United Foodbrands Limited (UFBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Barbeque Nation hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Kanodia from AMBIT Capital. Thank you, and over to you, sir.

Thank you. Good evening, everyone. Thank you for joining us for the 3Q FY '22 earnings conference call of Barbeque Nation. From the company, we have Mr. Kayum Dhanani, Managing Director; Mr. Rahul Agrawal, CEO and Whole Time Director; and Mr. Amit Betala, Chief Financial Officer. We'll start the conference with opening remarks from the management, post which we will open the floor for question and answers. Thank you, and over to you, Rahul for opening remarks.

Sorry, that would be Kayum Dhanani. A very good evening, ladies and gentlemen. I take the pleasure in welcoming you to quarter 3 FY '22 conference call of Barbeque Nation. Post the onset of COVID-19, quarter 3 was particularly the first quarter with minimum dine-in operating restrictions. I'm happy and proud to announce that in this quarter, our company has delivered highest ever quarterly sales of INR 287 crores and highest quarterly EBITDA of INR 70 crores. Our dine-in segment sales have crossed the sales during the pre-COVID period of quarter 3 FY '20. Our delivery segment has also continued to deliver strong year-on-year growth. Our network expansion plan is on track. We have added 7 restaurants in quarter 3 and another 3 restaurants in January 2022. We also have a strong under construction pipeline of 13 restaurants. We are confident of achieving our target of opening 20 new stores in FY '22. We also strive to close FY '22 with 188 restaurants against our previous target of 184 restaurants. We also added 4 new extension kitchens, taking overall extension kitchens count to 12 at the end of the quarter. While we started quarter 3 with significantly relaxed operating restrictions, towards the back end of the quarter, most of the markets saw restrictions of operating capacity, weekend curfews and night curfews, of course. The impact has continued in the month of January, which ranged from restrictions like complete dine-in, shut down in Delhi, weekend curfews in Bangalore and night curfews and seating capacity restrictions in most places. While this will impact our performance in quarter 4 of FY '22, we have already witnessed relaxation of some of the restrictions and are hopeful of a strong recovery during the rest of the quarter. With this, I will now hand it over to Rahul to take you through the performance of the business and the company during the quarter. Thank you.

Thank you, Kayum. Good evening, everyone. I hope you and your loved ones are safe and healthy. While COVID-19 related [indiscernible] were not behind us, we are experiencing diminishing economic impact during subsequent deliveries. As mentioned by Kayum, since the onset of COVID-19, quarter 3 FY '22 saw minimum dine-in operating restrictions. With an improving operating scenario, we are happy and thought to deliver the record quarterly sales and profits at Barbeque Nation. Our operating revenues were INR 287 crores in quarter 3 FY '22 compared to INR 195 crores in quarter 3 FY '21, thereby registering a strong growth of 47% over the previous year. The operating revenues in quarter 3 FY '22, were 23% higher than the revenues in pre-COVID comparable period of quarter 3 FY '20. We saw strong recovery in our dine-in business surpassing the levels of quarter 3 FY '20. Our dine-in business grew at 44% versus the previous year. In quarter 3 FY '22, the dine-in revenues were 108% of the dine-in revenues in pre-COVID comparable period of quarter 3 FY '20. With dine-in operating revenues of INR 240 crores, quarter 3 FY '22 has recorded highest quarterly dine-in sales for us since inception. In addition to the strong performance in our dine-in business, our delivery business has grown at 64% versus the previous year. Despite the strong recovery in the dine-in segment, our delivery business maintained the momentum and is generating incremental revenues of 15% to 20% over the pre-COVID revenues. We have strengthened our effort towards store expansion and opened 7 new restaurants in quarter 3 and another 3 restaurants in January 2022. Our current restaurant network stands at 177 with another 13 restaurants under construction and an equally strong pipeline of work in progress stores. 90% of our store network had both dine-in and delivery operations for the full quarter. In these restaurants, we have achieved average quarterly sales of around INR 1.75 crores per restaurant and delivered a strong restaurant operating margins of 21.5%. Our reported EBITDA was INR 70.2 crores in quarter 3 FY '22 versus INR 50 crores in quarter 3 FY '21. Without the impact of Ind AS 116, in quarter 3 FY '22, EBITDA was approximately INR 44 crores and PAT was INR 18.3 crores with an EBITDA margin of 18.4% and PAT margin of 6.4%. With this, we'll now open the floor for an interactive Q&A session. Thank you.

Can we open for Q&A, sir?

Yes. We're okay.

[Operator Instructions] The first question is from the line of Prakash Kapadia from Anived Portfolio Managers.

There are couple of questions from my end. What trends are we seeing on raw material cost and freight cost? And how are we managing it in the current scenario? Have there been price hikes? If you could give some sense on pricing changes done on a year-to-date basis. Secondly, on your delivery sales, we have plans to double it next year. So what kind of SKUs and price points are going to drive this? And directionally from this 15%, 16% of sales, would we expect like a 25% contribution in 2, 3 years? Also delivery sales, if you could comment on average billing size, changes, if any, over the last 3, 4 quarters, that would be helpful.

Thank you. So on the raw material side, yes, we are seeing unprecedented inflation. Especially on the meat prices, things like prawn, mutton, we are seeing inflation that we have not seen in the past. And like any other business, we have also taken some price hikes. In the quarter -- this quarter versus the previous same quarter, we have approximately 5% to 6% price hike on the overall portfolio level, right? There are some outtakes. Obviously, we also corrected the price based on what the market feedback is. But on a portfolio level, you would see 5% to 6% price hike. So that's on the raw material side. On the delivery side, we have said in last year FY '21 that FY '22 would strive to grow our business by 2x, and we have already achieved that target in the first 9 months of this financial year. What we expect is that we have hopefully closed this year at almost INR 200 crores of delivery sales, which if you look at the pre-COVID period, it was around INR 28 crores, INR 29 crores. So very happy to see the incremental business that was added from delivery in the post COVID scenario. Going forward, I think every year doubling from this, this is not possible, and we don't plan to do that. But my expectation is we should deliver pretty much 20%, 25% growth on the delivery portfolio now. And the way to look at it is -- what we are very happy about is, if you look at our delivery business, despite the way our dine-in business has recovered, our delivery business has pretty much maintained that momentum. And now my expectation is this business would range between 15% to 20% of the overall top line. Also, the business is very young. We've actually started during COVID time, and we are in the second year of this business. And the way we are seeing the response from customers, the changes that we're making on the product, menu, pricing, so very happy that it is going in the right direction. In terms of other parameters, our delivery business is largely driven by box sales, which is Barbeque-in-a-Box, which is a high APC product. So overall blended APC that we generate is pretty much 1.8 to 2x of the industry. And that helps us to give that superior economics also on the delivery side. But [indiscernible] business, work in progress, and we want to build it for long term with a view that the acceptance of consumers for the product is very high. So focus is more on product and profitability and sales. And even though the short-term profitability will be lower, we're okay with that right now.

And on the BBQ box, has there been increase in prices as compared to last quarter?

No, we have not increased the prices on the BBQ box.

So on individual items or single menu items on delivery there?

So it is very tactical, and we don't have standard pricing pan India. It all depends on your order demands, in some cases, a percentage of discounting. So various factor menu makes, what sells more in which outlet, so we are very, very dynamic about that.

[Operator Instructions] The next question is from the line of Ashish Kanodia from AMBIT Capital.

Rahul, on the delivery business, while we understand that you had a dine-in recover, there will be some decline in delivery. But within the quarter, have you seen the delivery revenue momentum kind of declining on a month-on-month basis? Or do you believe the current run rate, right, with -- the current run rate to be more sustainable?

No, we have not seen that. So if you look at our monthly delivery business, the first 4 months which was also the period of strict dine-in lockdown and in general countrywide lockdown, our delivery business has spiked significantly. And post the first 4 months, the business has been pretty stable. In fact, towards the end of last quarter, we also started to see some spike in that business. So I think what we have achieved in our delivery business, is a very stable number now in addition to the recovery in the dine-in segment.

Sure. Secondly, in terms of gross margins, so you talked about price hikes. But was there some element -- so when we look at gross margin improvement versus Y-o-Y and sequentially, was it also partially driven through higher share of dine-in? And secondly, as we enter into 4Q, RM inflation seems to remain at a higher level. So do you see any risk to gross margin? Or do you believe the price hikes which have been taken is adequate enough to kind of mitigate the risk of RM inflation?

So I don't think we need to take any more price hike in our business now. We -- I think whatever inflation -- pricing we need to take, we have taken. And this obviously comes with a caveat that there should not be any more significant hikes in raw material. In fact, in some cases, we're also seeing some marginal dip in some of the global supply chain things that we import from outside, those have started to marginally ease up, and we're also building up our inventories for that. So I don't expect more price hike. Regarding your question on delivery versus dine-in mix and because of that gross margin improving. I think the mix between last year versus this year has been pretty much stable. So that has not impacted our gross margin. But what has happened is that as delivery business is maturing, we are also becoming more efficient in our food cost in delivery business. So to that extent, the delivery business in quarter 4 last -- quarter 3 last year versus quarter 3 now, there is a reduction in the food cost. So that has impacted positively for us.

Sure. Just last bookkeeping question before I go on to the queue. What was the operating cash flow which you've generated during the quarter? And I assume that there is no debt on the balance sheet. So is that understanding correct? And also if you can share what is the net cash balance at the end of 3Q?

So operating cash is around INR 45 crores for the quarter. Our cash balance is approximately INR 115 crores. And we have some debt. We didn't retire entire debt. We have around INR 20 crores -- or INR 20 crores, INR 23 crores of working capital debt. So net cash would be approximately INR 90 crores to INR 95 crores.

The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.

Just curious, you've added extension kitchen this quarter. And then when you made a comment that you are not seeing month-on-month decline in sales of delivery. But on a per extension counter, you would have, right? Is that a fair understanding?

Yes. If you add extension kitchen to the overall count, then you will see marginal, but overall extension kitchen that we had on average in the third quarter was 10 out of total restaurant growth of 170. So yes, to that extent, 4%, 5%, you would say, there will be decline on a per average basis.

Okay. And quickly, I just wanted to check, this delivery business in the last 6, 9 months you would have gained some insights. Can you just talk about what's the occasion, why does a person order from Barbeque, I mean, order Barbeque-as-a-Box?

So it is, again, a group eating product. So if there is a family of 4, one Barbeque-in-a-Box product is good for them, and that drives typically the weekday demand. In case of some office get together, we are seeing box orders of say -- in a range of between 2 to 5. On weekends, if there's any get together, then again, people are ordering between 2 to 3 boxes, and it's working very well for house parties. In fact, towards the end of the quarter when the New Year season was there, last week was extremely good in terms of box orders. So that is what is driving the box demand.

But the demand is still celebration, right?

Yes, it is. Box is celebration. A-La-Carte is typically individual consumption.

Okay. Okay. Got it. And just also wanted to check with you if you can give a split between box and A-La-Carte, is it possible or you would not like to proceed.

I would not like to give that.

The next question is from the line of Manish Poddar from Nippon India AIF.

I just wanted to get your thoughts now, let's say, for store opening, how are you seeing the environment? Anything on rentals? Do you want to press the pedal and probably increase the store count addition for next year, given how, let's say, the COVID was in third wave?

Yes. Actually, we've already done that. So if you look at our store counts, we have added 2 in quarter 1, 2 in quarter 2 and then now 7 in quarter 3. And in this quarter, January, we already added 3. February, we are expecting to add around 4, March, again, around 4 to 5. So on a quarterly basis, this quarter, I think we should do around 10 to 12. And some may slip to first week of April, but the construction work then is very strong. And -- so we are seeing that. Our time line from the site coming inside the system to commercial launch is pretty long, which is around 4 to 5 months. So after quarter 2, when the COVID-related things went out, we have been building a bit -- our pipeline very strongly. And in the commercial rental, the kind of site that we look at, which is not a prime real estate, prime high street, high rental sites, we are seeing a good attraction. And I think the market rental that we are getting is justified. And to that extent, we are also speeding up our store opening.

Okay. Just one more, Rahul. Any idea, let's say, so the terms which we now get for delivery, how would that stack up with, let's say, larger QSR peers? Or would it be similar?

Difficult to say. I'm not ready to the exact terms of that, but I would tend to believe that they're similar.

But in terms of both variables, the data and, let's say, the take rate?

No, I won't be able to comment on that.

The next question is from the line of Harit Kapoor from Investec.

Congrats on excellent numbers. I just had 2 or 3 questions. On the margin side, this quarter, you've done 15.4%. This is in spite of the fact that the early part of the quarter was still a bit kind of half in terms of the way openings happened. I just wanted to get your sense on -- in a quarter where you're not full throttle and you still achieve such margins, does that provide a greater visibility into fiscal year '23, which will probably be a -- given the current situation, be a literally a normal quarter? So is that something that we built like a 15% plus kind of a number for FY '23? Or you think there are headwinds to that given the mix on delivery or even the inflation?

So I think we should be able to do that, and I'm positive -- more positive now than I was earlier. If you look at broad components, I think on gross margin, I'm not so worried. There are measures being taken to work on your food cost and that will tend to give you results. On the employee cost, we are pretty [indiscernible]. And we've also seen good whatever work we have done over the last 1.5 years during the COVID times has shown results in this quarter. And other costs are pretty much also in check. In fact, what I'm slightly optimistic about, and obviously, time will tell that, is further improvement in our dine-in business. If you look at this quarter also, towards the fag end of December, we started to see some restrictions coming. And that also matched with the celebration, right? So most of the restaurant industry makes good amount of business during the last week of the year, right? And that helps. And that [indiscernible] saw slightly declining both on the customer sentiment perspective, which is they don't go out and also some restrictions, they started coming in places like Bombay and Delhi and key markets. So to that extent, I think there is some upside also hopefully should come in our dine-in business. And also during the quarter, while there were some talks of corporate coming back when the Omicron wave started hitting the world, most of the large corporates, again, retracted back from opening up full throttle. So once that comes back and corporate comes back, there's also -- there should also be an upside on the top line. And a mix of those 2 should help us to meet that 15% plus EBITDA margin benchmark.

That's great to hear. The second question is on Toscano. So I missed the first 5 minutes. I'm not sure if you answered this already, but the investment of INR 17-odd crore, is that a signal that you're going to go a bit quicker in terms of expansions there? And secondly, given the implied valuation of that investment is higher than probably what's in your book currently for the company. So does that mean that you need to kind of upward revise that number? Is there a -- is there an accounting impact of that, that what we expect going forward?

So one, the investment is done at a post-money value of around INR 88 crores. So I think what -- one, considering is the fact that our shareholding moved up from around 61 to 68 by putting in INR 17 crores, but there's also dilution right? We are only doing primary investment here. So the 61 also is [indiscernible] to a lower number. So that's why the valuation is not higher than what we did in the first round. It's, in fact, slightly lower than what we did in the first round. We are a firm believer in this business, and we are also wanting to consolidate our position in this and invest for the growth. But before this quarter, we had around 10 restaurants in Toscano. We added 1 in this quarter. And we have 2 more under construction today. And over the period of next 2 years, we are expecting to take this from, say, 13 outlets to anywhere between 20 to 25. And again, it's about opening up markets. We have opened up apart from Bangalore, Chennai, Pune. We want to also do inroads into Bombay, hopefully in the next financial year. So to that extent, yes, we want to accelerate our position in Toscano.

Just a last follow-up on that. Would you -- would it be fair to say that you're probably more confident that you were about Toscano even when this business was bought into Barbeque Nation a few years back? So the confidence level has only gone up given the way the outlets have performed in the existing cities.

So I view all the confidence, frankly, Harit. And it's just about timing. Toscano was a very concentrated business in Bangalore, right? And because of restrictions because -- and they have small P&L, right? As compared to Barbeque Nation, so the COVID would hit a smaller P&L larger than -- more than what it would hit, say, Barbeque Nation, which also went ahead and raised capital and protected itself. So to that extent, I think we're very cautious. And once the business has performed pretty well over the last 3, 4 quarters -- it's also about opportunities, right? Toscano is a business which does -- it opens a site in more prime real estate than Barbeque Nation does, right? You will find Toscano in -- usually in Bangalore or in a mall. So there, unless rental makes sense, we would not do that. And in some of the cases, we believe that now rentals are making sense. So we're going at those sites.

[Operator Instructions] The next question is a follow-up from the line of Prateek Poddar from Nippon India Mutual Fund.

Rahul, just one question. When do you see the gap between restaurant operating margins and company margins coming down a bit? Can you throw some light over there?

So we are already down to around 5.3% in this quarter. I think somewhere 5% is pretty achievable, and we will try to achieve that in any of the quarters in next financial year. But below 5%, we'll have to see. Because at the same time, we also keep investing in our back end capability, right? So I would -- I'll not give guidance lower than 5% currently unless our top line goes up significantly more than that. But we've always done right. I think November last year, we were at 6% and now we're already 5.3%. So some advantage you're already seeing in our business.

I think you're response -- yes. No, I was just -- yo restaurant operating margins will also move up, right? Because this quarter, it's not a normalized one because some of your stores were not fully operational right? which you have highlighted in your presentation. They were partly operational. So to that extent, I understand what you're trying to say.

Right. Also the maturity profile of new stores, so that is something that you should kick in, yes.

[Operator Instructions] The next question is from the line of Dhruv Dhairya from Motilal Oswal.

[indiscernible]

Mr. Dhruv, your line is in talk mode.

Can you hear me?

Yes.

Yes. So first question is regarding employee expenses. If you can just elaborate what are the initiatives that you have taken to variablize this cost [indiscernible]?

So a few things here. One, if you remember, we've always spoken that during COVID times, we have tried to reduce the number of manpower in outlet by approximately 10% more with respect to [indiscernible] responsibility study. So that has attributed to lower mandate growth versus the top line growth. So that has reduced the percentage number on manpower. Also the mix of manpower, right. So in our outlets, we have the entry-level staff and goes up to the business manager, which is the restaurant head. So there are 5 levels in that, and we have tried to work on an appropriate mix and also fixed up outlets where the mix was not in the correct picture. So more of technical efforts going. We have not tried to keep them off-roads. We are very experience-driven brand. So just moving them off-roads and keeping them as totally variable pay doesn't work for us. As of now, while we are still evaluating some of these studies. But what has led to effort is more of the other tightly control and operating metrics measurement rather than moving them off road and making them totally variable.

Okay. And just 1 bookkeeping question. So do these lease concessions, which are included in the other income, do we expect them to go down going ahead considering that now the COVID situation has somewhat normalized? Or do you still have these negotiations going on with your landlords?

No, it has significantly went down. If you look at this quarter, we only have around INR 45 million as operating income, out of which some part is also interest income that has come from our FDs and all that we have, right? So it has significantly come down in quarter 3 given stabilization. And the number -- the result that you are seeing now is pretty much normalized results. So obviously, quarter 4 is impacted again. In the month of January, we had the shutdowns as Kayum mentioned, some companies shut down in Delhi to weekend curfews in Bangalore and night curfews and those stuffs. So to that extent, we are in discussions with our partners to see if we can make it variable or to the extent of the time that we lock the business. But going forward, I'm not expecting this to significantly add to our other income.

Okay. Last one question. If you can share, what is your rental agreement like? I mean, is it fully variablized -- I mean, is it fully fix or to what extent is it variablized?

So, this is very flexible. So we have fully fixed contracts also. We have very few contracts which are also fully variable cost, and some contracts have both minimum guarantee and some revenue share. But a large part of our portfolio would be fixed rental model.

[Operator Instructions] The next question is from the line of Ashish Kanodia from AMBIT Capital.

Just 2 questions. One, I think you talked about your store aspirations for Toscano. In terms of Barbeque, what is the number of stores which you are looking to open next year? And secondly, in terms of extension kitchen, I understand it might still be at a very nascent space, but is there a pipeline or a thought process that the number of extension kitchen which we want to open in the next 1 or 2 years?

So overall, in terms of total restaurant count, we want to add between 35 to 40 stores every year over the bit of next 3 years and try and take the count to around 300 by FY '25. So that's on the overall count. And the mix between Toscano and Barbeque Nation would be very opportunistic-driven decision. If we get good size in Toscano, I will not shy away from doing say 2, 3 sites in a quarter also. And if we don't get good sites, then I'll not do maybe -- not even a single site in a quarter, right? On the extension kitchen, we already have around 12 now, another 4, 5, we plan to add this quarter. And then I want to see -- it is very young, like you said, very nascent right now, not even more than 7, 8 months. So it's early to comment on that. But after looking at a portfolio of, say, 15, 16 analyzing it, looking at a few cuts, then we will try and see whether we want to take it ahead or not, or how do we want to take it ahead.

Sure, sure. And this 35 to 40 stores and the road map to Q1 [ trade ], does this also include any store expansion in international market? Or do you believe that there's no plan to open stores in the international market?

Yes. So I think it will include. We are very happy with our performance in international market. In fact, quarter 3, we have done more than 20% EBITDA margin at corporate level international market. And on a top line basis also. On the same-store basis, they have delivered SSSG of upwards of 35%. So now it is generating adequate cash, and we are accumulating that in that market, and we would try to invest that there. But in terms of proportion, out of say, 35, 40, we won't do more than maybe 1 or 2 international market, right? It won't be that -- so it will be less than I would say, 5% of expansion in that market.

Just on the international market side because -- I mean we did not had a great history, when we were expanding. So I just wanted to understand a bit deeper that first, what's the thought process in terms of incremental cash deployment. So when you think about opening 1 or 2 stores, will it be only restricted from the point with your existing stores in the international markets are kind of generating or if there is an opportunity maybe in terms of good sites and all and if there's a need, you would invest in those international markets from India as well?

Yes. So look -- yes, we had a bad experience with international market almost 2.5 years back. And like we have always said, we have worked towards improving our performance, and we have now consistently delivered more than double digits EBITDA margins over the last 5 to 6 quarters. So I think our business in international market is very positive. And we were very disciplined despite the performance to not take up any size there. There's definitely very selective opportunity that will come. And the payback period in some of these are pretty similar to what we see in India, right? So the decision-making lens is only from the fact that, that is the payback period justified and is it similar to what you see in India. And if the answer is yes, we want to grow that. So that is one part of the international strategy. The second part also is over a period of time and if your bandwidth permits, you will see how do you expand your international markets into a low-cost model, franchisee model or any other model, right? Today, I think our hands are full with expansion in India. But selectively, we would also add 1 or 2 in that market. Will it become, say, more than double-digit percentage of our total business? I don't see that happening in the near future.

Sure, sure. And just last bit on your both employee cost and other expenses. You talked about that this is a reduction in, I think, 10% in terms of headcount. But now when I look at the monthly run rate of both employee cost as well as other expenses, so employee cost this quarter was close to INR 56 crores, last quarter -- a quarter before that, it was around INR 46 crores. And when we look at FY '20 full year number, the total employee cost was around INR 200 crores. While when you look at the overall store expansion, I think the overall store has gone up by maybe around 5% or 6%. So I mean -- was there any one-off both in employee cost and other expenses? Because I mean, other expenses this quarter are INR 67 crores, previous quarter, it was around INR 57 crores. And when you look at the full year number for FY '20, right, it was around INR 190-odd crores or so. So is there any one-off which we are missing here?

Sorry, I see you've thrown a lot of numbers at me. But no, there are no one-off numbers. But on the employee costs, the head count is pretty much in line with our expansion. What has happened is, as the business has also grown, we might have added maybe a few more employees in some of these stores. Also, we had opened 14 restaurants this year and 13 under construction, right? So typically, manpower comes in anywhere between 30 to 45 days before the store launch, right? So that they also get the adequate amount of training. So some of the under-construction pipeline manpower is also added. So it's not just fair to just add the number of stores which are operational. Also, in our employee cost, we pay approximately 4% service charge to our employees, so that they feel part of the growth story of the company. And as the sales grows, some number grows over there, right? So despite that, you will see that as a percentage number, it is lower. But just to answer more, no, there's no one-off employee cost or occupancy cost numbers that we are seeing here.

Sure, sure. And just lastly, again on the store economics side, right? Now you have a base of a couple of stores who have been delivering for last 1.5 years now. So when you look at some of the stores who have been delivering for last 1.5 years and then maybe in 3Q, those stores reached back to your -- in terms of dine-in, they were already back to 100% of pre-COVID levels, when you look at some of those cohorts of stores, how is the EBITDA margin moving versus pre-COVID level? I mean -- I'm just trying to understand because when I look at the stores which are fully operational, you talked about I think [indiscernible] 21.5% EBITDA margin, right? So just from a stores perspective that, for the stores which are already matured enough and have a good track record of delivery, are the margins back to pre-COVID levels, are they better than pre-COVID levels or what it is?

So the back to pre-COVID levels, if you look at blended margins on a stand-alone India basis, we are pretty much similar at around 21%, 22%, right? And that's what we have done currently on a fully operational stores. So the margins are pretty much back in the quarter when we had full operations, right? There might be some pressure in margins when -- in quarter 4 because of the impact of Omicron third wave in January, right? But yes, the margins are pretty much pretty much back in this quarter. And in fact, also, if you look at our vintage analysis, pretty much all the vintage numbers are also on track. The only caveat there is, a few of the older stores, which are based in IT park hub area, they're not back to the same level.

[Operator Instructions] The next question is from the line of Kapil Agrawal from Itus Capital.

I have only 1 question. So when I look at the advertising as a percentage of sales, Barbeque Nation tends to spend relatively less despite having a smaller top line than established QSR chain. So what is the thought process behind this move? And if you're looking to scale to new ones and even penetrate more into the population, doesn't this serve as a [indiscernible] competitive disadvantage? Could you give some clarity on this, please?

Yes. So thank you, Kapil. Look, the Barbeque Nation brand has always relied on word of mouth advertising than ATL or BTL marketing. Over the last 15 years, if you look at our data, we have not spent more than, say, 1 or 1.5 percentage point of top line on this. We believe in investing back in our consumers. And our guests, we believe in giving them a great experience at the outlet and invest our money in that. And we believe that once our guests are happy, they will go back and talk about it and the business will actually happen. And there are very good metrics called guest satisfaction index, which we -- where we call back our guests every day and take their feedback. And I'm happy to say that quarter 3, our guest satisfaction index numbers were the best in a post-COVID environment. So consciously, we don't want to and don't need to also invest in advertising. Having said that, as the P&L is now growing larger, obviously, some of the benefits of now advertising can help us. And that would help us more on low demand base, which is week days, say, Monday or Tuesday or Thursdays. And very practically, we are spending money on that. And we don't need to, I think, do more than that as of now.

The next question is from the line of Susmit Patodia from Motilal Oswal AMC.

Rahul, congratulations on a great set of numbers. Rahul, the full ops restaurant data...

Mr. Patodia, your voice is breaking up, so if you can speak closer to the handset, please?

So the -- yes, the full ops data that you have given on average quarterly revenue per outlet at INR 1.7 crores. Is this what you would expect to be the full throttle? Or do you think there is some seasonality. So should we think about a full ops restaurant of Barbeque generating INR 7 crores of sales a year?

Yes, it should. And typically, in the quarter 3 -- in quarter 3, we have seasonality. But in this quarter...

We were lost of few days also, right?

Yes. That's what I'm saying. So in this quarter, we had lost actually a few prime days towards the fag end of December. And also this quarter, we are not seeing the corporates coming back the way it used to happen pre-COVID, right? So with both the impact, I think I would not -- I tend to believe that the seasonality impact is not there in quarter 3, which we typically see in a pre-COVID environment.

Got it. Got it. Okay. So just if I had to think about FY '25 when you said 300 restaurants, so the potential of that 300 restaurants could be INR 2,000 crores to INR 2,100 crores [ of sales ] because this includes delivery, right?

Yes, this includes delivery, yes.

Okay. And somebody asked this question earlier, the gap between restaurant margin and corporate margin, will that fall at a similar pace of 50, 60 basis points for every additional, let's say, INR 100 crores of revenue? Or do you think it's...

No, I think 50, 60 will be a bit more optimistic. I think as we grow larger, there may be some other management costs that might come in. So I would model not more than -- not less than, I would say, 5%, and that's a very comfortable number. And while we obviously strive to bring it down to around 4.5%, but as of now, I think 5% number is a decent number.

Last question, Rahul. What is the net cash position now at the end of 9 months?

So we have cash of around INR 115-odd crores, and we have some debt of around INR 20 crores INR 23-odd crores. So net cash would be around INR 91 crores, INR 92 crores.

This is after the [indiscernible] that Toscano [indiscernible]?

No. Toscano [indiscernible] will happen this quarter.

This quarter. Okay. So I need to deduct [indiscernible].

Yes. But that money also is going for expansion and will be part of subsidiary, right?

The next question is from the line of Sameer Gupta from IIFL.

Just joined a little late, so apologies if this is asked before. So dine-in recovery at 108% level, can I also know what it would be for a per-store level? So basically just dividing the per -- number of stores in the base?

Yes. So at per-store level, we are at par with what we did in the same quarter of FY '20.

Okay. So there's no growth?

Yes. So it is -- yes, when I said par, yes.

The next question is from the line of Sher Singh Yadav from Moneylife.

Sir, I just wanted to ask about the status of corporate clients. Are they coming back and to what extent?

No. Initial part of the quarter, we are getting news of some large corporates coming back. But towards the end of November, early December, with the news of Omicron spreading around the world, we again -- some of these plans of these large corporates have been postponed. And we still don't see large corporates around in our restaurants as much as we used to see pre-COVID.

And sir, what is the margin right now for the extended kitchens? You had given a target of around 15% to 16%. So what do you think where is the margin right now?

So a very young business, and it's evolving, but it is pretty much at the same status as last quarter. We also said that as we work on our top line growth in extension kitchens and then it will -- these margins will come in. And this is very new around less than 6, 7 months old. So we should wait and see how this evolves. And also a very small portion of our overall business to write.

And what about the status of Toscano extended kitchens, they were about to be opened?

Sorry, they were about to? I missed the last part.

They were about to be open, you said that in the last con call I think. Toscano extended kitchen, sir.

So we added 1 Toscano extended kitchen this quarter.

As there are no further questions, I now hand the conference over to the management for closing comments. Over to you, sir.

So thank you all for joining. We had a record sales and profit quarter at this time, and we'll strive to achieve better numbers as we move ahead. And as the impact of subsequent waves also subsides. We are hopeful of the large India opportunity that we see. And we'll look forward to talking with you more in subsequent quarters. Thank you very much. Thank you, Ashish, and AMBIT team for organizing this.

Thank you. Ladies and gentlemen, on behalf of AMBIT Capital, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.