Sapphire Foods India Limited ($SAPPHIRE)

Ladies and gentlemen, good day, and welcome to the Safa Q4 FY '26 Earnings Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinion and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]. I now hand the conference over to Mr. Sanjay Purohit from Sapphire Foods. Thank you, and over to you, sir.

Good afternoon, everybody. Welcome to the quarter 4 and full year '25/'26 business performance highlights. I'm joined by my colleague and fellow Board member, Vijay Jain, who is our Executive Director and CFO. Both of us will take you through the presentation. Quarter 4 FY '26 has been our best quarter in the last 12 quarters in terms of both SSSG and adjusted EBITDA growth. This has come on the back of a strong new consumer recruitment performance by KFC as well as strong performance in Sri Lanka also. And you will all know this is despite the LPG-related availability that we have faced both in India and Sri Lanka and some inflationary challenges. I think this uplift in performance is really encouraging as we move into the new fiscal. We delivered a revenue of INR 7.9 billion with 11% growth Y-o-Y in the quarter, revenue for KFC grew by 15%, which is the highest in the last 8 quarters and Vida had India revenue declined by 6%. Sri Lanka grew in revenue by 15% in LK. In the quarter, we added 19 KFC restaurants, 2 Pizza Huts in India and 3 Pizza Huts in Sri Lanka. Our total restaurant count was 1,052 as of 31st March '26. Consolidated restaurant EBITDA grew 21% year-on-year and margin of 13%, up 100 basis points. Adjusted EBITDA was INR 61 crores, INR 610 million, grew 20% year-on-year, and consolidated adjusted EBITDA was 7.7%. Consolidated EBITDA post [indiscernible] was INR 125 crores, up 15.8%, and this grew 10% year year-on-year, it's actually down 20 basis points. Consolidated adjusted EBIT before exception was INR 8 crores, 1.1%. And -- PBT, before exception was negative INR 2.7 crores or minus 0.3%. Consol PBT with exceptional items was negative INR 15.5 crores or minus 2% and these exceptional items include the impact of INR 6.2 crores on account of labor code changes and INR 6.6 crores towards merger-related costs, really the ESO modification for employee-retention. Let's [indiscernible] the full year numbers. Full year numbers, we delivered 8% revenue growth. So clearly, the quarter at 11% was better than the full year number. Adjusted EBITDA declined 9% -- by 9% at 7.6%, 150 basis points down. KFC grew by 11% with a restaurant EBITDA of 16.3%, down 100 basis points. We opened 73 KFC restaurants during the year, 575 total restaurants. Pizza Hut revenue for the year declined by 7%, revenue of INR 507 crores with a reported EBITDA of minus 3.3%, 570 basis points below last year. We opened 7 restaurants during the year, a total of 341 restaurants Srilanka business grew 60% in LTR terms, with restaurant EBITDA of 14.9%, down 50 basis points. We opened 9 restaurants during the year. 136 is our total count in Pizza Hut. The KFC performance has been driven by the two-pronged consumer recruitment strategy. Plus with the merger announcement with Aviani International, we think that this will enable a unified brand strategy on both the brand and this future proves the growth in the coming years. I'm going to go straight to KFC on Page #19. As I said, KFC SSSG grew at 4%. 6% without the impact of Navrati. Navratri last year, 2 days were in March and 7 days were in April. This year entire Naratiwas in March. So underlying growth was 6%. And the 6% is highest in 14 quarters. So it really bodes well. And there's a clear 2-prong consumer recruitment strategy for the for the more evolving markets where chicken consumption is slightly lower than the more developed in consuming markets. our recruitment strategy of advertising plus an entry-level burger meal is working really well. This is being promoted only in our dine-in takeaway channel, and it is has been -- it is really driving SSSG. And then in more developed markets, we have got disruptive value at the -- at a higher price point. So we ran a BOGO 4 pieces of hot and crispy for free and 8 pieces of hot and crispy for free on quite incredibly, this is also driving new consumer recruitment in some way. This is only in select markets on 1 day in the month. only on [indiscernible] it. From an innovation perspective, we have had 2 big innovations. Typically, we run 3 to 4 innovations in a year. We have up to innovation intensively done many of you would have tried, which is a global [indiscernible] where sauces are not added over the chicken, but the Atanas of chicken is dumped into a pot of the sauce. I mean this absolutely fantastic. And then we launched the KFC Shawarma innovation, which has also done really well. I'm moving to the digital agenda. Our digital kiosks now have been implemented in 73% of restaurants. And clearly, there's a APC upside that we get from the kiosks compared to what we get at the counter. You can see some of the new stores that we have opened to [indiscernible] Mall in Delhi, in Gujrat, [indiscernible] Tamilnadu and Mumbai. And quickly Vijay will handle the numbers, the financial numbers.

On Slide 25, channel-wise sales mix. After a few quarters of declining trend in dining and takeaway channel [indiscernible] we are seeing a really healthy performance on that front. The dining and takeaway mix for the quarter remained stable at 57% same as last year. This was on account of improved performance we have seen in those channels, backed by the value things which Sanjay spoke about, which is easily available in dining and takeaway only. From CG point of view, 4% SSSG, 6% in [indiscernible]. And overall revenue grew by 15% with addition of 19 stores in the quarter. Gross margin improved by 70 bps over last year. and remains similar to previous quarter, quarter 3. This, along with the operating leverage, which we generated out of positive SSSG. It meant that we improved our restaurant EBITDA by 110 basis points, which came in at 16.8%. Slide #28 gives the full year in 5 quarters. And while the annual restaurant margin dropped by 10 bps the last 2 quarters, quarter 3 and quarter 4 saw an improvement in margin, which was generated on back of positive SSSG and August really well as we move into the new fiscal view.

Let me take the Pizza Hut business performance. It continues to be challenging. However, our strategy of Diamond forward omnichannel with emphasis on great food and great dine-in experience, it continues to deliver double-digit SSSG and EBITDA delta in Tamil Nadu, the only exclusive Sapphire market versus the rest of the country. So we believe very strongly that this is the pay book for the future. For our #2 brand, we've got to invest behind invest behind advertising, creating top of mind and consideration amongst consumers, and that there is a big market share play that is possible. Jain the financial numbers, please.

Slide #34, generalized sales mix, dining and takeaway mix for the brand came at 49% and delivery at 51%. This largely end stable quarter-on-quarter and over last year as well. From our SSSG perspective, minus 7% and overall revenue declined by 6% for the brand. Gross margin improved by 40 basis points over last year. However, restaurant EBITDA decline came in at 6% on account of operating deleverage. Slide #37, there's a 4-year and 5-quarter performance. It can be seen that the overall performance for the brand continues to remain a challenge. However, as mentioned by Sanjay, Tamil Nadu delivered double-digit delta on both SSSG and investment EBITDA performance, and we [indiscernible] the playbook for the future.

Our Sri Lanka performance was very healthy. We delivered our sixth consecutive quarter of double-digit SSSG along with healthy transaction growth. We opened 9 restaurants during the financial year. This has been the highest in the next -- over the last 3 years. And this really shows that Srilanka is a highly promising market for CA. We should be able to continue this restaurant pace of expansion going forward in the next 2, 3 years.

Slide 41, channel wise sales mix, again, Sri Lanka as well, our dining and takeaway, which remains stable and healthy at 62%. From a [indiscernible] perspective, 11% for the quarter, which was -- from a revenue perspective, 15% in LTR and 16% in INR terms. While gross margin improved by 290 basis points, which was a combination of risk reduction in discount as well as increase in price. We had a margin which came at 14.6%, down by 20 basis points, and the entire benefit of the operating leverage because of the FSS did not flow through the bottom line on account of high minimum wages being experienced in a particular country, and there were 2 increases last year. Slide #45 gives full year in 5 quarters as can be seen the business continue to deliver healthy performance and we continue to retain and consolidate our novel [indiscernible] acquisition in [indiscernible].

Our business performance in terms of numbers comes on the back of certain foundational work that we do. Last time, I said that we have been ranked the #1 QSR in the country and the #3 QSR in the world on PSG metrics as per Dow Jones Sustainability Index. This is a matter of great pride for us and the 2 areas where we perform outstandingly well are in the social and governance areas. And indeed, when we look at our social scores, there's another valuation of the unique culture that we have at Sapphire.We've been recognized by Gallup as an exceptional workplace in the world, this is among the -- about 70 companies around the world who have been who have been recognized in this manner. To be -- to qualify for this also there is a need to be among the top quartile of all companies globally on employee engagement scores for 4 to 5 years in a row. Only then does Gallup invite you to take part in this. And we took part and we were recognized as a Gallup exceptional workplace only in QSR organizations and recognized in the country, only 4 Indian organizations recognized globally. So with this, we conclude our numbers and our business performance highlights. Again, the quarter performance, especially on KFC as well as on Sri Lanka bodes well as we get into the new fiscal. April also is trending similarly and that gives us confidence for the new fiscal I want to reiterate here, the KFC performance is work that has been done to improve new consumer recruitment and you would have heard me speak about this several times over the last quarters. It has taken us time to find the right marketing mix to deliver on this intent, but we think we've got it now, and that's very happen. Over to you all -- over to you for questions.

[Operator Instructions] The first question is from the line of Saurabh Kundan from Goldman Sachs.

I wanted to ask you, is the [indiscernible] value initiate in KFC now rolled out across our network, especially the North and West, where you have the INR 99 [indiscernible]

So we started it sort of in about 150-odd stores in the month of November, December, then rolled it out to perhaps 200 stores in January. February, March. And as of April, all our stores, except our Tamil Nadu stores are running this new consumer recruitment offer. So it's not a promotion. I want to underline that it's not a promotion. This is a permanent -- is a permanent value layer that we are building.

Coming towards North and West and south, we are implementing a different strategy.

Understood, understood. And what's the same-store transaction growth that you are seeing? And if you could remind us what the trend has been last, let's say, 4 quarters?

So we have not given out the number, but the asset has been closer to the SSSG performance in the previous quarter. It follows a similar trend line. It's closer to our SSG performance.

All right. All right. Last question from me. You [indiscernible] marketing in KFC. Could you give us an idea the margin that you see in KFC, the restaurant margin, how much has the marketing and ad spend gone up as a percentage of what was it earlier? And what -- was it earlier and was it now. Earlier as an [indiscernible].

So while I'm not aware giving the exact number anywhere between 75 to 80 to 100 additional marketing trends we have put behind the brand. And we have too.

The regular amount which we end up spending as per the contract, which is over and above the regular amount.

And this will continue to on, I mean becomes a permanent [indiscernible]

Permanent or not. Because right now, the focus in getting -- focus is on getting the transactions and getting the SSSG. So market investment or the gross margin investment right now becomes a bit secondary in terms of the focus. As long as we are able to get a positive stand transaction, thereby finally create an accretive bottom line, I think that's the focus area.

Got it. Can I just ask one more question on gross margin. So in our previous quarters, you were not fully rolled out. This quarter, you have [indiscernible] rolled out. You make your gross margin is similar to the previous price quarter. Is it right [indiscernible] in 1 year or...

So the primary reason is that this particular offer has been also supported by our vendor partners as well. As a result, we've been able to hold on to the gross margin. That's the reason. Having said that, if I look at into the future and if the vendor partner support goes away, we expect the gross margin impact of anywhere on the gross margin investment of anywhere between 50 to 70 basis points. That's our estimate.

The next question is from the line of Tejash Shah from Avendus Park Institutional Equities.

So the last quarter had 2 distinct trades in terms of operating environment, Jan-Feb at one end and March was very volatile, especially on operational time. But despite that numbers came out very well compared to what the quarter was painted operationally. So just wanted to know, Jan-Feb a very good momentum, which got -- I'm assuming it got disrupted in March? Or is that -- was it uniform throughout?

Yes. So March was also good. I would say, while there was a disruption on LPT and indeed, there's significant inflation that has happened on we were still able to manage to keep our stores aligned. Now that when I say the manage, it's a day-to-day activity, so our teams on the ground just do an incredible amount of work. So we have not -- store closures have been restricted significantly in wherever we have still been able -- in some cases, we've still been able to operate with a [indiscernible].

And sir, how is the current operating environment?

Just to add to that. So KFC had 0 closures, okay? So while availability was a challenge. I think we've been able to manage the situation quite well. So there was a 0 closure on KFC, and there continues to be closure few stores would have been impacted by truncated menu [indiscernible] have been impacted by transit timings, but those are a handful of the stores. Hence, March went very well from that perspective. In Pizza Hut, we had closures, which I would say for 10 days, 15 days, but the number of stores would be less than 5% of the overall overall brand for Pizza Hut. So the bigger challenge right now is the LPG price where the impact could be anywhere between 25% to 40% increase in terms of the cost, which could impact the EBITDA by 30 to 50 basis point. But as long as we're able to keep the store open, I think that 30 to 50 basis points impact right now in relative theory, it's not so material.

And sir, there are consensus expectation on energy price increase coming quarters or some months. So any price hike that we have planned or already rolled out? And in general, if inflation picks up, what will be our strategy because inflation is coming after a long time.

So currently for KFC, the price hike has happened in the range of 1-odd percent. And in March, also a small amount of price hike happen. If I add up both the price hikes, it's in the range of 1.5% to 2% price hike for KFC. Similar price hike has been taking place for Pizza Hut or has taken place for Pizza Hut as well in the month of April, around about 2%. We don't see any further price in the immediate future, unless we see the situation at the ground going dramatically outwards whether raw material prices or for that [indiscernible] specifically oil prices go out of the WAC. Unless that happens, we don't see any [indiscernible] price hike happening in the near future.

Perfect. And just one clarification on the reply to previous participant question, you said that despite the broader rollout of the value offering, the margins did not come under pressure because it was supported by vendor partners. But I thought it was largely for dine-in, right?

Dining, takeaway. And when I say vendor partners, the raw material supplier, the supply of the chicken clients and the beverage partners.

[indiscernible]

So they cross subsidize, is it?

Yes.

Yes. Because they get volume.

Substantial volumes.

The next question is from the line of Gaurav Jogani from JM Financial.

[indiscernible] question with regards to KFC again, and specific to margins. Would it be prudent to say that [indiscernible] in terms of the new strategy and you have managed the cost as the margins now have bottomed down and you can see the recovery in margins going ahead?

Sorry, if you can -- the margins of what? Come again.

Have they bottomed out -- in margins might bottom out? And can we only see recovery margin going ahead despite the raw material and et cetera.

Yes. So as long as we're able to hold on to the SSSG, we feel confident that we should be able to hold or improve the margins. So the SSSG is key, and that's what we've been saying for the last 2 years. So the drop of margin has been a direct of lack of SSSG for last 2 years. So yes, the quarter 3 and quarter 4 the moment we hit the Sit has helped us improve the margins.

So there are 2 margins. One, gross margin and restaurant EBITDA, he was -- jain was mentioning, restaurant EBITDA [indiscernible]

[indiscernible] restaurant EBITDA, right? That was [indiscernible]

Yes.

Just further on this. Given that now we have a very low base to hit and also the strategy started to work for [indiscernible] so how is confident of -- how confident are you of achieving mid-single kind [indiscernible] of being KFC over the next couple of years?

So I don't think the confidence comes from the low base. If that was the case, I think the last 3 years, we will see struggling, right? Every year, we think the base has gone low. And yet, it was now 3 years for us to get a 4% asset. So the confidence does not come from the low base. It comes from the strategy, which is right now working at the ground which has been now in operation for last 4 months or so. We have been cautious of expanding from 150 stores to 220 now to 400-plus stores. So I think that the traction at the ground gives us the confidence and the way April has also gone so far gives us the comfort that we should be able to deliver as nimble as SSSG as we move forward.

Sir, that is what I meant actually. What I was trying to ask you is that what was really was in changing that traction? Is it your strategy that is working? Is it the consumers are coming back. Are you seeing a shift in the consumer sentiment that is helping what is actually leading to this recovery.

It's a combination of 2 things. Certainly, we believe the consumer environment from a demand perspective is certainly improved in quarter 4, and this is what we alluded to when we had a quarter 3 con call as well. But that backed by our specific strategy in terms of driving consumer recruitment, the twofold state which is INR 99 per mill for driving customers recruitment in North and West, which is the more or less than [indiscernible] less involved marketers of committing pattern and then another which is abundant and disruptive value. I think which has clicked and it has not been easy to over the last 1.5 years, we did several experiments, several pilots. We did that [indiscernible] campaign as well. We run it for the first 9 months. So it has been a mix good part is that we are finally able to arrive at something which is clicked with the customers resonate with when we are able to see traction. So that gives us the confidence.

And just 1 last question on the Sri Lanka. Sri Lanka also faced challenges in terms of LP and the intensity of the issues there were a bit higher versus India. So how do you see Q1 so far pension out file specifically the margin program?

So it's a tough situation from being able to manage both fuel for our transport vehicles as well as LPG. The quarter has started okay, has started well only, but we've got to see how it avert a couple of weeks. So this at situation is ever evolving situation. It's very difficult to say how the quarter looks like taking that particular parameter into consideration. So that's evolving in India as well as evolving in Sri Lanka as well.

So it was the question more in context of are the consumers also filling up plans? And have they cut down on their discretionary spend in any way, which then could have a ripple effect on the demand?

But from that perspective, I think the plan reasonably okay. Of course, we have been delivering double-digit SSG for last 2 years. So it's a really high base. So coming out of that kind of a base. But yet, we continue to deliver positive SSSG in April.

The next question is from the line of Devanshu Bansal from Emkay Global.

Sir, firstly, I wanted to understand this [indiscernible]. So when you say tense continued, you mean the overall quarter SSSG trends or the comparable S&P trend? So maybe if you could help me better understand that comment?

Sorry, can you say -- you're asking SSSG trend. What's it mean?

For April.

For the quarter, we delivered 4% ex [indiscernible], 6%. So that kind of momentum we are seeing in as well from an SSSG point of view.

Okay. But Vijay loss that happened, which was preponed to Q4, that should have an fit you, right? So in [indiscernible]

So I'm calling out the another like-for-like scenario. So just like 4 become 6. So I'm comparing on both sides and comparing the underlying number ex [indiscernible] benefit, or external are impact, whichever the quarter you're looking at. So I'm stripping that off.

Okay. Okay. So underlying consumption, if we say for Q4 was 6%, then in Q1 also that similar trend is sort of shaping up right like-for-like [indiscernible]

Similar [indiscernible]

Okay. Vijay, two sort of clarification from balance sheet. So I noticed that in financial assets, both current and non current if we combine them, there is some INR 100 crore increase, right? So what can this be attributed to?

So right now, that balance sheet, which we are facing is post IndAS 116 impact, right? So there are a lot of other impacts in terms of how these accounting consider the picture, however, [indiscernible] comes into the picture, the timer of the agreement. So right way to look after shipping of that particular impact. And maybe in that case, we can take this question offline. You can connect with this lately.

Okay. Sure. And from a CapEx perspective, also, there is about INR 320 crores of CapEx that we have done, and we have opened about 90-or-so, so how should we see this because it seems to be at that higher right?

So the CapEx has 3 components, which are not given companies only, of course, the new store in it also has a component the referred CapEx, which every 5 years and 10 of the store needs to be [indiscernible] as per the agreement. There's also a renewal fee, which comes into the picture now a part of the initial. So renewal fee because now we fire, we have completed 10 years. So there's a renewal fee component which kicks in every year. So it's not just the CapEx on the stores. These are the several components which tie to the overall CapEx. When I look at the coming year, we see a similar number of CapEx, similar number in terms of the CapEx spend for FY '27 as well.

Okay. Possible to break them into these 3 buckets, broad numbers.

[indiscernible] could help from initially or renewal fee, we are not allowed to share that the [indiscernible] to be there. If you're trying to do a modeling, we have always called out what the kind of a KFC number looks like per store, right? So KFC number looks like anywhere between INR 2.1 crores to INR 2.0 crores post. So that's pure CapEx [indiscernible] initial fee or renewal fee as a part of it. The Pizza Hut, we have always called out it first to CapEx is like 1.35 to 1.4 [indiscernible] per store. So that's the number you can look at from a modeling perspective.

[indiscernible], but that number [indiscernible]. So there is the additional INR 140 crores of CapEx that has been down. So that was the [indiscernible]

So also what we do -- what gets probably missed out in this is, let's say, the store closures in Pizza Hut, while store opening for the calendar year '25 or there were close to 15 to 20 stores, which we shut down and we opened something else. So that's another angle which gets record in the overall CapEx when you are looking at the overall number. But yes, largely, we saw the components.

Next question is from the line of Avi Mehta from Macquarie.

Two questions. First, this April SSSG of almost about 6%. Is a very stark contrast with what other discretionary peers are at least suggesting that there's a cautious consumer sentiment post the Iran contract. Now 1 I just wanted to kind of get your thoughts on where the strength is more due to what we have done? Would it be right? Or is it also seen -- is it because the industry is going up? So any thoughts or any -- if you could give some thoughts over here, please.

Just to correct, you said April SSSG of 6% by [indiscernible] never quarter we just 6%.

Yes. Sorry, sir [indiscernible] before San purchasing. SP-13

[indiscernible]

I wanted to understand what are other people saying because we don't have access to that. So you're using to have better access. So at this moment, from our perspective, I mean, if I look at the change that has happened from, say, quarter 3 to quarter 4 and April, something that we are doing store working undoubtedly. We are [indiscernible]. Let's see as to how this pans out.

So Sanjay, where I was coming from is if I were to look at other apparel retailers, not exactly comparable, but they have kind of stated that there is some sign of a caution in the consumer sentiment. And hence, I was -- because you have at least -- I was just trying to kind of read maybe from a food industry perspective, whether there is moderation has been seen by other peers, which you have bucked the trend and that is where the context. So the impact from your initiatives is actually very strong. But any sense over there if you could give.

So we believe that it is work that we have done. But we are the first to go off the block in terms of announcing full year quarter results. So we'll wait for all other results before making a definitive statement there.

Okay, sir. So then in that instance, the other bit that I wanted to kind of understand is more from a structural thing. While it's encouraging to see KFC deliver 15% growth, when I contrast it like aggregators, [indiscernible] just kind of reported today as well. They saw almost 19% NAV growth. So I wanted to get your thoughts on this on how do you see your -- this gap in growth next being over time?

So I guess if we have to have not seen the [indiscernible] have not in the internal numbers. But 1 of the things that we've just got to do check here is how much is coming in from both advertising renews and improved take rates. So I'm not making any judgment on either front. But without seeing this, it's difficult to comment. If we look at our own business, with the aggregator business in time more or less with with our overall SSSG number.

Having said that, what's different this quarter has been the performance of the dining and takeaway. The delta, which is to exist between the dining and takeaway visas delivery that is certainly reduced by a big margin. And also, over the last 1, 1.5 years or 2 years for that matter, our own channel -- own delivery channel, our own app performance has continuously exceeded the delivery partners in terms of the excitation growth. And that's by quite a bit of margin in terms of the performance of our own delivery and vis-a-vis aggregates.

Would it be to read this comment as, over time, the way it would foresee is our [indiscernible] as a brand could kind of at least equal or become ahead of aggregate industry growth. Is that something that you see panning out?

Very difficult to comment, but it looks very, very long run, eventually, the brand and the aggregator growth it has to fall in the same line, right? As long as there's kind of arbitrage which is available. So for today, also in India, the delivery one comes at a price, which is slightly lower, and we are seeing more developed markets, the total paid of time, the cost of delivery eventually goes up. And then the the arbitrage available to a few of the customers who look at it from a timing versus a delivery channel, this goes away. So in the very [indiscernible] we expect the mix to stabilize. But now when will that happen, it's very difficult to come.

The next question is from the line of Rehan Saiyyed from Trinetra Asset Managers.

Sir, I want but understanding regarding your [indiscernible]. So besides macro volatility, [indiscernible] has delivered [indiscernible] sales stores growth. So how much of this [indiscernible] recovery [indiscernible] nomination and also. Do you see any opportunity to enter product [indiscernible] in India?

So yes, the country has gone through multiple macro or geopolitical situation impact starting from a few years ago. where the economy went down dramatically, pad that there was a power impact now this is the political situation, yes. So something other has been going on. I think the the strength of the brand and the organization structure, which we have in the ground that has helped us tie over the situation. And also, I think the belief in the value strategy. One of the very strong things which we have done over the last 2 years in Sri Lanka also. But we have not taken price increase in line with the inflation that country had seen a year or 2 years ago, the country saw a combined inflation of almost 90%, 95% over a 18 months. And at that time, also, our price increase was restrict to 50-odd percent. So a huge focus on making sure that we make our products more affordable in terms of value that has [indiscernible] really good hand in helping us drive this double-digit SSSG. This, of course, backed along with the innovations which we have done over the years. [indiscernible] so while [indiscernible] started off well in India and then it's lost momentum because of the lack of the marketing budget. But in Sri Lanka, we continue to back it for a very long time. So those kind of innovations have also helped us deliver a double-digit SSSG. From a store opening point of view, I think we have opened 9 stores this year, which is the highest in the last 3 financial years. I think from we are in terms of the the margin, the SSSG, the overall business condition, we should be able to accelerate store expansion as well as Sumanta, which would be anywhere between, let's say, a high single digit or low early double digits as well. So that's possible for the next 2 to 3 years.

The next question is from the line of Bharat Kanan from MC Research.

Sir, you mentioned that in quarter 4, the NPG when the KFC was at 0 closure and [indiscernible].

Sorry to interrupt, Bharat, can you please use your handset?

Is it better now?

Yes.

Sir, my question that you have given comments on the LPG shortage leading to about 0 closure in KFC and approximately 5% stores in Pizza Hut that was for quarter 4. So sir, just wanted to check on the current status. I mean, what you are seeing on ground? Is the situation same as quarter 4? Or has it worsened? Or has it improved? So just wanted your comments on that?

So while you're saying quarter 4, I'm just clarifying that it's the situation was March. So Jan-Feb felt comfortable. March was also while availability was lesser of [indiscernible] inflationary energy prices or the gas prices were more of a concern. The April remains the same. So we haven't seen any KFC closure in April as well. And in fact, in case of pizza, the closures, which was less than 5% in March, it has come down now less than 3% in the case of KFC -- in case of Pizza Hut, and KFC continues to be 0 closer.

Okay. So it is -- so this commentary that was therefore that was specifically for March and you're saying that in April, distribution has improved basically?

The situation has remained same for KFC because it was 0 and slightly [indiscernible]

Slightly move up.

The next question is from the line of K [indiscernible] from IIFL Capital.

This is Percy here. So my question was you mentioned earlier that over the last 4, 5 months, you have done a lot of work, and that is giving you rewards in terms of improved sales performance. And 1 of the things you mentioned is that you have a sort of very strong focus on value. So apart from the Boko recruitment tool. Can you elaborate what exactly you mean when you say you have a strong focus on value. Does it mean that you have launched more products at entry price points? Or does it mean that you have increased the intensity of promotion and thereby delivered more value? Or does it mean something else? And a related question to that is that if you have given more value to the consumers, what is the -- why you would have, of course, gotten more transactions -- what is the impact on the very value because of this initiative?

Yes. So per se, in the past, we have run INR 99 product offers. And they're not worked as well. Remember, we had a snackers range at INR 99 and so on and so forth. So I think what is working here is -- I don't know whether you've seen the advertising that we have run along with the INR 99 along with the 99 products, that advertising is really addressed directly at aware non-users and it encourages them to come to KFC and see the kind of range because that is the consumer that's a simple consumer insight. There are people who are aware of the brand, but they still don't come in because of misplaced thoughts in their head about the brand. I think this -- it's a combination of behavior changing advertising along with the core meal at INR 99. So believe the things that are working. So we ran a core feel at INR 299 didn't work as well. Also, our advertising there didn't call out and did address this a winner non-trier as effectively as we wanted. So this has been a, I think, it's a learning experience that we have had. And perhaps this did well in November, December, we extended it in about 1/3 of our stores in -- by January. And now in April, all our stores, except the Tamil Nadu stores are [indiscernible].

And sir, impact from [indiscernible] value?

So initially, we find that there is an impact on -- there's a difference of transactions are higher than and the bill value is negative. But over a period of time, this closes quite rapidly. So it is also showing that the person comes in and then buys other things also. The consumer comes in and by other things. But there'll be about 300 to 500 basis points difference in transactions will be higher than SFS. So again, so we are talking about 2 strong strategy INR 99 mill, there is a difference of there's a lower PC over there and higher transaction. But then what we learn in the south market, which is the [indiscernible] is at a higher end in terms of the ticket price. So while there's a drop in dropping ticket prices in North and because of 1 particular kind of offer, the idea is to drive through a air ticket price to a different kind of offer, which is a [indiscernible] offer and select base. So at the organization level, what's ingesting probably anywhere between 2% to 3% from a from an impact on a PC on these offers per se. There are other sales which happens where we also drive the pricing up or the ticket price up, not the pricing up, the ticket price up, but there -- this is a very specific to this particular, 2% to 3% drop.

Understood. And while you mentioned that in Mogo, the vendors are also participating and it therefore doesn't impact your gross margins, but what about the INR 99 mill. I mean I'm sure that is at a significantly lower GM versus the rest of your average portfolio. So is there any kind of impact of GM on that? And if so, how are you mitigating it?

So [indiscernible] is actually other way around. We called out that the INR 99 CRISPR Chicken [indiscernible], that's where the participation is there from the vendor partners, not on the [indiscernible] side. I think you understood [indiscernible]. And I also called what -- as we move forward, probably the impact is the vendor partner support is not there also depending upon what kind of mix we try and generate. There could be a potential impact of 50 to 70 basis points on gross margin as a Right, right. So in that case, my question would be, is there any significant impact from the Gogo offer on the gross margin? The answer is yes, there is the impact of Gogo the gross margin, but it's there for that particular day because we don't run it on a continuous basis. It's on a select day or a couple of days in a month. So even if that margin impact under [indiscernible] than it's made up by the kind of volumes and throughput we see on that particular day. So overall, at a restaurant EBITDA margin percentage level also [indiscernible].

Next question is from the line of Kevin Andy from Capgrow Capital.

I just had one question. Just wanted to understand that the expected [indiscernible]. So where is the one to [indiscernible]

Your voice is very feeble, but I guess I got your question. It was about the time line of mergers and when it's expected to get consumed. Am I correct? Is that your question?

Yes. Yes. That's the question.

So from a process point of view, when we announced it on first of Jan, we called it out, it's a 12 to 15 months process in that process where we are currently our registered office change got approved by shareholders. Initially, Subsequently, we have received an approval from the authority also for the registered office change. The formalities will get completed in the next 2-odd weeks. So that's one agenda which we have done. The second big ticket item is getting approval from SEBI. We have already had a few round of queries from NSE and BSE. That's got clear now. It's moved to the SEBI we expect that clearance probably to happen over the next 30 to 45 days. Once that happens, with the register office change in place and the SEBI approval in place, we should be able to go to NCLT and make an application. And NCLC approval process can be anywhere between 7 months to 10 months from approval process. parallelly, we will make a CCI application as well. I would say it looks like by the end of this financial year, we should be in a position to consume the merger. That's the likely scenario by the end of this financial year.

That was the last question for today. I now hand the conference over to Mr. Sanjay Purohit for closing comments. Over to you, sir.

Thank you, everybody. Like I said, good quarter bodes well for the fiscal going forward. And it's been a aground performance. So when you see our ESG scores and our employee engagement scores, these are what contribute to the and being and continuing to iterate on strategy till we get it right. I think this is what is enabling us to deliver this result. That's it from us. Thank you so much.

Thank you very much. On behalf of Sapphire Foods, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.