Pizza Hut, KFC, Costa Coffee operator Devyani International to raise an estimated ₹1,400 crore through IPO

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Pizza Hut, KFC, Costa Coffee operator Devyani International to raise an estimated ₹1,400 crore through IPO
BCCL
  • Devyani International, the largest franchisee of Yum Brands in India, received the regulator’s approval for the IPO.
  • The company is looking to raise an estimated ₹1,400 crore.
  • It operates 692 stores in 26 states across 155 cities in India, as well as, internationally in Nepal and Nigeria.
Devyani International, the largest franchisee of Yum Brands in India, which operates quick service restaurant (QSR) brands such as Pizza Hut and KFC, besides its own brands has received the regulator’s approval for issuing an initial public offering (IPO).

The company is looking to raise ₹ 1,400 crore through the IPO, according to market sources. However, in the draft red herring prospectus (DRHP) filed on May 14, the company had said that it is planning to raise ₹400 crore.

It operates 692 stores in 26 states across 155 cities in India, as well as, internationally in Nepal and Nigeria.

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The company’s business is broadly classified into three verticals that includes stores of KFC, Pizza Hut and Costa Coffee operated in India.

However, revenue from Pizza Hut and Costa Coffee has been falling in the last three financial years.

Percentage of total revenue from operations
Core brands businessFY19FY20FY21
KFC35.41%40.17556.77%
Pizza Hut32.30%27.53%25.37%
Costa Coffee6.88%5.41%1.88%
Total74.59%73.10%84.02%

In addition it operates stores of certain other brands including Vaango, Food Street, Masala Twist, Amreli and Ckrussh Juice Bar. The company derives 5.28% of revenue from these other operations, as an FY21.
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The company believes the QSR channel is expected to witness a significant rebound in the future due to rapid urbanisation and proliferation of internet and scarcity of time for meals owing to busier lifestyles played key roles in the growth of popularity of western fast food in India.

Quick-service restaurant is an eating establishment primarily focused on the provisions of meals or soft drinks, with limited or no table services.

In 2020 particularly, home deliveries drove revenues of these players, amid the pandemic. However, much lower footfalls in their venues made them close several of their outlets. Domino’s Pizza shut 100 of its outlets in the third quarter of 2020, showed the company’s DRHP filing.
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The company plans to repay its borrowings with ₹357 crore with the net proceeds of the IPO.

Moreover, the pandemic has accelerated the growth of online food ordering through food delivery apps, as consumers turned to online platforms to avoid spreading or being infected by the coronavirus in public places.

Besides the pandemic, increasing internet and mobile penetration in India and the advent of food delivery apps are also key factors leading consumers away from traditional dine-in experiences and towards convenience-driven options, as per the DRHP.
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