💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue from operations grew 11.09% YoY to INR 28,818.64 million. The KFC segment delivered a robust 11% revenue growth reaching INR 19,039 million, while the Sri Lanka business saw a 24% growth in INR terms (14% in LKR terms).

Geographic Revenue Split

India operations (standalone) contributed INR 24,838.82 million, representing approximately 85.1% of total consolidated income. International operations, primarily Sri Lanka, contributed the remaining 14.9% (approximately INR 4,351.97 million).

Profitability Margins

Gross margins remained stable at 68.2% in FY25. However, Net Profit Margin significantly declined from 2.0% in FY24 to 0.6% in FY25 due to higher operating expenses and negative operating leverage in the India business.

EBITDA Margin

KFC Restaurant EBITDA margin declined by 240 bps to 17.3% (INR 3,299 million) from 19.7% in the previous year. Consolidated operating margins moderated to 17.8% in FY24 and faced further pressure in FY25 due to a 4% decline in Same Store Sales Growth (SSSG) in India.

Capital Expenditure

Property, Plant and Equipment increased by 5.8% YoY to INR 10,185.36 million. The company added 91 new restaurants during FY25 and plans to incur sizeable capex over the medium term to fund its aggressive store expansion policy.

Credit Rating & Borrowing

The company maintains an adequate liquidity position with cash and bank balances of INR 2,648.27 million (up 24.9%). Borrowings were reduced by 28.5% to INR 198.61 million. Interest Service Coverage Ratio stands at a strong 177.71.

⚙️ Operational Drivers

Raw Materials

Food ingredients and packaging materials represent the primary raw materials, with the total cost of materials consumed amounting to INR 9,068.44 million, which is 31.47% of total revenue.

Capacity Expansion

The company achieved a milestone of crossing 500 KFC restaurants in FY25, adding 73 KFC stores during the year. Total restaurant additions across all brands reached 91 for the financial year.

Raw Material Costs

Raw material costs as a percentage of revenue increased slightly from 31.26% in FY24 to 31.47% in FY25, reflecting a YoY cost increase of 11.83% in absolute terms to INR 9,068.44 million.

Manufacturing Efficiency

Efficiency is measured by Average Daily Sales (ADS) per restaurant, which for KFC stood at INR 114 thousand in FY25, down from INR 125 thousand in FY24 due to muted consumer demand.

Logistics & Distribution

Delivery sales as a percentage of KFC restaurant sales increased to 41.5% in FY25 from 38.0% in FY24, indicating a higher reliance on delivery logistics which contributed to margin compression.

📈 Strategic Growth

Expected Growth Rate

11.09%

Growth Strategy

Growth will be driven by the rapid expansion of the restaurant network (adding 91 stores in FY25), focusing on smaller-sized omni-channel restaurant models to optimize costs, and leveraging digital transformation to increase customer engagement. The company also intends to pursue inorganic growth opportunities and drive margins through operating leverage as store maturity increases.

Products & Services

Quick Service Restaurant (QSR) products including fried chicken, burgers, and sides (KFC) and pizzas and related Italian-American cuisine (Pizza Hut).

Brand Portfolio

KFC, Pizza Hut, and Sri Lanka operations (Gamma Island Food).

New Products/Services

Continuous investment in menu innovation is mentioned as a key element of growth, though specific new product revenue contributions are not quantified.

Market Expansion

The company is targeting multi-decade growth in the Indian QSR sector by doubling its KFC store count over the last 3 years and expanding its footprint in Sri Lanka.

Market Share & Ranking

Sapphire KFC is recognized for delivering one of the highest restaurant margins in the Indian QSR industry.

Strategic Alliances

Franchise partnership with Yum! Brands for KFC and Pizza Hut; notable investors include Samara Capital and Creador.

🌍 External Factors

Industry Trends

The QSR industry is seeing a shift toward digital penetration and omni-channel strategies. Delivery mix is rising (now 41.5% for KFC), and there is a trend toward smaller, more efficient store formats to counter high rental costs.

Competitive Landscape

Faces intense competition from other global and local QSR players, particularly in the pizza segment where competitive intensity has impacted SSSG and margins.

Competitive Moat

The moat is built on exclusive franchise rights for globally recognized Yum! Brands (KFC, Pizza Hut), a large-scale network of 500+ stores providing procurement advantages, and a professional management team with deep industry expertise.

Macro Economic Sensitivity

Highly sensitive to food inflation and consumer discretionary spending. Operating margins moderated from 19.0% to 17.8% in FY24 due to inflationary costs and soft demand.

Consumer Behavior

Shift toward delivery-led consumption and value-seeking behavior amid high inflation, evidenced by the increase in delivery sales mix and decline in same-store transactions.

Geopolitical Risks

Operations in Sri Lanka expose the company to local economic volatility, though the segment saw a strong turnaround in FY25.

⚖️ Regulatory & Governance

Industry Regulations

Compliance with the Companies Act 2013, SEBI Listing Regulations, and Indian Accounting Standards (Ind AS) is maintained. The company has established a Risk Management Committee per Regulation 21 of Listing Regulations.

Taxation Policy Impact

The effective tax rate for FY25 was approximately 27.8% (INR 64.32 million tax on INR 231.36 million PBT).

Legal Contingencies

The Board confirms the maintenance of adequate accounting records for safeguarding assets and preventing fraud; no specific pending court case values were disclosed.

⚠️ Risk Analysis

Key Uncertainties

Key risks include sustained negative SSSG in India operations, inflationary pressure on raw materials (31.47% of revenue), and potential delays in the stabilization of new stores which could further impact RoCE (currently 2.9%).

Geographic Concentration Risk

High concentration in India (85% of revenue), with secondary exposure to Sri Lanka (15%).

Third Party Dependencies

Highly dependent on Yum! Brands for franchise rights and brand standards.

Technology Obsolescence Risk

The company is mitigating tech risks through digital transformation and implementing cyber security policies to protect its growing delivery and digital sales channels.

Credit & Counterparty Risk

Trade receivables are low at INR 365.62 million (1.2% of revenue), indicating minimal credit risk due to the cash-and-carry nature of the QSR business.