Sapphire Foods India Ltd (SAPPHIRE) Q4 FY22 Earnings Concall Transcript

Sapphire Foods India Ltd (NSE: SAPPHIRE) Q4 FY22 Earnings Concall dated May. 17, 2022

Corporate Participants:

Rahul Kapoor — Head, Investor Relations

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Vijay Jain — Chief Financial Officer

Analysts:

Percy Panthaki — IIFL — Analyst

Richard Liu — JM Financial — Analyst

Jaykumar Doshi — Kotak — Analyst

Akshen Thakkar — Fidelity International — Analyst

Prateek Poddar — Nippon India Mutual Fund — Analyst

Devanshu Bansal — Emkay Global Financial Services — Analyst

Shivam Agarwal — Mirae Asset Capital Markets — Analyst

Utkarsh Maheshwari — Reliance General Insurance — Analyst

Gopal Nawandhar — SBI Life Insurance — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 and Full Year FY ’22 Earnings Conference Call of Sapphire Foods India Limited organized by Orient Capital. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Rahul Kapoor, Head, Investor Relations. Thank you. And over to you, Mr. Rahul.

Rahul Kapoor — Head, Investor Relations

Hi. Good evening, everyone, and a warm welcome to Sapphire Foods fourth quarter FY ’22 earnings conference call. I’m Rahul Kapoor from Sapphire Foods Investor Relations team. I hope everyone on the call is doing well and staying safe.

Today on the call, I’m joined by Mr. Sanjay Purohit, who is our Group CEO and Whole Time Director; our CFO, Mr. Vijay Jain; and Orient Capital, which are our investor relation advisors. We have uploaded our investor presentation and earnings press release on stock exchange and on our company website. I hope everybody on the call got a chance to go through these documents.

We’ll begin the call with the comments from the management, which will be followed by a adequate session of Q&A. This call may contain some of the forward-looking statements, which are purely based upon our beliefs, opinions and expectations of the company as of today. These statements are not at all a guarantee of our future performance and involve risks and uncertainties, which cannot be predicted at this point in time.

With this, I’ll hand over the call to Sanjay. Here you go, Sanjay.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Good afternoon, ladies and gentlemen. Thank you, everybody, for attending our investor conference call. We are going to be announcing our quarter four FY ’22 and our full year FY ’22 financial year. Like Rahul said, the presentation that I’m making is already on the SEBI website as well as our own website.

So, quarter four saw operational disruptions because of the third wave of the COVID pandemic. And January and February were impacted and things started to get somewhat to normal in March. And despite these operational disruptions, we’ve delivered a really strong performance in quarter four FY ’22. We added 29 new restaurants. Revenue grew by 46% year-on-year, EBITDA by 66%, up 260 basis points and PAT of 5.4% as against a loss of 4.1% in quarter four FY ’21.

Our adjusted EBITDA pre-Ind AS 116 rose to 12.9%, which was up 470 basis points year-on-year. From a financial year perspective, this has undoubtedly been by far the best year in Sapphire Foods’ short operating history. You would have known me to say that we started operations in 2015-’16. In this five, six years, this has been our best every year. We added 142 new restaurants during the year, revenue grew at 69% over 2021, EBITDA by 82%, up by 130 basis points. And for the full year also, we delivered a PAT of 2.7%. And this last year, in FY ’21, was a loss of 9.8%. Our adjusted EBITDA pre-Ind AS 116 has risen to 10.5%, up 670 basis points. So it delivered INR180 crores roughly of adjusted EBITDA.

When I look back two years to March ’20 when the COVID pandemic struck us, we really expected this pandemic to have a very detrimental impact on our fledgling business. However, in reality, the last two years have actually helped us transform our business and significantly improve the financial performance. And in many ways, this positive outcome, I think, is a consequence of perhaps the rare values and resilience that has been shown by each and every Sapphire employee in just responding to the travails of this pandemic.

Internally we call this as a step-up year for us. And actually all three businesses have delivered a step change in performance in FY ’22. So KFC became a INR1,000 crore plus brand for Sapphire with its highest ever restaurant EBITDA of 19.5%. We have talked a lot about the only channel strategy of Pizza Hut and we are seeing this play out with the brand delivering double-digit restaurant EBITDA of 13.4% and with the more compact omni-channel stores that we have opened, say, from April ’18 onwards that are delivering mid-teens restaurant EBITDA.

The Sri Lanka business also is doing exceedingly well. We continue to be the biggest and the best QSR chain in the country despite the macroeconomic conditions being difficult. And in FY ’22, it delivered the best ever performance, 25 new restaurant additions, SSSG of 42%, revenue growth of 80% — 60% and restaurant EBITDA of 23.2%, up 360 basis points.

Over the last few months, we are seeing inflationary pressure. All of you will know that on all our imports, and therefore this has required us to do a very fine balancing act between increasing prices, ensuring that there is minimum impact on consumer wallets, how do we sustain revenues and profitability growth. As operating conditions have normalized in April and May to pre-COVID levels, we’re actually seeing very strong consumer demand for our brands. And so we have taken price increases on both the brands and, in Sri Lanka, right now we are seeing — continuing to see transactions to improve. In fact, we are growing strongly.

Our new restaurant additions are on track as we indicated — as we’ve been indicated that we should be able to double restaurant count over the next three, four years. So that seems to be on track. And I think finally, we’ve been able to develop organizational muscle to be able to cope with volatile situations. And therefore, we’ll find ways to get better, we’ll find ways to manage the inflationary pressure and we are quite confident about our future growth.

Before I take you through the results, I just want you to — I always like to reiterate the Sapphire story because we are such a young organization. We operate restaurants as a pool of the largest global brands KFC and Pizza Hut. And in our short operating history, we’ve been able to build substantial scale and operations, thereby leading to PAT profitability and scale among the top three QSR operators. As a restaurant operator, we pride ourselves on our execution mindset. We want to deliver great customer experience, great food, great experience, great value. And our back-end operational capabilities aid this customer experience.

We have worked hard to develop our capital allocation model to be optimized and therefore have worked on with the new restaurant expansion model. So, again, you would have heard us speak about this, our focus on smaller-sized omni-channel restaurants. This has started to play out, improved accessibility and profitability. We’ve built ourselves. We have a platform where we have the capability and capital to drive both organic and inorganic growth. And I think underlying this, these are values based work culture, very high on governance, enabled by a professional management, professional Board and professional performance.

Let me now take you through the quarter four results. Restaurant sales were at INR494 crores, up 46%; EBITDA was INR104 crores, up 66%; and EBITDA margin was 21%, up 260 basis points, and we delivered a PAT of 5.4%. We added 29 restaurants, 13 KFC, 10 Pizza Huts in India, 6 in Sri Lanka and nothing in Taco Bell for the quarter. It’s also our best-ever year performance, as I talked about. So we delivered INR1,715 crores restaurant sales, up 69%; INR325 crores in EBITDA, up 82%; 18.9% EBITDA margin; PAT of 2.7%, and totally opened 142 stores, 60 KFC, 57 Pizza Hut, 22 Pizza Hut in Sri Lanka and three Taco Bell restaurants. And our total restaurant count at the end of March was 579. We have a very strong balance sheet, and cash net of debt is about INR400 crores. And you know we operate with negative working capital.

This is the next slide, which is Slide number 8, shows you the restaurant count across years. If you look at how our additions have gone during the year, we added 13 stores in quarter one, 32 in quarter two, 68 in quarter three, and 29 in quarter four. And we said in December, our restaurant count was 550 and our guidance was, we expect that to double in three to four years. I think this year, we are on target to be able to meet that broad objective.

I’ll now hand it over to Vijay. Vijay Jain is our CFO to take you through the specific financial details.

Vijay Jain — Chief Financial Officer

Thank you, Sanjay. Good evening, everyone. I’ll cover from Slide number 9, consolidated financial highlights. This is at our overall consolidated level. Restaurant sales, we clocked INR494 crores, up by 46% over corresponding quarter. Gross margin of 69.1%, a drop of only 3 basis points on account of inflationary pressure. We will deep dive into each of these at a business level at KFC, Pizza Hut and Sri Lanka level to understand this in a bit more detail.

Restaurant EBITDA, we clocked 18.3%, up by 30 basis points. So, in spite of gross margin under pressure, through our cost efficiencies, we were able to deliver expansion on restaurant EBITDA. And mind you, this was the quarter where January and February was impacted by COVID. So, inflationary pressure plus COVID, still we were able to drive restaurant margin expansion. Company adjusted EBITDA, which is pre-Ind AS 116 at 12.9%, up by 470 basis points. Overall company EBITDA post-Ind AS 116 at 21%, up by 260 basis points and PAT at 5.4% for the quarter, up by 950 basis points vis-a-vis loss of 4.1% in the corresponding quarter. And if you look at the annual number of PAT, 2.7%. This was the first ever year for Sapphire to deliver PAT profitabilities, so quite an important milestone from Sapphire point of view.

Moving on to the next two slides, I’ll go into details of P&L and balance sheet. Moving on to cash flow, Slide number 14, again, the cash flow is based on the post-Ind AS 116 representation, so we’ll not a completely correct picture, the way one want to look at it. However, if I give you two — couple of important data points over here. Cash generated from operations, if I bring it up pre-Ind AS 116, it would be close to INR240 crores, INR250 crores cash from operations. And when you look at the capex which we incurred for the year, so while the investing activity showed INR691 crores, it also includes the funds which we would have made — invested into FDs, mutual funds. So if I exclude that, the capex investment for the year would be INR285 crores for the year. The closing balance of cash shows INR58 crore. However, if you include the investments which we carry, the overall cash balance net of debt is close to INR400 crore at a consolidated level.

So let me talk now about the KFC performance. KFC, despite the operational disruption, had a strong quarter. We grew SSSG by 15%. So if you look at Slide number 16, we talk of the recovery versus FY ’20, so delivery is tracking at an ADS level double of FY ’20. Dine-in has come back and is slowly coming back, but is still at 67% of FY ’20 level. And as in April and May, this is starting to further improve. There are several branding and promotional initiatives that we had during the quarter. I think the launch of the Biryani Bucket was very important innovation, and that’s really doing well. From the operational perspective, the 7-minutes Express Pick Up or get a free piece of chicken was — is really quite successful, helping our operational people to really hustle in the kitchen and drive customer satisfaction. So that’s worked well. There’s a lot of work happened on digital activation. We won the brand disruption award for the value burger campaign with Mr. Anil Kapoor.

There are some of the pictures of our new restaurant launches. As you can see, they look really beautiful. When you see the Attur, Salem store, for example, it’s a 1,500 square foot store, but looks really imposing and beautiful. And then, we’ve got some pictures of our Mumbai store and our Pathankot drive-through, and then an Indore store.

Moving on to KFC financials, Slide number 21. The SSSG for the quarter was 15%. ADS was at INR132,000, growth of 12% over corresponding quarter. So, in spite of the first 45 days impacted by COVID, quite a healthy SSSG and ADS growth. Overall revenue for the brand at INR296 crores, up by 43% and we added 13 restaurants during the quarter.

Moving on to the next slide. Gross margins, we dropped by 70 basis points on account of inflationary pressure. The large price increase which we took was in September. Since then, towards last week of March, first week of April, we have taken another price increase of close to 9-odd-percent in KFC, but the quarter had no price increase. And despite the drop in gross margins, we were able to improve our restaurant EBITDA by 90 basis points at 19% for the quarter. Overall, KFC again had a very strong year — the best year. It has become a INR1,000 crore brand for Sapphire and restaurant EBITDA of 19.5%.

From a Pizza Hut perspective, our Pizza Hut was slightly more impacted by the third wave of COVID. And this is largely because of our strong mall presence. And malls in quarter three and quarter four are still not operating at 100%. The third wave of COVID had also impacted, if you know, our business. And the fact that we have in South and West, and South and West with has had most operational disruptions. So the Pizza Hut business for the — little more impacted than KFC in the quarter. Having said that, we had a SSSG of 3% year-on-year. We launched the San Francisco Style Crust, I’d encourage any of you to have this. This is a absolutely fantastic product and it expands across options that we are offering to consumers. So, you all know the pan pizza — deep dish pan pizza is the signature Pizza Hut crust. But this one, the San Francisco Style Crust, which is a global innovation, also starting to do quite well. It’s just a lighter, little airier and little crispier product. It’s at the same price points as the deep dish pizza. And as innovation offers little better — little better margins that there deep dish pizza.

Again, from a promotion perspective, we’ve shown a couple of pictures. A lot of activity around the Francisco style pizza on digital. On Slide 28, there are new restaurants that — with some pictures. Again, each of them is roughly in the region of about 1,200 square foot or so, Magadi Road store in Bangalore, or the Bhayandar store in Mumbai having about 50 seats. We’ve got a beautiful store in Fort, Mumbai, next to Sterling Talkies. You can see the Waluj, Aurangabad store also.

Moving on to Slide number 29, let’s start with Pizza Hut financials. SSSG of 3% for the quarter. And as Sanjay said, the Pizza Hut was probably a bit more impacted compared to KFC. For the simple reason, this is the — territories which we operate in south — largely south and west and the mall portfolio, but still a 3% SSSG, ADS growth of 2%, overall ADS at INR55,000.

Restaurant revenue of INR103 crore, up by 33%. Restaurant additions of 10 during the quarter. And while gross margins dropped by 180 basis points, the restaurant EBITDA were largely able to help in spite of both COVID impact and inflationary impact with restaurant margins at 11.5%. And within this entire cohort of stores which were opened from 1 April ’18 onwards. So stores opened over last four years, they have delivered profitability in the range of mid-teens. And this is the compact omni-channel format stores, which we have — which as a company as a strategy, we will be rolling out as we move forward as well.

Overall, for Pizza Hut also, this was the best year. We have moved from single, low-single digit EBITDA to a double-digit restaurant EBITDA. And within that double-digit restaurant EBITDA, the entire [Indecipherable], which is the recently opened since April ’18 onwards, compact omni-channel format stores delivering mid-teens level of profitability. And this is in spite of the fact that the dine-in has been a bit constrained over last one or two years. So we are quite confident about this particular format and the model as we move forward.

Let’s now talk about the Sri Lanka business. The Sri Lanka Pizza Hut business is the biggest QSR chain in the that country and is also perhaps the best QSR chain. In terms of our number of stores that we operate, the average daily sales, our customer experience is absolutely top-notch. During this period from a local currency perspective, we’ve continued to go from strength to strength. In fact, if you look at the business, it delivered a 29% SSSG in Indian rupee, but from a Lankan rupee perspective, which is really what local consumers are paying, there was a 47% SSSG in this quarter. So, this business continues to do well. We also opened 6 stores, like I said again, and here we’ll talk about the financials, is doing really well.

And then, if you look at the channel sales contribution, which is the Slide number 32. Our recovery even on dine-in now has come to almost 100% of pre-COVID levels. And Delivery and Take Away continue to do exceedingly. We’ve had a slew of new product launches. So we did meal for one, which is the my box launch. That’s doing very well and we had quite a innovative product, which is pizza and biryani combined, which is limited just to our dine-in — just to the dine-in occasion during lunch, again with very, very nice innovation.

Lot of work on digital, the new store launches, you can see, all these are, I would say, smaller town outside Colombo and outside the main cities. So, our reach and expansion of the brand continues. It continues to occur at a reasonably fast pace. So, if you see, during the year itself, we would have opened 22 Pizza Hut stores on a base of close to about 67 or so. So, really strong number of additions, and that we are quite confident will continue.

Moving on to Slide number 36, Sri Lanka business financials. SSSG of 29% in Indian rupees, as Sanjay said, very handsome growth in Lankan rupees, 47% SSSG. And this is not just led by — some times you feel that it’s led by inflation, but that’s not the case. We are seeing a very handsome transaction growth over there in Sri Lanka business, 30% plus transaction growth. So that’s the real test of the business and we are seeing a very good transaction growth over there.

Overall ADS, 30% growth in LKR terms. Restaurant sales at INR92 crore, up by 82% in Indian rupee terms and up by 105%. So we have almost doubled the business over last year. And mind you, last year Q4 in Sri Lanka, we were not trending below pre-COVID levels. So last year itself was also at a — largely at a pre-COVID level. So on that number, we’ve been able to double the business in Sri Lanka this quarter. Gross margin drop of 530 basis points. I’ll just try and bifurcate this into two parts.

Last year quarter four FY ’21 when we showed 70.2% as a gross margin, that has a 200 basis points annual benefit which was accrued in quarter four. So the drop is more like around 330 basis point. Yes, because of inflationary pressure, but in spite of that we have delivered a very high restaurant EBITDA of 24.4% for the quarter. And even if you look at the year, restaurant EBITDA of 23.2%, which has been the best ever year for even Sri Lanka business both in terms of revenue as well as profitability. And if I convert this into a group at absolute value, the restaurant EBITDA for the quarter has grown by 16%. And the restaurant EBITDA for the year has grown by 79%. So, a lot of times when we see that Sri Lanka is whether small contributor, the answer is no. It continues to grow very fast and it continues to contribute very handsomely to the overall business.

Let me take a minute or two to talk about our other initiatives. Last time I spoke of our ESG initiatives that there is a lot of work that is actually happening on ground. But what we thought we would benefit from was to be able to — was to on-board of professional firm and therefore we are starting to work with PwC, and so fine-tune our charter and review our progress on ESG. I’m not going to be talking about this every quarter. So, to make meaningful progress here, we’ll start to talk about it is every half. Every six months, we’ll talk about some of our ESG initiatives.

So if you look at just one or two small suits [Phonetic] that we have now started to take on a larger scale, we implemented solar panels in a couple of stores, they have the — solar panels are giving us benefit and providing us a payback in the region of three years. And therefore, now we are expanding it to more number of stores. So we will see that over the next couple of months. We launched a very beautiful store in T Nagar. We refurbed a very beautiful store in T Nagar, Chennai, which is a sustainable store. So a lot of local cement texture, handmade tiles used, laminated from vendor that follow sustainable manifesting [Technical Issues] so on and so forth. So, this is the initiatives that we’re doing [Technical Issues].

From a people perspective, we won a Equity & Inclusion Award at the Pizza Hut Global Summit in ’21. We were awarded Best Work Place for Millennials in Sri Lanka. And I think this agenda will just get stronger and more focused as we go forward. And that’s it from me. I’m going to stop here.

And now, I will hand it for Q&A.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We take the first question from the line of Percy Panthaki from IIFL. Please go ahead.

Percy Panthaki — IIFL — Analyst

Hi, sir. Congrats on a very good set of numbers. I just wanted to understand your plans for next year in terms of what is the total capex that is planned for the year on a consolidated basis. And if possible, if you could also give an idea on how many stores you would be opening across formats.

Vijay Jain — Chief Financial Officer

So, Percy, Vijay here. Again, we do not like to give year specific guidance. As Sanjay mentioned, 550 restaurants we had as of 31st December. We planned to double that over three to four years. So if you average it out, it would be [Technical Issues]. And in terms of capex, currently we incurred [Technical Issues] our stores that would give you broad indication on where our capex [Technical Issues]. But we would have abstain from giving a very specific number. We are on track on this particular projections of doubling it over three to four years. With capex of ours, which is INR285 crore rupees includes refurbishment of our stores, and this is one of the big things which we do to make sure the customer satisfaction levels are always high. So this capex of current year, which is FY ’22, of INR285 crores includes new stores, refurbs, plus IT capex as well.

As we going forward, Percy, many of the stores that we have opened now are five, six years. So they come into the refurb cycle. And we’ve always found that when we do a refurb and overall facelift of the store, it has a very positive impact on the customer experience. So, refurbs also will start to increase in numbers going forward.

Percy Panthaki — IIFL — Analyst

So if I look at this year’s capex of INR285 crores and our store addition of about 142. On average, it works out to be about INR2 crore per store, including the refurbishment IT, etc. So, given that your metal prices, commodity prices are also up, do you think this INR2 crore per store will see an inflation in FY ’23? And if so, by how much?

Vijay Jain — Chief Financial Officer

Percy, again, the way you did the math, too good. First, it’s not the right way to look at things because you have included the total capex and divided by just the NSOs over here, the new stores over years. So not really the right way. But just to answer on your inflation part, we are seeing inflation in the range of 3% to 5% on the capex front — at overall capex front. Again, but there is always a hand over that how do you create more efficiencies internally, so that not everything eventually hits us but 3% to 5% inflation is what you’re seeing.

Percy Panthaki — IIFL — Analyst

Okay. But given that your refurbs will continue, it would be fair to say that on a per store basis, whatever number of stores you opened in FY ’23, multiplied by about INR2 crore to INR2.1 crore would be the total capex that you would sort of require. Is that understanding correct?

Vijay Jain — Chief Financial Officer

I would still say that INR285 crores, plus the adjustment for the stores increase or inflation is the right way to look at, because when you label it INR2 crores per store, it gets labeled somehow that is supposed to close, so I don’t want to label it that way, Percy.

Percy Panthaki — IIFL — Analyst

Okay. Understood. Secondly, on Sri Lanka, I just wanted to understand, while the Q4 figures, obviously you’ve given in the presentation and they are very good. But on the ground, what is happening currently? Are you seeing any kind of disruption in terms of demand, given the heavy inflation that the economy is going through, and therefore the pressure on the consumer wallet leading to a demand compression? Or secondly, any sort of demand issues because of the disruption of daily life? And on account of that, if there is any sort of decline in the constant currency sales per store. Would that have a negative operating leverage on the EBITDA margins also?

Vijay Jain — Chief Financial Officer

So, the advantage which are getting in Sri Lanka right now is somewhat similar to what happened in India when COVID striked. When COVID striked, like Sanjay said, initially everybody thought that probably this was — this would put us back by two years, but eventually it gave us an advantage when we came out of COVID. Something similar is happening in Sri Lanka. And a lot of times just looking at just one month back, but the problem started even nine months back. But over nine months, whether it is a inflationary pressures, whether it is other things which are happening on the macroeconomic front, the quarter four performance is in spite of those macroeconomic pressures. Yes, the things have got worsened on the macroeconomic front over last 30 to 45 days.

But even when we look at our April trajectory, we continue to see very high double-digit SSSG. So, our quarter four was in the range of 40-odd percent SSSG. We are see seeing similar numbers [Technical Issues]. The real barometer is the SSTG. We are going to see very high SSTG in that [Technical Issues]. So while this macro economic situation is tough, business wise as we are very strong. The advantage over there is, 90% of our deliveries, we own the fleet, we deliver ourselves. So that’s another advantage over that. We being the biggest brand and the largest brand over there give us an unique advantage over to us. So, as long as the stores are operational, which have been the case throughout, we are very confident that we should be able to generate very high throughput from our stores. Yes, there were couple of occasions of disruptions on account of fewer emergency. But barring those, as long as the stores are operational, we are confident of the revenue being generated.

Percy Panthaki — IIFL — Analyst

Okay, sir. That’s all from me. Thanks, and all the best.

Operator

Thank you. We take the next question from the line of Richard from JM Financial. Please go ahead.

Richard Liu — JM Financial — Analyst

Hi, thank you. Can we request you to give some perspective on the movement in the non-restaurant costs? So I’m really talking about the difference between restaurant EBITDA and company adjusted EBITDA. That cost used to be about INR95 crore in each of FY 2021, which has gone up significantly to about INR140 odd crores in FY ’22. Can you help us understand the reason for this quantum jump from INR94 crores to INR140 crores?

Vijay Jain — Chief Financial Officer

So the difference also includes the ESOP cost. So if you actually strip of the ESOP cost, ESOP cost for the year was in the range of INR35 crore. So that reason you will be looking at a big jump when you’re looking from a restaurant EBITDA to adjusted EBITDA, because adjusted EBITDA is post this cost.

Richard Liu — JM Financial — Analyst

Okay. So that INR140 crores minus INR35 crores, which is INR105 crores, that is the real ESOP cost.

Vijay Jain — Chief Financial Officer

Yes.

Richard Liu — JM Financial — Analyst

Okay. And Vijay, Sanjay, can you — obviously the margin picture at the restaurant level have turned out to be much better than what one would have anticipated maybe about one, 1.5 years back. Can you give us some guidepost in terms of how are you looking at this? I mean, given that it’s turned out better than what it is, are you looking at further expanding to this or you think that this is really the optimal level that you would like to operate at?

Vijay Jain — Chief Financial Officer

So, again, when we look at restaurant EBITDA, we would like to see it at a business level rather than at a overall level. Overall level actually gets skewed because of the mix each business would play out. So it will take business by business, KFC right now at 19.5%, I think they’re quite happy where it is closer to 20-odd-percent. We have always maintained that we’ll continue to see some efficiencies as we keep building more stores and we keep generating operating leverage, but quite happy where the range is right now at close to 20-odd-percent for KFC.

Pizza Hut, while the overall brand is at around 11.5% for the years. I’m now stripping off the additional incentives we have received during the year. So it’s 11.5% for the year. Within that, the new stores opened from FY ’18 onwards at mid-teens. This is that we believe will start moving towards high teens as the dine-in comes back strongly for us. And as we keep adding more and more the smaller and tighter omni-channel format stores, the overall brand profitability, which is currently around 11.5%, we see this moving towards mid-teens — entering teens and eventually moving towards mid-teens.

Sri Lanka currently at 20% plus, I think we are quite happy if it remains in the range of 20-odd percent as long as the kind of growth we are getting over there of 40%, 50% SSSG because the idea is to manage inflation and we don’t take price increases which is equal to inflation, we normally try and take it below inflation so that we will become more attractive to the customers. We remain competitive and we continue to offer more values. So, as long as we’re able to deliver 20%-plus restaurant EBITDA on Sri Lanka, we’re quite happy.

Richard Liu — JM Financial — Analyst

And just to confirm again, with regards to the store ambition, if I heard you correctly, you basically said doubling versus that 550 stores of December ’21 over a five-year period?

Vijay Jain — Chief Financial Officer

Over a three to four-year period.

Richard Liu — JM Financial — Analyst

Over a three to four-year period? Okay, got it. Thanks a lot. Wish you all the best.

Vijay Jain — Chief Financial Officer

Thank you.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Thank you.

Operator

[Operator Instructions] We take the next question from the line of Jaykumar Doshi from Kotak. Please go ahead.

Jaykumar Doshi — Kotak — Analyst

Hi. Thanks for the opportunity. In the question on Sri Lanka, if you can let us know how are you managing the operations. What are the risks that you’re facing at this point of time purely from supply chain perspective and what’s the base case and worst case scenario for Sri Lanka? That’s number one. Another is, usually when countries go through such difficult macro situation in default, how does a QSR business perform over a two to three-year period? What are your learnings if you have looked at similar situations in other countries where — how has Yum franchisees performed in those countries?

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Yeah. So from a operational perspective, we have a really strong team there in Sri Lanka, Jay. And if I have done extensive research in Sri Lanka, I will say that this is perhaps the best QSR scheme.

Jaykumar Doshi — Kotak — Analyst

I meant availability, right. So, there was a headline article saying that they don’t have more than enough petrol supplies of one day or power cuts of 15 hours in such situations.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Correct. So, what are the issues — the issues are, for example, getting fuel and getting electricity to be able to run our stores. So, there occasionally we have been able to still manage to get [Technical Issues]. Yes, there have been disruptions, but [Technical Issues] that we need to close down the stores. So we normally do that during the lean period. So, apart from that, we have been able to manage the operational disruption. From a supply chain perspective, from an import standpoint, both — so cheese is our biggest import. And again, there we’ve been able to — we have stocks in hand. We have been able to manage imports, plus we are helping through India also. So, typically we have to get cheese from Fonterra in New Zealand. Now we are getting it — some cheese from India also.

So, apart from that, most of the other products are local. Capital equipment also, we’ve been able to manage. So on ground, this transaction growth that you’re seeing is a result of us being able to manage that situation really, really well there. And I know we read a lot in the newspapers about violence, etc, but in general, it’s the peace loving country. Citizens are peace loving and I think very disciplined. So, even if you go to a fuel station there, you won’t find the kind of — you will find the disciplined line, and therefore we will have one person almost stationed at the fuel station to ensure that we get the right amount of diesel to run our generator sets. So, I think overall all our operational parameters of the business continues to do well. We see an actual opportunity here. And again, we have talked informally to other people in the Yum system. We also talked to some other people who have been perhaps exposed to higher inflationary environments. So contrary to what people say, we think that this is a great opportunity to strengthen our business, improve our accessibility further. When I look at, say, even close by, say, the Pakistan business of Yum seems to again be doing fairly well.

So I think apart from that — so we’ve got a team that is very capable. We’ve got certain operational strength that are unique to us really in that market. And we believe that from a macro perspective also, things will start to stabilize over the next six months or whatever, whenever they start to stabilize. We remain confident about this business and what it can do from a constant currency perspective. So Sri Lankans are paying in Sri Lankan rupees, they are opening their wallets and spending on Pizza Hut. And I think that’s what we have to focus on. If the currency depreciates versus the Indian rupee and therefore from our consolidation of accounts, what that does, it doesn’t affect the Sri Lankan consumers. So, overall, we continue to be bullish on that business.

Jaykumar Doshi — Kotak — Analyst

And if I may ask, as of today, have you managed to pass on all the inflationary pressure that you are facing on the raw material input side in terms of price increases, are your gross margins and EBITDA margins as we speak today comparable to what it was before depreciation of Sri Lankan currency?

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

The strategy [Technical Issues] from the entire inflation [Technical Issues] to the customer. We will always want to pass on something which is lower then the inflation which makes you more attractive for the customer. [Technical Issues] value for attractive to the customer who makes you more competitive in the market. That’s the general strategy we always follow. For example, last year, the inflation in Sri Lanka business was probably 20%, 25% maybe. And again, I’m giving you very approximate numbers over here, just to make a point. We would have taken a price increase of around 15% last year. And we dropped our gross margins last year. If you look at the annual number, we have dropped our gross margins last year. But we’ve been able to improve our EBITDA. So the way to improve our gold or improve our EBITDA is not just the gross margin line, how we can make sure that you deliver other cost efficiencies, thereby you don’t pass on everything to the customer and still continue to hold and improve our restaurant EBITDA margins. And this could be again the way forward. So, again, we will not be passing on the entire inflation to the customers, but again very confident of trying to hold the restaurant margin, as I said, 20% odd restaurant EBITDA, we are quite comfortable and confident of.

Jaykumar Doshi — Kotak — Analyst

Understood. And couple of bookkeeping questions. One is, when I look at your India performance, KFC as well as Pizza Hut, on a sequential basis, there is about hardly any dip in gross margin for KFC, marginal decline in gross margin for Pizza Hut. And I’m talking about sequential December to March. There is definitely a seasonal drop in ADS for both the brands. But when I look at your EBITDA margin drop on a sequential basis. It’s slightly higher than what you usually see in sequential performance of other QSR players. So I was just wondering, is this natural or seasonal decline in the margins, and so should one look at this quarter’s EBITDA margin of brand level margin of 19% of KFC and 11.5% as more representative of your full year potential or is there any scope for — especially Pizza Hut, we were sort of — after last quarter’s performance, my expectations were probably will inch closer to 15% as the mix of new stores improve, but it’s gone closer to 10%.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

So there is two-fold impact, right. It’s not just the seasonal impact. You rightly said that seasonal impact would be there in quarter four versus quarter three. And if you and for the benefit of everyone, we had called out that quarter three typically is anywhere between 100 to 200 basis points higher than the annual average. And this would again depend upon where the Navratri falls, where the Diwali falls, where the [Indecipherable]. Sometimes it’s in Q2 — towards the end of Q2, sometimes it falls in quarter three. But industry level trend is that quarter three margins are 100 to 200 basis points higher than the annual average. So this is the one impact that you see.

The other impact which probably discounting is on the COVID impact, the 45 days impact of COVID which has impacted Pizza Hut more than even KFC over here. And as I said, because of the territories which we operate, and that’s reflective in the margin of Pizza Hut as well. On your other part that how much drop we have seen, if you look at KFC, if I recollect the number correctly, between 21 was approximately the number in quarter three, we have delivered 19-odd-percent for KFC. It’s a 200 basis points drop. Yes, if the COVID impact wouldn’t have been there, I think we would have been more closer to 20-odd-percent for KFC.

Pizza Hut, we have delivered 11.5% versus quarter three of 14.9%. So while you expected 15%, quarter three itself was 14.9% if I strip of the additional incentives which we called out in quarter three, so 11.5% probably should have been around 12% to 13% if we wouldn’t have had impact of COVID in quarter four.

Jaykumar Doshi — Kotak — Analyst

That’s very helpful. I have a follow-up question, but I’ll go back in the queue and come back later. Thank you.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Thank you.

Operator

Thank you. We take the next question from the line of Akshen Thakkar from Fidelity International. Please go ahead.

Akshen Thakkar — Fidelity International — Analyst

Congratulations to the team on a good set of numbers. And thank you for clarifying on the Sri Lanka business operations in this quarter. Just had a question around how do you now trade the translation impact of currency? The currency has weakened, right. So could you just talk through how does it impact P&L and also balance sheet right now? Thanks. That’s the question one.

Vijay Jain — Chief Financial Officer

So, on quarter four, the P&L impact is not too big, because what we saw the depreciation started happening from second week of March onwards and till a preview would say. So the Sri Lankan currency was anywhere around 37 paisa Indian rupee to Lankan rupee. This was somewhere around end of Feb. By the end of — right now, we are at 21 paisa, so almost a 40% depreciation has happened on the currency front. However, the impact in the Q4 P&L is less than 10%, I would say, in terms of currency translation for the P&L. Going forward, yes, quarter one, if you see, we would have a 40% impact in terms of translation. Sri Lanka business delivered roughly INR50-odd crore for the current financial year in terms of overall EBITDA, I would say. And again, I’m giving you a very approximate number. If you try and apply a depreciation of 40%, but we are growing there very handsomely by almost 40% or 50% SSSG. The overall quantum could be in the range of INR10-odd crore for the year FY ’23. As long as the stores are operational, I think we don’t see a big impact. Yes, if the stores shut down, of course the impact would be higher, but the stores are operational. This is the impact we are seeing on Sri Lanka business for FY ’23.

Akshen Thakkar — Fidelity International — Analyst

Balance sheet assets that you have…

Vijay Jain — Chief Financial Officer

On the balance sheet, yes. So on the balance sheet front, the closing rate has to be used on the balance sheet side. So when you translate your net assets on the balance sheet, we have taken INR20 crore impact on conversion of assets and this is reflected under OCI, which is other comprehensive income. Major impact has already been taken, because this was done when the currency was at 24 paisa. Right now it’s trending at 21, 22 paisa. So a big impact has already been taken account under those.

Akshen Thakkar — Fidelity International — Analyst

[Technical Issues]

Vijay Jain — Chief Financial Officer

Sorry. What I hear…

Operator

Sorry to interrupt. Your voice is not clear, Mr. Thakkar. Sir, the audio is not clear. We cannot hear you clearly.

Vijay Jain — Chief Financial Officer

A bit more better, Akshen, give it a shot.

Akshen Thakkar — Fidelity International — Analyst

[Technical Issues]

Vijay Jain — Chief Financial Officer

No, not audible.

Operator

We are unable to hear you. So we’ll move on to the next question from the line of Mr. Prateek Poddar from Nippon India Mutual Fund. Please go ahead.

Prateek Poddar — Nippon India Mutual Fund — Analyst

Yeah, hi. Congrats on a great set of numbers. Just wanted to check, in Sri Lanka, how much of the benefit you’ve got from competitive pressures in the sense because of such high inflation? Have you seen competition shut down and given our scale has that played to our advantage, which explains high SSSG?

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

So, the competition from a QSR perspective, no one has shutdown stores. The unorganized market in Sri Lanka definitely has got impacted, because they are not able to operate in the same manner that we are able to. And therefore, there’ll be some benefit that we have got from there.

Vijay Jain — Chief Financial Officer

And there has been a shift from unorganized to organized, which has helped the QSR industry in general and they have been beneficiary in that, given our scale.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Yeah. And I think — so, our benefit is also on the delivery side, Prateek here. So they don’t have a — so in Sri Lanka, there isn’t an ecosystem of aggregators and so on. And therefore, it is important to own the delivery channel yourself. And our delivery capabilities in that market are by far the best.

Prateek Poddar — Nippon India Mutual Fund — Analyst

Got it. And just — can you…

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Therefore, even with respect to other QSR brands, you would have gained a little bit.

Prateek Poddar — Nippon India Mutual Fund — Analyst

And can you quantify this impact from unorganized to you guys? Is it possible to break down or…

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

I mean, just look at the SSSGs, so that just gives an idea. But other — it is impossible to quantify how much is coming from unorganized or organized. There is no numbers to track the sector as such, isn’t it?

Prateek Poddar — Nippon India Mutual Fund — Analyst

Yeah, I agree. Thank you. Thank you so much for this.

Operator

Thank you. We take the next question from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Yes, sir. Hi, thanks for the opportunity. Sir, you indicated that you have expanded addressable market by launching a thinner crust, which is San Francisco Style. So wanted to check if you can share the division of industry pizza sales in terms of thicker and thinner crust in the pizza category to understand it better.

Vijay Jain — Chief Financial Officer

I think you have misunderstood. It’s not a thin crust, it’s a similar crust the way it is, but it’s different in taste, it’s more crispier, it’s more lighter, but it’s not thin crust pizza.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Okay. But I guess — Sanjay mentioned that you have sort of increased the addressable market with this launch.

Vijay Jain — Chief Financial Officer

Yes, we have, but it’s not a thin crust pizza. [Technical Issues] but it’s not a thin crust.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

So, Devanshu, you must have it. I mean, it will be difficult for all of us to try to find the right word, but I think, texturally it’s quite different from our pan pizza. And it is hand toast, therefore I’d just encourage you to perhaps try one out. I’m sure you’ll love it.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Sure. I’ll definitely try.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

It’s not thin crust.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Okay. Secondly, wanted to understand Dine-In recovery has been about 60% to 70% for the entire Q4. So if you could share the trends post opening up in late Q4 early Q1 across dine-in and delivery channels, it would be really helpful.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

So 67% is again average for quarter four. If you look at our quarter three numbers, we said it’s already hitting 80% — close to 80% for all the three businesses, Sri Lanka, Pizza Hut India, KFC India. So towards the end of quarter four, we are again seeing similar numbers, things reaching 80% plus for both the brands in India. And in fact, Sri Lanka already in quarter four, we are seeing it hitting close to 100%.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Sure. And lastly, I wanted to understand that you were in the process of implementing a new POS system across your restaurant chain. So I wanted your thoughts on the benefit that we expect to accrue from this in terms of growth or operational efficiencies.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

First of all, the POS system that we used to operate micros was end of life product. Oracle had bought over this company and then they had sunsetted it. And hence it was imperative for us to look at our new POS. We implemented LS Retail. So there are several back-end benefits of it, but the biggest fronted benefit is consumer processing time for billing. And we are seeing that billing time has reduced anywhere between 12% and 15% on an average, the time it takes to punch in a bill and serve a customer.

Devanshu Bansal — Emkay Global Financial Services — Analyst

It has been rolled out in August of last year?

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Yeah. So we have rolled it out in June. So by August, we had finished the implementation across India restaurant base.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Sure, sir. Sure. That’s helpful. That’s it from my end.

Operator

Thank you. We take the next question from the line of Shivam Agarwal from Mirae Asset Capital Markets. Please go ahead.

Shivam Agarwal — Mirae Asset Capital Markets — Analyst

Yes. My question is, what is the store expansion strategy that you are taking for the Sri Lanka business for current year? And do stick to your overall target dispatch slowdown in the economy?

Vijay Jain — Chief Financial Officer

So last year, we opened 25 restaurants, and even in the last quarter, we opened six restaurants. As Sanjay said, probably this is a great opportunity for us to strengthen our base in Sri Lanka. So we would continue to expand. This year, they’re looking at anywhere between 10 to 15 odd stores this year. Again, we will watch this quarter-on-quarter that how things pan out over there, but this was the plan for this particular year, 10 to 15 restaurants.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

Again, at a broader level, Shivam, we have said that we expect to again double our restaurant base in Sri Lanka for three to four years. But I think we continue to hold that.

Shivam Agarwal — Mirae Asset Capital Markets — Analyst

My second question is, are you planning to take any price hike in the Pizza Hut or KFC for the current year?

Vijay Jain — Chief Financial Officer

To KFC, we just recently had a hike in last week of March, first week of April of 9-odd-percent. Last week of March, we also saw a price hike of roughly 2.5% to 3% in Pizza Hut as well. Nothing immediate on cards for KFC at least. On Pizza Hut, we have been very conservative in terms of our price increase over last two, three years, because we wanted to drive this value. But I think the inflationary pressures continue to remain, you may see other small hike in case of Pizza Hut in the upcoming quarter.

Shivam Agarwal — Mirae Asset Capital Markets — Analyst

Okay, thank you.

Operator

Thank you. We take the next question from the line of Akshen Thakkar from Fidelity International. Please go ahead.

Akshen Thakkar — Fidelity International — Analyst

Sorry. Am I audible sir?

Vijay Jain — Chief Financial Officer

Yes. Loud and clear, Akshen.

Akshen Thakkar — Fidelity International — Analyst

All right. Thanks. Sorry for the disturbance earlier. Just do you know on the price hike point that you were mentioning, you’ve taken price hikes in KFC and Pizza Hut in March and April. How should we be thinking about gross margin in each of the business in India at least, versus the exit in the year? Given the price hikes, do margins improve a little bit or you think this is just staying defense to the inflation that we saw?

Vijay Jain — Chief Financial Officer

Again, the point which Sanjay made, the way we look at price hike is to make sure that we balance out the impact on customer wallet, how do we remain competitive in the market and still drive transaction growth and drive value. So, price hike typically will always be lower than the inflation. However, having said that, on restaurant EBITDA margins, we would certainly drive other cost efficiencies to hold and slightly improve our current restaurant EBITDA margins for both the brands. So while you may see a small drop maybe on the gross margin side, we are confident of holding and improving our restaurant EBITDA margin moving forward.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

And I think, if I add, so one eye is on consumer transaction. The transactions needs to continue to improve. At the moment at least we are finding in April, May on transactions on both the brands have continued to improve. So this is important. So, in an inflationary environment, it is not about we are taking price hikes to cover all the inflation, but do to take it in such a way that transactions are not compromised, right now at least we are seeing that happen. And then, [Technical Issues] as Vijay said, restaurant margins are protected [Technical Issues].

Akshen Thakkar — Fidelity International — Analyst

Got it. Just last question from my side. If I see rising behavior in the pizza market by the market leader, they have been little more upfront in taking the larger price hikes. And you’ve taken smaller price hikes. I guess the gap between the two would have reduced now. Is that playing a role in driving transactions for you or do you think it’s more to do with the kind of product offering that you have out there and the kind of communication that you’ve been able to put out about Pizza Hut?

Vijay Jain — Chief Financial Officer

So, to be honest, I don’t think we have looked at what the competition has done. Even from a pricing standard, over the last two years, we have taken a slightly different pricing outlook. So we’ve got – if you look at, compare a la carte pricing, pizza to pizza, we might be more expensive than our principal competitor. However, what we have pushed is our meal. So Pizza Hut is known for meal location. And if you look at our meal deals that are on offer, those are very competitive, in some cases might be even better value than the principal competitor. And I think that — so we’re not chasing someone. This is our way to go. And once we see dine-in come back, consumers are rewarding us for the value that they see in our meal deals. And plus, if we look at all the work that is happening on innovation, the San Francisco crust pizza is doing well. And I think that Momo Mia did really well. So, if I just look at the last 12-15 months on the brand, actually there is a lot of noise, lot of positive noise that we are seeing even on a new product and inflation. But that’s over the last five years, we have not done — not seen. Was that clear, Akshen?

Akshen Thakkar — Fidelity International — Analyst

Yes, yes. Very clear, sir. Thank you and all the best.

Vijay Jain — Chief Financial Officer

Thank you.

Operator

Thank you. We take the next question from the line of Utkarsh Maheshwari from Reliance General Insurance. Please go ahead.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

Hello. Actually I just want to understand what was the quantum of incentive which we received for this quarter — and I mean, for the full year. And I think this is only for this period, right. I mean, next year, it will not be there, right?

Vijay Jain — Chief Financial Officer

So, good in fact you brought out this point. For the quarter four, we have not booked anything which is additional incentives. The normal incentives, which are going to be there for the next five years, it continues to remain — it is what it is booked for quarter four. Additional incentives was booked for the period April to December, which we have called out. And if you look at our annual numbers, the number in the bracket brings it out clearly, 1.1% to be precise. It was additional incentives booked from the period April to December, which has been called out.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

Okay. So basically — one more thing which I want to understand, I mean, we have been able to survive the storm in Sri Lanka. So what could be the new things which we should be keeping in mind just to keep this selling. I mean, what could be the new areas or what could be the areas where we can have some pressure which can come to us?

Vijay Jain — Chief Financial Officer

Again, the focus continues to remain to make the business stronger. And this is what has enabled us to survive the thing. So, as long as the store remain operational, we are confident of handling the situation and confident of driving the revenue and transaction growth. If there’s something else which happens on a broader macro, which would relate to shutting down of our stores and one can’t help. But as long as stores are operational, I think we are very confident of driving revenue and profitability growth in that particular market.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

If I want to understand — if you can quantify what could be the percentage increase cost of operation for us in the current scenario, is it just hyperinflationary over there compared to the similar times last year, say, comparatively?

Vijay Jain — Chief Financial Officer

Increasing cost of operations, I think you’re talking about general inflation.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

No, increased cost of operation for us, because I mean when things are in short supply, we might be paying something extra to keep them coming to our business.

Vijay Jain — Chief Financial Officer

But we have been influentially still dragging margin expansion even in quarter four — even in entire FY ’23, not in quarter four, but still a very healthy margin of 24% in quarter four.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

That is why because we are under hyper inflationary environment because I mean you’ve said, the growth was like 28%, 29% in terms of SSSG. So — I mean, probably if I want to just rephrase the question, what could be the quantum of increased cost of operation for us? Though it has been passed on so far, but what could — what is the quantum as a percentage if I want to understand?

Vijay Jain — Chief Financial Officer

So, again, we have not passed on to customers, even the current SSSGs, we are talking about is led by transaction, so 30% plus transaction growth we have seen in that particular business for Sri Lanka. So, the cost are doing anywhere between 10% to 15%. The inflation on raw material was 25%. We took a price increase of only 15%. So we have not — we’ve been able to drive cost efficiencies, dilute the higher throughput probably at a similar cost level. And as a result, we’ve been able to expand margins.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

So, I mean, what could be the secret recipe to get things going. Because I mean, as we are reading that there is a shortage of everything, I think — as you have rightly pointed out, cheese is in a short supply and I think fuel is already a problem. So, I mean, what were the steps we have taken to just ensure that clearly it is sailing through in the right direction?

Vijay Jain — Chief Financial Officer

So, a lot of things — when you read in the newspapers, probably are not giving the correct picture. So when you say, read of 15 up out, at least our stores are not experiencing a 15 up. As Sanjay said, there is a challenge for two or three. Second, again, we are making sure that we have enough reserves in terms of backup for fuel, which will enable us to operate through IRDG. Because on the brand front, Sanjay said, probably we’re movement from unorganized sector to organized sector. Again, with organized sector, we are the largest player by far that helps drive transaction and the growth over there. So the trend of the business by being there over last so many years. The team Sanjay spoke about, the delivery capabilities which Sanjay spoke about, I think it’s all adding up together. It’s very difficult to put a finger on a one particular aspect over here, to be fair. But I think all these things put together is what’s driving the business. And as long as the stores remain open, we are confident of the growth over there both in revenue and profits as well.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

There was one particular thing, which is called is your dine-in delivery, which is like 56% of the total sales. So, I mean, fuel cost is on us or fuel cost is on the rider part?

Vijay Jain — Chief Financial Officer

No, it’s on us. It is our fleet, our riders.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

Yeah. So, I mean, when we see that, what kind of inflationary impact which have been still felt because of this. As a proportion, it is almost like 50% of the revenue is coming from your delivery only. So, the rise in fuel cost is going to be certainly an impact for us.

Vijay Jain — Chief Financial Officer

Yeah. But then, fuel costs are rising, all other costs which are there at the part of the store operating costs are largely fixed in nature, right. So when you see a topline growth of 40% and 50%, you had a huge operating leverage out of that particular business, which enables you to drive expansion. So, yes, there are few lines in the P&L which would grow disproportionately, but then the rest of the lines you are able to generate operating leverage. As a result, you can still deliver healthy margins. And that’s what is happening in Sri Lanka business.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

Okay. So basically it is fair to assume that till the time we have a good win and growth coming in from Lanka, then I think we should be in a better position to manage, right. So is that a clear assumption?

Vijay Jain — Chief Financial Officer

Yes.

Utkarsh Maheshwari — Reliance General Insurance — Analyst

Okay. Fair point. Thanks.

Operator

Thank you. We take the next question from the line of Gopal from SBI Life Insurance. Please go ahead.

Gopal Nawandhar — SBI Life Insurance — Analyst

Hi. Am I audible?

Operator

Yes. Please go ahead.

Gopal Nawandhar — SBI Life Insurance — Analyst

Yeah, yeah. Thanks a lot for the opportunity, sir. I have few questions on — what would have been the impact of this wave three on ADS or can you give some sense in terms of how it was in January, February, and now it is in April?

Vijay Jain — Chief Financial Officer

So, it is very difficult to exactly quantify, but there’s a lot of factors at play, mall impact, the territorial impact, different — each state getting impacted differently, different restrictions across different cities. But again, if I try and make an attempt, probably around 5-odd percent, maybe 4% KFC, 5% to 7% maybe for KFC, Pizza Hut would be probably around 10%. And again, I’m trying to give you a very high-level perspective, a very approximate number over here.

Gopal Nawandhar — SBI Life Insurance — Analyst

Okay. Sure sir. And this proportion of the delivery take-aways and dine-in, for the last two years, it has been more towards delivery. Do you see this going ahead?

Vijay Jain — Chief Financial Officer

So, again, we have not pushed one channel over the other. So far has been always saying that we are a omni-channel player, omni-channel player, omni-channel player. The push across all the three channels. While we have seen simply the dine-in be lower than pre-COVID levels is for simple reason that the operating hours are constrained or operating capacity has been constrained. There is no impact on consumer demand side as the restrictions are coming off. As the norms are coming back, with movies coming back in multiplexes, we are seeing customers coming back to the restaurants and we are seeing Dine-In coming back. So it’s not one channel over the other, yet because we had a loan delivery and takeaway as well and the digital capabilities, we were able to take advantage. We were in advantageous position to. So we take the market share and drive that channel as well, but it was not one channel favoring the other.

Gopal Nawandhar — SBI Life Insurance — Analyst

Okay. Sure. And sir, lastly, can you give some sense in terms of what is the kind of SSSG one should expect for financial year ’23 for Pizza Hut and KFC?

Vijay Jain — Chief Financial Officer

So, again, we would be giving a specific year guidance over next three years. We have kept saying that as long as we’re able to drive revenue in the range of 20% CAGR, including our new stores, I think we should be quite comfortable and happy and we would continue to maintain that. I think we are on track for that.

Gopal Nawandhar — SBI Life Insurance — Analyst

Okay sir. Thank you.

Operator

Thank you. We take the last question from the line of Jaykumar Doshi from Kotak. Please go ahead.

Jaykumar Doshi — Kotak — Analyst

Hi, thanks for the follow-up. There were a number of locations and you indicated that you usually take lower price increase than the inflation both in Sri Lanka and India businesses. Just trying to — just need a clarification. For a 70% gross margin business, 30% COGS as a percentage of sales. If there is 20% inflation, you just need high-single digit price increase to offset the absolute increase in RM. So — but in percentage terms, obviously the price increase will be much lower, like you mentioned in Sri Lanka, you’ve taken 15% price increase versus 25% inflation. Is that the right understanding that you — in a percentage basis, you take lower price increase than in inflation, you see at RM basket level, but on a absolute basis you would try and cover the absolute increase in RM costs at all point of time.

Vijay Jain — Chief Financial Officer

Again, very difficult to say in a formulaic sense because you do the math each time different for different, for example, with KFC currently 9.5%, you would have tried to cover a lot of it. In two years [Phonetic], we have been trying to drive value. So, again, at what point in time [Technical Issues]. But yes, more certainly, we always try and at least cover that increase. [Technical Issues] base minimum. But at the same time, you make sure whether — what are the other levers in the P&L, so restaurant EBITDA margins, we don’t drop and we continue to hold and improve the restaurant EBITDA margins.

Jaykumar Doshi — Kotak — Analyst

And is price increase entirely your decision or do you need Yum’s approval or how does it work in India because there are two franchises, so does it sort of — is it something that is uniform across the country or you have a choice not to take a price increase even if the other franchises…

Vijay Jain — Chief Financial Officer

It is uniform across the country. This is joint committee between us, the franchisee and Yum. So, there is a joint decision making on all pricing decisions. And at the end of the day, I think the overall objectives of both the franchisees and the AUM as a partner is all on objective, as well as [Technical Issues], I don’t think this is a concern in terms of taking and not taking a price increase. We are quite comfortably come out with a unanimous decision on price increase across both the brands.

Jaykumar Doshi — Kotak — Analyst

Thank you so much. That was very helpful. And good luck with the coming year.

Vijay Jain — Chief Financial Officer

Thank you, Jay. Thank you very much, ladies and gentlemen.

Operator

Thank you. Due to time constraints, I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Sanjay Purohit — Whole Time Director and Group Chief Executive Officer

So, thank you very much all of you all for joining. We’ve had record number of participants today. So I’m very grateful to all of you for your questions. Also, I just want to repeat the story. Despite the COVID disruptions in quarter four, we’ve had a very strong quarter four. Yes, there are inflationary pressures, but we have taken price increases on both the brands. And when I look at April a from a transaction perspective, we continue to see good consumer demand. From a store expansion perspective, we got out that we should be able to double our store base over three and four years. And this year, we should be able to again pick up the numbers that we want. So, from a overall business perspective, we remain quietly confident about our prospects going forward. That’s it from our side today.

Operator

[Operator Closing Remarks]