Devyani Intl. Q2 FY27 Earnings Call — Analysis (NSE: DEVYANI)

Devyani International reported Q2FY27 consolidated revenue of ₹1,519 Cr (+10.4% YoY) and pre-Ind AS operating EBITDA of ₹125 Cr (+34% YoY), supported by CCI clearance for its proposed merger with Sapphire Foods and steady store additions.

5 Nov 2026 · Analysis by Alpha Inflection

Result quality: strong — Loss reversed. Management sentiment: optimistic.

The take

Q2FY27 Consolidated Revenue ₹1,519 Cr ( +10.4% YoY ) . New guidance — FY27 total net new store additions i… 200 to 220 . New story: Value laddering and customer recruitment .

Results

Revenue grew 10.4% YoY to ₹1,519 Cr while pre-Ind AS operating EBITDA rose 34% YoY to ₹125 Cr (margin 8.2%, +140 bps) and PBT turned positive to ₹5.7 Cr.

Financial highlights

Guidance

Management re-affirmed its full-year store expansion guidance of 200 to 220 net new stores for FY27, including 100 to 110 KFC units, and targets closing the Sapphire Foods merger by the end of FY27.

What management committed to

• We are on track to meet our full-year guidance of 200 to 220 net new [store] additions with the same discipline, the right locations and a clear line of sight to profitability. — 200 to 220, FY27
• Whatever we guided initially for the year, we are still on the same guidance. We talked about 100 to 110 stores for Devyani for KFC for the current year. We will be able to deliver on that. — 100 to 110 stores, FY27
• In summary, we continue to remain optimistic about closing the [Sapphire Foods] merger process by the end of the current financial year. — Q4FY27
• In the short to medium term, our objective is to get Biryani By Kilo brand contribution to about 14%-15% level. — 14%-15%, short to medium term
• We continue to see strong customer response to our offerings and campaigns, strengthening our belief that the [KFC] brand can sustainably deliver mid-single SSSG growth in the long term. — mid-single, long term

Key themes

Store expansion and merger integration progress

How the narrative shifted

• Value laddering and customer recruitment: Management is expanding entry-level value price points (₹99 and ₹149 combos) and dine-in promotions to drive footfalls in a cautious consumer discretionary environment.
• Macro headwinds and K-shaped consumption: Food inflation, LPG price doubling, and state wage increases are squeezing household budgets and restaurant cost structures, requiring calibrated pricing.
• Sapphire Foods merger execution: Receiving CCI approval clears a major regulatory hurdle for creating India's largest unified Yum! Brands franchisee platform.
• Pizza Hut portfolio turnaround: Pizza Hut remains unprofitable at the brand contribution level (-1.8%) and requires product innovation and entry-level price restructuring, with full integration plans slated post-merger.
• Turnaround in Own Brands portfolio: Biryani By Kilo and Vaango are delivering positive SSSGs and margin improvement via scale procurement and express format expansion.

Operational commentary

• Added 70 net new stores in Q2 (68 in India, 50 KFC units), expanding total global footprint to 2,325 stores (1,923 in India).
• Received Competition Commission of India (CCI) approval for the proposed merger with Sapphire Foods; currently awaiting SEBI No-Objection Certificate before filing with NCLT.
• Sky Gate merger is progressing with NCLT approval expected shortly.
• KFC launched entry-level meal combos at ₹99 and ₹149 along with Friday BOGO bucket offers and targeted Wednesday promotions to drive customer recruitment and dine-in traffic (56% on-premise saliency).
• Pizza Hut tested a new 3-in-1 spicy pizza range and sides to address menu innovation gaps, while working on an entry-level price-laddering strategy.
• Biryani By Kilo (BBK) turnaround gained traction with 8.1% SSSG and near double-digit brand contribution margin, supported by procurement synergies and 26 BBK Express outlets.
• Navigated inflationary headwinds in raw materials (chicken, edible oil, dairy), doubling of LPG costs, and minimum wage hikes across key southern states with a calibrated 1-2% price increase YTD.

Analyst Q&A

• Q. Why did KFC SSSG lag some peers sequentially, and how is demand trending in October?

  The divergence was largely due to regional festival timing (Navratri shifting to Q3 benefiting North/West peers, while Durga Puja in South/East also moved to Q3). Q2 and Q3 combined performance will align with peers, and North region SSSG was +20%.

• Q. Are the inflation pressures from raw materials, wages, and LPG fully baked into the P&L or will there be incremental headwinds?

  RM and packaging inflation is stabilizing, state minimum wage increases are baked in unless new states notify hikes, and doubled LPG prices are stable. The company is taking calibrated, staggered price hikes and optimizing deals to protect margins.

• Q. Can Biryani By Kilo achieve 20%+ brand contribution margin over the next 3-4 years given zero royalty?

  Management is currently focused on taking BBK's brand contribution margin to 14%-15% in the short to medium term via procurement synergies and labor efficiencies before targeting higher levels.

• Q. Why continue rapid KFC store expansion amid macro headwinds and upcoming merger integration?

  Chicken consumption remains heavily underpenetrated compared to pizza and general QSR competition, and non-veg demand is secularly strong. DIL will stick to its 100-110 KFC store addition target for FY27.

• Q. Can management share the detailed strategic reset and turnaround plan for Pizza Hut?

  A full strategic plan will be shared closer to the consummation of the Sapphire Foods merger, as DIL needs granular operational visibility across Sapphire's Pizza Hut network to design a unified turnaround.

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