, and extension with ‘Barbeque in a
offers higher value-for- which have lower kitchens, could box’, it could dilute
money and attracts dine-in dependence sustainably add a new brand equity and affect
new consumers to the  With a premium revenue stream the delivery business
brand pricing, it cannot
cater to the mass
segment
December 2021 72
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Key management personnel
Mr. Kayum Dhanani, Managing Director

Mr. Dhanani has been a Director of BARBEQUE since 30th Nov’12 and became the
MD in 27th Mar’13. He holds a Diploma in sole making from the Central Leather
Research Institute, Chennai. He has been associated with Sara Suole since CY05,
which is involved in the business of manufacturing, processing, and selling leather
goods, including, soles, shoes, and other leather accessories.
Mr. Rahul Agrawal, Whole-Time Director and CEO

Mr. Agrawal holds a B.Com (honors) from SRCC, Delhi and a PGDM from IIM,
Bengaluru. Prior to joining BARBEQUE, he was associated with E&Y and Beacon BVM
Advisors. He was also associated with CX Advisors from Oct’09 to Jul’17. He joined
BARBEQUE on 24th Jul’17 and has been a Director since 31st Dec’20.
Mr. Amit Betala, CFO

Mr. Betala holds a B.Sc from the University of Madras and a PGD in Agribusiness
Management from IIM, Lucknow. He is also certified as an FRM by the Global
Association of Risk Professionals. Prior to joining BARBEQUE, he has over seven
years of experience in various organizations, including Clix Capital and Axis Bank.
Mr. Mansoor Memon, Head of Projects

Mr. Memon is a Mechanical Engineer from MJCET Hyderabad, which is affiliated to
Osmania University. He has previously worked with Chase Contracting, Dubai, and
has an experience in operations and project management. He began working with
BARBEQUE in Jun’07 as a consultant and joined it on 1st Mar’19. He is the nephew of
Mr. Dhanani.
December 2021 73
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Income Statement (INR m)
Net Sales 4,895 5,863 7,390 8,470 5,071 8,339 12,518 15,043
Change (%) 21.4 19.8 26.0 14.6 -40.1 64.4 50.1 20.2
Material Consumed 1,742 1,978 2,476 2,922 1,782 2,960 4,319 4,964
Gross Profit 3,153 3,885 4,914 5,548 3,288 5,378 8,200 10,079
Gross Margin (%) 64.4 66.3 66.5 65.5 64.8 64.5 65.5 67.0
Operating expenses 1,977 2,522 3,455 3,906 2,825 4,223 6,293 7,449
EBITDA 1,176 1,363 1,459 1,642 464 1,155 1,907 2,630
Change (%) 139.8 15.9 7.0 12.6 -71.8 149.0 65.1 37.9
Margin (%) 24.0 23.2 19.7 19.4 9.1 13.8 15.2 17.5
Depreciation 627 703 895 1,340 1,212 1,218 1,669 1,671
Int. and Fin. Ch. 438 536 564 756 849 626 675 721
Other Non-recurring Inc. 20 41 35 38 460 272 198 127
PBT 131 165 35 -415 -1,136 -417 -240 364
Tax 64 124 144 78 -197 -110 0 18
Tax Rate (%) 49.2 74.9 416.8 -18.8 17.3 26.5 0.0 5.0
Adjusted PAT 66 41 -109 -493 -940 -307 -240 346
Change (%) 12.8 -37.5 P/L - - - - L/P
Margin (%) 1.4 0.7 -1.5 -5.8 -18.5 -3.7 -1.9 2.3
Non-rec. (Exp.)/Inc. -48 -99 -275 164 21 0 0 0
Minority interest -3 0 0 -5 -14 0 0 0
Reported PAT 21 -58 -384 -324 -905 -307 -240 346

Share Capital 135 138 140 140 170 194 194 194
Reserves 925 1,312 1,176 -81 2,269 4,739 4,499 4,845
Net Worth 1,060 1,450 1,316 59 2,439 4,932 4,693 5,039
Loans 854 1,277 1,579 2,450 1,528 400 400 400
Lease Liabilities 2,707 3,507 4,200 4,816 4,498 5,533 5,990 6,415
Others 0 0 0 52 38 38 38 38
Gross Block 5,579 7,446 9,619 11,910 12,049 13,444 15,570 17,757
Less: Accum. Depn. 1,517 2,197 2,986 4,507 5,456 6,673 8,342 10,014
Net Fixed Assets 4,062 5,249 6,634 7,404 6,593 6,771 7,228 7,744
Capital WIP 150 185 159 109 60 60 60 60
Goodwill 230 230 190 723 723 723 723 723
Investments 28 0 0 0 0 2,459 1,921 1,600
Deferred tax assets 0 0 0 0 0 0 0 0
Curr. Assets, L&A 818 1,568 1,209 1,319 4,002 3,240 3,895 4,744
Inventory 161 190 193 149 202 228 377 495
Cash and Bank Balance 53 436 120 147 2,455 1,251 1,210 1,270
Others 564 886 847 1,001 1,319 1,714 2,229 2,897
Curr. Liab. and Prov. 623 945 1,057 2,167 2,855 2,329 2,686 2,958
Other Current Liabilities 109 152 141 894 1,237 1,261 1,325 1,351
Creditors 417 673 768 1,125 1,468 914 1,200 1,443
Provisions 98 120 148 148 150 153 161 164
Net Curr. Assets 195 623 152 -848 1,147 911 1,209 1,786
Current tax liabilities -43 -53 -40 -11 -20 -20 -20 -20
Appl. of Funds 4,622 6,234 7,095 7,377 8,503 10,903 11,120 11,892
E: MOFSL estimates
December 2021 74
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Ratios
Basic (INR)
EPS 2.5 1.5 -3.9 -17.6 -27.7 -7.9 -6.2 8.9
BV/Share 39.2 52.5 47.0 2.1 71.9 127.3 121.1 130.1
DPS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Payout (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Valuation (x)
P/E 589.0 962.7 N/M N/M N/M N/M N/M 161.9
EV/Sales 8.1 7.0 5.7 5.1 9.5 6.3 4.3 3.6
EV/EBITDA 33.9 29.9 28.8 26.1 103.9 45.7 28.0 20.4
P/BV 36.9 27.5 30.8 684.6 20.1 11.4 11.9 11.1
Return Ratios (%)

RoE 6.3 2.9 -8.3 -833.5 -38.5 -6.2 -5.1 6.9
RoCE 9.1 3.2 -28.5 5.6 -3.0 1.6 4.0 9.0
RoIC 9.4 3.3 -28.7 5.2 -9.4 -0.7 3.2 10.8
Debtor (Days) 3 3 2 1 2 2 2 2
Inventory (Days) 12 12 10 6 15 10 11 12
Creditor (Days) 31 42 38 48 106 40 35 35
Asset Turnover (x) 1.1 0.9 1.0 1.1 0.6 0.8 1.1 1.3
Leverage Ratio
Debt/Equity (x) 0.8 0.9 1.2 41.4 0.6 0.1 0.1 0.1

OP/(loss) before Tax 104 66 -295 -251 -1,115 -417 -240 364
Int./Div. Received 23 8 207 -149 -412 -272 -198 -127
Depreciation and Amort. 650 753 1,022 1,340 1,212 1,218 1,669 1,671
Interest Paid -368 -472 -488 -659 -739 -626 -675 -721
Direct Taxes Paid 87 145 143 78 -12 -110 0 18
Inc./(Dec.) in WC -18 -121 57 -291 -244 968 339 518
CF from Operations 1,077 1,275 1,223 1,811 679 297 1,568 2,094
Inc./(Dec.) in FA -716 -1,010 -1,299 -840 -143 -1,395 -2,126 -2,187

Free Cash Flow 361 266 -76 971 536 -1,098 -558 -93
Others -54 42 7 -678 71 -87 -161 -232
Pur. of Investments 3 3 0 0 0 -2,459 538 322
CF from Invest. -767 -965 -1,292 -1,518 -72 -3,941 -1,749 -2,098
Issue of Shares 124 478 320 1 1,495 2,800 0 0

Incr. in Debt 232 405 302 876 73 -93 457 425
Dividend Paid -24 -33 -34 -34 0 0 0 0
Others -600 -778 -836 -1,109 133 -267 -316 -362
CF from Fin. Activity -268 73 -247 -265 1,700 2,440 141 64
Incr./Decr. in Cash 42 384 -316 27 2,308 -1,204 -41 60

Add: Opening Balance 11 53 436 120 147 2,455 1,251 1,210
Closing Balance 53 436 120 147 2,455 1,251 1,210 1,270
E: MOFSL estimates
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Annexures
Annexure I: Menu prices (as on 4th Aug’21)

BARBEQUE employs differential pricing for weekends and dinners. Pricing is also
differentiated for locations.
Exhibit 123: Worli, Mumbai (incl. taxes) Exhibit 124: Vadodara (excl. taxes) Exhibit 125: Madurai (excl. taxes)
Lunch Dinner Lunch Dinner Lunch Dinner
Vegetarian Vegetarian Vegetarian
Mon-Tue 786 891 Mon-Tue 649 649 Mon-Tue 599 599
Wed-Sat 839 1080 Wed-Sat 729 729 Tue-Fri 699 699
Sun 975 1080 Sun 729 729 Sat-Sun 699 699
Non-Vegetarian Non-Vegetarian Non-Vegetarian
Mon-Tue 786 891 Mon-Tue 769 769 Mon-Tue 699 699
Wed-Sat 944 1,154 Wed-Sat 869 869 Wed-Sat 799 799
Sun 1,154 1,154 Sun 869 869 Sat-Sun 799 799
Kids 400 400 Kids 350 350 Kids 399 399
Source: Zomato, MOFSL Source: Zomato, MOFSL Source: Zomato, MOFSL
Annexure II: ‘Barbeque in a box’ and its variants
Exhibit 126: ‘Barbeque in a box’, which contains 18 items, and its variants offer varied
products at varying price points
Product Type MRP
Grills in a Box Vegetarian 499
Biryani and Kebabs Box (Vegetarian – Regular) Vegetarian 569
Meals in a Box (Vegetarian North Indian) Vegetarian 599
Barbeque in a Box Vegetarian 799
Biryani and Kebabs Box (Vegetarian) Vegetarian 799
Biryani and Kebabs Box (Chicken – Regular) Non-Vegetarian 629
My Biryanis and Kebabs Box – Regular Non-Vegetarian 669
Grills in a Box (Non-Vegetarian – Overload) Non-Vegetarian 699
Grills in a Box Non-Vegetarian 699
Meals in a Box Non-Vegetarian 699
Biryani and Kebabs Box (Mutton – Regular) Non-Vegetarian 779
Barbeque in a Box (Non-Vegetarian Regular) Non-Vegetarian 799
Barbeque in a Box Non-Vegetarian 899
My Biryanis and Kebabs Box Non-Vegetarian 899
Biryani and Kebabs Box (Chicken) Non-Vegetarian 899
Chicken Overloaded Box Non-Vegetarian 1,049
Barbeque in a Box (Non-Vegetarian overload) Non-Vegetarian 1,099
Biryani and Kebabs Box (Mutton) Non-Vegetarian 1,099
December 2021 76
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Annexure III: Comparative pricing with other CDR players

 We compared the pricing of ‘Barbeque in a box’ (vegetarian) with other CDR
players, and the findings were astounding. BARBEQUE’s pricing is attractive.
 We tried to replicate the items in this product at other restaurants on a à-la-
carte basis. Since we conservatively assume that there will be more consumers
ordering this basket, we have only increased the quantity of breads from two for
BARBEQUE to four for its peers.
 It is important to note that ‘Barbeque in a box’ has six starters, while we are
assuming two for others. Even adjusted for portion sizes, the volume of starters
in ‘Barbeque in a box’ will be significantly higher than the two for the others.
 For a like-to-like comparison, we are assuming equal add on cost, which would
include taxes, delivery charges, restaurant packing charges, and discounts.
Exhibit 127: Organized player Exhibit 128: Unorganized player Exhibit 129: Barbeque Nation
Premium casual dining Indian restaurant Mass-end restaurant serving Indian cuisine Barbeque Nation
Location Andheri, Mumbai Location Parel, Mumbai Location -
Type Organized Type Unorganized Type Organized
Units Price Units Price Units Price
Vegetarian starter 1 284 Vegetarian starter 1 176 Vegetarian starter 5
Paneer starter 1 335 Paneer starter 1 248 Paneer starter 1
Paneer gravy 1 330 Paneer gravy 1 242 Paneer gravy 1
Vegetarian gravy 1 299 Vegetarian gravy 1 170 Vegetarian gravy 1
Dal Makhani 1 279 Dal Makhani 1 170 Dal Makhani 1
Vegetarian biryani 1 335 Vegetarian biryani 1 165 Vegetarian biryani 1
Lachha paratha 4 348 Lachha paratha 4 200 Lachha paratha 2
Dessert 2 350 Dessert 3 180 Dessert 3
Total 12 2,560 Total 13 1,551 Total 15 799
Source: Zomato, MOFSL Source: Zomato, MOFSL Source: Zomato, MOFSL
 Even on a conservative basis, while we assumed four consumers for its peers v/s
two for BARBEQUE, the cost per person is comparable to an unorganized player,
despite BARBEQUE’s product quality being much better.
 On a more realistic basis, the pricing is an absolute steal and extremely high on
value v/s cost.
Exhibit 130: Barbeque Nation is attractively priced

Organized player – Unorganized player – Barbeque
casual dining restaurant mass-end restaurant Nation
Conservative No. of persons 4 4 2
comparison Price per person 640 388 400
No. of persons 3 3 2
Realistic comparison
Price per person 853 517 400
Source: MOFSL
December 2021 77
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RECENT INITIATING COVERAGE REPORTS
December 2021 78
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Explanation of Investment Rating

Investment Rating Expected return (over 12-month)
BUY >=15%
SELL < - 10%
NEUTRAL < - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take
appropriate measures to make the recommendation consistent with the investment rating legend.
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Food Service Industry (QSR) Thematic

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December 2021

Dil khol Hungry

Dhairya Dhruv – Research analyst (Dhairya.Dhruv@motilaloswal.com)

Food Service Industry

JUBI upgrade to Buy note

Well placed to recover rapidly

Jubilant FoodWorks is our preferred largecap pick in this space

Maintain our Neutral rating on Westlife Development

Initiating coverage on Devyani International

 We arrive at a SoTP-based TP of INR190 per share after assigning 27x/20x FY24E

Initiating coverage on Barbeque Nation

Exhibit 1: Retail: Comparative valuations of QSRs

Large opportunity in India’s Food Services industry

19% characteristics: a) accounting transparency, b) organized operations with quality

Exhibit 2: Organized market to grow faster than

FY15 FY20 FY25E

Source: MOFSL, Technopak

Multiple growth drivers for FSI

Median age of population CY22E (years)

350m Western Europe

Source: MOFSL, Media

Source: MOFSL, WLDL Source: MOFSL, JUBI

d) Higher internet penetration: Internet penetration in India is rising at a faster

Nov'18 Feb'20 12.4

India China Brazil UK South Africa US

Source: MOFSL, cable.co.uk

e) Increasing availability of Retail space: In view of the huge success witnessed by

Exhibit 9: Delivery market’s prospects improve due to the COVID-19 outbreak

Total delivery market post COVID-19

2016 2020 2025E

Source: MOFSL, Technopak

g) Urbanization and nuclear families: India’s urban population comprised 28% of

FSI is highly urban centric

Exhibit 10: Chain Restaurants are extensively urban centric

Source: MOFSL, Technopak

Channel mix is getting optimized for a higher throughput

DOMINO'S MCDONALD'S PIZZA HUT KFC

Source: MOFSL, Technopak

Burgers and Sandwiches dominate the QSR segment

Market Share by Outlet Count (%) Market Share by Revenue (%)

Source: MOFSL, BKI Source: MOFSL, BKI

FY20 Market share (%) FY20-25E CAGR (%)

Burgers & Sandwiches 30.9 Burgers & Sandwich 22

Pizza 26.6 Pizza 18

Chicken 14.9 Chicken 10

Indian Ethnic 14.9 Indian Ethnic 36

Others 12.8 Others 30

COVID offers multiple tailwinds for organized players

Companies covered in the report

Jubilant FoodWorks .................................... Pg13

Westlife Development ................................ Pg19

Devyani International ................................. Pg25

Barbeque Nation ......................................... Pg54

Valuation and view

Exhibit 18: Domino’s mobile app downloads continue to grow rapidly

Source: Company, MOFSL

Domino's Store Count YoY net addition (%)

Source: Company, MOFSL Source: Company, MOFSL

Exhibit 21: Expect SSSG to remain healthy

SSSG YoY (%) 30.0

EBITDA Margin (%) 180.5 PAT (INR b) PAT growth (%)

Source: Company, MOFSL Source: Company, MOFSL