Barbeque Nation Hospitality Limited (BARBEQUE) Q2 FY23 Earnings Concall Transcript

Barbeque Nation Hospitality Limited (NSE:BARBEQUE) Q2 FY23 Earnings Concall dated Nov. 09, 2022

Corporate Participants:

Kayum Dhanani — Managing Director

Raul Agarwal — Chief Executive Officer and Whole time Director

Analysts:

Amandeep Grover — Ambit Capital — Analyst

Percy Panthaki — IIFL — Analyst

Pritesh Chheda — Lucky Investment Managers Private Limited — Analyst

Varun Singh — IDBI Capital — Analyst

Harit Kapoor — Investec Capital Business — Analyst

Vishal Gutka — PhillipCapital — Analyst

Vicky Punjabi — UTI Mutual Fund — Analyst

Manish Poddar — Motilal Oswal AMC — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, And welcome to Q2 FY ’23 Earnings Conference Call of Barbecue Nation Hospitality Limited, hosted by Ambit Capital. [Operator Instructions]I now hand the conference over to Mr. Amandeep Grover from Ambit Capital. Thank you, and over to you.

Amandeep Grover — Ambit Capital — Analyst

Thank you. Good evening, everyone. Welcome to Q2 FY ’23 Earnings Call of Barbeque Nation Hospitality Limited. From the management, we have with us Mr. Kaan Banani, Managing Director; Mr. Raul Agarwal, CEO and Whole time Director; Mr. Arana Mittal, Chief Financial Officer; and Mr. Vijay Sharma, Head of Investor Relations. Before we begin the presentation, I would like to remind you that some of the statements were in today’s conference call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to the earnings presentation for a detailed disclaimer. I now hand over the conference over to Mr. Kaan Banani. Thank you, and over to you, sir.

Kayum Dhanani — Managing Director

Thank you. A very good evening, ladies and gentlemen. I take the pleasure in welcoming you to Quarter 2 FY ’20 conference call of articulation. This was a milestone quarter in terms of store additions as we crossed 200 marks during the quarter. We celebrated this milestone even by participating in the other festival serving needs to 200 underprivileged kids across each of our 200 restaurants, serving a 40,000 meals. We added 10 new stores during the quarter taking our total store count to 205 stores and remain confident of achieving our guidance of 40 stores for FY ’23.

On the existing 25 restaurants, Babinet India network has 1 86 restaurants, Toscano has 13 restaurants and international portfolio includes 6 restaurants. We continue our growth momentum in quarter 2 FY ’23 with year-on-year revenue growth of 41%. This was driven by 23.4% same-store sales growth a new additional store additions. Our dining business has grown by 61% on a year-on-year basis, again, driven by volume increase and increase in average realization. Our dining business growth was partially offset by 23% year-on-year decline in delivery revenues. While our delivery business volumes have increased on a year-on-year basis, — average order values have come down due to the change in product mix.

Our delivery business has stabilized during the quarter, and we are starting to see marginal uptick in monthly delivery revenues. As discussed during the last quarter with the objective of further enhancing our delivery portfolio, we launched a Pirani brand called Bumper. — unsafe was launched during the second half of the quarter across 25 locations. The initial response to this product has been very encouraging, and we plan to launch themself across all our restaurants in a case manned by the end of FY ’23.

Our gross margins improved by over 40 basis points during the quarter as compared to the previous year and dropped by 70 basis points as compared to the previous quarter. This was primarily led by input cost inflation. We are seeing a moderation in some of our input costs and believe that the gross margins should marginally expand during the second half of the year. Our reported EBITDA margin was 19.3% as compared to reported EBITDA margin of 22.6% in the same quarter of the previous year. However, last year, we had the benefit of some one of rent waivers. — adjustments for these waivers.

Our core EBITDA margin remained flat compared to the same period last year. This translates to a core EBITDA growth of 39.1% versus the previous year. Our margins are also impacted by the higher mix of new and yet to mature restaurants. Our restaurant level EBITDA margins for the mature restaurant continues to be strong and healthy. We continue to remain focused on our core strategy of expanding the Barbeque Nation India network. — building a strong delivery business, growing the Toscana brand and calibrated expansion of our international business. We are extremely focused on growing each of these 4 verticals to build one of the largest food service companies owning its own restaurant brands.

With this, now I hand over to Raul to take you through the quarterly performance. Thank you very much.

Raul Agarwal — Chief Executive Officer and Whole time Director

Thank you, Per. Good evening. In quarter 2 FY ’23, consolidated revenue from operations were INR310.5 crores, delivering a year-on-year growth of 4.6%. This was driven by same-store sales growth and network expansion of 40 new stores during the last 12 months. On a sequential basis, overall revenues relatively flat despite the fact that Q2 is a seasonally weak quarter for the business. Mining business grew by 61% over last year, driven by both volume growth and increase in average picalization.

In the delivery segment, delivery transactions have increased on a year-on-year basis. However, average order value has declined due to a change in product mix. This led to overall delivery revenue declining by 23% versus the previous year and around 65% versus the previous quarter. The share of our box business has declined and share of a la carte orders have increased — based on the new reengineering exercise, we also launched a few combo mills, which called very encouraging response.

Launch of Demap also added to the delivery revenue go marginally. Temora operating in 12% of our network and that to broadly is only a month. after a few quarters of sequential decline in delivery, we are seeing uptick in our overall JV delivery sales and believe that going forward, delivery business would start contributing to overall growth. On a segment basis, each of the 3 businesses have performed well molecule in revenue grew year-on-year by 38%. Revenue from Toscano business doubled compared to same period last year. And our international business recorded a year-on-year revenue growth Consolidated gross margin for the quarter was 66.1% compared to 65.6% in Quarter 2 FY ’22.

We were able to materially improve the gross margin as compared to the last year despite inflationary pressure on input cost. — are calibrated price hikes in the past year and improved operating efficiencies enabled us to manage gross margins better. On a sequential basis, gross margin declined by 70 bps, largely led by input cost inflation. We have also not taken any structural price hikes during the quarter. We’re already seeing some softening in core input costs and believe that gross margin should marginally improve in H2 of this fiscal year. Reported EBITDA for the quarter was around INR60 crores with margins of 19.3% as compared to EBITDA margin of 22.6% in the previous year same quarter.

Comparable quarter last year included some one-off rental levels, as Pam mentioned. Existing for these, the margins were flat, and our core EBITDA margins also got EBITDA also grew around 39% year-on-year. Adjusted EBITDA margin, which is pre-Ind numbers, India 116 was 10.5% during the quarter and grew by 28.2% versus last year. Again, adjusting for these one-off waivers, rental levels that we got last year, — the growth in EBITDA or adjusted EBITDA without Ind AS 116 was around 75%. EBITDA margins also had the impact of new store added during the last 1 year. and which is yet to mature out of total network of 205 restaurants, 47 restores are classified in the new Westerns.

And out of this, 40 were added only in last 1 year. The core portfolio of mature store continues to do well. Despite quarter 2 being a seasonally soft quarter, this matured portfolio delivered average annualized revenue of INR6.67 crores per restaurant with average operating margins of 19.2%. This is restoring margins. Again, India 16%. On H1 basis, this matured portfolio delivered annualized revenue of around INR6.8 crores per restaurant with restaurant-operating margins of around 20%. As we enter sequentially, a seasonally stronger second half of the business. We remain confident of delivering the average annualized revenue of INR7 crores per restaurant with around 21% destoperating margin in our mature portfolio.

We also reported net cash flow from operating activities of INR135 crores during first half of this fiscal year. And net of lease payments, the net cash flow from operating activities were INR73 crores for H1. Overall ad downloads have also increased to around 5.1 million and the share of Barbican India revenue from owned digital assets have grown to around 28.7% in quarter 2 FY ’23. We also added 10 new restaurants during the quarter, taking the overall network Out of these 10 restaurants, 7 were added in metro and even markets and 3 were added in Tier 2 cities, Metro and Tier 2 GS3 cities mix to remain at around 70, 30 mix.

Further, we have around restaurants under construction and an equally strong pipeline of sites and devaluation. As Gary mentioned, we are confident of adding restaurants during the year. And only this will include 33, 35 Barbeque Nation restaurants in India. — around 4 to 5 Pestana restaurants and 1 to 2 baby conditions in the international business, again, primarily Middle East. Also, to reiterate, each of our business segments are independently generating operating cash flows — and these operating cash flows are primarily used for expanding in the respective segments or geographies.

We do not need to allocate any capital from our Barbeque Nation stand-alone balance sheet to our Pascago business or international business for the planned expansion in these businesses. We’ve been focused on our 4-pillar strategy of exciting Baby Connection India dining business, both in delivery, unlocking the growth potential of Tuscan and again, calibrated international expansion to drive growth going forward.

We can open the session for Q&A. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. Ladies and gentlemen, we will wait for a moment while the question — we have a first question from the line of Percy Panthaki from IIFL. Please go ahead.

Percy Panthaki — IIFL — Analyst

Hi. Good morning. My first question is on capex. Would you be able to give some idea on what is the total capex you would do at a consolidated level for FY ’23 and FY ’24

Raul Agarwal — Chief Executive Officer and Whole time Director

So for the 40 restaurants that we are opening up and including the capex for maintenance and some capex will also go towards our Bani project. we’ll do approximately INR135 crores of capex in this financial year. And based on the growth plan for next teasing that it remains at between say, 40 to 45 distant extols the capex would be anywhere between INR35 crores INR crores.

Percy Panthaki — IIFL — Analyst

Okay. Understood. Secondly, on your delivery sales, which is down about 20% Y-o-Y, — any thoughts on that? Why this is happening? I mean, on such a small base. Thank you.

Raul Agarwal — Chief Executive Officer and Whole time Director

So like I mentioned in our opening remarks, our share of business mix is changing. Our share from the box business is coming down. Currently, it’s approximately 45-odd percentage. And our card order business has gone up, and that obviously is an individual consumption order and the Oslo there. So what I’m actually most excited about is the fact that between last year and this year, our transaction volumes have gone up there’s no doubt that you are gapping with the fact that our delivery business was going down sequentially over the last 5, 6 quarters, right?

So the priority of the magnet team was to ensure that you come up with a product which sort of fits the consumer need, given that the barbecue box business was coming down, it was more a gritting sort of product, right? Now as I said, in the current exit month of a September and also considering that in the month of October number, — we are seeing that the numbers on a monthly basis are actually at 5 months high.

So we have broken that sequential decline trend now. And given that we also launched new combo offers and the transaction volumes are up, I expect this business to now start contributing to the growth. So quarter 3, for example, is already looking up from what we were in the previous quarters. And so this is the short term. Long term, I think we will be at an average AOV of here between 500 to 550 and then focus on doing the transaction volumes in this business.

Percy Panthaki — IIFL — Analyst

So how long you think before we go back to our original INR50 crores to INR55 crores per quarter run rate on delivery?

Raul Agarwal — Chief Executive Officer and Whole time Director

So based on the current numbers, maybe quarter 1 off of next year or if I look at cumulatively, so what you’re saying is INR20 crores, INR250 crores number FY ’24 should be really achievable. There’s — quality itself is looking up from where we were in.

Percy Panthaki — IIFL — Analyst

But that would also be a seasonal normal seasonality, Q3 always being bank Q2, right?

Raul Agarwal — Chief Executive Officer and Whole time Director

So you’re right. But like I said, our September numbers are also good, right? And September numbers also were seasonally weak given that there are a lot of visitation consumption days, right? And that trend also continued in the month of October, which also had festivals like Diwali and those as well.

So I think based on what I’m seeing, both in the month of September and October, I’m excited about the uptick that we are — that we’re noticing in this business. And obviously, quarter 3 should help, like you said, with better performance in the month of December. So to answer your question, INR50 crores, INR55 crores, which has annualized INR200 crores FY ’24 given that there will also be some new sites that you’ll add up to us should be really achievable?

Percy Panthaki — IIFL — Analyst

Understood. And on your guidance of INR7 crore per restaurant and 15% margin on an annual basis, that’s for the mature store, right? But how would this look at the overall company level, including the new stores, these numbers would need to be adjusted to what extent?

Raul Agarwal — Chief Executive Officer and Whole time Director

For this financial year, look, the new store portfolio is actually not even 2-year-old, but only meal, right? And if you look at the recent opening in last 2 quarters, we had opened up actually half of this and that too is seasonally because first half of the business, right? So overall, the impact on margin decline because of this new portfolio, maybe 1 percentage at Max — but good thing is that even this new portfolio is actually more skewed towards metro markets and metro markets, which are also on premium side as compared to — and the rental — on a per square buses that you’re paying these markets are more. So the initial losses in these businesses are actually higher because it takes in our business at least to 6 months to even stabilize, right? But since these are based on metro-market —

Percy Panthaki — IIFL — Analyst

FY ’23, obviously, because everything is so new, I understand the issue, and I’m not looking at FY ’23 at all. but more at our FY ’24 level, at a overall company consolidated level, this 15% from mature stores would translate into what 15% for the overall company or 14%.

Raul Agarwal — Chief Executive Officer and Whole time Director

The more than sold not by more than 1 percentage point. So maybe 1.5.

Percy Panthaki — IIFL — Analyst

Okay, okay. And last question on Damcofer. Can you give some idea on how many cities it is in or how many restaurants are servicing that — and also how do we see this ramping up over the next 1 to 2 years?

Raul Agarwal — Chief Executive Officer and Whole time Director

So as of September, we were in around 25 outlets. As of October, we are already in around 2 kits. — by end of December, we’ll try and go to around 75 and hopefully try to be in all the outlets by end of this financial year. Month-on-month, we are seeing increase in average elysales and the outlet that we launched. I think it’s too early. The exciting thing is the response, the ratings that we have on this business.

Obviously, there are product trial, there are some initial changes that we need to do to the menu also, but the initial response on this has been very good. Now in terms of longer-term picture, if I look at my rice business and see how that performs precise so do an ADS of around INR3,000, INR4,000 record. That ADS in UC business has gone to around INR20,000 — now even if we do, say, INR5,000 or INR10,000 Din our Tamsa brand, and we all know that brand is not a large category, 5,000 ads at 200 at this will give us approximately code every month, which is around 1% adding to the top line, right?

So like you said, we own the infrastructure, we own the capability to serve multiple different SKUs? And then can we create more brands out of these and then add to the overall revenue potential of these outlooks. So that’s the broad number that we have right now. Again, we’ll come back to you once we had some history of at least 3, 4 quarters, right? Otherwise, it’s too early to sort of comment.

Percy Panthaki — IIFL — Analyst

Right. And all the best. That’s all for me.

Raul Agarwal — Chief Executive Officer and Whole time Director

Thank you.

Operator

Thank you. We have a next question from the line of Pritesh Chheda from Lucky Investment Managers Private Limited. Please go ahead.

Pritesh Chheda — Lucky Investment Managers Private Limited — Analyst

Sir, with this — the new stores being added in the system now on a regular basis. So we have 40 this year, and then we have this whole ramp up from INR180 crore to INR300 crores over the next 3 years. Will it continue to impact the margin and not bring in the overall operating leverage in the system and impact the mature store overall performance as well — and past call, we had always discussed this, and you mentioned new store will not impact, but what we are seeing in the numbers is new store impacting. So your comments there would be very well.

Raul Agarwal — Chief Executive Officer and Whole time Director

Look, it will impact. It has obviously impacted our numbers in this quarter. And in the past calls also, we had always said that — we are looking at around INR1 crore average revenue from a mature portfolio recon 21% margin. And there will be some drag from the new store because it typically takes between 2 to 3 years for stores to mature, right? So that will be. But obviously, in this quarter, it is — if you look at this quarter numbers, 1, almost 25% of our portfolio is less than 1 year old.

That too is is a look back for the seasonally weaker quarter and that to where the portfolio is more skewed towards metro markets where the initial losses are slightly more than what you will expect in a Tier 3 sites, side? I think I believe since the portfolio also steps metal market, the revenue product potentially in the metro market is higher as compared to 3 markets. And that’s why once this portfolio restart of goes through the initial cycle of 2 years, this will start delivering the same return as the mature portfolio.

Pritesh Chheda — Lucky Investment Managers Private Limited — Analyst

Usually, what is the ramp-up of a new store, if you could get from 0 to 6 months and 6 to 12 months in terms of revenue and in terms of operating profitability.

Raul Agarwal — Chief Executive Officer and Whole time Director

So 0 to 6 months typically flattish or very low single-digit margins. For the entire first year, we would look at around 7% to 8% margins. Second year, we look at store margins of around 14%, 15% and third year, would come to around 21%.

Pritesh Chheda — Lucky Investment Managers Private Limited — Analyst

So sir, when we add, we are going to add 20% to our outlet this year we are going to add another 15% to 18% of our total outlet next year. So this — is it fair to assume that some amount of drag on the overall company margin will exist. And if it exists by what percentage should it exist?

Raul Agarwal — Chief Executive Officer and Whole time Director

So as this entire portfolio matures and obviously, there is some same-store growth should also come from the mature portfolio. So a drag, which is higher now should come down over a bit of time.

Pritesh Chheda — Lucky Investment Managers Private Limited — Analyst

You mentioned 0 to 6 months is 0 profitability. 6 to 12 months is single digit?

Raul Agarwal — Chief Executive Officer and Whole time Director

Yes, for the entire full year, we will do around 7% to 8% margin. So actually, second half.

Pritesh Chheda — Lucky Investment Managers Private Limited — Analyst

On a new portfolio?

Raul Agarwal — Chief Executive Officer and Whole time Director

On the new customer, yes.

Pritesh Chheda — Lucky Investment Managers Private Limited — Analyst

So the trajectory is 0 to 6 is 6 to 12 in a single digit and — it takes 24 months to reach the restaurant operating margin number, right?

Raul Agarwal — Chief Executive Officer and Whole time Director

So I said second year would be around 15% and that 30% would be around 21%.

Pritesh Chheda — Lucky Investment Managers Private Limited — Analyst

Okay. Thank you.

Operator

Thank you. We have our next question from the line of Varun Singh from IDBI Capital. Please go ahead.

Varun Singh — IDBI Capital — Analyst

So my first question is on the delivery part of the business. So you mentioned that the midst and primarily revenue contribution from the box business has come down to 45%. If you can give more detail regarding your understanding about what is the primary reasoning for the box business contribution coming down? And where do you see this number to stabilize?

Raul Agarwal — Chief Executive Officer and Whole time Director

So look, it has been coming down. So — very difficult to give you a forecast on where this will stabilize. But broadly, what we’re seeing is our AVs have been pretty much holding up over last 2, 3 quarters. around 500, 550 levels, right? So even in our box business, there are some products at around INR900 and there’s some product around INR600, INR700. And during the current quarter, we also come up with new combo offers whose proportion has increased on an overall basis.

Varun Singh — IDBI Capital — Analyst

Okay. Okay. And — and I mean, do you think that this reduction in the or movement in the shift in the revenue mix from box towards other cat is timely because of the impact of inflationary thing and because customers downgrading I mean any analysis over there?

Raul Agarwal — Chief Executive Officer and Whole time Director

So this is also a group adding product as we have things opening up basically well doing over time as things opened up gradually this as a portion came down, but overall, a la carte orders have gone up, which is more skewed towards individual consumption. So that is there. I don’t think it is customer downgrading from this box to Alacarte. Also as we have increased our menus from many options on combo offers, maybe there is some shift on from box business to a la carte in terms of one box business is equal to now 1.5 Alacarte order, right? We don’t have detailed insights on that because a large part of our business also comes from aggregators.

Varun Singh — IDBI Capital — Analyst

Right, right. And router, I mean, if we say that if you can also help us understand what kind of trends that we are building around delivery business other than the menu innovation that we could optically see?

Raul Agarwal — Chief Executive Officer and Whole time Director

Sorry, what do you mean mean in terms of trends?

Varun Singh — IDBI Capital — Analyst

Strength in delivery business.

Raul Agarwal — Chief Executive Officer and Whole time Director

Strength. Okay. Sorry. Look, Obviously, menu engineering is one-part, deliberating cane. We have seen now consistent ratings over quite some time. Overall, it’s around 3.9% on the entire portfolio of some 200 restaurants. Two years back, it was around 3% in the acceptance — the infrastructure in the outlets is now smoother in terms of operations. We obviously bad from our own restaurants trading space for that. delivery packaging measures also are very bulky, right? So operationally doing it from the same restaurant in the in efficient manner. All these have now become part of our deny operating protocol and baby commission.

Varun Singh — IDBI Capital — Analyst

Okay. So that’s it from my side. Thank you very much, and wish you all with us.

Raul Agarwal — Chief Executive Officer and Whole time Director

Thank you. Thank you.

Operator

Thank you. We have a next question from the line of Harit Kapoor from Investec Capital Business. Please go ahead.

Harit Kapoor — Investec Capital Business — Analyst

Yes. Good evening. I just had a few questions. One was on the Q2 seasonality. So how is the 19% restaurant operating in the —

Operator

To interrupt. Can you speak louder, please? Can you answer it?

Harit Kapoor — Investec Capital Business — Analyst

Can you hear me now? Is this better?

Operator

Yes.

Harit Kapoor — Investec Capital Business — Analyst

So what I was saying was the Q2 seasonality. So 19% restaurant operating margin for the mature out — is this normal for Q2, is that the way the restaurant operating margin happened in this quarter? I’m asking in the context that we really don’t have a normalized to since listing. So I just wanted to get your sense.

Raul Agarwal — Chief Executive Officer and Whole time Director

Yes, it is pretty normalized 19% margin. If you look at our revenue from per outlet from mature portfolio in quarter 1 and quarter 2 are down by approx which translated to around the 2% decline in our stoping margin on the mature portfolio. And if you look at our numbers, we have also given numbers coin — so if I look at adjusted EBITDA, within precise now, quarter 2 FY ’20 also were around 8.7% margin, which is around 1.5% currently. — and similar trends were also seen in the last year’s same quarter.

So quarter 2 margins being stretched in our business is it there, plus the only shift that happens is that if you’re like Marastra, falls in somewhere between quarter 2 and quarter 3. This time, it was in quarter 2. Last year, it was in quarter 3. So to that extent, there’s some impact is also come in. But by and large, quarter to all the rebates like this.

Harit Kapoor — Investec Capital Business — Analyst

Got it. Got it. The second question was on the revenue side. So — if you look at — you spoke about international, but on the international side, is there a — how has the profitability been there in terms of your margins, et cetera, how we kind of ended there?

Raul Agarwal — Chief Executive Officer and Whole time Director

So in H1 basis, international business is at the corporate level, we delivered 18% IDS margins.

Harit Kapoor — Investec Capital Business — Analyst

Okay. Okay. Great. And what level of price increase in India that we see now on a year-over-year basis, given what’s happened on the cost side, you did pass on price side. So weighted average based on a dynamic model, what’s that number?

Raul Agarwal — Chief Executive Officer and Whole time Director

So on the — between last year, second quarter and this second quarter, our pricing would have gone up by around 7%, 8%. This quarter, we have not taken any price hike. So we did around 4.5% price hike in.

Harit Kapoor — Investec Capital Business — Analyst

Got it. Got it. And given you’re saying that the cost table is now lower a little bit compared to what it was probably early part of the year. You don’t see any reason for incremental insight right now?

Raul Agarwal — Chief Executive Officer and Whole time Director

Yes. So we are not planning to do any incremental price hikes in the second half. On the pricing side, I think met prices are softening a bit. There is some inflation that we are seeing in our dairy pricing, but dairy is not a large consumption basket for entire portfolio, meat is larger. So net basis, I think we’re seeing softening of input food cost. — and that should help in the second half of the year. They’re not contemplating any price hike in the second half.

Harit Kapoor — Investec Capital Business — Analyst

Got it. Last question was on Dumo — while it’s early days, you mentioned that the kind of model that you would like would be at least INR1 crore kind of a revenue on an incremental revenue on a per store basis, if you’re able to hit a daily sales number. But from a cost standpoint, below gross margin, — what’s the incremental cost that is required to run this operation in a store in terms of people because rent assuming a portion to the dine-in business. So what would that cost line.

Raul Agarwal — Chief Executive Officer and Whole time Director

So one — say this dairy business, the gross margins are — contribution margins are lower because we have seen label costs, which is food cost Sackaging and commission. And below that, on the fixed cost side, to run this delivery operation, which also runs by, we don’t need incrementally more than one specialized maybe train the employees and on the run the machine that we have incorporated. And apart from that, there are some credit costs I mean. But cumulatively, it in both of them, it’s not a larger number.

Harit Kapoor — Investec Capital Business — Analyst

Understood. And last question was given that you launched the Biryani format now, I know you’re rolling it out to dine stores currently, but — does that now imply that expansion kitchen expansion will also happen in the near term going forward or that’s going to be a second leg really something to look forward?

Raul Agarwal — Chief Executive Officer and Whole time Director

So that’s not our focus right now. Like I said earlier, we know that our therapy business was down sequentially for now 5, 6 quarters, right? So the focus first was to stabilize this part rather than adding more capability in terms of adding more infrastructure. So happy to note that this is now at least stabilizing, and we should see this in this quarter. I’m not jumping to add new capacity on extension kitchen. — we are anyway obviously also doing delivery from the new restaurant expansion that we’re doing.

So I’ll just ride on that for some time. We’ll definitely wait for 2 to 3 quarters to see how this performs — and based on the economics of the extension cuts that we have already in place, we will then think about expanding it. But as of now, for next 2 to 3 quarters, I’m not looking at putting capital to that.

Harit Kapoor — Investec Capital Business — Analyst

Thank you, Miles.

Operator

Thank you. We have a next question from the line of Amandeep Grover from Ambit Capital. Please go ahead.

Amandeep Grover — Ambit Capital — Analyst

So firstly, on the recovery. So we understand that last quarter, you had a gap or 10% coverage in Rainin versus prove as corporate was yet to recover. So is acknowledging that 2Q is seasonally weak. So any sense on how dining now starts us is prepower on a like-to-like basis and trend in the recent months?

Raul Agarwal — Chief Executive Officer and Whole time Director

So it continues in the same fashion, Amandeep, also, like I said, the October month also had some festive days, right? And for our business, which is on primarily non-wage and also primarily going out, going out and dining. It is not very amenable of the business and don’t get any skip during these festive days. For example, the value price for us is likely Merit? And October had that one week of the entire impact pretty much for the entire country, right? So early days, but based on what we’re seeing currently, it’s pretty much same trend in terms of covers. — kicker comes in the month of December.

Amandeep Grover — Ambit Capital — Analyst

Fair enough. And secondly, on the gross margin front, — so last quarter, you had mentioned about getting better pricing, especially for meat, which is a large portion of your overall input cost portfolio. And apart from this, the delivery business being a bit lower on gross margin as it involves packaging cost and aggregator commission. — since delivery business was again impacted this quarter or even on a sequential basis. Can you help us with the sense of what was the India rational behind the impact of gross margin on sequential business

Raul Agarwal — Chief Executive Officer and Whole time Director

So on the ad front, we have — there’s one commodity, which is switch will largely import. That pricing was higher in quarter 2 as compared to quarter — so that is a big one. Also across our other businesses also, for example, our International business. Gross margin was down by around in our Middle East business, largely most of the items are imported, and there, there are some price hike — sorry, input cost hike. Similarly on the Tesco business, we had some margin increase on the cost. So the gross margin declined between, say, quarter 1 and quarter 2, we saw cost across all the 3 verticals, right?

The impact was lowest for Babis India and pretty much highest for international. But given existing for these, it is overall margin for this related to smaller businesses, which is both Pano International, we’re very strong. So now also just to complete that thought on the fish item. Post that, the new shipment that we got in the month of September are at low pricing. So that gives me some confidence of H2 that — and we also have some inventory buildup happening during the quarter, which gives some confidence that H2 margins should be better.

Amandeep Grover — Ambit Capital — Analyst

So this is helpful. And just — I mean, as a follow-up to this, as you were saying that you sort of combos delivery business, as you mentioned earlier, with no price than expected. Do you see this would impact the margins? Or it is not more of a discount, but a different offering?

Raul Agarwal — Chief Executive Officer and Whole time Director

No, no. So compute actually are better in terms of food cost. I think the food cost is lower for the company in combo means the food cost is among the highest for the company in our box product. So it won’t impact the margins.

Amandeep Grover — Ambit Capital — Analyst

Sure, sure. And lastly, on the expansion front. So you’ve already added 20 stores from bikini versus the guidance to these 200 stores — so could you see any upgrades over here? And if there is any change in guidance for expansion across Costa International business versus what you have guided you.

Raul Agarwal — Chief Executive Officer and Whole time Director

So I think we’ll be at around 40 outlets for this year. And at the stanopace, I think we will try and increase. We’ve only done 2 this year. And we hope to do 2 more. One is under construction and one more will go under construction in next few days. So the one portion which will try and kind of increase International, like I said, you’re only doing it from the profit delegating that business. So this year, I don’t see more than one happening and maybe subsequent year, maybe 2 more.

So that’s the way it will move. — will change next year to 50. I think like I always mentioned, it all depends upon the kind of size that we get and whether they are durable side or not, right? So I don’t think we’ll take pressure of opening up more sites. But if the business makes sense if the trade data makes sense, if it doesn’t lead to significant canalization to our nearby store other market that is different in the rental sort of is something that can sustain our business, we’ll do it.

Amandeep Grover — Ambit Capital — Analyst

Got it. That’s from my side.

Operator

Thank you. We have next question from the line of Vishal Gutka from PhillipCapital. Pleaser go ahead.

Vishal Gutka — PhillipCapital — Analyst

Congrats on a good set of numbers. I just wanted to know what percent of revenue generally comes from corporate group means. And now then IT companies interesting, a lot of employees to come at least side or twice a week. Do you see big revival coming through in the coming quarters as inventory that more and more people attending the office?

Raul Agarwal — Chief Executive Officer and Whole time Director

So this — the segment has increased. If I look at sequentially, last 6 quarters has gone up definitely better in the month of — in quarter 1 and quarter 2. Quarter 3, again, very early days, also a lot of festivals, people went home. So that business was slightly — obviously get impacted every year around this time. But like you said, I think companies are asking people to come back you should see good sort of movement in the subsequent part of the year.

Sorry, just to — I know that I give you any one we can’t tag the customer as the video track also is is what is the growth portion of the business? I mean how many transactions had more than, say, 8 covers per transaction? And then how many transactions happened during big day because these 2 are the main parameters in which IT cloud comes in, right? And both of these parameters, like I said, have been improving quarter-on-quarter.

Vishal Gutka — PhillipCapital — Analyst

Thank you.

Operator

Thank you. We have our next question from the line of Vicky Punjabi from UTI Mutual Fund. Please go ahead.

Vicky Punjabi — UTI Mutual Fund — Analyst

Hi. Thanks for taking my question. Just one observation, which I wanted to clarify. Now if I look at your delivery sales, it seems that the contribution from your own app has been steady or slightly improved sequential your aggregator revenues have declined sharply. I mean is it something that we are missing in the aggregator platform? Or is the competition levels high that we are seeing this impact — or is this just a general change in the customer behavior? I mean where are we seeing the real impact of delivery coming in?

Raul Agarwal — Chief Executive Officer and Whole time Director

No. So Vicki don’t correlate the 2 numbers because if you look at our own basal asset contribution, the large part of contribution is actually from a dine-in business, right? So our second point is, in our dine-in business, we own our customers. Approximately 20%, 20% comes from our app and website, another 25-odd percentage comes from our call center, and then there are some work in. And our dependency on the third-party greater for dining business is actually extremely low, which is single digit. So that is on the dine-in part.

On delivery part, on the other hand, large part of our business comes from these aggregators — so that mix has not changed. In the is coming from our app has always been based on quarters based on quarters over a bit of the last say 2 years in the range of 10% to 15%. And also given that delivery is now around 30-odd percentage of the business, this delivery segment doesn’t move significantly the own digital asset contribution business, right?

So those 2 are not correlated. I don’t think we are missing much on the — these are greater platform in terms of marketing. Like I said earlier, the focus was to stabilize this business. I believe in better numbers that I’m seeing on monkey basis. I believe this is stabilized, hopefully, where you’ll see next quarter — and then we’ll take it up to go further. But no long-term perspective, I think all of the labors in delivery segment and this is something that we will build for a period of time.

Vicky Punjabi — UTI Mutual Fund — Analyst

Sure. So how do I look at this aspect. The last year that you crores time today, we have more stores, but less among quantum of deli. So today, the steady state and last year possibly helped by Covent dine-in segment lowers and customer opting offering for barbecue that delivery. And last year, base was overstated, and this is what we are seeing is a normalization of base and from here, we grow. I mean, how do I look at this business now incrementally going forward?

Raul Agarwal — Chief Executive Officer and Whole time Director

I think you should look at it in that manner because both the decline in DLM has been pretty much inversely proportional to increase in our banking business, right? I think now is the time when we are seeing pretty much stabilization on the level. So if you compare it against last year, obviously, the decline is largely because of the impact of COVID and obviously one-off benefit that we would have received now in the previous years. Obviously, we didn’t want it that way, but this is where it is right now.

Vicky Punjabi — UTI Mutual Fund — Analyst

Sure. And just — I just needed one clarification from the dine-in segment. I did to understand one of your previous answers completely — so now if I look at the dine-in revenue for this quarter versus a pre-cohort levels, and we’ve taken price hikes out there as well. So is the dine-in revenue actually higher than pre cover levels? Or is it similar and the footfall that have declined has been offset by price hikes? I mean is that the way to look at that business?

Raul Agarwal — Chief Executive Officer and Whole time Director

Even on a per oselbasis?

Vicky Punjabi — UTI Mutual Fund — Analyst

Or outlet basis, yes.

Raul Agarwal — Chief Executive Officer and Whole time Director

Yes. So if I look at pre-Covid same quarter, it is on the same mature portfolio, just dining business, it is pretty much the same. It’s flat.

Vicky Punjabi — UTI Mutual Fund — Analyst

Yes. Okay. Okay. So price hikes have actually just offset some of the lower footfalls that could have happened. Is that the way to look at it?

Raul Agarwal — Chief Executive Officer and Whole time Director

Yes.

Vicky Punjabi — UTI Mutual Fund — Analyst

Okay. Sure. That’s it from my side.

Operator

Thank you. We have our next question from the line of Manish Poddar from Motilal Oswal AMC.

Manish Poddar — Motilal Oswal AMC — Analyst

Just a couple of questions. First one is how much is the actual rent paid in the first half FY ’23, sir?

Raul Agarwal — Chief Executive Officer and Whole time Director

Actual rent paid.

Manish Poddar — Motilal Oswal AMC — Analyst

Yes. So I think you said INR80 crores was the cash flow. I think post rental. Is that the number?

Raul Agarwal — Chief Executive Officer and Whole time Director

Sorry, to —

Manish Poddar — Motilal Oswal AMC — Analyst

Because the reported number is INR135 crores cash flow. So if you and get orders below.

Raul Agarwal — Chief Executive Officer and Whole time Director

Around INR62 crores, actual rental pads.

Manish Poddar — Motilal Oswal AMC — Analyst

INR62 crores. Okay. And just —

Raul Agarwal — Chief Executive Officer and Whole time Director

You’re right. So it’s around 10% of our top line. So yes, so 60-minute probably that crores.

Manish Poddar — Motilal Oswal AMC — Analyst

Okay. Just one more question, sir, let’s say, now you’ll be seeing probably more stable sales now Q3 onwards with, let’s say, things opening up. Is there a possibility or have you seen that across any of your cohort of stores where, let’s say, and now incrementally RM should also stabilize. So understanding to understand, is there a possibility in some micro markets where you’ve been able to price our product significantly higher or let’s even because there’s more demand and there is less supply.

And a couple of metrics, both in RM and, let’s say, footfalls favor. I’m just trying to understand, is there any cohort in the entire 180, 200 stores network, where you’ve seen any sort of more demand and you’ve been able to charge, let’s say, 10% more and still customers coming in again and again?

Raul Agarwal — Chief Executive Officer and Whole time Director

So look, our — like I said, our average pricing between last year and this year has gone up by around 7%, 8% already. And as a brand, we always want to be to be value driven. So overall at a comparable, this pricing will sort of not change much in H2. But in terms of a few markets, our pricing has always been different. So our metal pricing pricing in terms of markets like Bombay Delhi, Bangalore is different than what we charge in some of the other locations. So that — our pacings in the same city also. So our pricing starts have always been what is relevant for that market? And what is the right pricing for that market, and we follow that.

Manish Poddar — Motilal Oswal AMC — Analyst

Actually, what I’m trying to get us frame points. One is the pricing elasticity because in some micro markets like BKC your lot pricing, north of INR1,000 and still customers are flowing in. What I’m actually getting a broader sense is there will be days where you can price your products, let’s say, 5%, 10% more given that the demand is more and given Covera lot of this big format change have kind of closed down — so any sort of trends like that? Or that’s not the key asset.

Raul Agarwal — Chief Executive Officer and Whole time Director

That’s what — right. So our pricing is different for weekends up I think different for weekdays, lunch also is different.

Manish Poddar — Motilal Oswal AMC — Analyst

Dynamic is fine. What I’m trying to get a sense is, let’s say, if you had charged INR100 earlier, that’s a kicker. Now you can charge 10 on the same product because in the vicinity there are far and few restarts. — the same format or a larger sized food format. That is what I’m trying to get set?

Raul Agarwal — Chief Executive Officer and Whole time Director

So the fact is over the bit of last 3 years, be it be inflation, be it annual price hike. The pricing has gone up from pre-covid level to now. It’s already pretty much 3 years gone. So pricing would have gone up by around 20-odd percentage so 15-odd percentage over this period of time. And some of the new ones that we launched come at a lower price point and then over the period of, say, 6 months, we catch up to the normal size of that city. So in terms of a pricing engine, like I said, this is all kept keeping in mind the bad mix of that trade area, we and we day lunch dinner Sorry, Manish, I don’t know. I think I’m repeating.

Manish Poddar — Motilal Oswal AMC — Analyst

I take this offline. No. I hear you.

Raul Agarwal — Chief Executive Officer and Whole time Director

Maybe I can understand your question, well.

Manish Poddar — Motilal Oswal AMC — Analyst

Thank you so much.

Operator

Thank you. We have a follow-up question from the line of Percy Panthaki from IIFL. Please go ahead.

Percy Panthaki — IIFL — Analyst

I was just looking at your same-store sales growth and calculating it on a 3-year CAGR basis. So the 3-year CAGR on same-store store sales growth is somewhere around 5%. Now if I further dissect it, so 5% CAGR is about, let’s say, over a 3-year period, 15%, 17% kind of point-to-point growth on a same-store basis. versus 3 years ago. Out of that 12%, 13% or at least 10% is coming only from delivery, which was not there or very, very miniscule 3 years ago. and another 7% to 8% is coming from pricing. So if I remove these 2 aspects, the same-store sales growth over a 3-year period is almost 0. Is this the right way to look at it?

Raul Agarwal — Chief Executive Officer and Whole time Director

Yes. So same-store sales growth of around 5% to 7% CAGR over 3 years is almost 2 years of Covid, yes, that we around 10% out of this came from delivery and balance came from pricing. And like I said, there is still some cover volume with respect to precise now, the gap still exist. So yes, I think polythene is okay again.

Percy Panthaki — IIFL — Analyst

Okay, okay. And that gap in the cover volume — now should we take that as a permanent loss? Or are you hoping that it will come back?

Raul Agarwal — Chief Executive Officer and Whole time Director

So post Covid and how the corporates have moved, it’s already been in 2 years, right? I hope is that they come back as IT further opens up and our corporate business moves up.

Percy Panthaki — IIFL — Analyst

Okay. Okay. Secondly, on Dumsufer, while you have launched the app, I mean, what are you doing to popularize how will customers come to know that there is a brand or there is a place called dump suffer from which they can order Virani.

Raul Agarwal — Chief Executive Officer and Whole time Director

So all the marketing spend on aggregator Apps has already been happening. And if you look at month-on-month increase, there is growth in ADS from the same restaurants. — in some select markets, we’re also doing off-line marketing of deals and also the digital marketing being done in these locations where we’ve launched the Dana bank. It’s obviously only 2 months, 2.5 months old. So it will have to go through a gene of education in the customers’ mind. And then as the cost we have to speak for itself or others.

Percy Panthaki — IIFL — Analyst

So you mentioned that you’re expecting around INR1 crore per month sales from me — at that scale, do you think it will absorb the marketing spend? And if not, at what scale do you think this will be sort of generating sort of a decent profit for you after allowing for the marketing spend, et cetera?

Raul Agarwal — Chief Executive Officer and Whole time Director

So Pasi, we are not guys who will go out and spend completely on building this brand on offline sort of media, right? — large part of the market spend happens on the same age platform is platform, which is largely on the data, which is which is to the bank customers, all the points on the performance marketing site. So in that extent, I think even if you spend maybe 6%, 7% of our bumper revenue employs back and put it put it back, I think loans will build that business. So the question is that — sorry, go ahead.

Percy Panthaki — IIFL — Analyst

Yes. I was just asking at the scale of INR1 crore per month, will the brand be making similar EBITDA margins as compared to the overall company given that there is a lot of operating leverage, you have the same infrastructure, same delivery buy, et cetera. So at least, will it be making that 15% kind of EBITDA margin at that INR1 crore kind of scale?

Raul Agarwal — Chief Executive Officer and Whole time Director

Yes. Yes, that’s our expectation and that’s how we have loaned. So if you look at Ubrand for example, when we launched it in — that business was contributing highly 40 per month. And I think I’m excited about that business itself being approximately INR200 crores, right, soon. We did that last year and hopefully, based on our value now will reach there soon. And as Damaalsocossid that gene of 3-to-4-year repeat business, customer engagements, that sound of business that should come for us.

Percy Panthaki — IIFL — Analyst

Okay. And lastly, on cloud kitchens. When we started this, we had a very sound logic that there are stores which are more than 5 kilometers away from the customer home and then it becomes difficult to service that customer. And if at all, it is service, the experience is bad because food is cold, et cetera, et cetera. Therefore, we need to open cloud kitchens. Now what has changed in that logic for you to have paused the cloud kitchen sort of expansion?

Raul Agarwal — Chief Executive Officer and Whole time Director

No. So the logic events absolutely intact. There is no change in that. But the cloud pitcher model will work at a particular ADS levels.

Percy Panthaki — IIFL — Analyst

Right?

Raul Agarwal — Chief Executive Officer and Whole time Director

If the area comes down in a particular, say, sale point base cloud kitchen bet the malice store from they’re doing, you’re starting gain losses, right? So we already have 200 distribution points from where we have to do sales, and we can strengthen our operating performance on these and so that sales increases and the Acasti distribution point rather than going and investing money in clearing up more distribution points. So like I said earlier also, it’s not that the extension business are dead.

First, we have to fix the ADS growth in our existing outlet bring it to a point that it is — at least does not get money in extension picture. Once it’s reached to that point, adding consigns is not a big problem for us. These are highly sort of outlet this can be done quickly. And that will do on our delivery area sort of comes back. So it is cost that logic remains exact. It is just that today, it doesn’t make sense to look at capital to a segment which potentially will lose money at lower ADS numbers.

Percy Panthaki — IIFL — Analyst

Right. And one bookkeeping question in a normal year. the Q3 ADS is what percentage higher compared to the Q2 ADS?

Raul Agarwal — Chief Executive Officer and Whole time Director

You mean at the total company level business?

Percy Panthaki — IIFL — Analyst

Yes.

Raul Agarwal — Chief Executive Officer and Whole time Director

So this would be around 12% to 15% higher between quarter 3 and —

Percy Panthaki — IIFL — Analyst

So sorry, this is what — meant was on a per store basis. Are you talking about the total company sales or a per store basis, ADS?

Raul Agarwal — Chief Executive Officer and Whole time Director

So this is — I was talking about more total company sales, first store book should be around maybe 10% higher, yes.

Percy Panthaki — IIFL — Analyst

Got it. Thank you.

Raul Agarwal — Chief Executive Officer and Whole time Director

Thanks.

Operator

Thank you. As there are no further questions from participants. I now hand over the conference to Mr. Rahul Agrawal for closing comments. Over to you, sir.

Raul Agarwal — Chief Executive Officer and Whole time Director

Thanks, guys, for all the classification pasting the call. We look forward to somatropins going forward. Thank you.

Operator

[Operator Closing Remarks]