United Foodbrands Limited (UFBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the United Foodbrands Limited Q1 FY '27 Earnings Conference Call hosted by MUFG Intime. [Operator Instructions]. I now hand the conference over to Mr. Bijay Sharma from United Foodbrands Limited. Thank you, and over to you, Mr. Sharma.

Thank you. Welcome, everyone, to United Food Brands Limited Q1 FY '27 Earnings Conference Call. For today's call, I have with me Mr. Kayum Dhanani, Managing Director; Mr. Rahul Agrawal, CEO and Whole Time Director; and Mr. Amit Betala, CFO. Before we begin, I would like to remind that some of the statements made on today's conference call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to our earnings presentation for a detailed disclaimer. The results and earnings presentation have been uploaded on exchanges and our website and are available for anyone to access. We'll begin this quarter's call with Mr. Dhanani sharing his perspective on the quarter, followed by a detailed discussion on operating and financial performance by Mr. Agrawal. We'll then open the forum for questions. I'll now hand over the call to Mr. Kayum Dhanani. Thank you, and over to you, sir.

Thank you. Good evening, ladies and gentlemen, and thank you for joining us for quarter 1 FY '27 earnings conference call. Over the last 2 quarters, we have consistently demonstrated that the strategic and operational initiatives we have been executing are translating into stronger business performance. Quarter 1 FY '27 builds decisively on the momentum and in many ways, marks an important milestone for Barbeque Nation. This has been our strongest operating quarter in recent years with multiple performance benchmarks being achieved simultaneously. More importantly, the momentum is broad-based. Every business segment, every channel and every geography has contributed to our growth, giving us confidence that our performance is underpinned by structural improvements rather than isolated factors. Let me briefly highlight some of the key numbers. Consolidated same-store sales growth for the quarter was 28.7%. Consolidated revenue grew 43.4% year-on-year to INR 426 crores. Dine-in transaction volumes increased by 63.5%, accelerating further from strong momentum we witnessed in the previous quarters. Our delivery business also continued its excellent trajectory growing 62% year-on-year. Pre-Ind AS just operating EBITDA margin improved to 8.1%, reflecting a year-on-year growth of 152%. Within the portfolio, Barbeque Nation India has delivered same-store sales growth of 33.5% supported by dine-in transaction growth of 68.6%. Our international business continued its strong performance with revenue growth of 46.6% and same-store sales growth of 8.5%. Our premium casual dining restaurant business delivered revenue growth of 36% with same-store sales growth of 13.6%, while continuing to remain -- maintain healthy restaurant operating margins. While these numbers are encouraging, what gives us greater confidence is what they represent. Over the several years, we have invested patiently in strengthening our customer value proposition, deepening our captive customer ecosystem, building a more efficient supply chain, improving restaurant operations and developing a diversified multi-brand portfolio. For some time we spoke about building these capabilities. Today, we are beginning to see the cumulative impact of these initiatives reflected consistently in our performance. Importantly, this growth is being delivered alongside stronger profitability and healthier unit economy. Our mature restaurant operating margin reached 16.2% during the quarter, demonstrating that we are not pursuing growth at expense of return. Instead, we are building a business that can sustainably deliver profitable growth while continuing to invest for the future. Another encouraging aspect of the quarter is the continued strength of our diversified portfolio. Barbeque Nation remains our anchor growth engine over the international operations continue to scale profitably and our premium casual dining brands are delivering healthy growth while maintaining robust margins. Together, these businesses provide us with multiple growth drivers and greater resilience across market conditions. Looking ahead, we remain optimistic while also remaining disciplined. We recognize that the exceptionally strong same-store sales growth reported this quarter creates a higher base. And as the year progresses, reported growth rates will neutralize moderately. We view this as a mathematical consequence of stronger comparatives rather than any change in underlying consumer demand. Our priorities remain unchanged. We will continue to focus on driving healthy transaction growth, strengthening restaurant level economics, enhancing customer engagement and expanding our network in a disciplined manner. We remain confident in our expansion plans, which continues to be funded largely through our internal accruals, reflecting the strength of our cash generation. Finally, I would like to acknowledge our restaurant teams and colleagues across all our support functions. The performance you see today is the outcome of several years of disciplined execution, resilience and unwavering commitment from our people. We have helped build a strong organization, and this quarter reflects the quality of that collective effort. While we are encouraged by the strong start FY '24, we believe the opportunity ahead remains significantly larger. We will continue to execute with discipline, remain focused on creating long-term shareholder value and build on momentum we have established over the past 3 quarters. With that, I will now hand over to Rahul, who will take you through the operating performance in greater detail. Thank you.

Thank you, Kayum. Good evening, everyone, and thank you for joining us today. I'll walk you through the operating and financial performance and our outlook for the year. Quarter 1 FY '27 has been a strong quarter across every dimension of our business. Consolidated revenue for quarter 1 stood at INR 426 crores, growing 43.4% year-on-year. Consolidated same-store sales growth was 28.7% on top of the 14.4% we delivered in quarter 4 FY '26. Our growth continues to be entirely volume led. We have not taken any price increase during quarter 1, and our average per coverage spend continues to reflect changes in business segment mix, daypart and session mix and value-led initiatives that we started from quarter 2 FY '26. Consolidated dine-in transaction volumes grew 63.5% year-on-year. This is meaningfully higher than 43.4% we delivered in quarter 4 FY '26 and reflects the compounding of the customer acquisition and engagement work we have been doing over multiple quarters. Let me dive into each of our business segments. Barbeque Nation India delivered another exceptional quarter. Same-store sales growth was 33.5% Revenue growth was 43.4% and dine-in transaction volumes grew 68.6%. Every metrics were higher than the strong quarter 4 FY '26 levels. The strategic interventions we have been building for several quarters are now scaling meaningfully. Our value-led campaigns during some dayparts, the food-led occasions we have created, our Big Buffet format in Tier 1 and Tier 2 markets and our sustained investment in captive digital engagements are each yielding very positive results. Our monthly active users on our digital platform have grown to approximately 1.4 million, which is up by almost 60% year-on-year. Our captive digital ecosystem contributes to 65% of overall Barbeque India dine-in transactions, up from around 61% in quarter 4 FY '26. Approximately 90% of our dining volumes continue to come from our own captive channels, that is our app, our website, our reservation call center and walk-ins to our restaurants. This captive demand architecture is a structural feature of our business, and Q1 FY '27 shows in dipping further. Barbeque Nation International delivered another strong revenue growth of 46.6% year-on-year with same-store sales growth of 8.5% and dine-in volume growth of 45.2%. Gross profit grew 40.3% and pre-Ind AS restaurant operating margins grew year-on-year by 22% with restaurant operating margins of 18.7%. During the quarter, we added 1 new restaurant in UAE. Delivering this level of performance against the backdrop of ongoing Middle East geopolitical situation is a very strong outcome and reflects the operational discipline and execution quality of our teams on the ground. Our international business continues to operate with the strongest unit economics in our portfolio. This is despite the fact that quarter 1 restaurant operating margin came in at slightly softer than typical levels. This is mainly due to the impact of higher food inflation for a large part of our input categories. While this is linked to the ongoing and uncertain geopolitical crisis, we're making efforts to reduce the impact of this in our overall business. We continue to focus on building volume-led growth in our international business also and believe that short-term margin impact will correct over time as situation normalizes. Moving to our premium CDR business. The premium CDR business delivered around 36% revenue growth with 13.6% same-store sales growth and around 40% dine-in volume growth. During quarter 1, we added 1 premium CDR restaurants and closed 1, ending the quarter with same total network. Our mature premium CDR restaurant continue to deliver restaurant operating margins of upwards of 20%. The quarter 4 FY '26 cohort of new restaurants is now progressively maturing through FY '27 and is expected to lift the segment restaurant operating margin as we move further in the year. And across all 3 engines, quarter 1 FY '27 marked the third consecutive quarter of every segment and every channel growing at healthy double-digit rate simultaneously. We closed quarter 1 with 266 restaurants with 5 new additions during the quarter. As of today, we have 15 restaurants that are under construction, and these will operationalize through quarter 2 and quarter 3 of this financial year. Our new store pipeline is also healthy, and we believe that our FY '27 expansion trajectory is well on track. I'm moving to financial section now. Pre-Ind AS adjusted operating EBITDA margin for quarter 1 came in at 8.1%, which was around 350 basis points higher than quarter 1 of last year. On a sequential basis, also pre-Ind AS adjusted operating margin have increased from around 5.5% in the previous quarter to 8.1% this quarter. This reflects the operating leverage that we've been always talking about through our investments that we made in the previous year. Let me also walk you through the subcomponents of this margin profile. First of our gross margin. I think gross margin has begun to improve. On a sequential basis, our consolidated gross margin improved by approximately 30 basis points versus quarter 4 FY '26. More importantly, Barbeque Nation India gross margin improved by approximately 130 basis points, which is reflecting the beginning of recovery from the value-led investments that we observed in quarter 4 FY '26, combined with the procurement and scale benefits. This was partially offset by International segment where gross margin was softer due to the Middle East crisis-related inflation impact that I just mentioned earlier. Premium CDR gross margins have been steady and at healthy levels. Secondly, our matured portfolio ROM, we have seen this continue to improve. Quarter 1 FY '27 matured portfolio Pre-Ind AS restaurant operating margin came in at 16.2%. This was again around 290 basis points higher than quarter 1 of last year. This single metric, I think, depicts the strength of underlying unit economics. Every incremental rupee of same-store sales growth is flowing to our restaurant profitability at a healthy rate. And this is a structural operating leverage in our business that we've been building on. The margin expansion is despite the lower gross margin on a year-on-year basis. This is despite the higher investments in marketing spend that we have done, inflationary pressures that we saw from energy and manpower cost. And also when compared to last year, the share of delivery business has increased by around 2 percentage points. Third, on the margin profile on our new restore portfolio has also increased, which is accelerating our overall payback periods of restaurants. Our new restaurant portfolio reported 6% pre-Ind AS restaurant operating margin, which is the highest that we have seen in the last few quarters. We have done 5 additions this quarter and the FY '26 cohort is also maturing well. So the drag from this portfolio will also reduce over a period of time. The gap between matured portfolio and the consolidated operating margin have also reduced to 1.6% versus 1.8% in the previous quarter. The overall impact of the growth levers is an expansion of around 310 basis points in our consolidated pre-IAS restaurant operating margin, which has increased from 11.5% in quarter 1 of FY '26 to 14.6% in quarter 1 of FY '27. On an absolute basis, overall restaurant operating margin increased by around 82% on a year-on-year basis. Lastly, I think our back-end cost is also delivering operating leverage as revenue is scaling. We have mentioned in the previous call that our back-end cost has increased because of investments that we have made in our culinary team, marketing team, digital and central capabilities. I think these as a percentage of revenue has stepped up in the last quarter. In quarter 1, we have seen that operating leverage working in our favor. Our back-end cost as a percentage of sales have reduced from 7.1% in quarter 4 FY '26 to 6.5% in quarter 1 FY '27. Moving to our balance sheet and cash flow. I think our net debt position has moved marginally up from INR 102 crores at the end of FY '26 to INR 106 crores at the end of quarter 1 FY '27. This is marginally higher due to the investment that we have made in our CapEx and also the ongoing pipeline that we have. I think the capital allocation discipline is unchanged. We'll continue to fund expansion largely from internal accruals, and we'll keep the borrowings at prudent levels related to the underlying business profile that we have. Moving on to outlook for the year. I think on same-store sales growth, as Kayum mentioned in his opening remarks, we are conscious that the same-store sales growth will moderate as we move through FY '27. This again, is more mathematics than our comment on demand. Our comparable base tightens meaningfully as we move through the year with quarter 3 FY '27 and quarter 4 lapping on to our strongest quarter of FY '26. So our focus will continue to remain on building up healthy volume growth on top of the business that we have already built at scale. On margins, our approach to FY '27 is to continue to building on unit economics improvement that we are demonstrating. I think the gross margin recovery in India, the mature portfolio restaurant operating margin improvement, the improvement in margins of our new store cohort and operating leverage in the back-end cost space. Each of these is directional levers that we expect to continue delivering throughout the year. On network expansion, we continue to remain on track. We are committed to reaching 300 restaurants by FY '27, and we'll build our portfolio from there. And the pace will continue to be disciplined and calibrated, and we'll not chase to just at the cost of underwriting discipline. On capital allocation also, our priorities remain unchanged. I think we continue to fund our expansion largely from internal accruals. We'll continue to invest in our multi-engine portfolio that we have built. Overall, we'll continue to focus on building volume-led growth and deepening our captive demand architecture. This is the operating discipline that has helped us to deliver quarter 1 of this year and the same discipline is that will guide us through the rest of the year. To summarize, the business has reached a new operating scale. The unit economics are stronger than what we have seen ever. Our multi-engine portfolio is working very well, and we'll build forward from this base with the same discipline. Thank you. We can open the lines for questions now.

[Operator Instructions] The first question is from the line of Viraj Mehta from Enigma Small Opportunities Fund.

Congratulations, Rahul and entire team of Barbeque for an absolutely outstanding performance. Rahul, just had one question. Post the introduction of Big Buffet and the success that you have seen, in terms of the number of new markets that it opens up like Tier 3, Tier 4 markets, which probably could not take the price point earlier, but can take Big Buffet price point. In your view, how much more market does it open up for you, which probably wasn't really a market for you 2 years back?

Yes. Thank you, Viraj. I think this is a good question. As you know, 2.5, 3 years back, we were struggling in our Tier 2, Tier 3 markets portfolio, and we have been done working to see how we can change our operating model. Frankly, we have taken the same operating in metro markets to these markets. And we have experimented it. We have enough data for almost 6 quarters now. We are doing a mix of strategy. In some places, we are doing exclusively only Big Buffet and in some cases, we are doing mix of both Big Buffet and regular buffet that we do. And frankly, in my view, if there are 700 districts that we can look at, the Big Buffet model, we have taken to some markets where the population is as low as 3 lakh people. So overall, if I look at the dynamics that we have with respect to the metro markets, the Tier 1 markets and the Tier 2, Tier 3 markets, I think at the current scale, the brand, which is Barbeque Nation India can take it up to around 600-odd restaurants.

Sure. So earlier, what you thought was like the upper end of 400, 450 restaurants. Now you think we can go to 600 restaurants with Big Buffet?

Yes. And this is the current number. I think one of the other things that we have seen is that our penetration in some of the cities have also been increasing very well. So there are markets where we're only operating 1 restaurant and we're operating very profitably. As we've expanded to 2 and 3 restaurants, we have not seen the first restaurant economics deteriorating, right? So for example is a city like Visakhapatnam. Just 3 years back, we only had 1 restaurant. In fact, during the period, we also closed -- we opened 2 more. We closed 1. And today, we opened 2 more, and all 4 of them are doing exceptionally well, and we have tripped under discussion right now. So cities like Visakhapatnam and a lot of state capital, a lot of second, third largest cities are also opening up multi-store opportunities for us. So today, I think with Barbeque India having a portfolio of only 210, I'm not concerned about availability of trade areas to open new stores.

The next question is from the line of Pooja Sanghvi from InCred Finance.

Congratulations, sir, on a good set of numbers. I wanted to know that what were the key growth drivers for the improvement in SSSG because if we see in the last 5 quarters, this quarter has shown the best of SSSG like almost 2x in some of the areas. So if you can help me understand for Barbeque India, for Barbeque International and the premium CDR segment, what drove the SSSG and what?

I think the underlying strategy is as follows. We were just targeting value-driven volume growth across our business. And this is -- this started first in Barbeque Nation India and then taken over to international and also in some manner to premium CDR. The moment we have come up with a great value offer for our guests and that to also weaker dayparts, we increased our marketing spend. Earlier, this used to be approximately 1% or 2%, which has now moved by 1 percentage point higher. And on a higher revenue base, the quantum becomes also larger to ensure that these value initiatives have -- are reaching the customers appropriately through proper campaigns and initiatives. And third most important part is that we have really in our own digital assets which is helping us to convert the demand or the inquiries that are coming inside the system into a real transaction or a sale transaction, right? So all 3 put together has been accelerating. We pretty much started this in quarter 2 of last year. We have already started to see the impact of those in the months of September, October. I think that momentum build up in the month of -- in quarter 3. It carried on in quarter 4 and it's carrying on in quarter 1 of this year. What's most exciting is that our average revenue per mature restaurants have now increased to around INR 7 crores and obviously, moving ahead at the same pace from this number, it's not easy, but we are seeing that momentum continuing, right? So as I said earlier in my opening remarks, the focus is absolutely clear. We will drive transaction growth. We will drive volume growth, and we'll let other parts of the business settle down on its own. And this is exactly the playbook that we have also taken international business and in some manner in the premium CDR business.

Okay. Got that. And sir, one more question. So how much time does it take for the premium CDR restaurants to mature?

So historically, we have seen around 18 months to around 25 months. That's the time frame. But in premium CDR also was a very South region-specific brand, right? We started expanding in Pune a few years back. We went to Bombay almost 4, 5 quarters back. We went to Delhi 4, 5 quarters back. So restaurant in a South market like Chennai or Bangalore will mature faster. Expansion in a newer territory altogether like Bombay or Delhi would take some more time to mature. And that's the trajectory where we are in also right now.

The next question is from the line of Palak Shah from Entrust Family Office.

Congratulations on a very good set of numbers. My first question is regarding our matured restaurant margins ahead. What the growth that we have seen a 30% growth on the revenue per store. We have still left with 16.2% reported EBITDA margins pre-Ind AS. Even if I adjust for the 200 of gross delta that has happened over the last 1 year it's still at 18%. So is it fair to say that at 18% we cap our restaurant margin or there is still some juice left to be extracted from the operating margin point?

So thanks Palak, this is a very good question. And you're absolutely right about it that with the amount of SSSG that we have seen, which is around 28%, the mature portfolio should have delivered more margins, right? So just pure flow-through math that we always spoke about, if the business would have increased by 28%, our last year base of 13%, I at least should have been around 20%, right, because the base also shifts, right? So earlier, you're comparing on, let's say, INR 100, now you're comparing on INR 128, right? So overall, we have reported 16%. So there is a 400 basis points lower than what we have -- what we should have highly delivered, right? I think this is very clearly driven by 4 factors. One, as you rightly mentioned, last year, our gross margin was higher, and there is an almost 2 percentage point impact on gross margin. Since the SSSG base also compares with last year quarter 1, our marketing spend last year versus this year is also higher by approximately 1 percentage point. So these 2 factors itself accounts for around 3 percentage movement in the ideal number that we would have done. The third point is on our mix of dine-in delivery last year versus this year. There's a 2 percentage point incremental change between dine-in and delivery. So delivery comes with an incremental cost of commissions plus packaging cost, which is, let's say, around 30%. So there's an impact of around 60 basis points coming also from the change in delivery mix, right? And fourth very important point is we're also living in a very high inflationary environment. The energy cost, specifically gas and fuel costs has been really higher versus last year. We also have higher manpower costs due to minimum wage changes that we have seen. And there are some other items which have led to inflation below the gross margin level. So these together has again contributed to around 140, 150 basis points. So these 4 factors together had an impact of around 5 percentage. So ideally what would have been around 20% is actually 16.2% despite the fact that there's a drag for 5% from these factors. I think some of these we are already working on. And I won't say that the mature particular margin caps at 18%. I think businesses go through cycles. Once we are in a slightly favorable cycle, we also see that the gross margin impact is sequentially helping us between quarter 4 and quarter 1. So some of these initiatives will help us further.

Got it. And does this higher A&P spends at packaging our goods, playing the higher corporate overhead expenses because if I see -- look at your Y-o-Y INR 20 crores to INR 25 crores in last 1 year, the corporate overhead. I'm just subtracting your restaurant level EBITDA minus the corporate EBITDA that you have reported as Pre-Ind AS?

Right. So I didn't get the question there were sounds at the background.

Okay. So is it audible now?

Yes. Yes.

When I look at your corporate overheads which is very basic systematic attracting your restaurant EBITDA cumulatively minus the reported EBITDA margin, Pre-Ind AS EBITDA and the number has jumped up by 32% on a Y-o-Y basis ideally in a high SSSG area would have expected a much larger operating leverage there. So just part of this because of the A&P spend because there is some initial investments that you are making for a faster growth in other segments?

No, there is -- all the A&P spends are actually sitting in our store cost. So our restaurant operating margin is after all these. So there's nothing to do with that. As we mentioned in the previous call that we actually continue to invest in our back-end capabilities also. We have beefed up our culinary team. We have a new Chief Culinary Officer joining. Under them, we have created regional spots for our culinary heads. We earlier had spots for operations, but not entirely for culinary. So we have built in approximately 4 senior people all joining us from 5-star hotels with good culinary backgrounds with an experience of around 20% -- 20 years. We have beefed up our marketing team since we're making this investment, we have beefed up our investments in our brand team and digital team. We also strengthened our core tech digital team, which is on our app and website. We have also invested in some of the other specific functions where we found that needs specific areas of improvement because the business at scale and one improvement on, let's say, INR 1 of improvement will also add close to INR 1.5 crores of annual cost impact, right? So these investments have been done. So I think the right metrics to track is how did quarter 4 last year versus quarter 1 this year. We are broadly on track. The only impact would be increments which happen in the April month in our company. Other than that, I think this is a normalized level. We'll continue to invest in these positions if you believe that this particular segment of the business or area of the business requires a dedicated focus, and we'll not shy away from that to build. Our focus today is build volume growth, build scale and simultaneously also keep focusing on extracting cost-saving initiatives, efficiency initiatives and thereby deliver margins.

You mentioned that the TAM for Barbeque India is ideally 600 stores. Does it expedite your store expansion plans given that your model is better now and you believe that is scalable? Or you still believe in a more measured expansion over the next 5, 6 years in the decade?

So overall, this year to achieve a target of, let's say, 300 restaurants, we are adding 40 restaurants, right? Last year, we added around 35. We are also making investments in our business development team, our projects team, the legal team for these areas. That's continuing. So that's why today, with respect to the strong under construction pipeline that we have on the new store pipeline in the early stages is there, I feel that we'll keep adding more and more if we get a good site at an angle that we like, right? So I think overall, yes, there is a larger TAM. And yes, there is an opportunity to build it at the right scale given that it is also holding up pretty well. And we will continue to make those investments to maybe accelerate the pace if the site that comes to us justifies that. So I'm not -- I don't need to hold back anything for that.

Sorry to interrupt Mr. Palak, there is a lot of disturbance coming from your end. You are not audible. The next question is from the line of Dhwanil Desai, Turtle Capital.

Congratulations on a fantastic set of numbers and execution. So my first question, Rahul, is that you alluded to that the mature stores are already doing INR 7 crores per outlet kind of a number. Now looking, let's say, 1 year out, if you have to grow on that base I think in the earlier cycle, we were doing around similar numbers at the peak. So what are the levers that you have to move from, let's say, INR 7 crores to INR 8 crores? If you can elaborate on that, that would be very helpful.

So look, our levers are very simple. We are just focusing on building up volume growth across all our restaurants, right? And to build that, we have a focused strategy by daypart, by sessions. The team actually, we have data insights to understand which restaurant is not working on, let's say, Monday lunch or the second session of, let's say, Tuesday dinner, right? So team is structured like that. And our inquiry system that comes in either on our digital platform or on our call center, resolution call center, also tweak some of these with respect to ensuring that the volume is built up, right? We obviously also have a dedicated defined metrics for where the offer will go up to. And this is the way that we are building it. So that is one big lever that we have. Since beside all this, we have not taken any price hike in our business. We also are impacted by inflation a bit. But at the right moment, we will take that also. We will not do anything which impacts our volume growth momentum that we are building. If you feel that the momentum -- the volume has stabilized now on a larger base and in some of the places, the volumes have stabilized and there's opportunity to take some price hike, we can take that in those. But that's also a very selective decision based on that unit level itself, right? The other one is delivery. Our delivery business has also grown very well. The only impact on delivery is that the flow-through to the growth is lower because delivery also comes at a cost of higher marketing spend, slightly higher food cost as per our system and packaging costs and also commissions. So on the revenue bit, as long as it is incrementally generating absolute EBITDA for us, we are okay to do that. And overall, I think one number that I can tell you is that our average performance throughout the entire, let's say, quarter is still, let's say, lower than what we do in last 2 weeks of December, right, when the business is really good. So we are looking at that gap and saying, look, there's an opportunity, there's a customer who's dining out somewhere. Why can't they come to Barbeque Nation because the value proposition is super strong, right? Whether it goes to 8% or 8.5% or 9% or 7.5%, look, I don't know that right now. Our focus is absolutely clear. We will continue to build on volume growth and let everything else settle for itself.

Got it. Very clear. Second question is, I think this year, how do we look at going to double-digit EBITDA margin on a pre-Ind AS basis? Do we have a kind of line of sight for that? Or what are the things that need to be falling in place to get to that number?

Look, I believe moving ahead in the right direction -- our overall business economics, right? So rather than changing a number, I would like to focus on what are the levers of these margin improvements and track this, let's say, quarter-on-quarter. I think our margin levers -- as a big lever. We have matured restaurant operating margin expansion portfolio as one of the big levers, our new store cohorts are faster now. I think the new stores are maturing faster in case of Barbeque Nation than, let's say, in case of premium CDR. And the current year, the expansion is more geared towards Barbeque Nation than premium CDR, right? And lastly, the other lever is operating leverage on our back-end cost as we scale up revenue, right? Each of these levers are, in my view, moving in the right direction. And our performance in quarter 1 obviously confirms this, right? So going forward, as we've always done, we'll continue to report each of these levers.

Hello? Mr. Rahul.

Yes, I can hear you.

Yes. There is some disturbance. Your voice is getting cut again and again.

Sorry.

Yes, now it's clear. Please continue.

Okay. Sorry. So I'll repeat that. I don't know where I dropped, but I think what I was saying was we are moving in the right direction. And rather than chasing a number, we should look at what are the levers of margin improvement? And are we tracking well on these quarter-on-quarter, right? Is it clear. One is gross margin recovery. We have seen.

Sorry to interrupt, Mr. Rahul, I'll just reconnect you because there is an interruption coming again and again.

Okay. Sure.

Ladies and gentlemen, please hold while we reconnect. Yes, we have Mr. Rahul, back with us, pleas continue. Thank you.

Yes. Sorry for this. So we're talking about margin levers, right? And rather than chasing a number, I think we should look at what are the margin levers and are we moving in the right direction. I think these margin levers in our view is very clear. One is gross margin recovery. We have seen that happening in the previous quarter. Our restaurant operating margin of the mature portfolio should expand. Our new store cohorts should also mature appropriately. I think given that a lot of new store expansion is happening in Barbeque Nation, where the path to maturity is faster, so that should help. And the operating lever back-end cost, which should also help as revenue scales up. I think all of these levers are moving in the right direction. And our performance in the previous quarter is just confirming this, right? We'll continue to report on each of these levers as we move. And I believe the margin will be an outcome that we follow from these levers.

[Operator Instructions] The next question is from the line of Kaivalya Bang from IIFL Capital.

Hello, am I audible?

Yes.

Yes. First of all, congrats on a great set of numbers, sir. Sir, my first question, I just wanted to touch upon delivery. So delivery, we have seen a very strong growth. I mean I understand that the overall growth has been strong in general. But are there any specific initiatives that we are taking out for delivery? Because I'm assuming that since we are more dine-in focused, our marketing initiatives would be more oriented towards driving those sort of dine-in volume growth. So anything specific on that?

Yes. So on delivery, one, whatever marketing initiatives that we have done also have, to some extent, double impact on delivery. Our consumers know that we also do delivery from our stores, we are doing it for now almost 7, 8 years. So more marketing campaigns, while they all towards dining business also bring in a very good brand recall which converts into a delivery transaction for us. Specifically on delivery also, we have continued our focus on building up transactions and on value, right? Specifically, we have 3 brands that we operate. One is Barbeque Nation, which is focused more towards starters and tickers. Second is BBQ, which is more towards live and dayparts. And third is Dum Safar, which is for biryani. Across all of these platforms, we have launched value SKUs, and they have done extremely well in most of these restaurants. We have also run various campaigns for these SKUs, specific SKUs for various dayparts, which are not performing so well. So for example, the item called Bachelor Biryani in Dum Safar, which does extremely well during weekday lunch session because the price points are starting from as low as INR 129 for which format and going up to maybe INR 250 for a nonveg item. So these initiatives have helped. We also increased our marketing spend on the platforms to get delivery. So it's a mix of all of these 3 items that I spoke about, which has given us fantastic results on delivery.

Got it. Got it. And sir, you mentioned that we focus, I mean, dialed down on the value initiatives from 2Q FY '26. That's correct, right?