Devyani International Limited

Incorporate in 2000, Devyani International Limited is the largest franchisee of Yum Brands in India and are among the largest operators of chain quick service restaurants ('QSR') in India, on a non-exclusive basis, and operate 696 stores across 166 cities in India, as of June 30, 2021. Yum! Brands Inc. operates brands such as KFC, Pizza Hut and Taco Bell brands and has presence globally with more than 50,000 restaurants in over 150 countries, as of December 31, 2020. In addition, the company has franchisee for the Costa Coffee brand and stores in India.  Company's business is broadly classified into three verticals that includes stores of KFC, Pizza Hut and Costa Coffee operated in India (KFC, Pizza Hut and Costa Coffee referred to as 'Core Brands', and such business in India referred to as the 'Core Brands Business'); stores operated outside India primarily comprising KFC and Pizza Hut stores operated in Nepal and Nigeria and certain other operations in the F&B industry, including stores of company's own brands such as Vaango and Food Street ('Other Business'). Revenue from company's Core Brands Business, together with company's International Business, represented 83.01%, 82.94% and 94.19% of company's revenue from operations in Fiscals 2019, 2020 and 2021, respectively. The company have subsequently continued to expand its operations with both KFC and Pizza Hut franchises, and as of March 31, 2021, operated 264 KFC stores and 297 Pizza Hut stores across India. In company's Core Brands Business, they had an extensive presence in 26 states and three union territories in India as of March 31, 2021. In addition, the company is a franchisee of the Costa Coffee brand in India, which is owned by Costa, and operated 44 Costa Coffee stores as of March 31, 2021. The company have been consistently expanding its store network over the years. Stores in its Core Brands Business grew at a CAGR of 13.58% from 469 stores as of March 31, 2019 to 605 stores as of March 31, 2021. And in the six months ended March 31, 2021, company opened 109 stores in its Core Brands Business. As per financial performance, Devyani has posted total income/net profits (loss) of Rs. 1135.67 cr. / Rs. 37.95 cr. (FY18), Rs. 1,323.68 cr. / Rs. (97.29) cr. (FY19), Rs. 1,535.04 Cr. / Rs. (107.16) Cr. (FY20) and Rs. 1,198.89 Cr. / Rs. (57.76) Cr. (FY21). So company has posted consistent growth in sales, but not able to make any profit. In FY21, due to pandemic sales decreased as there was lock down in most of the Indian cities. Company has posted an average EPS of Rs. (0.76) and average RoNW of (24.26)% for last three fiscals. Issue is priced at a P/BV of 87.38 as per NAV of 1.03 on 31.03.21. Company has posted loss, so there is no point in calculating P/E ratio. Also company looks aggressively priced when compared with peers. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, four BRLMs are associated with this IPO, and have handled around 30 IPO in last three fiscals. From last 10 IPOs, 1 is opened below issue price and remaining are opened above issue on the day of listing. As of now, all are trading above issue price. ( As on 30.07.21) As per financials, company has shown good growth in sales, RoNW and P/E are negative as company is making losses consistently. In current pandemic situation, sales of company declined. This is a company from QSR category and has huge growth potential, also company operates stores of well known brands. But due to current pandemic situation, sales decreased significantly. Performance of BRLM is good. So, we are giving NEUTRAL rating to this IPO.

• 1 Ravikant Jaipuria
• 2 Varun Jaipuria
• 3 RJ Group Limited