Rolex Rings Limited Devyani International Limited - 14th September 2021

 
Rolex Rings Limited Devyani International Limited - 14th September 2021
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                       Devyani International Limited
                           Rolex Rings Limited

 Initiating
IPO    Note Coverage                                   14th September
                                                              28th July 2021 2021
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  India Equity Institutional Research II SalesInitiating
                                                Note Coverage               II 14h September, 2021

  Devyani International Limited                                                                                                                                               Best pick on platter, Bon appetit

                                                                     Company Snapshot
    Recommendation                                                   Devyani International Limited or “DIL" is the largest franchisee of Yum Brands in India and is among the largest operators
                                                                     of chain quick service restaurants (“QSR”) in India on a non-exclusive basis. DIL operates 696 stores across 166 cities in
      CMP (INR)                                              115.1   India, as of June 30, 2021. In addition, DIL is a franchisee of the Costa Coffee brand in India, which is owned by Costa, and
                                                                     operated 44 Costa Coffee stores as of June 30, 2021. DIL has other operations in the F&B industry, including stores of its
      Target Price (INR)                                       151   own brands such as Vaango and Food Street. DIL also operates KFC and Pizza Hut stores in Nepal, and KFC stores in
      Upside                                                  25%    Nigeria, on a non-exclusive sole franchisee basis.
      Rating                                                 BUY
      Sector                                                 QSR     Outlook
                                                                     Given the prevailing opportunities in QSR industry, change in delivery mechanism and DIL’s focus on implementation of
                                                                     technology to increase footfall and improving operational efficiency, rightsizing stores, store expansion in new areas,
     Market Data                                                     resulting into improving unit metrics and reduction of debt, we expect DIL to be a key beneficiary of the same.

      Mkt Cap (INR Mn)                                 1,38,410      Long term drivers such as rising per capita income, changing consumer preference and food habits, young population,
      52 Wk H/L (INR)                              141.05/107.7      business culture and influence of western lifestyle are expected to drive growth of QSRs. Digital and delivery
      Volume Avg (1m)                                10,45,970       penetration which was already gaining momentum before the pandemic, was projected to take years is happening in just
                                                                     months driving faster recovery.
      Shares outs (Mn)                                     1202
      Face Value (INR)                                        1      We Initiate Coverage on Devyani International Ltd. with a BUY rating for a target price of INR 151 per share valuing at
                                                                     30x FY24E EV/EBIDTA giving 31% upside from current levels. DIL’s share price has corrected ~18% to its IPO listing price
                                                                     which provides a good opportunity to buy the stock.
    Shareholding Pattern (%)                                         Key Financials
                                                          Post       Particulars (INR Mn)                FY19                   FY20                         FY21                FY22E                    FY23E      FY24E
      Particulars                 Pre-Issue
                                                         Issue       Net Sales                          13,106                 15,164                    11,348                 15,459                    21,919     28,265
      Promoters                        75.79%             67.99%     EBITDA                             2,790                  2,555                     2,269                   3,030                     4,625     5,964
      Others                           24.21%              32.01%    PAT                                 -593                   -788                         -813                  -99                     1,046     2,203
      Total                              100%               100%
                                                                     EPS                                 -0.75                   -1.1                        -0.5                  -0.1                      0.9      1.8
                                                                     EBITDA Margin (%)                   21.3%                 16.8%                     20.0%                   19.6%                      21.1%    21.1%
                                                                      Source: KRChoksey Research

ANALYST                                                                                                                       KRChoksey Research                    Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                       is also available on Bloomberg KRCS            www.krchoksey.com
                                                                                                                   Thomson Reuters, Factset and Capital IQ
Page   3
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage   II 14h September, 2021

    Investment Rationale
    Presence across key consumption markets
    DIL operates 696 stores across all brands and are present in 26 states and three union territories across 166 cities in India, as of June 30, 2021. DIL has strong presence
    in key metro regions of Delhi NCR (comprising Faridabad, Ghaziabad, Gurgaon, Delhi and Noida), Bengaluru, Kolkata, Gurgaon, Mumbai and Hyderabad. Over the
    years, DIL been consistently increasing the number of stores both organically and inorganically. With its cluster-based expansion approach, DIL has been able to
    address demand in high-potential domestic markets.

    Store expansion – key to drive growth
    DIL operates franchises of several highly recognized global QSR brands and is the largest franchise partner for Yum in India. DIL is the non-exclusive sole franchisee for
    KFC and Pizza Hut in Nepal, and for KFC in Nigeria and is also a franchisee for Costa Coffee in India. DIL continues to add stores in Core Brands (Pizza Hut – net addition
    28 stores and KFC – net addition 92 stores in FY21). It continued to add stores in Q1FY22 in existing as well as new location despite several disturbances caused by
    second wave of Covid -19. DIL added 40 stores in Q1FY22 and increased its presence from 155 cities in March 2021 to 166 cities in June 2021.

    Improving Same Store Sales Growth (SSSG)
    The SSSG has been impacted on account of COVID-19 but DIL has focused on improving the trend which is reflected in the performance of Core Brands Business in
    Q4FY21. The SSSG of Pizza Hut and KFC shown recovery in later half of FY21 largely driven by delivery and take-away but Costa Coffee is yet to fully recover from the
    impact of Covid-19 due to relative inconvenience of packaging liquid foods, consumption of these foods is restricted to dine-in and customer’s take-away.

    Increase in delivery of foods driven by change in consumer preference
    QSRs are seeing good recovery especially because of their inherent strength in delivery. Delivery now represents a larger portion of sales compared to the pre-COVID-
    19 period. DIL carries out direct delivery and has also entered into tie-ups with delivery aggregators to accept delivery orders placed on their mobile applications.
    Majority of the deliveries are carried out by delivery aggregators that provide end-to-end delivery solutions. Revenue generated from delivery sales represented 51.15%
    of DIL’s revenue from operations in its Core Brands Business in FY2020 and increased to 70.20% of its revenue from operations in its Core Brands Business in FY2021 and
    the trend is expected to continue in near future.

    Experienced Promoters and management team with strong domain expertise
    DIL benefits from an experienced and hands on promoter responsible for putting best-in-class processes, suitably supported by professional management team &
    specialized employees. Ravi Kant Jaipuria, one of the Promoters and Non-Executive Director on the Board, has over three decades of experience in conceptualizing,
    executing, developing and expanding food, beverages and dairy business in South Asia and Africa.

    DIL’s operations are conducted by a well-qualified and experienced management team that has significant experience in all aspects of its business. Each brand DIL
    operates has a dedicated team responsible for developing and delivering a superior brand experience. The management team is led by Whole-time Director (President
    & CEO), Virag Joshi, who has been a key strategist in expansion of Pizza Hut, KFC, Costa Coffee stores from a small base of five restaurants in 2002 to over 600 stores
    in the last 19 years.
ANALYST                                                                                                  KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                  is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                              Thomson Reuters, Factset and Capital IQ
Page   4
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage      II 14h September, 2021

        S. No.               Particulars                                                                                                                                                         Page No.

        1                    Company Overview                                                                                                                                                       5

        2                    Industry Overview                                                                                                                                                      8

        3                    Investment Rationale

              a)                   Presence across key consumption markets                                                                                                                          11

              b)                   Store expansion – key to drive growth                                                                                                                            11

              c)                   Improving Same Store Sales Growth (SSSG)                                                                                                                        12

              d)                   Increase in delivery of foods driven by change in consumer preference                                                                                           12

              e)                   Experienced Promoters and management team with strong domain expertise                                                                                          13

               f)                  Continue to improve unit-level performance                                                                                                                      13

                                   Investment in technology and focus on digital capabilities
              g)                                                                                                                                                                                   13

        4                    Management                                                                                                                                                            14

        5                    Financial Projections                                                                                                                                                  15

        6                    Outlook and Valuation                                                                                                                                                 16

        7                    Risk and Concerns                                                                                                                                                     18

        8                    Consolidated Financials                                                                                                                                               19

ANALYST                                                                                                          KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                          is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                                      Thomson Reuters, Factset and Capital IQ
Page   5
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage                     II 14h September, 2021

   Company Overview
   Devyani International Limited or “DIL“ is the largest franchisee of Yum Brands in India and is among the largest operators of chain quick service restaurants in India,
   on a non-exclusive basis, and operates 696 stores across 166 cities in India, as of June 30, 2021. DIL began its relationship with Yum in 1997, when the company
   commenced operations of its first Pizza Hut store in Jaipur. DIL has subsequently continued to expand its operations with both KFC and Pizza Hut franchises, and as of
   June 30, 2021, operated 284 KFC stores and 317 Pizza Hut stores across India. In addition, DIL is a franchisee of the Costa Coffee brand in India, which is owned by
   Costa, and operated 44 Costa Coffee stores as of June 30, 2021. DIL has other operations in the F&B industry, including stores of their own brands such as Vaango and
   Food Street.
   DIL’s business is broadly classified into three verticals that includes stores of KFC, Pizza Hut and Costa Coffee operated in India (KFC, Pizza Hut and Costa Coffee
   referred to as “Core Brands”, and such business in India referred to as the “Core Brands Business”); stores operated outside India primarily comprising KFC and Pizza
   Hut stores operated in Nepal and Nigeria (“International Business”); and certain other operations in the F&B industry, including stores of their own brands such as
   Vaango and Food Street (“Other Business”).
   No of stores                                              FY19           FY20            FY21           Q1FY22   No of stores (Core Brands)                            FY19                FY20                     FY21   Q1FY22
   Core Brands                                               469            504              605             645    Pizza Hut                                             268                  269                     297     317
   International Business                                    33              35               37             NA     KFC                                                    134                  172                    264     284
   Other Business                                            67              71               50             NA     Costa Coffee                                           67                   63                     44      44
    Source: KRChoksey Research                                                                                      Source: KRChoksey Research

   In the Core Brands Business, DIL has extensive presence in 26 states and three union territories in India as of June 30, 2021. Yum! Brands Inc. operates brands such as
   KFC, Pizza Hut and Taco Bell brands and has presence globally with more than 50,000 restaurants in over 150 countries, as of December 31, 20201.
   Pizza Hut: DIL is the franchise partner of Yum for Pizza Hut in India. DIL’s first Pizza Hut store in India opened in 1997 at Jaipur. It was the first international
   restaurant chain to develop a footprint in the region. As of June 30, 2021, DIL operated 317 Pizza Hut stores located in 20 states and three union territories, across
   106 cities in India. Pizza Hut restaurants operate primarily in two formats, first being the Enhanced Dine-In for fine dine experience and second being Pizza Hut
   Delivery, which provides the options of dine-in, carry out and delivery. In addition to the original pan pizza offering, DIL’s Pizza Hut stores have an extensive menu
   featuring pizzas, pasta, beverages and desserts.
    Pizza Hut (Year ending March)                                   FY19                FY20               FY21     Pizza Hut (Year ending March)                                             FY19                  FY20         FY21
                                                                                                                    Brand Contribution (Store level Profit)                                  655.5                  439.0        372.4
    Revenue                                                         4,233               4,174              2,879
                                                                                                                    Brand Contribution (% of revenue)                                        15.5%                  10.5%        12.9%
    YoY growth (%)                                                  8.6%                -1.4%              -31.0%   Average daily sales per store (in INR)                                  44,679.3               43,917.6    34,900.4
                                                                                                                    Average daily transaction per store                                       93.8                   94.1        65.8
    Gross margin                                                    3,131               3,126              2,135
                                                                                                                    Average transaction size (in INR)                                        476.3                  467.0        530.2
    Gross margin (%)                                                74.0%               74.9%              74.1%    Same Store Sales Growth (SSSG)                                            4.7%                  -3.7%       -30.3%
      Source: KRChoksey Research                                                                                     Source: KRChoksey Research
ANALYST                                                                                                                                KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                                is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                                                            Thomson Reuters, Factset and Capital IQ
Page     6
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage           II 14h September, 2021

   Company Overview
   KFC: DIL is the franchise partner of Yum for KFC in India and is the only franchise partner for KFC in Nepal and Nigeria, through its subsidiaries. KFC is the world’s No.1
   Chicken QSR restaurant and has industry leading stature across many countries like the UK, Australia, South Africa, China, USA, Malaysia and India. The first KFC store
   in India opened in 2005 at Kolkata. As of June 30, 2021, DIL operated 284 KFC stores located in 21 states and two union territories, across 107 cities in India. DIL’s KFC
   stores have an extensive menu featuring fried chicken buckets and allied chicken products, grilled chicken, burgers, rice bowls, and beverages.

      KFC (Year ending March)                                   FY19            FY20              FY21     KFC (Year ending March)                                                  FY19                     FY20       FY21
                                                                                                           Brand Contribution (Store level Profit)                                 853.7                     972.7      1,181.7
      Revenue                                                4,641.1           6,091.3           6,442.6
                                                                                                           Brand Contribution (% of revenue)                                        27.9%                    24.6%      27.1%
      YoY growth (%)                                            31.1%           31.2%             5.8%     Average daily sales per store (in INR)                               1,13,851.6             1,16,740.4     1,00,269.9
                                                                                                           Average daily transaction per store                                     284.0                     285.6      197.2
      Gross margin                                           3,064.3           3,949.7           4,360.2
                                                                                                           Average transaction size (in INR)                                       400.9                     408.8      508.4
      Gross margin (%)                                       66.0%              64.8%            67.7%     SSSG                                                                      4.7%                    3.2%       -33.7%
      Source: KRChoksey Research                                                                            Source: KRChoksey Research

      Costa Coffee: DIL’s first Costa Coffee store in India opened in 2005 at Delhi. As of June 30, 2021, DIL operated 44 Costa Coffee stores located in eight states and
      one union territory, across 17 cities in India. DIL currently operate two formats of Costa Coffee stores - full retail stores at high-street locations and malls, and
      branded kiosks at airports, hospitals and food courts at highways. DIL’s Costa Coffee stores have an extensive menu featuring coffee, sandwiches, wraps, Indian
      snacks, desserts, and other beverages.

      Costa Coffee (Year ending March)                          FY19              FY20             FY21     Costa Coffee (Year ending March)                                          FY19                   FY20        FY21
                                                                                                            Brand Contribution (Store level Profit)                                  181.7                    174.1      33.2
      Revenue                                                   902.0            819.6             214.0
                                                                                                            Brand Contribution (% of revenue)                                        26.2%                   27.5%       19.8%
      YoY growth (%)                                             3.6%             -9.1%           -73.9%    Average daily sales per store (in INR)                                37,458.4               37,413.6      18,510.1
                                                                                                            Average daily transaction per store                                       123.1                   117.3      57.8
      Gross margin                                              693.4            634.0             168.0
                                                                                                            Average transaction size (in INR)                                        304.4                   319.1       320.2
      Gross margin (%)                                          76.9%            77.3%             78.5%    SSSG                                                                      2.7%                   -4.4%      -61.6%

        Source: KRChoksey Research                                                                           Source: KRChoksey Research

ANALYST                                                                                                                      KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                      is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                                                  Thomson Reuters, Factset and Capital IQ
Page    7
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage       II 14h September, 2021

      Company Overview
     International Business: The international journey for DIL started in 2009 with opening of stores in Nepal and Nigeria. As of June 30, 2021, DIL has 37 stores of its
     Core Brands in Nepal and Nigeria, comprising 34 KFC stores and three Pizza Hut stores. DIL operates KFC and Pizza Hut stores in Nepal, and KFC stores in Nigeria, on
     a non-exclusive sole franchisee basis. In Nepal DIL operates both YUM brands i.e. KFC & Pizza Hut, whereas in Nigeria DIL only operate KFC.

     International Business (Year ending                                                     International Business (Year ending
                                                             FY19   FY20        FY21                                                                           FY19                           FY20                       FY21
     March)                                                                                  March)
     No of stores at the beginning of the                                                                                                                        % of total          % of total          % of total
                                                             32       33         35                                                                  Amount                  Amount              Amount
     period                                                                                                                                                         Int                 Int                 Int
                                                                                                                                                    (INR Mn)                (INR Mn)            (INR Mn)
     Addition                                                 1        2          3                                                                              revenue             revenue             revenue
                                                                                             Nigeria                                                   763.6        69.2%            1,131.5          75.9%      932.3      80.8%
     Closed                                                   0        0          1
                                                                                             Nepal                                                     340.1        30.8%            359.5            24.1%      221.3          19.2%
     No of stores at the end of the period                   33       35          37         Total                                                    1,103.7      100.0%           1,491.1          100.0%      1,153.6    100.0%
         Source: KRChoksey Research                                                           Source: KRChoksey Research

    Revenue from the Core Brands Business, together with the International Business, represented 83.01%, 82.94% and 94.19% of DIL’s revenue from operations in fiscals
    2019, 2020 and 2021, respectively. DIL has been consistently expanding its store network over the years. Stores in its Core Brands Business grew at a CAGR of 13.58%
    from 469 stores as of March 31, 2019 to 605 stores as of March 31, 2021, and had 645 stores as of June 30, 2021. Despite the ongoing COVID-19 pandemic, DIL has
    continued to expand its store network and in the six months ended March 31, 2021, DIL opened 109 stores in the Core Brands Business.

    Other Business: In addition to the Core Brands Business and International Business, DIL operates stores of other brands such as Vaango, The Food Street, Ile Bar,
    AMRELI, Ckrussh Juice Bar, among others. DIL typically operates these in the form of outlets within larger food courts in malls and airports. DIL launched its own brand
    ‘Vaango’, a south Indian QSR chain in 2011. The first Vaango outlet in India opened in 2011, at Noida. As of June 30, 2021, DIL operated 27 Vaango outlets located in eight
    states and one union territory, across 15 cities in India.

    In Fiscal 2019, 2020 and 2021, DIL opened 12, 11 and 2 new Vaango outlets in India. Vaango outlets are generally located in food courts in malls and shopping complexes.
    DIL also operate food courts, restaurants and bars for brands such as ‘The Food Street’, ‘Ckrushh’, ‘Ile Bar’, among others. DIL operates these outlets across food
    courts at airports, malls, highways, and hospitals. As of March 31, 2019, 2020 and 2021, DIL had 64, 71 and 50 stores, respectively, of other brands under Other Business.
    As of June 30, 2021, DIL had 51 stores of other brands under its Other Business.

ANALYST                                                                                                                     KRChoksey Research                  Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                     is also available on Bloomberg KRCS          www.krchoksey.com
                                                                                                                 Thomson Reuters, Factset and Capital IQ
Page      8
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage    II 14h September, 2021

   Industry Overview
   The Indian food service industry witnessed multi-fold growth in the last decade largely due to changing consumer patterns, increase in eating out trends and growing
   market proliferation of brands in India. The Indian food services industry was estimated at INR 8,366 billion in FY 2019-20. The market is projected to grow at a CAGR of
   15.5% over the next five years and is expected to reach INR 17,220 billion by FY 2024-25. Factors such as Rising per capita income, increasing internet penetration,
   urbanization, changing consumer preference and food habits, young population, business culture and western lifestyle are expected to play key role in growth of the
   industry. The rise in the number of transactions, which grew at a CAGR of 2.4% during the last five years, was one of the key reason for growth in the industry. The
   number of transactions is expected to grow by an even higher rate of 6.9% in the period between 2020 and 2025.

   Aggregators to play key role in the ecosystem: Food delivery applications, such as Zomato and Swiggy, have played vital role in the recent past and are
   expected to play an even more prominent role, as a large share of consumers will continue to prefer the convenience of home deliveries. The pandemic has amplified
   the role of food delivery providers in the ecosystem. DIL is among the single largest QSR companies in India that is listed on the Swiggy platform, and is among the
   largest QSR companies in India listed on the Zomato platform in CY 2019 and 2020.

   Historically, the quick-service restaurant (QSR) channel recorded the fastest growth among all foodservice channels, at a CAGR of 5.5% from 2015 to 2020. Their ability
   to provide affordable meals, with a quick service time, helped them register significant growth during this period. Global chains, such as KFC, McDonald’s, and Burger
   King, have invested in expanding their presence in the market.

   The quick-service restaurant channel has been rapidly growing in popularity in India, owing to factors such as rise in literacy, exposure to media, increase in disposable
   incomes, and easier and greater availability. Affordability has also been a key factor. In 2020, the QSR channel made the largest contribution to the foodservice
   industry, with a sales share of 34.1%. This was followed by pub, club, and bar, and full-service restaurants, with market shares of 27.1% and 15.5% respectively.
      Indian Food Service Sector - Value and Share by Channel (Year 2020)                          Indian Food Service Sector - Value Growth by Channel (Historic growth
   3,000.0                                                                     40.0%               2015-20 and Future growth 2020-25)
                                                                                             25.0%
   2,500.0      34.1%                                                          35.0%                                                          20.2%
                                                                               30.0%         20.0%                   18.0%                                 17.7%
   2,000.0                27.1%                                                                                                   16.0%                                15.0%
                                                                               25.0%
   1,500.0                                                                     20.0%
                                                                                             15.0%       12.4%
           2,854.8
                    2,268.0         15.5%                                      15.0%         10.0%
   1,000.0                                                                8.8% 10.0%
                              1,299.9          5.2%     5.2%      4.1%
     500.0                                                                                    5.0%
                                          431.9     431.2    341.2     739.4 5.0%                     5.5%                     3.9%        2.5%
       0.0                                                                                0.0%   0.0%

                                                                                                 -5.0%
                                                                                                                               -0.8%                                                      -1.9%        -1.7%
                                                                                                               QSR            Pub, Club & Bar       FSR              Leisure            Accomodation   Coffee & Tea
                                    Sales Value (INR billion)   Market Share (In %)                                                  Historic growth             Future growth                             Shop

    Source: Company, KRChoksey Research                                                                     Source: Company, KRChoksey Research
ANALYST                                                                                                       KRChoksey Research              Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                       is also available on Bloomberg KRCS      www.krchoksey.com
                                                                                                   Thomson Reuters, Factset and Capital IQ
Page    9
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage               II 14h September, 2021

   Industry Overview
   The QSR channel leads the industry in terms of the number of outlets in 2020, at an outlet count of 1,995,104. The total number of outlets in the channel grew by a
   CAGR of 2% between 2015 and 2020; the rate is the highest among all foodservice channels. The QSR channel is expected to lead the foodservice industry in terms of
   growth in the number of outlets between 2020 and 2025, at an expected CAGR of 6.5%.
      Indian Food Service Sector – Outlet by Channel (Year 2020)
                                                                                        Indian Food Service Sector – Outlet growth by Channel

 25,00,000                                                                                                        Pub, Club & Bar                 0.5%                    1.9%
               19,95,104
 20,00,000                                                                                                      Coffee & Tea Shop           0.1%                   1.4%

  15,00,000
                                                                                                                   Accomodation                       0.7%                   2.1%
                                                                                                                               FSR                           1.6%                    2.6%
  10,00,000

                                    3,39,117            3,23,011    2,50,561
                                                                                                                 Mobile Operator                      0.7% 1.4%
  5,00,000                                                                         2,17,003          2,08,248
                                                                                                                               QSR                                         2.0%                                                             6.5%
          0
                    QSR               Mobile                 FSR   Accomodation Coffee & Tea Pub, Club & Bar                         0.0%             1.0%            2.0%             3.0%             4.0%               5.0%   6.0%          7.0%
                                     Operator                                       Shop
                                                                                                                                     Future growth (CAGR 2020-25)                               Historic growth (CAGR 2015-20)
         Source: Company, KRChoksey Research                                                                                                   Source: Company, KRChoksey Research

       Indian QSR channel grew by a CAGR of 5.5% to amount to INR 2,854.8 billion in 2020 from INR 2,189.2 billion in 2015. While the number of transactions grew by 3.8%,
       number of outlets grew by 2%. Home deliveries played a key role in pushing the number of transactions. Over the next five years, the value sales of quick-service
       restaurants is expected to grow at an even higher pace of 12.4%, indicating a steep rebound in these outlets post the pandemic.

       The year 2020 saw significant changes in the business operations of QSRs. Contactless dining experiences and takeaways were adopted by restaurants, with the help
       of technology. For instance, Pizza Hut, when it opened restaurants during the ‘unlock’ phase of the pandemic, enabled consumers to order using QR codes on their
       tables, through which they could order online. The channel is also focused on modifying their menus according to changing global trends and Indian eating habits.

       KFC also, in May 2020, introduced contactless takeaways from its restaurants. In response to COVID-19 pandemic, KFC and Pizza Hut were among the earliest brands in
       India to roll out contactless delivery and consumers have been able to place an order that is prepaid on the KFC application, mSite, and website and walk into a KFC
       outlet to pick up the order. As the pandemic is still ongoing, contactless dining and deliveries will be priorities into 2021 as well. Similar to 2020, the year is likely to see
       more fast-food outlets adopting QR code-enabled menus.

ANALYST                                                                                                                             KRChoksey Research                    Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                             is also available on Bloomberg KRCS            www.krchoksey.com
                                                                                                                         Thomson Reuters, Factset and Capital IQ
Page   10
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage   II 14h September, 2021

   Industry Overview
   Coffee and Tea Shops: The coffee tea shop channel was worth INR 341.2 billion in 2020 registering a negative CAGR of -1.7% between 2015 and 2020. The virus
   outbreak was one of the main reasons for the decline in the channel’s value during the review period. The channel represents only 4.1% of the Indian foodservice profit
   sector value. Indian coffee and tea shop market is expected to grow at a CAGR of 15.0% to reach a valuation of INR687.4 billion in 2025. Key players in this segment
   include Costa Coffee, Chai Point, Barista, Starbucks and Café Coffee Day.

   Increasing the average transaction price will drive future value growth as key operators compete for quality and innovation rather than price. With average transaction
   prices of the channel currently being the lowest of any foodservice channel, operators can look to add unique and indulgent food and drinks to the menu to gain
   premium positioning and increase average transaction prices.

   Demand for higher quality tea, coffee, and coffee beans has gained popularity in recent years. As consumers’ expectations of on-premises coffee continues to rise,
   operators are also offering capsules and roasted coffee products for home consumption. India has largely been a tea drinking country. At the turn of the twentieth
   century, however, coffee has become a more popular drink. It is now a refreshing and trendy beverage, rather than a traditional drink. The high price point associated
   with coffee compared to tea has driven the channel's sales.

   Despite its still small size, the channel is expected to have a noticeable impact on foodservice. Coffee chains, both local and foreign, are likely to grow their footprint
   significantly in coming years. The rising demand from the young population, rapid urbanization, business culture, and western lifestyle can be attributed to the
   coffee and tea shop's future growth. Further, an increase in the number of dual-income families, increasing global exposure, growing media penetration would all lead
   to the growth of coffee and tea shops in India.

    Impact of Pandemic and way forward: The pandemic has devastating effect on food service industry , the footfall fell precipitously but QSR segment was first to
    recover. Increase take away, drive through and delivery helped the industry to recover faster. The prevalence of home delivery in the Indian QSR industry is expected
    to continue to grow due to changing lifestyles and changing consumer eating patterns in the post-COVID atmosphere. Digital and delivery penetration was already
    gaining momentum before the pandemic. Now, a transformation that was projected to take years is happening in just months.

    Most key brands have seen increased online orders, higher deliveries and take away which seems to be a new normal. The pandemic accelerated the growth of online
    food ordering through food delivery apps, as consumers turned to online platforms to avoid spreading or being infected by the virus in public places. Increasing
    internet and mobile penetration in India and the advent of food delivery apps are also key factors leading consumers away from traditional dine-in experiences and
    towards convenience-driven options.

    Most of the QSRs have large number of stores in malls where footfalls are low and there are uncertainties around recovery in footfalls. With increased vaccination and
    gradual opening up of economy, brands are hopeful of increase in footfalls at malls and recovery in dine-ins. QSRs will see a better recovery compared to other
    channels, owing to their better suitability for take-away. Going forward, the investments in expansion of stores and technology will also drive the growth. Apart
    from it, recovery of income levels of consumers, rise in work from anywhere culture, menu innovation and demand from urban consumer will help recovery in near
    future.
ANALYST                                                                                                 KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                 is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                             Thomson Reuters, Factset and Capital IQ
Page    11
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage         II 14h September, 2021

    Investment Rationale
    Presence across key consumption markets
    DIL operates 696 stores across all brands and are present in 26 states and three union territories across 166 cities in India, as of June 30, 2021. DIL has strong presence
    in key metro regions of Delhi NCR (comprising Faridabad, Ghaziabad, Gurgaon, Delhi and Noida), Bengaluru, Kolkata, Gurgaon Mumbai and Hyderabad. Over the years,
    DIL been consistently increasing the number of stores both organically and inorganically. With its cluster-based expansion approach, DIL has been able to address
    demand in high-potential domestic markets.
    Presence – Top 5 cities (Core Brands)                                                                   Region-wise no of outlets (Core Brands)
    No of stores                                                       FY19                    FY20        FY21
                                                                                                                                              188
    Bengaluru                                                            23                    30           80
    New Delhi                                                            67                    70            54                                                                           254
                                                                                                                                                                                                        North   East
    Kolkata                                                              39                    39            42
                                                                                                                                                                                                        West    South
    Gurgaon                                                              35                    34            34
    Noida                                                                30                     29           28                                 47
    Total                                                               194                    202          238                                            116
    Source: KRChoksey Research                                                                                                         Source: KRChoksey Research

    Store expansion – key to drive growth
    DIL operates franchises of several highly recognized global QSR brands and is the largest franchise partner for Yum in India. DIL is the non-exclusive sole franchisee for
    KFC and Pizza Hut in Nepal, and for KFC in Nigeria and is also a franchisee for Costa Coffee in India. DIL continues to add stores in Core Brands (Pizza Hut – net
    addition 28 stores and KFC – net addition 92 stores in FY21). It continued to add stores in Q1FY22 in existing as well as new location despite several disturbances caused
    by second wave of Covid -19. DIL added 40 stores in Q1FY22 and increased its presence from 155 cities in March 2021 to 166 cities in June 2021.
  Pizza Hut (Year ending March)                                 FY19           FY20             FY21   KFC (Year ending March)                                                     FY19                 FY20      FY21
  Stores at the beginning of the year                           244             268             269    Stores at the beginning of the year                                          99                   134       172
  Addition                                                      35               15              57    Addition                                                                      25                  31        50
  Acquired                                                       0                0              0     Acquired                                                                      13                   9        51
  Closed                                                         11              14              29    Closed                                                                         3                   2            9
  Stores at the end of the year                                 268             269             297    Stores at the end of the year                                                134                  172       264
    Source: KRChoksey Research                                                                         Source: KRChoksey Research

ANALYST                                                                                                                KRChoksey Research              Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                is also available on Bloomberg KRCS      www.krchoksey.com
                                                                                                            Thomson Reuters, Factset and Capital IQ
Page    12
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage             II 14h September, 2021

    Investment Rationale

    Improving Same Store Sales Growth (SSSG): The SSSG has been impacted on account of COVID-19 but DIL has focused on improving the trend which is
    reflected in the performance of Core Brands Business in Q4FY21. The SSSG of Pizza Hut and KFC shown recovery in later half of FY21 largely driven by delivery and
    take-away but Costa Coffee is yet to fully recover from the impact of Covid-19 due to relative inconvenience of packaging liquid foods, consumption of these foods is
    restricted to dine-in and customer’s take-away.

    SSSG for Core Brands Business

                                                                       SSSG(%)                     SSSG(%)                                                                                                                   Q4
                                                                                                              Brand Contribution (INR in Mn)                                    2018-19             2019-20      2020-21
                                                                                                                                                                                                                           2020-21
    Same Store Sales Growth
                                                                                                   Q4 2020-
                                                             2018-19       2019-20 2020-21                    KFC                                                                  854                  973       1182       575
                                                                                                      21

    KFC                                                       4.7%          3.2%       -33.7%       19.6%     Pizza Hut                                                            655                  439       372        157

    Pizza Hut                                                 4.7%          -3.7%      -30.3%       13.4%     Costa Coffee                                                          182                 174        33        26

    Costa Coffee                                              2.7%          -4.4%      -61.6%       -24.9%    Brand Contribution - Core Brands Business                           1,691               1,586       1,587      758

                                                                                                                 Source: KRChoksey Research
     Source: KRChoksey Research

    Increase in delivery of foods driven by change in consumer preference
    QSRs are seeing good recovery especially because of their inherent strength in delivery. Delivery now represents a larger portion of sales compared to the pre-COVID-
    19 period. DIL carries out direct delivery and has also entered into tie-ups with delivery aggregators to accept delivery orders placed on their mobile applications.
    Majority of the deliveries are carried out by delivery aggregators that provide end-to-end delivery solutions. Revenue generated from delivery sales represented 51.15%
    of DIL’s revenue from operations in its Core Brands Business in FY2020 and increased to 70.20% of its revenue from operations in its Core Brands Business in FY2021 and
    the trend is expected to continue in near future.

ANALYST                                                                                                                          KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                          is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                                                      Thomson Reuters, Factset and Capital IQ
Page   13
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage   II 14h September, 2021

   Investment Rationale
   Experienced Promoters and management team with strong domain expertise
   DIL benefits from an experienced and hands on promoter responsible for putting best-in-class processes, suitably supported by professional management team &
   specialized employees. Ravi Kant Jaipuria, one of the Promoters and Non-Executive Director on the Board, has over three decades of experience in conceptualizing,
   executing, developing and expanding food, beverages and dairy business in South Asia and Africa.

   DIL’s operations are conducted by a well-qualified and experienced management team that has significant experience in all aspects of its business. Each brand DIL
   operates has a dedicated team responsible for developing and delivering a superior brand experience. The management team is led by Whole-time Director
   (President & CEO), Virag Joshi, who has been a key strategist in expansion of Pizza Hut, KFC, Costa Coffee stores from a small base of five restaurants in 2002 to
   over 600 stores in the last 19 years.

   Continue to improve unit-level performance
   The management believes that with further cost efficiencies DIL will be able to expand its store level profitability and Brand Contribution Margins. The growth of its
   stores will allow DIL to apportion fixed overheads costs such as brand building and administrative expenses across its store network which will improve the Brand
   Contribution Margins. DIL has been able to rationalize certain stores that were loss-making to improve its overall store level profitability. Store rationalization will also
   help improve the margins going forward. The continued food innovation and value proposition will help enhance its unit level performance by driving order frequency
   and order ticket size. Going forward, DIL intends to work with Yum to re-engineer its menus and introduce high margin offerings aligned to target groups for home
   consumption.

   Investment in technology and focus on digital capabilities
   DIL will continue to invest in technology to maintain its competitive advantage. The company will focus on improving its overall technology infrastructure including
   digital and delivery capabilities. DIL plans to increase its investment in end-to-end digitalization, automation, artificial intelligence and machine learning, to connect
   online traffic with its offline assets effectively. DIL is working with Yum to improve its technology platform and further integrate its systems with Yum’s platform to
   ensure greater operational efficiency.

ANALYST                                                                                                   KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                   is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                               Thomson Reuters, Factset and Capital IQ
Page   14
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage   II 14h September, 2021

   Management

    Ravi Kant Jaipuria, Chairman and Non-Executive Director
    Ravi Kant is a promoter of the Company and has over three decades of experience in conceptualizing, executing, developing and expanding food, beverages and dairy
    business in South Asia and Africa. He has an established reputation as an entrepreneur and a business leader and has received PepsiCo’s award for International
    Bottler of the Year, awarded in 1997.

    Varun Jaipuria, Non-Executive Director
    Varun attended Millfield School, Somerset, England and attended a degree course in international business from the Regent’s University, London. He has 12 years of
    experience in the soft drinks industry and has also completed a program for leadership development at the Harvard Business School. He has been a Director on the
    Board since November 13, 2009.

    Raj Pal Gandhi, Non-Executive Director
    Raj Pal has over 28 years of experience with one of the group companies (Varun Beverages Limited) and has been instrumental in strategizing the company’s
    diversification, expansion, mergers and acquisitions, capex funding and institutional relationship.

    Virag Joshi , Whole-time Director (President & CEO)
    Virag has been a key strategist in expansion of Pizza Hut, KFC, Costa Coffee outlets from a small base of five restaurants in 2002 to 600 plus outlets in last 19 years. He
    has been earlier associated with Indian Hotels Company Limited, Domino’s Pizza India Limited, Milkfood Limited, and Priya Village Roadshow Limited.

    Manish Dawar, Whole-time Director and Chief Financial Officer
    Manish is a Chartered Accountant and a member of the Institute of Company Secretaries of India. He has wide experience in various industry domains and across
    various geographies in the world. He has worked in various corporate setups including Reebok India, Reckitt Benckiser, Vedanta, DEN Networks Limited, and
    Vodafone India Limited.

    Naresh Trehan, Independent Director
    Naresh holds a bachelor’s degree in medicine and surgery from the University of Lucknow and has been certified as a thoracic and cardiac surgeon by the American
    Board of Thoracic Surgery. He has received the Padma Bhushan Award in 2001, presented by the Government of India. Naresh has been a Director on the Board since
    April 21, 2021.

ANALYST                                                                                                  KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                  is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                              Thomson Reuters, Factset and Capital IQ
Page    15
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage       II 14h September, 2021

      Financial Projections
      Revenue
      We expect DIL to clock a healthy 16.6% revenue CAGR over FY19-FY24E, and expect revenue to touch INR 28,265 Mn. in FY24E from INR 13,106 Mn. in FY19. We expect
      revenue to see sharp jump from later half of FY22E as increased efforts toward vaccination and safety will restore confidence in consumers. We expect growth to
      come from focus on implementation of technology to increase footfall, new store expansion, improvement in same store sales growth, increased footfall in malls,
      increased delivery and take-away and recovery in dine-in.

                     30000                                                                                                                                                                                          60%
                                                                                                                                 36%                             42%                                                40%
                     20000                                                                                                                                                                           29%
                                                       18%            16%                                                                                                                                           20%
                                                                                                                                                                                            28,265
                                                                                                                                                             21,919                                                 0%
                     10000                                                                            -25%
                                               13,106            1516,4                                                 15,459                                                                                      -20%
                                                                                             1134,8
                             0                                                                                                                                                                                      -40%
                                                2019              2020                       2021                    2022E                                   2023E                           2024E
                                                                Revenue                                      % growth YoY
             Source: KRChoksey Research

      EBITDA and EBITDA margin
      We expect DIL to report 16.4% EBITDA CAGR over FY19-FY24E and EBIDTA margins to remain at the 21%. EBITDA in absolute terms is expected to reach INR 5,964 Mn.
      in FY24E from INR 2,790 Mn. in FY19. The improvement in margin is largely driven by improving operational efficiency, rightsizing stores, store expansion in new
      areas, focus on improving unit metrics and reduction of debt.

                       8000                                                                                                                                                                                                    25%
                                                         21%                                            20%                                                                       21%                                 21%      20%
                       6000                                                                                                                   20%
                                                                            17%
                                                                                                                                                                                                                               15%
                       4000
                                                                                                                                                                                                                  5,964        10%
                       2000                                                                                                                                               4,625
                                                 2,790              2,555                                                             3,030                                                                                    5%
                                                                                                    2,269
                             0                                                                                                                                                                                                 0%
                                                  2019               2020                           2021                              2022E                               2023E                                   2024E
            Source: KRChoksey Research                            EBIDTA                            Margin (%)

ANALYST                                                                                                                       KRChoksey Research                 Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                       is also available on Bloomberg KRCS         www.krchoksey.com
                                                                                                                   Thomson Reuters, Factset and Capital IQ
Page   16
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage   II 14h September, 2021

   Outlook and Valuation

   We expect favourable economic scenario for businesses and economy after the pandemic recedes. Factors such as Rising per capita income, increasing internet
   penetration, urbanization, changing consumer preference and food habits, young population, business culture and western lifestyle are expected to play key role in
   growth of the industry. Digital and delivery penetration was already gaining momentum before the pandemic. Now, a transformation that was projected to take
   years is happening in just months driving faster recovery.

   Launch of 5G to boost online orders across geographies: The launch of 5G technology will boost the internet penetration in urban as well as rural India which
   will lead to higher online ordering which augurs well for QSR players like Devyani International given their increased focus on delivery which has already reached to
   70% in FY21 and it is further expected to increase despite recovery in dine-in.

   Recovery in footfall at malls to improve SSSG: QSRs have sizeable presence in malls which has severely impacted due to outbreak of Covid-19. The footfall at
   malls were initially tepid but it is gradually improving across geography which is good sign for players like DIL. The same store sales growth of DIL is expected to
   improve as the restrictions around dine-in further eases.

   Store rollout in new areas will improve revenue visibility: DIL intends to increase the store network by implementing its defined new-store roll out process
   and its cluster approach and penetration strategy with respect to store location, while aiming to achieve an optimal mix across different types of restaurant formats
   in order to drive footfalls and compete effectively. As DIL expands its store network, the company also intends to expand in new areas and markets where there is
   strong potential for growth.

   Focus on digitization to improve traffic: DIL plans to increase its investment in end-to-end digitalization, automation, artificial intelligence and machine
   learning, to connect online traffic with its offline assets effectively. The company is working with Yum to improve its technology platform and further integrate its
   systems with Yum’s platform to ensure greater operational efficiency.

   DIL’s topline in FY21 has been impacted, in-line with the industry, largely due to Covid-19 as QSRs are either closed entirely or operating on a limited basis, offering
   only takeout, pickup, delivery, drive-through, or some combination of those options. Revenues from operations for FY 21 have come in at INR 11348 Mn, compared to
   INR 15164 Mn and INR 13106 Mn for FY20 and FY19 respectively. EBITDA margin were also lower at 15.8% in FY21 compared to 16.6% and 19.4% respectively for the
   corresponding periods.

   DIL, however, managed to reduce losses last year by taking cost rationalization initiatives. DIL is taking various initiatives to improve company’s performance
   including rightsizing stores, paying off debt from IPO proceedings, focusing on delivery which is a structural change in the industry, negotiating lease rental costs and
   continued focus on store expansion.

ANALYST                                                                                                 KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                 is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                             Thomson Reuters, Factset and Capital IQ
Page   17
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage          II 14h September, 2021

   Outlook and Valuation
   Peer Comparison
   DIL is one of the key player in the QSR industry and reasonably valued compared to its peers and industry average. The growth potential in the industry is immense
   and DIL is adequately placed to take advantage of the prevailing trend in the industry. DIL’s margin profile is better than most of the key players and expected to
   improve further. If we compare these companies on price to sales (on FY21 sales) Devyani International (price to sales 12.8x) is available at a discount to Jubilant
   Foodworks (price to sales 14.2x).

   In last one year the stock price of Jubilant Foodworks has given return of more than 80%, Westlife Development has given return of more than 40% and Burger King
   India has given more than 160% return from its IPO price. In comparison, DIL has given 30% return since its listing.
                                                             Mkt Cap
                                                                                                                                                                                                            EBIDTA
    Company Name              CMP (INR) (INR Mn) EV/EBIDTA EV/Sales Price/Sales                 RoE     RoCE         Company Name                               Revenue                  EBIDTA             Margin   PAT
    Devyani International        115.1   1,38,410   54.8     12.5       12.8                    -113%    9%          Devyani International                            11,348               2,269             20%           -813
    Jubilant FoodWorks
                                4,099   5,40,954    53.0     12.4       14.2                    18%     16%          Jubilant FoodWorks Limited                       33,120               7,800             24%       2,320
    Limited
    Westlife Development                                                                                             Westlife Development Limited                     9,860                 610               6%           -990
                                  518     80,797   134.4     8.3        7.03                    -17%     -2
    Limited
    Burger King India Limited    160      61,375    86.7     4.4        10.1                    -35      -7          Burger King India Limited                        4,940                  150              3%       -1,740
                                                                                                                          Source: KRChoksey Research
      Source: KRChoksey Research

   Valuation
   We believe multiple growth drivers are in place for QSR industry for next 5-10 years and DIL is in sweet spot to take advantage of them. Given the prevailing
   opportunities in QSR industry and DIL’s focus on implementation of technology to increase footfall and improving operational efficiency, rightsizing stores, store
   expansion in new areas, focus on improving unit metrics and reduction of debt, we expect DIL to be a key beneficiary of the prevailing trend in the industry. We
   Initiate Coverage on Devyani International Ltd. with BUY rating and target price of INR 151 per share, 30x FY24E EV/EBIDTA and 31% upside from current levels. The
   share price of DIL is trading at ~18% discount to its IPO listing price which provides good opportunity to buy the stock.

   Recent initiatives taken by DIL will help in increasing revenue however the economic recovery post Covid-19 is key for the QSR industry. Reports suggest organised
   restaurant business will take at least a year after the lockdown is lifted to recover from the Covid-19 pandemic as recovery would be gradual. We have considered
   moderated impact of third wave of Covid-19 on the performance of the company in FY22. However, we will relook at our valuation considering sever impact of third
   wave of Covid-19 on the economy and performance of the company.

ANALYST                                                                                                                     KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                     is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                                                 Thomson Reuters, Factset and Capital IQ
Page   18
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage   II 14h September, 2021

   Risks and Concerns:
   •  The outbreak of the COVID-19 pandemic and its continuing impact on the business and operations has been significant. The impact of the pandemic on company’s
   operations in the future, including its effect on the ability or desire of customers to dine in stores, is uncertain and may be significant and continue to have an adverse
   effect on company’s business prospects, strategies, business, operations, company’s future financial performance, and the price of their Equity Shares.
   • The company relies on arrangements with Yum for its KFC and Pizza Hut stores that comprise a significant majority of company’s business, and a termination of or
   inability to renew these arrangements, will have a material adverse effect on company’s business, results of operations and financial condition.
   • The company has incurred losses in Fiscals 2019, 2020 and 2021, resulting in erosion of our net worth. In the event company’s net loss continues to increase, it may
   adversely affect company’s business and financial condition.
   • The company’s Statutory Auditors have included certain adverse remarks/ qualifications/ matters of emphasis in the Audited Consolidated Financial Statements.
   • There are outstanding litigation proceedings against the Company, Subsidiaries, Directors, and Promoters. Any adverse outcome in such proceedings may have an
   adverse impact on company’s reputation, business, financial condition, results of operations and cash flows.
   • Changes in consumer preferences and food habits as well as negative perception of the QSR industry could decrease the demand for company’s products and
   have a material adverse effect on company’s business, results of operations and financial condition.
   • Increasing cost of raw materials and other costs could adversely affect company’s profitability.
   • Failure to obtain or maintain or renew licenses, registrations, permits and approvals in a timely manner or at all may adversely affect company’s business and
   results of operations.
   • The company has certain contingent liabilities that have not been provided for in company’s financial statements, which if they materialize, may adversely affect
   company’s financial condition.
   • Any failure or disruption or breaches of company’s information technology systems or an inability to adapt to newer systems could adversely impact company’s
   business and operations.
   • If the company is unable to comply with health, safety and environmental regulations, and any other regulations, company’s business, results of operations and
   reputation could be adversely affected.

ANALYST                                                                                                  KRChoksey Research             Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                  is also available on Bloomberg KRCS     www.krchoksey.com
                                                                                              Thomson Reuters, Factset and Capital IQ
Page   19
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage            II 14h September, 2021

   Financials
   Income Statement                                                                                 Balance Sheet
 INR Mn                                             FY20     FY21     FY22E     FY23E      FY24E    INR Mn                                                  FY20              FY21              FY22E         FY23E     FY24E
                                                                                                    Share capital                                           1,062             1,154              1,203         1,203     1,203
 Revenues                                          15,164    11,348   15,459    21,919     28,265   Reserves and surplus                                    -1,891            1,138             4,236          5,282     7,485
                                                                                                    Shareholders' funds                                    -2,282              719               5,019        6,065      8,268
 COGS                                               4,604    3,447    4,684     6,641       8,564
                                                                                                    Long-term borrowings                                    3402              3594                354           354       354
 Gross profit                                      10,560    7,902    10,775    15,278     19,701   Short term borrowings                                  904.6               211.1              211.1         211.1     211.1
                                                                                                    Total debt                                              4,307             3,805               565           565       565
 Employee cost                                      2,255    1,543    2,102     2,981       3,844
                                                                                                    Other Financial liabilities                             11,812           7,986              7,986         7,986     7,986
 Other expenses                                     5,750    4,089    5,643     7,672       9,893   Other Liabilities                                         126              179                179           179       179
                                                                                                    SOURCES OF FUNDS                                       13,963            12,688             13,749        14,795    16,998
                                                                                                    PPE                                                     4,787             4,307              5,031         5,759     5,984
 EBITDA                                             2,555    2,269    3,030     4,625       5,964   Other Intangible Assets                                  577              1,855              1,855         1,855     1,855
                                                                                                    Capital WIP                                               135              143                143           143       143
 EBITDA Margin                                        17%     20%      20%        21%        21%    Non-current investments                                11,498             7,922              7,922         7,922     7,922
 Depreciation & amortization                        2,233    2,295    2,164     2,630       2,827   Goodwill                                                 224               644                644           644       644
                                                                                                    Other financial assets                                    182              167                167           167       167
 EBIT                                                283     -505      819      1,929       3,053   Non-current assets                                     17,404            15,039             15,763        16,491    16,716
                                                                                                    Inventories                                               721              622                847          1,201     1,549
 Interest expense                                   1,584    1,528    1,076     1,076       1,076
                                                                                                    Trade receivables                                         173              169                 212          300       387
 Other income                                         187     641      155        219        283    Cash and Bank Balance                                    160               405                329           818      2,974
                                                                                                    Other current & financial assets                         378               449                450           451       452
 PBT                                                 -769    -824      -102     1,072       2,260
                                                                                                    Current assets                                          1,432             1,645              1,838         2,771     5,362
 Tax                                                  18      -11       -3        27          56    less: current liabilities and
                                                                                                                                                           4,873             3,996               4,033        4,726      5,406
                                                                                                    provisions
 Share of Profit/(Loss) of
                                                       0       0        0          0          0     Trade payables                                          1,632             1,619              1,655         2,347     3,027
 Associates/Minority
                                                                                                    Other current liabilities                                170               193                193           193        193
 Net profit                                          -788     -813     -99      1,046       2,203   Other financial liabilities                             3,027             2,100              2,100         2,100      2,100
 EPS (INR)                                           -1.14   -0.50    -0.08      0.87        1.83   Short-term provisions                                     44                83                 84           85         86
                                                                                                    Net current assets                                     -3,441            -2,350             -2,195        -1,955       -44
 No. of Shares (Mn) - Diluted                       1,062    1,154    1,203     1,203       1,203   APPLICATION OF FUNDS                                   13,963            12,688             13,568        14,536     17,203

ANALYST                                                                                                                     KRChoksey Research               Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                     is also available on Bloomberg KRCS       www.krchoksey.com
                                                                                                                 Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II SalesInitiating
                                                Note Coverage   II 14h September, 2021                                                                                                                      Page 20

      Cash Flow Statement

    INR Mn                                                                               FY20                 FY21                            FY22E                          FY23E                 FY24E

    Net Cash Generated From Operations                                                   3,015               2,391                            1,754                          3,849                 5,249

    Net Cash Flow from/(used in) Investing Activities                                    -974               -3,586                            -3,000                        -3,000                 -3,000

    Net Cash Flow from Financing Activities                                              -2,226              1,420                            1,178                           -387                  -149

    Net Inc/Dec in cash equivalents                                                       -133                267                              -70                             489                 2,156

    Opening Balance                                                                       266                  132                             400                             329                  818

    Closing Balance Cash and Cash Equivalents                                             132                 400                              329                             818                 2,974

    Ratio Analysis

    Key Ratio                                                                             FY20                 FY21                            FY22E                           FY23E                FY24E

    EBITDA Margin (%)                                                                      17%                  20%                             20%                              21%                 21%

    RoE (%)                                                                                 -                  -113%                            -2%                              17%                 27%

    RoCE (%)                                                                              14%                   -11%                            15%                              29%                 35%

    EV/EBITDA                                                                             51.6                 62.7                            47.8                              31.2                23.9

    EV/Sales                                                                               8.7                  12.5                            9.4                              6.6                 5.0

    EPS (INR)                                                                             -1.14                -0.50                           -0.08                            0.87                 1.83

ANALYST                                                                                                        KRChoksey Research                 Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                        is also available on Bloomberg KRCS         www.krchoksey.com
                                                                                                    Thomson Reuters, Factset and Capital IQ
Page      21
  India Equity Institutional Research II SalesInitiating
                                                Note Coverage                               II 14h September, 2021

                                                                                                                    Rating Legend (Expected over a 12-month period)
                                                           Our Rating                                                                                                                                                   Upside
                                                              Buy                                                                                                                                                    More than 15%
                                                           Accumulate                                                                                                                                                   5% – 15%
                                                              Hold                                                                                                                                                       0 – 5%
                                                             Reduce                                                                                                                                                      -5% – 0
                                                              Sell                                                                                                                                                   Less than – 5%
   ANALYST CERTIFICATION:
   I, Vikrant Kashyap PGDBM (Finance & IT), Research Analyst, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect my views about the subject issuer(s) or securities. I also certify that no part of our
   compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
   Terms & Conditions and other disclosures:
   KRChoksey Shares and Securities Pvt. Ltd. (hereinafter referred to as KRCSSPL) is a registered member of National Stock Exchange of India Limited and Bombay Stock Exchange Limited. KRCSSPL is a registered Research Entity vides SEBI Registration No. INH000001295 under SEBI
   (Research Analyst) Regulations, 2014.
   We submit that no material disciplinary action has been taken on KRCSSPL and its associates (Group Companies) by any Regulatory Authority impacting Equity Research Analysis activities.
   KRCSSPL prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analyst covers.
   The information and opinions in this report have been prepared by KRCSSPL and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to,
   copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of KRCSSPL. While we would endeavor to update the information herein on a reasonable basis, KRCSSPL is not under any obligation to update the
   information. Also, there may be regulatory, compliance or other reasons that may prevent KRCSSPL from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or
   KRCSSPL policies, in circumstances where KRCSSPL might be acting in an advisory capacity to this company, or in certain other circumstances.

   This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be
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   opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent
   judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. KRCSSPL accepts no liabilities whatsoever for any loss or
   damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ
   materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. Our employees in sales and marketing team, dealers and other professionals may provide oral or written market commentary or trading
   strategies that reflect opinions that are contrary to the opinions expressed herein, .In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest.

   Associates (Group Companies) of KRCSSPL might have received any commission/compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of brokerage services or specific transaction or
   for products and services other than brokerage services.
   KRCSSPL or its Associates (Group Companies) have not managed or co-managed public offering of securities for the subject company in the past twelve months.
   KRCSSPL encourages the practice of giving independent opinion in research report preparation by the analyst and thus strives to minimize the conflict in preparation of research report. KRCSSPL or its analysts did not receive any compensation or other benefits from the companies
   mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither KRCSSPL nor Research Analysts have any material conflict of interest at the time of publication of this report.
   It is confirmed that, Vikrant Kashyap PGDBM (Finance & IT), Research Analyst and Parvati Rai (MBA-Finance, M.com), Head Research, of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our
   Research Analysts is not based on any specific brokerage service transactions.
   KRCSSPL or its associates (Group Companies) collectively or its research analyst do not hold any financial interest/beneficial ownership of more than 1% (at the end of the month immediately preceding the date of publication of the research report) in the company covered by Analyst,
   and has not been engaged in market making activity of the company covered by research analyst.
   It is confirmed that, Vikrant Kashyap PGDBM (Finance & IT), Research Analyst and Parvati Rai (MBA-Finance, M.com), Head Research, do not serve as an officer, director or employee of the companies mentioned in the report.
   This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other Jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which
   would subject KRCSSPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are
   required to inform them of and to observe such restriction.                                                            Please send your feedback to research.insti@krchoksey.com
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                                                                                                                                    KRChoksey Shares and Securities Pvt. Ltd.
                                                                                                                                                Registered Office:
                                                                                                                       1102, Stock Exchange Tower, Dalal Street, Fort, Mumbai – 400 001.
                                                                                                                                Phone: +91-22-6633 5000; Fax: +91-22-6633 8060.
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ANALYST                                                                                                                                                                   KRChoksey Research                   Phone: +91-22-6696 5555, Fax: +91-22-6691 9576
Vikrant Kashyap, research2@krchoksey.com, +91-22-6696 5423                                                                                                  is also available on Bloomberg KRCS            www.krchoksey.com
                                                                                                                                                              Thomson Reuters, Factset and Capital IQ
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