Devyani International Ltd (NSE: DEVYANI) Q4 2025 Earnings Call dated May. 23, 2025
Corporate Participants:
Ravi Kant Jaipuria — Promoter and Chairman
Manish Dawar — Whole-time Director and Chief Financial Officer
Analysts:
Anoop Poojari — Analyst
Vivek — Analyst
Gaurav Jogani — Analyst
Jivanshu Jain — Analyst
Saurabh Kundan — Analyst
Devanshu Bansal — Analyst
Percy Panthaki — Analyst
Sanjeev Raj — Analyst
Presentation:
Operator
Good day and welcome to the Devyani International’s Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and anyone who wishes to ask a question may enter star and one on their touchstone phone. To remove yourself from the queue, please enter star and two.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over toMr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Anoop Poojari — Analyst
Thank you. Good afternoon, everyone, and thank you for joining us on Devani International’s Q4 FY ’25 earnings conference call. We have with us Mr Ravi Jaipuria, Non-Executive Chairman of the company; Mr Raj Gandhi, Non-Executive Director; Mr Virav Joshi, CEO and Whole-Time Director; and Mr Manish, CFO and Whole-Time Director of the company. We will initiate the call with opening remarks from the Chairman, followed by key financial highlights by the CFO. Thereafter, we will have the forum open for a question-and-answer session. Before we begin, I would like to point out that some statements made in today’s call may be forward-looking in nature and a disclaimer to this effect has been included in the results presentation shared with you earlier. I would now request Mr. Ravi Jaipuria to make his opening remarks.
Ravi Kant Jaipuria — Promoter and Chairman
Thank you. Good afternoon, everyone, and thank you for joining us today. I’m pleased to welcome you to International’s post-results earnings conference call to discuss our performance for the 4th-quarter and financial year 2025. The previous financial year was a challenging one, marked by several headwinds, including a slowdown in GDP growth.
Input inflation, weak urban consumption and shifting geopolitical dynamics. However, the Union Budget 2025 aims to counter some of these pressures by attempting to boost consumption through tax relief measures targeted at individuals. Despite these headwinds, we are pleased to report that DIL continues to demonstrate strong momentum in its growth journey,
Both organically and through strategic acquisitions. During 2025, DIL reported consolidated revenue of INR4,951 crores, registering a robust 39.2% year-on-year growth. This performance was primarily driven by the strategic acquisition of KFC stores in Thailand and supported by ongoing store expansion in India.
The company’s EBITDA margin stood at 17%, while absolute EBITDA increased by 29.1% over ’24. Most recently, we announced the acquisition of Skygate Hospitality, owners of Biryani by Kilo and other brands. Making our entry into another high-potential food category. This will further strengthen our overall brand portfolio and deepen our well-laid out strategy. During the year, we also tied-up with three international brands that is New York Fries,
Tea Life and Suna Kitchen. We are proud to share that we have recently opened the first New York Fries store in Mumbai. This marks the beginning of our expansion with the new brands and you will see more coming in the current year. Our store expansion strategy has been instrumental in driving growth and reinforcing our market leadership by following a balanced approach of scaling the footprint while maintaining rigorous store-level performance standards.
We successfully added 257 new stores during full-year ’25, elevating our total presence to 2039 stores as of March 31 March 2025. We have achieved our store rollout target across all brands, reflecting disciplined execution and strong execution capabilities. Our core brands, KFC, Pizza Hut and Costa remained at the forefront of this expansion, collectively contributing 204 net-new stores, thereby further strengthening the presence of our brands.
The store growth not only extends our reach to the new consumers, but is also serves existing ones better, enhances the operational synergies and brand equity across markets. On the market front, our brand campaign Taste the Epic was recognized as an innovative and impactful campaign at the ACEF Global Customer Engagement Awards. Over the past five years, DIL has outperformed the organized QSR market in terms of both revenue growth and new-store openings.
While the revenues for the listed QSR industry grew at a CAGR of 29.6%, DIL achieved a significantly higher CAGR of 44.5%. The industry store count expanded at a CAGR of 22.5% against that DIL recorded a robust store growth of 31% CAGR. To conclude, despite a subdued demand environment, DIL has remained focused on expansion while actively exploring new and innovative ways to engage with consumers.
As one of the leading players in the Indian QSR sector, we are well-positioned to capitalize on anticipated recovery in the industry. With market conditions expected to improve, driven by union budget initiatives focused on agriculture and rural prosperity, along with increased consumption supported by tax relief measures. We remain optimistic about the growth opportunities ahead. Overall, we remain confident in our strategy, execution capabilities and ability to deliver constant growth.
Our focus will remain on scaling profitability, strengthening both our core and emerging brands and creating long-term value for our stakeholders. With this, I would like to conclude my address and now hand over to Manish for the financial highlights. Thank you very much
Manish Dawar — Whole-time Director and Chief Financial Officer
Thank you, Mr. Good evening, everyone. A very warm welcome and thank you for your valuable time for attending DL’s Q4 FY ’25 earnings conference call, our 15th such call since our listing in August ’21. DIL has continued with its store expansion plans. The store count as of 31st March ’25 was 2039 stores with our core store footprint at INR1,917 crores, comprising of 1,060 KFC stores, 637 Pizza Hut stores and 220 Costa Coffee stores. The consolidated operating revenue for FY ’25, including Thailand was INR4,951 crores with a robust growth of 39.2% versus FY ’24. The Indian business witnessed a revenue growth of 7.5%. Quarter-four FY ’25 consolidated revenue stood at INR1,213 crores versus INR1047 crores in Q4 FY ’24, growth of 15.8%. Indian business revenue for quarter-four FY ’25 was INR801 crores, reflects — reflecting a growth of 6.6% versus quarter-four FY ’24. The gross margin of the consolidated business for FY ’25 was 68.9% versus 70.3% in FY ’24. The gross margin for quarter-four FY ’25 was 68.5% versus 68.7% in-quarter three FY ’25. A slight drop-in margin was contributed mainly by cooking oil, coffee bean prices and higher deal composition. The brand contribution for FY ’25 was at 14.2% versus 15.5% in FY ’24. This is mainly on account of sales deleverage and the amendment in GST loan rentals. Consolidated operating EBITDA, including Thailand on a pre-IndAS basis for FY ’25 was INR494 crores versus INR381 crores in FY ’24. Pre-Indas margins for FY ’25 was 10% versus 10.7% in FY ’24. FY ’25 consolidated reporting — reported EBITDA margins on a post-Indas basis was 17%, INR842 crores versus 18.3% in FY ’24. The PBT for FY ’25 on a consolidated basis was INR12.8 crores versus INR3.7 crores in-full year ’24 with growth of — with a growth of 248%. Moving the discussion to our core brands, KFC in India added 100 new stores in FY ’25. With this, the total store count for KFC in India stands at 696 stores as of 31st March ’25. Average daily sales for FY ’25 was INR94,000 versus INR105,000 in FY ’24. Revenue of FY ’25 at INR2,179 crores increased by 6.6% versus FY ’24. Gross margin for KFC for FY ’25 was 68.9% versus 68.3% in-quarter four FY ’25. The brand contribution margin for FY ’25 was at 17.4% and 16.2% for quarter-four, Respectively. FY ’25, a decrease of 100 basis-points. During the quarter, Pizza Hut India closed 14 stores. Overall on a full-year basis, Pizza Hut added 63 net-new stores in FY ’25 versus 61 in FY ’24. The Pizza Hut India store count was 630 as of 31st March ’25. Revenue for FY ’25 was INR732 Crores versus INR709 crores in FY ’24. And for the quarter ’25, revenue was INR175 crores versus INR162 crores in-quarter four FY ’24. The ADS for the brand was INR34,000 in FY ’25 versus INR37,000 in FY ’24. Gross margin for FY ’25 was 76.3% versus 75.9% in FY ’24 and brand contribution margin for FY ’25 was INR20 crores with a margin at 2.7%. Costa Coffee added 11 new stores during the quarter and 41 stores during the entire financial year of ’25, reaching a cumulative store count of 220 stores as of 31st March ’25. FY ’25 revenue at INR199 crores was INR152 crores in FY ’24 with a 30.8% growth and quarter-four FY ’25 revenue was INR52 crores with a 16.1% growth versus quarter-four FY ’24. The gross margin for FY ’25 was 75.4% versus 75 point versus 76.8% in FY ’24. This impact is primarily because of inflation in coffee beans as well as other input materials for pasta coffee. Brand contribution for FY ’25 was 16.1% and FY ’24 was 17.6% versus 16.9% in the previous quarter. Moving to our international business, our total number of international store was 375 as of 31st March ’25. The international business revenue for the quarter was INR419 crores. The gross margin for FY ’25 was 64.2%, an improvement of 3% versus FY ’24 and the brand contribution margin for FY ’25 was at 15.9%, an improvement of 2.3% versus FY ’24. This is primarily on account of Thailand consolidation. Most recently, we announced the acquisition of Skygate, owners of Birani Bakilo, Goella Butter Chicken and the Bojin, marking our entry into high-profile Indian high-potential food category. We have acquired the business at an equity valuation of INR519 crores. The stake of 80.72% will be settled by way of preferential allotment of DL shares in accordance with SEBI regulations. DL shareholders have voted in favor of the transaction and we are planning to close the same in the next couple of weeks. We will also be infusing up to INR90 crores cash by way of additional capital in the business. The business is currently loss-making and we are hoping to turn it around in the next one year. To conclude, we continue to maintain a disciplined approach to growth, supported by strong execution and diversified brand portfolio that includes high-potential domestic and international formats. Our expansion strategy remains focused on driving profitability through operational efficiency and the continued rollout of small format stores, Which are both capital-efficient and scalable. As we look-ahead, we believe the anticipated improvement in-market conditions positions us well to build-on the momentum of FY ’25. On that note, I would like to request the moderator to open the forum for any questions or suggestions that you may have. Thank you very much.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. Participants are requested to use handsets while asking a question.Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Vivek from Jefferies. Please go-ahead.
Vivek
Hi, good afternoon, team. A few questions. First on KFC. Manish, this 83K EDS number looks very low. I mean if I look at — I mean, except for, let’s say, if you go back to second-quarter 2021, this is the lowest number that I have seen at least in the 18 quarter. What is the key reason for this number to be so low?
Manish Dawar
Yeah. Vivek, we’ve seen the primarily one or two markets which have got impacted in KFC, which has pushed the SSG down and therefore the ADS numbers also. So one is AP and Telangana where we’ve seen the impact of bird flu, which was only in AP and Telangana in this year. And the bird flu lasted for almost about 70 to 75 days.
We are seeing the sales now coming back-in AP and Telangana. That has primarily kind of pushed down the table on SG as well as the ADS. The other thing that we’ve seen is primarily Kerala and West Bengal, where the impact of geopolitical situation continues. And we are hoping that as things kind of now stabilize, we will see the SSGs coming back-in Kerala and in West Bengal also. As you know, these are three very important states for us and therefore, as we see the improvement coming back-in these states,
Things will start to improve. At the same time, Karnataka, which is the largest state for us has seen a very, very stable numbers. Even the SSG in Karnataka as a state and Bangalore as a city is positive and there the ADS momentum is maintained. So therefore, in our view, let’s say, once these three states start to come back, we are seeing the signals now, we will see a better ADS as well as the SSG.
Vivek
Got it. So does that mean, Manish 4th-quarter marks the trough and things should sequentially get better or you can be at this level for some time and then the improvement may still be away. The — the other way of putting this also is that the SSS number of minus 6% is also on a base of minus 7%, which was on a base of plus 2%.
So it’s not that the base has been very-high, right? So how do you think about the improvement you get better from here or you stay here for some more time?
Ravi Kant Jaipuria
You’re right, Vivek. We should see better numbers sequentially. And as I said, I mean, it’s primarily because overall we are seeing the recovery and that’s the reason I kind of called out these three states separately because most of the other states, for example, I mean, UP is a good state for us. There are other states also, which have seen a positive.
Manish Dawar
So as, let’s say, these three states start to come back, we should. And I think in our belief also is probably the trough that we are seeing. Okay. And one last bit on this point, Manish, so — and again, apologies if I don’t understand your business that well. But let’s say if I go back to, let’s say ’22 — fiscal ’22, fiscal ’23, we — you were broadly ballpark 120K in terms of EDS.
Vivek
That number, let’s say, in the last 3/4 has been reasonably below 100,000 or INR1 lakh. Do you think there is something which has changed in the business or you think as and when urban consumption picks up, you can still go back to those, let’s say, 120,000 or thereabouts kind of numbers, which are looking quite far, but do you think that issue will you know, those numbers are achievable in the next few years?
Manish Dawar
So Vivek, I think what we need to bear in mind that, let’s say, when we had an ADS of almost 125,000, 127,000, there were about 300 odd KFC stores, which are now sitting at close to 700 stores. So it’s more than double. And all of this has happened in the middle of the consumption slowdown and all.
So therefore, the way we are looking at the business in terms of what used to be 120,000, the new normal should be about 100,000, 105,000 and we are confident of delivering the same margins that were delivered at 120,000, 127,000 ADS at 100,000. So we’ve kind of geared up the business accordingly that from a profitability perspective, we should be able to deliver the same margins. Obviously, with this kind of store growth there is some bit of cannibalization also happening that kind of impacts the ADS numbers.
Vivek
Sure. What I meant, Manish, was that was a cyclical high at that point of time. I understand the stores have — but India is a growth market as you have been also highlighting over-time and we have seen cycles in this business particularly. You do not — my simple question is this 120K number is not an abnormal number.
So as and when the cycle picks up, I’m not thinking about average, but as and when cycle picks up, those are still possibilities or you think that there was something specific, we were coming out of COVID and so on and so forth?
That’s why that starting point was incorrect from that perspective.
Manish Dawar
So we are resizing the business, Vivek, for about 100,000, 105,000 because as you know, I mean, over a period of time, we’ve reduced the store sizes also. We’ve reformatted the store sizes, we’ve maintained the payback periods. So therefore, I mean, read that whatever was 120,000, 125,000 number is 100,000, 105,000.
And as I said, we’ll be able to deliver the same margins, which we were delivering at 120 at 100, 105 now.
Vivek
Got it. Christal, Manish. Second question is just a big-picture or let’s say, whatever your philosophical thoughts are. But as I see the kind of acquisitions that you have done, whether it’s overseas or India in terms of brands, it is as an outfitter, I get a feeling that the portfolio is getting a bit complicated. You have too much on your plate right now. There are like there is like KFC, which is the star and then there are a lot of actors Around it. How do you ensure that the management bandwidth stays on course and there is no, there is no accident in the journey therefore?
Manish Dawar
So the way we are structured, every brand gets a completely independent focus from — as far as the brand team is concerned. And when I say to the brand team, there is a separate CEO for the brand, there is a separate marketing team, there is a separate operations team and so on and so forth. It’s only the support functions which are common across the brand and that kind of works as a foundation for the entire business. So therefore, even for, let’s say if you were to look at say newer brands in terms of Sanu Kitchen and Tea Live and all, we’ve hired a new CEO.
If you were to look at the Thailand business, the team that existed prior to our acquisition has continued as-is there has been no change in the team and they are doing a great job. So we are not kind of tinkering too much as far as the brand teams are concerned. So that’s how we are kind of scaling up. Obviously, the new brands, they need more bandwidth.
But again, over a period of time, our objective is to create multiple legs for the business so that we are not just dependent on one or two brands. And if you look at, let’s say, our recent acquisition in terms of Biryani, I mean that’s the largest online ordered and online consumed item as far as the Indian cuisine is concerned and Biryani is a large category. And we’ve acquired a company, which is one of the market leaders in the space. And there also even in this acquisition,
The founders and the promoters who originally founded the brand will continue to run and manage the brand. We will only kind of harmonize the support functions to be able to draw the synergies. Otherwise, we have no intention to kind of change the fundamental brand-management from that perspective.
Vivek
Got it. And just one last follow-up, if I may. Manish, on this point, you know for longest time you — Devyani had, let’s say, um portfolio and Costa alongside and a couple of your own brands. And we have now seen a pickup in pace in terms of what you have done both outside India and in India. It just gives a feeling that is there — are you a bit concerned about KFC or a deceleration in the growth of that business and which is why you are actually going after quite a few opportunities.
I mean, it’s just the pace has surprised. So if you can just elaborate a bit more on that part, why do so many things instead of just focusing on a couple of big things so as you know, so as far, okay, let me just address this in multiple parts.
Manish Dawar
One is as far as KFC — KFC is concerned, it remains our star brand. We are as bullish on KFC as we were ever. So therefore, there is no change in terms of the way we look at the brand, the way we are bullish on the brand, the way we are kind of expanding the brand. So there’s no change. Pizza Hut, obviously, we’ve slowed down a little bit and we’ve communicated that also in the past in terms of store growth and the other things.
And we want to create a leg which kind of becomes another, let’s say, Pizza Hut in the business. As you know, even for example, let’s say, the new brands that we’ve signed-up, they are all unique brands which are currently not so prevalent in the market and we are trying to create that category.
So therefore, we are quite bullish on those. Even Birani, for example, if you were to look at, I mean, that’s the largest Indian food category, as I said. So obviously, we want to create different legs. And at the same time, in terms of the opportunity and when it comes, I mean it’s a matter of when it comes and when you’re able to grab it.
So therefore, I mean, obviously, I mean it cannot be at our speed and our choice when these opportunities come. And so we are absolutely in sync with what you’re saying and we are absolutely cognizant to whatever you are saying that we have to focus and we have to pay attention to these new brands and the existing businesses that we have.
And that’s what we are doing.
Vivek
Got it, Manish. Thank you for your detailed response, wishing you and your team all the very best.
Manish Dawar
Thank you.
Operator
Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. Our next question comes from the line of Gaurav Jogani from JM Financial. Please go-ahead.
Gaurav Jogani
Hi, thank you for the opportunity. Manish, my first question is with regards to the corporate overheads and specifically the overheads in the international business. That seemed to have jumped quite higher. If you can provide any details, why so and how is the outlook there?
Manish Dawar
So as far as international business, Gaurav is concerned, we’ve done some reclassification in terms of the management fee that we charge to Thailand to harmonize between in the accounting treatment of what was happening in India and what was happening in Thailand. Otherwise, in terms of the corporate overheads, they are absolutely in control.
There’s no change. If at all, if you look at the current quarter, they are down by a few bps versus the previous quarter. Even the full-year basis is more or less remained the same versus what it was on a full-year basis. So it’s only a reclassification between the heads that you’re seeing that aberration a little bit.
Gaurav Jogani
I think if you look in the absolute terms, last quarter the corporate overheads were around INR54 crores and this quarter it’s around INR59 crores. So I mean in bit terms also Q-o-Q and Y-o-Y, both it has increased actually. So that’s what I said there is a reclassification between the brand contribution and the corporate overheads.
Manish Dawar
Otherwise, if I were to negate that, then it stays on course. That’s what I said. Okay. Okay. Got it.
Gaurav Jogani
And Manish, the other question is with regards to the margins. I mean you partly alluded that KFC margin despite a lower ADS, you might be able to do the same numbers that you were doing earlier. So how should we think about the margins in the next two years, given that the recovery has been gradual versus what the earlier expectation was.
Manish Dawar
So if you look at even the current margins, Gaurav, we are currently sitting at about 16.2% at probably, as Vivek said, the worst ever ADS in the history of the brand at 83,000. So as I said earlier, let’s say, once we are able to hit 105,000, we will be able to get back to 20% margins on this one. So that is how we’ve kind of reshaped the business and we are absolutely confident that once the top-line recovers, those numbers are doable because otherwise,
If you look at a decline from 127 to 83, the brand would have been lost brand, which is not the case. We are still delivering 16% to 17% brand contribution margin. So therefore, that kind of gives you the proof that we’ve already resized the business. We’ve already kind of recreated that from an overall P&L perspective.
Gaurav Jogani
Yeah, surely. I have more questions. I’ll come back.
Manish Dawar
Sure. Thanks.
Operator
Thank you. Our next question comes from the line of Jivnanshu with Bernstein. Please go-ahead.
Jivanshu Jain
Hi, thank you for the opportunity. Manish, one question on Pizza Hut. So what do we think is our plan forward for reviving that brand because I think it seems to have stabilized at these ADS levels and they are not levels at which we can generate returns for us. So what are our plans for that? And I think there was some conversation in your sister Concerns investor call also regarding this. So would love to hear your perspective, please. Thank you.
Manish Dawar
So Jaganshu, on Pizza Hut, as we’ve communicated in the past, we’ve slowed down the growth exactly because of the same concerns. And therefore, we are in discussions with Yum in terms of how do we turn-around the brand because for example, you know that most of the levers are controlled by Yum in terms of innovation, in terms of price point, promotions and so on and so forth.
So we are currently in discussions with Yum in terms of how do we take this brand forward. See, overall, let’s say, if you were to look at between us and our second franchise partner, it still remains a strong brand. I mean, between the two, it’s almost a INR1,200 crores INR1,300 crore brand, which is the number two-brand in the country after — after the market-leader. We are absolutely hopeful that the brand can be turned around.
We have to make the tweaks as far as innovation, valuation of value offerings, communication is concerned. So I think we should be able to come back to you by next quarter in terms of what is our exact plan on Pizza Hut. Okay, great. Thank you. And a second question was on Thailand.
Jivanshu Jain
So any specific details you can share about what is the shape of the business there and what is your outlook for going-forward there in terms of either growth or profitability?
Manish Dawar
Okay. See, Thailand business is very stable. We’ve improved the margins from the time we’ve actually taken over the business. We’ve managed to maintains as well as the ADS numbers at a healthy level compared to the rest of the business. So therefore, it’s going at a right clip. We are also evaluating — introducing new brands in Thailand.
So for example, T-Live, as you — as you know, we communicated that we’ve signed-up this brand for India and Thailand and you will see the new stores opening both in India and Thailand in the current quarter for Tea Life. So our idea is to kind of leverage the existing Thailand infrastructure with the new brands
Jivanshu Jain
From our portfolio with the new brands that we are signing and therefore build it further from there. We are bullish on the Thailand business as well as the overall market. So a small follow-up on Thailand itself. So are we profitable PAT level this year?
Manish Dawar
No, PAT level, we are not. But at a brand contribution level, at an EBITDA level, we are positive. Because I think I don’t know whether — sorry, go-ahead. No, no, sir. Sorry, please finish. Please finish. So because, for example, Thailand has more aggressive depreciation policy than India and we’ve not tried to kind of realign that to the Indian business because of tax reasons and that’s the reason the PAT is negative. Otherwise, on a standalone basis, it is.
Jivanshu Jain
Okay. I’m so sorry. I am so sorry. And lastly, TLIVE is part of Thailand business then or will it be like a new subsidiary?
Manish Dawar
It will be part of the main business and the legal entity. It will not be a new subsidiary.
Jivanshu Jain
Okay. All right. Great. All right. Thank you.
Manish Dawar
Thank you.
Operator
Okay. Thank you. Our next question comes from the line of Saurabh Kundan from Goldman Sachs. Please go-ahead.
Saurabh Kundan
Yes. Thank you very much, sir. Most questions are already answered, just one that you might have already had your development agreement discussions with with Yum on annual basis. If you could just let us know format wise, what would be your targets this year and few years ahead. Thank you. That’s why
Manish Dawar
So, we do not have annual development target discussions with Yum. We typically enter into an agreement which spans over a period of five to six years and that is how we kind of maintain in case of any exceptional situation, we obviously go back to yum and we mutually align in terms of what is doable in the current circumstances and so on and so forth. So as far as KFC is concerned, there is no change. We’ve talked about for this year about 110 to 120 stores
. We are on course for that. There’s no deviation. As far as Pizza Hut is concerned, we are having an overall discussion, which is what I mentioned in my earlier response in terms of how do we take the brand forward and that includes the development discussions also with Yam. Yeah. So we’ll be able to come back to you by next quarter in terms of what is our exact plan on Pizza Hut, but KFC stays absolutely on course.
Saurabh Kundan
All right. Thank you very much. That’s all. Thank you.
Operator
Thank you. Our next question comes from the line of Devanshu Banzal from Emkay Global. Please go-ahead.
Devanshu Bansal
Yes, hi, thanks for the opportunity. Manish, there has been gross margin decline across formats. Checking if you can segregate this into an impact due to value offerings? And the second that you mentioned that there is some input inflation as well. And the night question is, are you planning to take some price increase to beat this inflation?
Manish Dawar
Yeah. Sure. So Devanshu, two things there. If you look at, let’s say, say, KFC, we’ve seen input price increase in palm oil, a small bit in chicken and the flour. But we think it will probably come back and we’ve seen in the current quarter even though oil prices are stabilizing now. So therefore, that is not a big worry. We do not want to take a price increase given the current overall consumption slowdown and so on and so forth. So we’ll try and absorb to the extent we can.
But we are hopeful that things should improve from where we are. As far as Pizza Hut is concerned, there is no big input price increase. So therefore, it’s stable gross margins. And third one is Costa, where we’ve seen a very strong input increase as far as the raw coffee bean pricing is concerned.
And there we’ve taken and balanced it out from a pricing perspective as well as the deals and promotions. So we are also trying to introduce some value layers in all of our brands and we’ve seen that happening very, very strongly with the competitive brands, whereas we’ve been kind of a little behind the curve, which has impacted our SSGs also.
So therefore, we are planning to become a little more aggressive on the value layers and we will see that happening from the current quarter
Devanshu Bansal
Understood. And the value layers, at least from an annual perspective can have some impact on the gross margins or that is manageable?
Manish Dawar
Not so much because as of now, we it’s only test mode. We will try and implement and introduce that to the market. Let’s see how it goes. And typically it takes almost one or two years by the time it becomes a sizable composition of the menu mix. So — but again, what is important is you need to have these value layers and price offerings so that you’re able to get the footfalls in the stores. And then once the consumer comes into the store, then obviously it’s not such a big issue.
Devanshu Bansal
Understand. My last question is by Kilo, the currently the brand is having some operational laws. So what are the medium-term expectations on the scale that this can achieve and the margin improvement that can happen in this format? You mentioned some of INR90 crore in this brand. What is the period for which the growth can sustain with this infusion that making?
Manish Dawar
So Devanshu Birani, as you understand, there is a huge opportunity and let me explain you that in bits and pieces. So one, as we kind of take-over the brand, there’s kind of opportunity in all lines, so we can improve the GMs from where they are, we can improve the brand contribution where they are and so on and so forth. So that’s how I said on an organic basis, we will be able to turn-around the brand in one year’s time.
At the same time, in terms of the expansion growth, so for example, they’ve got three brands, which is Biraniba, Kilo, Goela Butter Chicken and the Bojan, it can easily fit into all of our food coat locations, whether it is on the highways or it is there in the malls or it is there in the airports.
So that’s a good synergy that we can drive-in because as you know, even today also we deal with third-party brands. So we are going to be — in fact, we’ve already started that exercise that wherever on a per square feet basis, we have some inefficiency coming in. We’ll be easily able to replace the third-party brands with the — with our own brands coming out-of-the Skygate portfolio.
At the same time, they have a network of cloud Kitchen. So we are also evaluating whether in their cloud kitchen, we can put some of our brands depending on the location and what is the size of the cloud kitchen. So both way the synergies can work. So we see it as a great opportunity. It can become a very strong leg in the business over a period of time, and that’s the reason we are bullish on this entire portfolio.
Devanshu Bansal
And for the period, this INR90 crores infusion, is this the only infusion that we plan or this is going to be a continuous process where somebody will be required to be infused in this brand for some time.
Manish Dawar
See, it is too early to comment on that because we are hoping that with this the overall brand will turn profitable, one for sure. And second, we have to understand, let’s say, the first two phases of — of the brand expansion from a store perspective will be very efficient because we’ll just house the brands within our own food coats and airports.
So therefore, it will not be a huge capex. But let’s see what is our growth aspiration because we are drawing up the long-term plans to be able to figure out. But from an operations perspective, INR90 crores should be — should be enough. And at the same time, please remember that as the overall portfolio exists today, we have to — we have to do a buyout of one or two subsidiaries and that is where some of the — some of the cash-out of INR90 crores will go away. Because Goella butter chicken is not fully-owned by Skygate.
So we have to complete that acquisition that is part of the terms. And at the same time, the Mumbai franchise partner ownership is — has to be consolidated. So some bit of money will go towards consolidation of that. And the founders have already signed the term sheets on that.
Devanshu Bansal
Understood, Manish. Thanks for taking my questions.
Operator
Thank you. The next question comes from the line of Bantaki with IIFL Securities. Please go-ahead.
Percy Panthaki
Hi, sir. My question is on the KFC, you earlier mentioned that you are basically making it such that at 105 sort of ADS, you would still make close to about 20% ROM. So just wanted to understand apart from the store size change, what other measures are being put in-place for this to happen?
And for the store size change, is it just a change for the stores which have opened in the last year or so or even the older stores you are somehow resizing downwards.
Manish Dawar
So Percy, we’ve done that analysis to answer your last question first. Wherever, let’s say the KFC stores are exceptionally large. And as you know over a period of time, we’ve kind of opened new stores and therefore, there has been some bit of cannibalized — cannibalization in the existing stores. We are planning to carve-out the space for our newer brands, which are very, very small chaos type of formats and so on And so forth. So obviously, these brands will be independent, but we’ll be able to carve-out some space. To your earlier question in terms of where-is — where are these margins going to be coming from, one is obviously the format that we’ve discussed earlier. And the other one is as we kind of go along and if the ADS is a little down, you have the opportunities from a labor perspective, You have the opportunities from other overheads perspective. That is what we have looked at and we’ve kind of brought in that efficiency in the business. We are also negotiating some terms with the landlords, which again is a continuous process in the business and therefore, we are hopeful that we’ll be able to kind of control the rentals also to some extent. And is there any change in terms with the brand owner in terms of ad spends, royalties, etc. Yeah, that remains the same. There is no change. So as you know, I mean, our commitment on royalty as well as the brand spends is on a percentage to the top-line. So there’s no change on that. And we do exactly as per the — as per the agreements that we’ve committed to.
Percy Panthaki
Got it. Just wanted to understand in terms of Skygate, the business has an EBITDA loss. So do you have a plan in terms of how many more quarters it will take for it to be EBITDA breakeven?
Manish Dawar
So as I said, Percy, earlier on that we’ll be able to turn-around the business in one year’s time and therefore, we are absolutely confident that should happen.
Percy Panthaki
So got it. And just one last question in conference call with one of your sister franchisees, they said that there was a little bit of a sort of difference of opinion in terms of the ad spends on Pizza Hut. So would like to know your take on that.
Manish Dawar
See, there is no difference of pin in I would say because we both have different geographies. We both have a focus in terms of the formats because they are opening a little — they are from operating a little larger stores, which are more dine-in focused, whereas our portfolio is small format, which is more delivery focused.
So as such, there is no difference of. All we are trying to do is basically do whatever is required locally to ensure that the business kind of gets back on-track. So because of the geography and because of these different formats, that is where the difference is.
Percy Panthaki
Okay. Thank you very much.
Operator
Thank you. Our next question comes from the line of Sanjeev Raj from Anand Rathi Institutional Equities. Please go-ahead.
Sanjeev Raj
Hi, team. Good afternoon. Thank you for giving this opportunity. So just want to understand a little bit better on our recent entry into the Briani business. So we know that we are differentiated brand in QSR through strong execution and. But if you look at the Briani business, it’s highly fragmented, around 70% to 80% of the business is unorganized player. So it’s very competitive and it’s a low entry barrier and tough to scale.
So what’s the thought process behind this move on how we are planning to bring differentiation in terms of value in such a competitive space? And also you mentioned that currently the business is plus making, how you’re planning for a turnaround strategy here?
Manish Dawar
Thank you. Sure. See, Birani, as you know, is a large category. I absolutely agree with you that it’s highly fragmented. But as the food services play kind of grows in the country and as the consumption grows, we’ve seen a huge amount of consolidation on the Western brands. The same thing will happen in the Indian food category also.
So the brand is very well-positioned. It’s a premium brand. There is a very strong repeat rate from the consumer’s point-of-view and the consumers indeed love this brand. So one, but it — sorry, go-ahead. Obviously look at the same, but it’s been changing from the state-to-state to, if you look to every 200 kilometers the case has been changing guys.
Sanjeev Raj
So on that part, how you’re making the AS and how we are planning to manage this total strategy sure.
Manish Dawar
So if you look at the Biryani market overall, the largest category is Hyderabadi Birani, followed by Biryani and then Calcutta Biryani. So let’s say if you were to look at between these three that will be almost like 60% to 70% of the market. So from that point-of-view, while it kind of varies from state-to-state, but it is not as fragmented as we used to think in the past.
And we’ve actually gone into the details of how much is what category and which state and so on and so forth and that is how we took a call. Coming to your question in terms of the turnaround, as I said earlier, we have the opportunities on material sourcing. So there is a good opportunity there in terms of the way we buy and obviously, we will start to buy and source for Biryani kilo as well. So there is a sourcing opportunity, there is an opportunity on the labor.
The way the labor gets deployed, there is an opportunity on the rentals because currently the space or the — or the premises that they operate from has a potential available. So we can actually house some of our brands there or we can actually cut the space wherever it is not required. So there could be lot of synergies, which will be coming in as a result of Skygate becoming part of a bigger portfolio, including all the support functions and so on and so forth.
So that is how our plan is to turn-around the business. Yeah. So thank you, sir. But second question is that so are we trying to position ourselves as a full range QSR player with a variety — wide variety of food offerings? Because we are already present in a stock category, KHC, Pizza is and South Indian, which means now Briani. Is that the idea is to build a broader portfolio, pursue a different customer preference? See, we already are present in all the categories.
As you know, in the Indian market, QSR big categories are basically chicken, pizza, burgers, coffee. So we are present in all of these categories. We’ve now got into the Indian category, which we were missing earlier apart from Bango because Bango was only focused on South Indian. And at the same time, we’ve taken some new brands, which are typically indulgent brands on-the-go more whatever, rather than let’s say, a planned occasion,
It’s more whatever temptation, buying or temptation consumption. So we are trying to position ourselves to cover various spaces available, not only from a brand perspective, but also from a channel perspective. And that’s the reason we talked about our food coat strategy in the past and all of this portfolio helps with our food coat strategy as well.
Sanjeev Raj
Yeah. Thank you, sir. So finally on KFC, so we have reported almost 6.57 — roughly SS negative 7% SSG and last two years, we have been reached the bottom. So can we say this is the bottom? And if you mentioned that two markets have affected by bird’s flu. Apart from this, this negative SSG is coming largely from a Tier-1 or Tier-2 city, sir?
Manish Dawar
Yeah. Yeah, it’s largely coming from three markets. As I said, one is AP, Telangana, Cerala and West Bengal and rest of the markets have already turned around. And we are absolutely hopeful that these three markets also should turn-around in the next few months.
Operator
Yeah. Yeah. Thank you, sir. Thank you for opportunity. All the best.
Sanjeev Raj
Thank you. Okay. Thank you so much.
Manish Dawar
Thank you.
Operator
As there are further — no further questions, I would now like to hand the conference over to the management for closing comments.
Ravi Kant Jaipuria
Thank you very much. We hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free-to contact our Investor Relations team. Thank you once again for your interest and support and for taking the time-out to join us on this call. Thank you very much once again. Thank you.
Operator
On behalf of Devyani International, that concludes this conference. Thank you for joining us and you may now disconnect your lines