Devyani International Limited (DEVYANI.BO) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Devyani International Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us for the Devyani International's Q1 FY '26 Earnings Conference Call. We have with us Mr. Ravi Jaipuria, Non-Executive Chairman of the company; Mr. Raj Gandhi, Non-Executive Director; Mr. Virag Joshi, CEO and Whole-Time Director; and Mr. Manish Dawar, CFO and Whole-Time Director of the company. We will initiate the call with opening remarks from the Chairman, followed by key financial highlights from the CFO. Thereafter, we will have the forum open for a question-and-answer session. Before we begin, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier. I will now request Mr. Ravi Jaipuria to make his opening remarks.

Good afternoon, everyone, and thank you for joining us today. I'm pleased to welcome you all to Devyani International's post results earnings conference call to discuss our performance for the first quarter of the financial year '25-'26. India's QSR industry is on a structural growth trajectory, underpinned by rising urbanization, growing income levels, increasing digital adoption, increase in female work participation rate and growing appetite for convenience among younger consumers, while near-term macro factors have led to phase of soft consumer demand. We see a better outlook for the industry in the coming times. We are learning from the evolving consumer trends, and we need to reset our business to have a differential -- differentiated and compelling proposition for our consumers whether they are online or offline. We strongly believe that our industry will remain a prime beneficiary of evolving consumer behavior. It's important that job creation continues in the economy with rising per capita income, which will lead to higher consumption. Considering the significant market potential, we continue to execute on our long-term growth agenda. I'm pleased to announce that we have concluded the acquisition of Sky Gate Hospitality, which runs Biryani by Kilo and Goila Butter Chicken brands and increased our stake to 86.13% subsequently. This gives us access to market-leading brands to expand our presence in the Biryani and the Indian cuisine segment. One of the largest food categories in the country, Sky Gate Hospitality has 105 outlets at present, and we are confident that these brands will be one of our key contributors to our expansion plans going forward. Across the portfolio, we are expanding our footprint in a focused manner. To this end, we have added new stores in KFC, Pizza Hut and other brands in our geographies. We are also in the process of launching our 3 new international brands: New York Fries, Tealive and Sanook Kitchen in the next quarter. Savers offer, providing a 9 for INR 299 combo, this offer has been enthusiastically received by the consumer. We are already seeing significant contribution from this combo despite it being a dine-in only offer. Pizza Hut saw the launch of Juicylicious range of pizzas with 3 unique flavors of marinated toppings and Indian sauces. We have seen a good response and adoption for the product to provide more value to our customers. We also piloted Unlimited Pizza Fridays at select stores. Results are encouraging as the participating stores showed healthy growth in transactions and ADS. Our financial performance has been healthy on a consolidated basis. Quarter 1 revenues reached INR 1,357 crores, a 11.1% year-on-year growth. This growth was driven by healthy growth from KFC, Costa and the Food Court business in India, and supported by 11.2% year-on-year growth in the international business. Reported EBITDA came in at INR 205 crores with EBITDA margin at 15.1%. The slight dip in margin was due to deleverage from lower ADS year-on-year and investments in marketing and promotion in the quarter. As one of the leading QSR players, we are well positioned to benefit from the rebound in consumer spending. Our multi-cuisine, multi-format strategy caters to a broad spectrum of consumer taste, occasions and price points while diversifying away from any category or geography-specific risks. It also enhances our ability to capture opportunities across varied markets and evolving consumer trends. With the strength of our brands and our execution capabilities, we are confident of our ability to deliver consistent growth. Our focus will remain on scaling profitability, strengthening both our core and emerging markets and creating long-term value for our stakeholders. With this, I would like to conclude my address. And now I hand over to Manish for the financial highlights.

Thank you, Mr. Jaipuria. Good evening, everyone. A very warm welcome, and thank you for your valuable time for attending DIL's Quarter 1 FY '26 Earnings Conference Call, our 16th since our listing in August '21. We ended June 2025 with a total store count of 2,145 stores, comprising of 1,067 KFC stores, 627 Pizza Hut stores and 221 Costa Coffee stores. As you all know, we have signed up new brands and completed the acquisition of Sky Gate Hospitality recently. In view of this, please note that we've made an update to how we report our India operation metrics. From this quarter, we are presenting our data across 3 key operating segments, which is Yum Brands consisting of KFC and Pizza Hut; other franchise brands such as Costa Coffee, New York Fries, Tealive and Sanook Kitchen; and our own brands, including Vaango and recently acquired Sky Gate Hospitality portfolio. This will give better clarity and alignment with how we manage our business and how we look at our business internally as well. From the current quarter onwards, we are consolidating Sky Gate Hospitality financials. The transaction was consummated on 10th of June. Hence, the results have been consolidated from June 11, and a 20-days impact is there in the consolidated numbers of DIL. On to the financial metrics. Consolidated operating revenue for quarter 1 FY '26, including Thailand, was INR 1,357 crores, up 11.1% year-on-year basis. Consolidated Q1 FY '26 gross profit came in at INR 925 crores, which was up 9.5% Y-o-Y, with margins at 68.2%. Brand contribution margin was at 13.1% versus 15.3% last year. This debt is mainly on account of decline in margins in the Indian operations. Consolidated operating EBITDA on a pre-IND AS basis was INR 110 crores with margins at 8.1% versus 8.9% in the previous quarter. Lower brand contribution margin led to decline. Reported EBITDA was INR 205 crores with a margin of 15.1%. The Indian operations grew 11% Y-o-Y to reach to reach INR 932 crores in revenues. Gross margin came in at 69.6%, a decline of 2.3% versus previous year. This has been primarily on account of investments to support transaction growth in our brands. There was also a small impact for the increase in raw material prices of cheese, flour and edible oils. A change in GST applicability on rent has also led to an increase in rental cost. As a reminder, our industry does not get input credit on GST. Further high saliency of off-premises sales across the 2 key brands, which is KFC and Pizza Hut led to higher aggregator and delivery expenses. These costs have increased on a structural basis across the industry and the impact will continue for the year. We also took initiatives to mitigate this increase by way of tight control on utility costs and other operational expenses. However, they could not fully offset the impact. On to the brands. KFC in India added 8 net new stores in quarter 1 FY '26. With this, the total store count for KFC in India stands at 704 stores as of 30th June, and we are on track to open approximately 100 to 110 net new stores of KFC. Average daily sales at INR 98,000 for KFC is higher sequentially but lower on a Y-on-Y basis. We have seen good progress with KFC SSSG after multiple quarters with SSSG stabilizing at negative 0.7%. Revenues came in at INR 613 crores, up 20.5% year-on-year. Gross margin was lower at 67.1%, primarily due to investments in growing transactions and a small increase in the edible oil prices. The brand contribution margin came in at 15.5% for quarter 1 FY '26 due to lower gross profit margin, higher delivery costs and aggregator costs and deleverage on lower ADS. With the aim of improving the performance of the brand, we continue rationalizing our footprint at Pizza Hut. Due to closures of nonperforming stores, we ended quarter 1 FY '26 with 618 Pizza Hut stores in India, a net decline of 12 from the previous quarter. In the current financial year, we are planning to slow down our organic expansion of Pizza Hut stores openings. Pizza Hut India revenue for the quarter was INR 187 crores, up 3% Y-o-Y. The ADS recovered slightly to INR 33,000 on a sequential basis. SSSG came in at negative 4.2% and efforts are underway to stem the decline. Gross margin at 74.8% was lower due to inflation in flour and edible oil prices, coupled with investments made to support the brand. The brand had a slight negative brand contribution in the current quarter. Franchise brands, which include Costa Coffee and the newer brands in India had a stable quarter. We opened the maiden New York Fries stores at Mumbai International Airport. We are enthused by the performance and will continue to grow New York Fries and other brands. The division's revenue came in at INR 52 crores with a stable gross margin at 75.2% and brand contribution of INR 6.7 crores. Brand contribution for the division includes the start-up costs associated with the new brands. Own brands, which includes Vaango, Biryani by Kilo and Goila Butter Chicken brands reached INR 35 crores in revenues with steady gross margin at 70.1% Please note that acquisition of Sky Gate Hospitality was effective from June 11. Hence, only 20 days of financials of Sky Gate Hospitality are included. Brand contribution margin from own brands declined to 6.7% owing to this consolidation and dilution from Sky Gate portfolio of brands. We are working towards achieving positive brand contribution and turnaround of Sky Gate over the next 12 months. Our international business continues to grow steadily. Revenues reached INR 433 crores in quarter 1 FY '26 with gross margins at 65.6%. Brand contribution improved to INR 72 crores, representing 16.7% margins on the back of better gross margin performance in the Thailand business. In conclusion, we are navigating a phase of soft consumer demand with a disciplined and measured approach. Our marketing strategy strikes a balance between broad-based brand campaigns and targeted tactical interventions. Driving profitable and sustainable brand growth remains our unwavering North Star. On that note, I would like to request the moderator to open the forum for any questions or suggestions that you may have. Thank you very much.

[Operator Instructions] First question is from the line of Aditya Soman from CLSA.

So 2 questions from me. Firstly, on KFC, we've seen sort of flattish like-for-like growth on a base that was already quite negative. So from here on, to see an improvement in trajectory at KFC, what in your view are sort of the 2 or 3 key things that need to happen to start seeing a meaningful improvement? And within this sort of flattish SSG, is there any meaningful trend difference that we saw maybe in the first half of the quarter versus the second half or in the more recent period in July? And my second question is on these new brands that we are adding, whether it's Biryani by Kilo or New York Fries. Over what period does the management intend to make these significant from an overall company perspective?

Okay. Let me -- thanks, Aditya. Let me first talk about KFC SSSG. So while I agree with you that the KFC has been negative SSSG for a few quarters. In fact, to be precise, almost 8 to 9 quarters. So there have been this whole quarter-on-quarter kind of impact, which comes in. But despite that, we've managed to stem the degrowth in KFC SSSG, which was there, and we are virtually flat this time. So this time, there was also a season shift from a Sawan perspective, where the consumption is typically low because last year, the period was a little different. It was spilling over into second quarter a little bit, whereas in the current one, so that we've seen a better impact. So given that impact, we would have been probably virtually flat or a small positive on KFC SSSG. Having said that, we've seen a good growth momentum in the online category because we took initiatives on online specifically. And therefore, the SSSG on online, which is Zomato and Swiggy is positive. We are trying to address the dine-in piece, which we are hoping that we will be able to do that over the next 1 or 2 quarters. And therefore, with that, you will see the numbers kind of improving because what we did on online from a SSSG perspective is very heartening. Coming to the new brands from Biryani or, let's say, New York Fries and all. So right now, as far as the new brands that we've signed up, we want to test those brands, see how the consumer response is and then scale up. We've opened New York Fries, 1 store at Mumbai Airport. We'll be shortly opening some of the Tealive stores on Sanook Kitchen also. We will start with a couple of stores to see how the consumer responses. So therefore, this will take some time to scale up and become an overall contributor -- meaningful contributor within the DIL portfolio. As far as Sky Gate portfolio is concerned, which is Biryani by Kilo and Goila Butter Chicken, it's almost about 105 stores. So the objective there is to first set the model. As you all know that it's a loss-making portfolio as of now. So our first priority is to turn around the brand. We are hoping in the next 12 months, we will have a positive brand contribution and brand EBITDA. And post that, start to ramp up the brand into our own channels and so on and so forth. Simultaneous to the overall turnaround, we've also started experimenting the new formats or the new distribution channels for Biryani by Kilo, which is airports and food courts, again, to test how the consumer responses from a dine-in perspective. We are also starting to work on some bit of recipe optimization from the kitchen preparation time and so on and so forth. So there's a lot of groundwork which has already started to happen along with the turnaround priority. And once this is all achieved, that is where we will talk about a significant ramp-up in the new portfolio. I hope that answers your questions.

Yes. Very clear. Maybe just on Biryani by Kilo, just as a follow-up. The current model is largely delivery-only, is it?

See, they do have some dine-in stores, but even from those dine-in stores also, predominantly, it's delivery. So if I were to look at the overall portfolio, 90% plus is delivery, whether you talk about the dine-in stores or the cloud stores.

Next question is from the line of Gaurav Jogani from JM Financial.

Sir, my first question is with regards to the gross margin impact that we are seeing because of the promotional spends. How long do you expect these to sustain? And additionally, given that they will also help to drive the transaction growth, so at an EBITDA level, when do you expect this to start contributing positively?

So Gaurav, we did multiple experiments on online to see how the consumer is reacting so that we are able to kind of -- and as you know, I mean, online, you are able to kind of measure such things much more closely and much more faster manner compared to the offline channel. And that's the reason you see a significant impact in the gross margin as well as the brand contribution. So having kind of done that for a couple of months, our plan is to continue with the same model for another 1 or 2 months, get our learnings and then start to optimize in terms of what is working, what is not working. And therefore, within the next quarter, when I say next quarter means not the current quarter that we are talking about, we will start to see the gross margins improving as well as the same flowing into the brand contribution margin. Because right now, we are in the process of testing multiple things to see what is -- and then the objective is to basically fine-tune after that.

Sure. And I'm assuming that this will be across both the brands, KFC and Pizza Hut, both?

See, the nature and the extent and therefore, the impact is different. But as an initiative, it is both brands.

Sure. And the next question is with regards to this drag from the Sky Gate Hospitality brands on the own brands franchise. If you can quantify how much that have contributed negatively towards the margin this quarter for the own brands?

See, maybe I can quantify it on a onetime basis, but we will not be able to kind of do it on a repeated one because we are going to be presenting the divisional results as own brands because otherwise, let's say, given the multiple brands we have, it will become very, very complicated for everyone. So just to kind of quantify, the negative brand contribution for the first 20 days that we've consolidated is about INR 1.2 crores from the portfolio. So therefore, if you were to look at the own brands portfolio, excluding the Biryani by Kilo portfolio, then the Vaango numbers are virtually flat.

Okay. Okay. And Manish, sir, last question is with regards to the impact that you called out from the GST bit of the rental and some impact of that increase in the aggregator expenses. If you can elaborate that a bit?

If you remember, last year, October, there was this GST ruling change, whereby earlier, for example, there was this whole exemption, which was available for rentals lower than a threshold level, which government kind of brought in as a reverse charge mechanism. And therefore, as far as the corporates are concerned, they are supposed to pay GST on 100% of the rents, wherein earlier, given the lower income levels of the landlords, you would save some bit of GST. So that impact has carried out. And therefore, we -- so since in QSR, as you know, the GST is not allowed to be set off. Therefore, in our case, it kind of hits the bottom line. So that's the impact that I talked about.

Okay. And you said something about the aggregator bid as well, the aggregator cost also increasing?

Because if you see in the current quarter, KFC online sales are higher than earlier quarters. And with the online sales becoming higher because we have these multiple things as an initiative on the online basis, obviously, your aggregator cost also goes up because the aggregator proportion is going up in the overall sales.

[Operator Instructions] Next question is from the line of Sujit Jain from BALIC.

This is to Mr. Jaipuria, and these are not quarter-related questions. You may note them down. A few points. Our categories are urban-centric, so that brings cyclicity. When urban is in a slowdown, we also slow down. We don't have an answer to the entire industry except Jubilant to 20-minute delivery, which has worked for them. For us to even think about something like that, maybe we need to get our store economics right before we start thinking of adding an additional expenditure line. The third thing is that if I look at 9 quarters, 9 to 10 quarters, the SSSG has been negative to flat, whereas the like-to-like for something like Jubilant has been positive. So there is at least one player that has done better than the industry. And the fourth thing is some of the categories that you've entered, which are more -- there's regional variation such as in a biryani. And for example, when I tested a Vaango because of the batter that will change locally from place to place, there's a limited standardization you can do. So how do you address that?

Okay. Let me address a few questions, Sujit, for you, and then Mr. Jaipuria would also come in. And let me start from -- so you talked about Biryani in terms of regional piece. So you're right, there are multiple types of biryani available in the country. If I remember my number right, there are almost 300 types of biryani which are available in this country. But if you were to subsegment the entire market and you were to analyze in terms of what works in the overall category, Hyderabadi biryani is the biggest piece, followed by Lucknowi biryani and followed by Kolkata. So therefore, if you were to look at almost 70% of the market would be top 4 to 5 types of biryanis. So within that, if you look at BBK portfolio, we have Hyderabadi, Lucknowi and Kolkata, which is already there, and that is working well for us. Hyderabadi biryani works on an all-India basis. Lucknowi biryani works virtually on an all-India basis. Kolkata biryani is predominantly in East. So they have already kind of fine-tuned the portfolio on the basis of 3 biryanis. If need be, maybe if we need to add 1 or 2 more, we can do that. But otherwise, we are largely covering what is important from an overall market perspective. Coming to your point on the brands being urban-centric and therefore, what is happening there. See, we -- I mean, if you look at the overall QSR market, I mean, Jubilant is there in 400-plus cities. We are also in about 280 and 290 cities. Similarly, if you look at the penetration of the food aggregators, they are currently in more than 800 cities. So therefore, this whole thing is straddling much beyond what are historically understood as urban centers. And therefore, we are also kind of there. The opportunity lies in the Tier 2 segment because the awareness is there, the aspiration is there, but the income levels are a little bit of an issue. But otherwise, we've started to present ourselves beyond the urban centricity, beyond the urban presence. That's how we managed to cover almost about close to 280 to 290 cities. And again, let's say, when you go there, it is not just about opening a store, you need to have the portfolio, you need to have the right product mix, the right price points, what works in a smaller town from a promotion point of view. So all of that also needs to be worked, which is what we've optimized a few things. We are working on a few things. So therefore, we are geared up beyond the urban India. Obviously, we are far, far away from rural as of now. But let's say, urban itself is still a very, very big opportunity. You talked -- your another question was about delivery. Am I right?

Yes, 20-minute delivery.

So we've experimented, as I said, a few things in the delivery platform, and that's given us good results from a SSSG perspective, both for KFC and Pizza Hut. But obviously, you're right that Jubilant is doing a far, far better job versus what we are doing because their model is kind of -- fits very well with the overall delivery portfolio because it's a delivery-first brand, right? And we have kind of over a period of time, moved from a dine-in-centric brand to a delivery brand. And therefore, we are also moving in that direction. We are also internally strategizing in terms of how do we kind of capture that market quicker and maybe we'll be able to come back to you in the next few quarters so that we are able to cater to the current consumer preferences. And therefore, with that, we will see that our SSSG also will start to fare better. At the same time, on the online basis, we have to work -- on the dine-in basis, we have to work on our menu options and what we offer to the consumers on a unique basis versus what is there in delivery. So that is again something that we are already working on.

Sure. And how to improve the store economics so that you can accommodate more branding expenditure and including more expenditure on this delivery initiatives?

See, we need to continue to optimize the formats for the dine-in channel. And as you know, over the last few years, we've reduced the store format sizes. So KFC, since everybody knows, but let me for the sake of repeating it, KFC, the format used to be 3,000 square feet. We are down to about 1,400 to kind of catch up with the delivery trends and the lower dine-in. Similarly, on Pizza Hut also, we've moved away from a dine-in-first brand to a delivery kind of focused format. So therefore, this needs to be continuously optimized. At the same time, we also need to be cognizant of the fact that there is a category of consumers who prefer and they prefer a good dine-in experience, so which kind of have started to work in -- on a very segmented basis. So therefore, more than the format optimization, we also need to combine formats along with the channels that will give us good results, and that also is a plan that we are currently working on.

And I wanted to hear Mr. Jaipuria...

Sorry to interrupt Mr. Jain, may we please request you to rejoin the queue.

This is not a question. I wanted to hear Mr. Jaipuria, how he wants to take this company under pole position.

See, I think it's better Manish is on the ground level with this. So that's why I've asked Manish to say it. I am not totally at the ground level, so I didn't want to answer your question, and that's why I've kept quiet. But I will understand a bit more from him and then get back to you. I don't want to give you an answer, which is I'm not fully prepared for.

[Operator Instructions] Next question is from the line of Niharika Kamani from CapGrow Capital.

So I have a couple of questions. First question is more towards the QSR sector. So do you think QSR sector has kind of bottomed out? Or is it also facing threats from the likes of, say, cloud kitchen or consumers ordering more from the likes of Swiggy, Zomato? Is this more of a structural change? Or is it related to QSR slowdown? And second is, when do we see SSSG getting ramped up? Like is it a matter of a couple of more quarters? Or will the turnaround take some more time?

Niharika, see, to your first question in terms of what is happening with the QSR sector and where is it headed? In our view, there is nothing wrong with the QSR sector. If at all, we still believe that this is one of the highest opportunity industries which are available. Now when you talk about, let's say, just the listed QSR space, obviously, it is different. But I'm talking about QSR as an industry, so which means that will include aggregators, that will include local competition, that will include all the new players who are coming in. So all of that constitutes and they are predominantly playing in the QSR space. So there are multiple start-ups, which have experimented traditional foods. They've converted that into QSR, and therefore, they are kind of jumping in. So therefore, that is all about the QSR industry. But coming to the listed players, if you look at where the recent issues are -- and I will combine your question along with the SSSG. We've expanded very, very aggressively over the last 4 to 5 years. If you look at, let's say, Devyani numbers, what they were around the time we listed to where we are now, we are multifold in terms of the top line. Similarly, if you look at, let's say, the competition also, everybody has grown. Now that densification has come at the cost of SSSG. But if the overall industry has to grow, we have to make sure that we are densified because if you look at, say, -- so take U.S. as a market. In the U.S., QSR industry is bigger than the FMCG industry because of the food habits, because of the multiple choices available, because of the densification and so on and so forth. So therefore, in our view, there's a significant opportunity in the QSR space. The densification is required. Once the consumption starts to pick up, we will see the SSSGs also coming back. It is also a combination of how aggressively we are opening and adding new stores. And I've said in my comments that you will see a very limited Pizza Hut organic expansion. And therefore, we are hopeful that with that little bit of slowdown, we should see positive SSSGs. On KFC, if you look at the current quarter performance, we are virtually -- we have neutralized the losses which were there for the last many quarters because we've played out some online strategies. So therefore, we are working on these things, and you will start to see a positive SSSGs over the next few quarters.

Okay. Got it. Just one follow-up here. So what are your views on cloud kitchen? Will it be a threat? Or is it just complementary to listed players?

See, it is complementary because today, for example, if you look at the consumer convenience, they prefer to consume food at home given urbanization, traffic jams and so on and so forth. So we have to ensure that how do we become a very meaningful player as far as the cloud kitchen or, let's say, online food strategy is concerned because it's important that we are able to satisfy the consumer demand. And as Sujit mentioned, for example, Domino's has kind of worked very beautifully on this whole 20 minutes delivery time, and they are seeing good results. We are also working on a similar strategy because if, let's say, 50% of the industry is getting consumed at home, then obviously, you need to make sure that you have a proper location strategy, you have to have a cloud strategy so that you are able to serve the consumer demand through the aggregators. So all of those pieces are work-in-progress, and we are already working on those.

Next question is from the line of Jignanshu Gor from Bernstein.

Manish, am I audible?

Yes, you are, Jignanshu.

Okay. Great. Manish, just one question. I think a lot of it has been discussed already. On KFC and Pizza Hut, I hear the argument and the logic behind the marketing investments or the promotional investments to bring transaction growth. Would you be -- sir, 2 parts to this question. A, for the current quarter in the Y-o-Y or sequential improvement in SSSG that we have seen, would you be able to share what kind of transaction growth have you seen in both these brands? And the extension is, do you have a particular ADS number in mind at which you will sort of start to taper these specific investments in growing transactions, if at all?

Okay. So obviously, we don't disclose the transaction numbers, but we've seen almost 10% plus improvement on the transactions overall with the initiatives that we've taken. If you look at only the online strategy, which is where this whole initiative was focused on, we've seen a much higher transaction growth. So therefore, this was one, as I said, to test. Second is to kind of spur the consumer momentum a little bit. And within this, now we will select in terms of what to do and how aggressively to do that. On the ADS side, our normalized KFC target is about INR 100,000 of ADS on a consistent basis for the full year. And that is what we want to kind of aim at on an immediate basis. And once that is there, obviously, we will start to rationalize. So they both kind of work together from that point of view.

Okay. Great. Just a clarification. These promotions or campaigns were done across all stores/cities? Or was it selected clusters for KFC and Pizza Hut?

Jignanshu, there was a differentiated strategy for online and offline. Where we've seen a huge momentum is the online strategy. So obviously, the stores -- so those promotions and schemes were not run at the dine-in stores. Dine-in had different sets of promotions. So that's how it has been. But obviously, as you know, the entire servicing is from the stores only.

Correct. Correct. But it was across geographies, right? It wasn't like focused only on metros or on Tier 2 and so on?

No, across geographies, you're right.

Next question is from the line of Saurabh Kundan from Goldman Sachs.

My question is also regarding these promotions. Just wanted to understand them a little better, Manish. What is the nature of these spends that you're doing, especially on online? Is it something paid to aggregators for better visibility? Or are these some menu level strategic pricing or combos that you've done based on insights that are leading to better revenue growth?

Saurabh, if you look at, there are multiple ways to kind of handle the entire online piece. One is this whole banner advertising and so on and so forth, which in any case, we've been doing in the past, and we've continued with that because that comes out of the overall advertising revenue. And when we talk about online, it predominantly goes into the aggregators apart from the other targeted digital media. In terms of the last spend, that has been mainly consumer-focused in the shape of participating in some flash sales. It could be a new combo. It could be a little bit of a different structure and therefore, a higher discount and so on and so forth. So there will be multiple combinations which we've tried.

Right, right. So some of those spends are for visibility. And my only question was...

So visibility has been more or less in line with whatever we've done in the past. It has been targeted at consumers directly.

Okay. All right. The second and last question is at this point, do you have any color on -- because you said multiple types of initiatives are going in. Any color on what type of initiatives are working and which ones will you pull back, which ones will you continue? That's it.

See, obviously, I will not be able to share each promotion detail on a call like this. But obviously, we've seen what the result has been. So because as I said, I mean, I cannot give you entire rundown of all the promotions.

Understood, sir, I just meant that -- is it something like value that's working? Or is it, I don't know, some combos, any pattern to the initiatives that are working?

See, the value always works for the Indian consumer, right? That's normal, you pick up any category, any industry, you give value to the consumer, there'll be queues.. So therefore...

Next question is from the line of Percy Panthaki from IIFL Securities.

Manish, I was just looking at the dine-in numbers for KFC. So you've given the total sales and you've given the dine-in percentage, so you can calculate that. And I see that the dine-in sales in rupee-crore terms has declined 14% Y-o-Y. This is in spite of whatever store additions we have. So on a per store basis, it's probably declined in the high-teens. So just wanted to understand this, like while we are seeing a growth in the online format, is it just a customer shifting the channel from online to offline? And if so, it's really not very good, right? Because we have had negative SSG for the last 2, 3 years, which means that the capacity utilization in the store is anyways low. And if we get higher capacity utilization in store, the flow-through from gross margin to EBITDA is going to be huge. So we should focus on that rather than diverting the customer away from the dine-in towards delivery by launching these schemes and all that.

So Percy, what you're saying is right because if you see quarter 1 of FY '25, the ADS was INR 104,000. And now it is INR 98,000 with a much higher share of delivery. So therefore, I mean, what you're saying is right because, as I said, we've taken some specific initiatives for online. And obviously, when we focused more on online, there are some consumers who got shifted because they were able to get the value proposition sitting at home because we wanted to -- if you see the last few quarters, we've been kind of protecting our margins, not participating, whereas the competing businesses have been doing that and the margins were eroding. So therefore, we also wanted to kind of test. So we've seen better transaction growth. We've seen better SSSGs and so on and so forth. As Mr. Jaipuria also said in his address, and I also mentioned that we need to have a very, very differentiated strategy now for online and for dine-in, which is what we are working on so that we are able to differentiate the consumers. But with our learnings, obviously, we will now be balancing out in terms of what is happening in the online and dine-in to ensure that the consumers are not getting shifted.

So this Epic Savers, 9 pieces for INR 299, which is for dine-in, was that run only towards the end of the quarter? Or was it running for the entire quarter?

It was somewhere in the middle of the quarter, and it was only a dine-in. This offer was not available on an online basis.

Yes, which is why my question that if it is available only for dine-in and despite that, the dine-in salience has fallen and the absolute sales per store has fallen. So does it mean that this offer is not really having the kind of impact that we hoped for? Or is it that just it was for a very small part of the quarter and therefore, the impact is not visible?

See, on this one, for example, let's say, whenever we experiment with new offers, we set some kind of targets for ourselves that this should be the menu mix. And therefore, from that perspective, Epic has kind of exceeded that menu mix. But at the same time, the offers which were available on online were much more compelling than this value proposition from a consumer point of view. And therefore, we've seen the online momentum much more than the offline. So that's the reason I said that once we now try and balance out things, you will see a better one coming in.

Understood. Understood. So for bringing the dine-in growth back, do you think the Epic Saver -- just continuing the Epic Saver is going to be enough or some more intervention will be required?

So this will obviously continue. Obviously, we are also planning on some more promotions, which are only dine-in focused. We are also looking at some more value offers there. So therefore, that's the overall strategy that I talked about.

Understood. Just one more question from me, again, possibly on KFC only. So we have seen almost 2 to 3 years of bad top line and demand scenario. Now generally, there is one thought that -- or one school of thought which says that when we are having this kind of a backdrop, then the recovery can be equally sort of steep. So it can -- rather than just go into a low-single or mid-single digit, we can have 1 year, 1.5 years of double-digit kind of SSSG just because we've had a poor performance in the past. So do you think that the averaging just works out on its own? Or I mean, there is something very specific, which would be needed for the double-digit growth to happen or just a normal consumer recovery will help that double-digit SSSG happen?

See, we've seen these kind of consumer behaviors in multiple cycles in the past, right? Whenever it's weak and then suddenly it kind of spikes up, we've seen that in the other industries also. Now overall, it's a play of whether the consumption is strong or not. So if the consumption is kind of strong, obviously, it comes back even more strongly. And given this phenomenon also probably is bottoming out, it could be some good times, let's hope so. So we can discuss this more on an offline basis. But we are also equally hopeful as you are.

Ladies and gentlemen, we will take this as the last question for the day. I would now like to hand the conference over to the management for the closing comments.

Thank you very much. We hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about our company, please feel free to contact our Investor Relations team. Thank you once again for your interest and support and for taking the time out to join us on this call. Thank you very much.

Thank you, sir. Ladies and gentlemen, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.