🟣 At a Glance
Devyani International runs 2,000+ stores across India, including KFC, Pizza Hut, and Costa Coffee. Despite massive sales growth (from ₹2,000 Cr to ₹4,951 Cr in 3 years), its profit is still stuck in the oven. The stock is down ~25% from highs, ROE is negative, and yet it trades at 18x book. So what’s cooking?
🍕 1. Business Model: RJ Corp’s Fast-Food Empire
- Devyani is part of Ravi Jaipuria’s RJ Corp empire (which also owns Varun Beverages)
- Largest franchisee of Yum! Brands (KFC, Pizza Hut) in India
- Also runs Costa Coffee, and expanding into luxury airport food court biz via Sky Gate
- Total store count: 2,039 as of FY25
Fun Fact: Devyani’s rival, Westlife (McDonald’s), has fewer stores but better profitability. 🥲
📈 2. Financials: Sales Zoom, Profits Doom
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 1,135 | 2,084 | 2,998 | 3,556 | 4,951 |
| Net Profit (₹ Cr) | -63 | 155 | 263 | -10 | -7 |
| OPM % | 17% | 23% | 22% | 18% | 16% |
| ROE % | – | 11% | 11% | -1% | -0.6% |
| Borrowings (₹ Cr) | 1,336 | 1,254 | 1,565 | 2,906 | 3,188 |
Translation:
- Sales CAGR (FY21-FY25): 38.6%
- Profit CAGR (FY21-FY25): still MIA 🚑
- Net profit in FY25 = ₹-7 Cr, despite crossing ₹4,900 Cr in sales
🧾 3. QSR Economics: Pizza Profitable Hai Ya Popcorn?
Let’s simplify:
- Store count up = fixed costs up
- Staff cost + rentals are high (especially in malls & airports)
- KFC and Pizza Hut margins are tighter vs McD (Westlife)
- Add interest (Rs. 265 Cr) + depreciation (Rs. 570 Cr) = crushed PAT
FY25 EBITDA: ₹810 Cr FY25 PAT: ₹-7 Cr
Where’s the money going? To pay loans for those fancy airport outlets 🍕
🧱 4. Balance Sheet: Expanding Like There’s No Tomorrow
- Total assets doubled from ₹2,985 Cr in FY23 to ₹5,339 Cr in FY25
- Borrowings jumped by ₹1,600+ Cr in 2 years
- Equity dilution? Not yet — but preferential allotment to buy Sky Gate for ₹419 Cr is step 1
📉 D/E Ratio climbing like a Zinger Burger in inflation
🔍 5. Valuation: 18x Book for a Loss-Making Company?
- CMP: ₹167
- Book Value: ₹9.07
- P/B: 18.4x 😶
- ROE: -0.64%
Even with no profits, market cap is ₹20,129 Cr.
Fair Value Range (EduEstimate): If we apply:
- 10x EV/EBITDA on FY25 EBITDA of ₹810 Cr = ₹8,100 Cr EV
- Subtract debt: ~₹3,188 Cr
- Fair Market Cap = ₹4,912 Cr
➡ FV per share = Rs. 40 – Rs. 50 (vs CMP ₹167) Translation: Valuation is stuffed crust.
🧠 6. The RJ Corp Angle: Pattern Repeat?
- Varun Beverages also went through a low-margin, low-profit phase before exploding
- Will Devyani follow the same arc?
- Current focus: expand aggressively, then improve unit economics
BUT:
- VBL had monopoly bottling rights, better margins
- Devyani faces brutal competition: Swiggy, McD, home-cooking inflation
🪦 7. Verdict: Good Biz, Bad Timing
✅ Massive QSR opportunity ✅ Strong promoter pedigree ❌ Debt-heavy expansion ❌ Profitless growth ❌ Sky-high valuation
Unless margins double or interest drops, shareholders will keep saying: “KFC toh khaya, returns kahan hai?”
✍️ Written by Prashant | 🗕️ June 22, 2025
Tags: Devyani International, KFC India, RJ Corp, QSR stocks, Pizza Hut, Yum Brands, Fast Food India, EduInvesting Recap, Fair Value Estimate
