Ladies and gentlemen, good day, and welcome to Barbeque Nation Hospitality Limited Investor Analyst Call Q1 FY 2025 Earnings Conference Call. As a reminder, all participant lines will be in a listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bijay Sharma, Head of Investor Relations. Thank you, and over to you, sir. Thank you, Eliza. Good evening, and welcome everyone to Barbeque Nation's Q1 FY 2025 Earnings Conference Call. For today's call, I have with me Mr. Kayum Dhanani, Managing Director, Mr. Rahul Agrawal, CEO and Whole Time Director, and Mr. Amit Betala, CFO. We will begin the call with Mr. Kayum sharing his perspective on key highlights for the quarter. This will be followed by a detailed discussion on business performance and outlook by Mr. Rahul, post that we'll open the forum for an interactive Q&A session. Before we begin, I would like to remind you that some of the statements made in today's conference call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to the earnings presentation for a detailed disclaimer. I will now hand over the conference to Mr. Kayum Dhanani. Thank you, and over to you, sir. Thank you. A very good evening, ladies and gentlemen. I take the pleasure in welcoming you to Q1 FY 2025 conference call of Barbeque Nation. The operating environment remained challenging in Q1 and have been so far last few quarters. However, we are seeing gradual month-on-month improvement in SSSG numbers during the last four months and remain hopeful that things will gradually improve during the rest of the year. As you are aware, during the previous years, we have chosen to focus on existing network and temporarily pause restaurant addition with an intention to protect margins and cash flows. We are happy to note that our margins have been improving on year-on-year basis for last three quarters. We expect the margins to further improve with gradual improvement in the demand scenario. Though our approach led to temporary reduction in our year-on-year revenue, we are pleased to see our operating margins improving. The benefit from various cost and efficiency initiatives undertaken has delivered positive margin growth on year-on-year basis. While our same-store sales growth was negative, our same-store EBITDA growth was positive. Barbeque Nation's core business has delivered mid-single digit same-store EBITDA growth, driven by gross margin improvement. Our premium dining brands, that is Toscano and Salt, are growing well and have delivered high operating margins. Our international business continues to perform well, though we had temporary impact in sales due to floods and prolonged rainfall in Dubai. We are focused on maintaining best-in-category guest experience to drive dine-in footfalls. We have undertaken various food festivals in Barbeque Nation and launched seasonal special menus in Toscano and Salt. We are continuing to invest in our assets and designs to give the best-in-category experience to our guests. We are also on track to achieve 25-30 new stores additions in FY 2025. During the quarter, we opened four new restaurants, all of which are with updated designs. We are targeting to add 100+ restaurants over the next three years and achieve a network of 325 restaurants by FY 2027. Over the years, we have built strong tech-driven backend process to scale brands, and it's probably the best in the casual dining category in India. We believe these properties' backend systems will help us scale other existing and future brands in our portfolio. Over the years, we have maintained industry-leading margins and will strive to achieve these and generate strong cash flows to drive shareholder value. Thank you, and I would now hand over to Rahul to walk you through the performance in details. Thank you. Thank you, Kayum. Good evening, everyone. During the quarter, we reported a revenue of INR 306 crore, a decline of 5.6% on year-on-year basis, and a growth of 2.6% sequentially. The year-on-year decline in revenue was primarily due to negative same-store sales growth. Around 4% impact was due to store closures in the previous year and controlled new store additions, last year. We reported negative SSSG of 7.4%. While we continue to navigate the industry challenges around subdued discretionary spend, few company-specific factors also negatively impacted SSSG. In Barbeque Nation, we had base impact of relatively higher sales from value promotions undertaken in quarter one FY 2024, which were discontinued subsequently. Also, being predominantly a non-vegetarian brand, Barbeque Nation sales were also impacted by Navratri festivals, which was not in the base quarter. In our premium CDR segment, that is Toscano and Salt, there was one-time impact of liquor-serving restaurants being closed during general elections in few states. In our international business, also got temporarily impacted due to heavy rains and floods in Dubai. Our dine-in delivery mix continues to be 85-15. Gross margin for the quarter increased by about 400 basis points on a year-on-year basis. Around 80 basis points improvement was due to reclassification adjustments. If you remember, we carried that out in quarter three FY 2024, wherein employee food costs shifted from cost of goods sold to employee cost. And the balance improvement is due to better realizations in this quarter as compared to quarter one FY 2024, and balance improvement is primarily due to a lower input cost. Restaurant operating margins increased by 200 basis points, driven by better gross margins and cost controls. This is despite the operating deleverage from minority associates. Consolidated operating EBITDA for the quarter increased by 8.8% to INR 51 crore. Reported operating margins also increased by 220 basis points compared to last year to 16.6%. Adjusted operating EBITDA, that is after the impact of Ind AS 116, grew by 18% to INR 21 crore. Adjusted operating margins for the quarter was 6.9%, an improvement of 140 basis points compared to same period last year. We also maintained a robust EBITDA to cash conversion and delivered around INR 20 crore of cash profit, an increase of 17.4% compared to same period last year. We've been focused on maintaining best-in-category guest experience to drive our dine-in growth. We continue to invest in our restaurant culinary experience and restaurant asset upgradations to drive our core dine-in business. We added four new restaurants during the quarter and closed two restaurants. At the close of the quarter, we had 219 restaurants, which included 186 restaurants of Barbeque Nation in India, eight Barbeque Nation restaurants in international markets, and 25 restaurants of Toscano and Salt, out of which Toscano was 17 and Salt was eight. In the near to medium term, our growth would be network-led along with SSSG improvement. We plan to add 100 new restaurants by FY 2027, which will be broad-based across our brands. We are excited to build a portfolio of scaled F&B brands and remain optimistic that various initiatives undertaken by us, coupled with network expansion, will further enhance our net operating performance. Thank you. With this, we can open the session for Q&A. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Harit Kapoor from Investec. Please go ahead. Yeah. Hi, good evening, Rahul and team. Congratulations on margins. I just wanted to check with you on the extent, you know, some, you know, internal issues which you mentioned. Some of these challenges would not have been there in the months of June and July. So I was just wondering, you know, how do you see the kind of trends shape up for you as the quarter progressed? Sorry to interrupt, Mr. Kapoor. Yeah. You have a lot of disturbances in your background. Yeah. Please hold on one second, please. Yeah. Is this better? Yes, please go ahead. Okay. Yeah, yeah. So, I just wanted to check on, you know, some of these issues which you mentioned were largely April and May centric. So, if you could just help understand, you know, how June and July has trended, if the performance from an SSSG perspective has been better. And also going into Q2, you know, we do have the impact, we did have the impact in the base quarter of, you know, an extended mourning period last time around, which affects, I think, non-veg a little bit more as well. So in that context, you know, how do you see, you know, the trend shaping up over the next quarter or so? Hi, thanks, Harit. So, yes, the one-off that we mentioned are largely April and May phenomena. If you look at our April SSSG was down almost double digits. This subsequently improved in both May and June. And, for the overall quarter, we had around -4.7%. And if I look at the first four weeks of July, we are approximately -3%. So yes, the trend is improving, and that gives us that confidence, you know, from where we are in the month of July to May and June to... Sorry, where we are in the month of April, to May and June and July, is slightly better. Yes, quarter two last year was largely impacted because of Aadi month. Now also we are, you know, we have Shravan going on, which impacts our business in some manner. Despite this, we are at -3. My hope is that, as we enter into August and Shravan ends on 20th of August, we'll have close to one month to play and then, you know, Sharad starts. So quality generally is the biggest for us, but I hope that the negative trend that we saw in quarter one is not continuing in the same way in quarter two. At least we are seeing positive numbers in trend-wise in the month of July. Got it. Got it. Got it. And the second thing is on dine-in. You know, I mean, while you are not a QSR, you're a CDR business, but QSRs continue to have weak kind of dine-in performance. Dine-in as an overall space seems to have been a little bit more weak over the last four, five, six quarters. I just wanted to understand what is kind of your prognosis of demand, consumer behavior, et cetera, et cetera, for your price points. That will be very helpful. So yes, dine-in has been impacted much more, but at least for our brands and, you know, as you know, generally the demand decline has largely been on the value segment. You know, we consider Barbeque Nation as more of a value brand, whereas our other, you know, premium CDRs, like Toscano and Salt, as premium brands. There, you know, our SSSG numbers have been positive, if you look at last year, full year. And barring the impact of few restaurant closures because of elections, you know, this year also, overall numbers have been, you know, just flattish, right? So the impact has been more in Barbeque Nation. And in Barbeque Nation, while dine-in has been, by and large, impacted, we have core group level demand, you know, that we satisfy, and that business is not directly impacted because of any other channels that has come up. And if you look at regional shift between our dine-in business today, for the month of July, for example, we're already seeing things in positive SSSG in our north and east market. West is approximately, you know, flattish, but south is actually, you know, negatively impacted much more than other regions. Okay, I understand. And, the third thing is on the 100 store target for next year. How could it help and, to understand, well, you know, how much of this, in your view, will be Barbeque Nation led, and how much of it will be non-Barbeque Nation led? So basically, everything else, one side in Barbeque Nation, one side, so, in terms of expansion over the next, three years. So, around 12 stores will be from Barbeque International, which is between three to four stores, you know, every year, so that's one. Around 40 stores will come from our premium CDR, between two brands, which is Toscano and Salt. So we'll do around 10-12 stores every year of these, and balance 50 will come from Barbeque India. Right. I'll come back for more. Thanks. Thank you all. Thanks, Harit. Thank you very much. Ladies and gentlemen, you may press star and one to ask a question. Next question is from the line of Palash Kawale from Nuvama Wealth. Please go ahead. So thank you for the opportunity, and congratulations on margins. So my first question is around gross margin. So could you just explain in details what are the different margin drivers of margin expansion, and have you taken any price hikes in last one year? So two parts to it. If you look at our gross margin versus quarter one of last year and quarter one of this year, there is almost 400 basis points change. If you look at our past quarter results, you will see that in quarter three, there's no auditors, nothing. We started reclassifying the cost of, you know, meals that are served to employees at, you know, at the store level largely has moved from COGS, cost of goods sold, to employee cost. And that gave us a benefit of approximately 80 basis points, which is then also in the current year. And in quarter one of FY 2024, we had a lot of offer-driven, you know, growth which has reduced our advertising realization. So to that extent, yes, there is a price difference. But if you compare our gross margins with the sequential quarter four, there is a decline in gross margin of approximately 70 basis points. And that is largely because of increase in meat item, which is largely chicken, in quarter one, and also because of another Express offering that we're running in some of our Tier 2 markets, which is at lower gross margin. Hmm. Okay, sir. Thank you for the detailed answer. Sir, what was the contribution of value sales last year in Q1? So we ran very aggressive Happy Monday Tuesday offers, which is where the prices were around INR 599 as compared to our regular prices of around... Or INR 600 as compared to regular prices of around INR 860, also today. And these ran for two days, which is approximately 30% of the month of the quarter, and this ran in approximately 60%-65% of our outlets. Okay. And sir, what is that stable gross margin that we are looking into for FY 2025 and FY 2026, given the chicken and meat prices remain stable? No, so, this is 68% is the, at the current, costing structure, 68% margin is, is scheduled for the full year. I think after that, you know, we have seen those prices also coming down. The month of July, we already seen that benefit coming in. Also, prawn prices have also reduced, a bit, in the current quarters, in the ongoing current quarter, which will help us. So I think full year basis, 68% is a decent number. Okay, sir. Thank you for that. Thank you for your detailed answer. Actually- Thank you. you. Thank you, Palash. Thank you very much. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Chaitanya, an individual investor. Please go ahead. Hi, thanks for providing the opportunity. I had two questions, majorly with respect to opening of new restaurants. So first, what is the CapEx for opening a new Barbeque Nation restaurant, and what would be the amount of pre-operative expenses that form a part of this CapEx? And second, how much time does it take for a new restaurant to ramp up, and what will be the expected payback period? So CapEx is now approximately INR 3 crore per store. Our pre-operative would account around 10% on these CapEx. And, our breakeven typically happens by three years, and, payback periods are also around three years if you look at long-term data of our store performances for each of these categories. Understood. And these pre-operative expenses, these are capitalized or expensed? Part of these are capitalized, part of these are expensed. Understood. So anything which relates to addition of assets are capitalized, and anything which is operating in nature are expense off. Understood. Understood. Thank you very much. The next question is from the line of Resha Mehta from Green Edge Wealth. Please go ahead. This SSSG of -7.2%, can you break that up for Barbeque Nation, specifically between dine-in and delivery? So we don't provide that breakup, but broadly, if you look at our mix of dine-in delivery, it is similar to what it was in quarter one of last year. So the impact is pretty much proportional in both the cases. Right. And also, you know, for the demand, if you know, you can just talk about, do you see the... So you did speak about, you know, Q2 being the weakest, et cetera. But otherwise, how do you see the overall general demand? Are there any green shoots, any form of improvement that you are seeing around? Yes, we are. So So like I said, if you look at the first four months of this financial year, there has been a sequential improvement from April to May and June to July now. While Q2 is weaker, Q2 also was weaker in the previous year. And, SSSG-wise, the numbers are slightly better. But, you know, you know, we would like to remain cautious because if you look at our trend in quarter three and quarter four, we were tracking pretty well. And then in quarter one, you know, at a business level, we were down more than expected, right? So I think our focus now is, SSSG is what it is. Our focus is on improving our margins further. There are a lot of cost initiatives that have been taken last year, and that's the reason why, you know, one is, gross margin, but also at the cost levels, also at, when you look at also fixed cost levels at stores, you know, there is a, there is a per store expense decline. So that has played out, and that is something that, you know, we will, we'll continue to tightly control so that, we try and defy as much as possible, the, the negative operating leverage that comes out in this business. And, second focus is also on, on growth. I think our consolidation, rationalization, cannibalization, all of these, you know, impacts has, have gone. While we'll continue to maybe re-look at our portfolio and close one restaurant, you know, in a quarter, but the growth of new stores is right on top of our agenda. And you know, good thing is that the growth is very well spread out across brands and markets, which will also, you know, reduce the impact of of you know, of negative margin that comes from the new store expansion. So that's the, that's the plan, and over three years, you know, looking at it, we'll see that that markets will sort of change and will give us a benefit. Right. And, is there any seasonality difference between Q4 and Q1? Yes, Q1 normally is better because of you know, summer holidays in most of the places, so family demands go up. Quarter four, you know, you get the benefit of first weeks in of January, but February, you know, number of days are lesser, so that impacts a lot. March, demand from families normally drops because of you know, kids' exams and those sort of stuff. So generally, historically, pre-COVID, our quarter one versus quarter four, quarter one has been markedly better. And lastly, on your SSSG, that is negative 7.4%. So if we take out the, you know, stores that were closed, then what will the SSSG look like? So we have mentioned around four factors, specifically, and if I put all of these together, we believe there's an impact of approximately 3%, on SSSG because of that. So adjusted for that and, and now it is around 4.5%, which is, you know, decline, mainly decline because of, market factors. Got it. Thank you. Thank you. Thank you very much. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Bhavin Pandey from Athena Investments. Please go ahead. Hello. Hi, good evening, everyone. So I just wanted to understand, you know, recently vegetable prices have increased significantly, so will we see any impact on gross margins this quarter? So don't see much. The cost of vegetables in our overall purchase basket is relatively smaller. And even if we see, you know, less single differentiation on those, it really doesn't impact our gross margins as such. I think the real change happens from meat basket, which is chicken, prawn, mutton and fish. Okay. And, you know, expanding on that only, so when we look at sort of non-veggie meat market in India, every quarter there could be some period where, you know, there's some festival and the consumption gets delayed. So is there a way to make business immune from this pattern? Or do you think it's part of the business which should be recovered in a quarter, which has minimal of these days? No, it does so, and we do have our sourcing strategy for each of these commodities. And, based on movements of prices, we also, you know, move our inventory levels across various markets. Out of all the markets, one market we source, you know, chilled rather than frozen, and in that market, sometimes the price goes up really high, then there is some impact. That also, you know, gradually will shift into frozen, and once you do that, then we can further streamline this commodity. Okay. But I still could not understand the... You know, I'm talking about the cyclicality part of it for the non-veg business, from a demand perspective, from a consumption perspective. So do you think there's a way to make business more immune from this cyclicality that comes with the festivities being around? No, you mean on the cost side or on the revenue side? The consumption, the demand side. Sorry, I couldn't mention it clearly. Revenue side? Yeah. So, the seasonal factors do impact. So when we say that, quarter two is usually the weakest quarter, it happens because, you know, quarter two also has a lot of festival days, or veg only days, like, Shravan, in which, you know, specifically North India, you know, Hindi-speaking belt, they don't consume non-veg, and that drops significantly. Similarly, on the positive side, during, you know, festive seasons, you know, second week of December onwards to around first week of January, there's a lot of, you know, going out, which helps our dine-in business a lot. So to that extent, and, you know, our business is a high opening business. So even if the demand moves 10% ±, it starts impacting in your overall, you know, top line and margins. Okay. Okay. And, do you think, post-COVID, the dine-in business and the way people spend on restaurants has changed significantly, or do you think it's just, a patch of, you know, demand slowdown due to high inflation? And once this inflation is behind us, we can see same sort of demand that we saw pre-COVID, or do you think now because of the aggregators coming in, delivery will also account for a significant chunk of the business? So, look, eventually, dine-in business have been around for many, many years, and dine-in is not just food, but it's also experience, right? I think, yes, delivery is growing across the segments, but delivery is also replacing mostly the home cooking, you know, business, and also creating new demands, which were not serviced earlier, because, because people were not going out and doing that, eating. For example, desserts wherein, you know, earlier you had to go out and there was an issue, but now you can order in that. Specifically for dine-in segment, which is where the product is not just food, but also experience, also ambient service, all of these put together, and you have a great meal with your dear ones. That is a segment that is continuing to remain. It has remained in for many years, and will not impact. I think delivery helps to the extent of giving one more channel of revenue and growing the market, as such. In terms of dine-in, one, I think two trends that we see if I compare before COVID. One is that there is increased level of competition coming in. If you look at during COVID times, there was some reduction in the overall industry level supply, which pretty much benefited a lot of players during second half of during the entire calendar year 2022. And, as COVID was behind us and new supply sort of kept coming in, this overall demand got distributed across multiple players. That is a trend that at least we are seeing in the dine-in side of the business. The second trend is that there is clear you know drive towards premium experiences. And that's the reason why more of our premium you know portfolio brands, while they're small, have done better. And on the value segment, there is clearly an impact of lower money in the pocket because of inflation. So mix of all these factors you know it has led to that increase. Frankly, I'm already seeing, you know, some kinds of stress in some of the smaller ones, you know, a less number of unorganized small players, wherein they realize that, with the SSSG numbers being lower, it's very difficult to sustain this operationally heavy business. I think some of these consolidations, in my view, should also happen over the period of next maybe four to eight quarters. Once that corrects, there will also be a normalization happening in the whole industry that we saw pre-COVID. Okay. You know, and just, contrary to what other listed QSR players are doing in terms of introducing new basket of products, most of them are skewed towards the entry-level products, you know. But, when we look at broad scheme of India, we are setting up our capital going, for premiumization happening, where more gourmet restaurants, you know, as you mentioned, luxury dining, premium dining should pick up. So what do you think is the opportunity for listed players and QSR players like you to capitalize on it? So I will refrain from talking about QSRs. I think I understand CDR very well, as compared to my understanding of QSRs. But I think I believe the opportunity in the country is for pretty much every segment. You know, this is a large country, and at least in the top 30 cities of this country, you can build a scale business across brands as long as you deliver on the brand promise to your guests. And with that philosophy, I think we have an opportunity to build on our existing Barbeque Nation, and we have opportunity to also build on our two premium CDR brands, Salt and Toscano, which today are in three and two cities only. This year, we plan to enter two more cities in both the brands. And so, overall, I think, scale becomes a big advantage for, for restaurants. And, you know, we've, we know the journey of last 10 years when we had to invest in our back-end to, to grow one brand, and now that we have that advantage of the back end, we will try and take it up to, to other brands as we, as we scale up. That was really helpful, and thank you for answering my question so in a broad way. Thank you. Thank you so much. Thank you, Bhavin. Thank you very much. Thank you very much. The next question is from the line of Amrita from Wealth Managers India Private Limited. Please go ahead. Thank you for this opportunity. I've got two questions. The first is, do we offer the delivery service in the premium, CDR, segment, the Toscano and Salt? Yes, we do. All right. And, we have, like, for FY 2024, roughly around 17%-18% of the revenue came from the premium CDR and the international business. And, from FY 2024 to 2027, we are looking to more than, doubling this number of stores. So why-- what kind of a revenue contribution, are we targeting for FY 2027 from these? I think store economics would remain same. So gradually, you know, there is diversification in the portfolio happening, and over the period of a few years, this will move in favor of the other brands. All right. Thank you. Thank you. Thank you, Amrita. Thank you very much. Ladies and gentlemen, you will wait for a moment while the question queue assembles. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Ritesh from Lucky Investment. Please go ahead. Sir, I just wanted to know the sensitivity of restaurant operating margin to SSSG. What will be the sensitivity? For every 1% SSSG growth now, what should be the margin change? It ranges between 40%-50%. 50%? Yeah. For every 1% SSSG change, 50 basis points margin. Yes. Right? Anyway, I had calculated 60 basis. I just wanted to confirm with you. Your comment is that, on the SSSG side, you know, based on your best guess, when do you see the SSSG is improving? So I think, with quarter three, this should further improve. We are seeing this trend over last four months, as we discussed in the previous part of the call. And these two months, both August and September, also have some disadvantages because of lot of Navratri days. So I think quarter three is a right time when you can see that, that's further improving. Okay. Okay. Done. Thank you very much, sir. Thank you, Ritesh. Thank you very much. The next question is from the line of Khush Gosrani from InCred Asset Management. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. I just wanted two data points. Earlier, you used to give new store versus mature store, ADS, revenue per store, and margins. So if you could highlight how it has been in Q1 as well, that would be helpful. Yes. Yes. So on matured stores, we did revenue per store of around INR 5.9 crores, with a restaurant operating margin of around 16%. In new stores, we did revenue per store of INR 4.6 crores, with restaurant operating margin of 8%. 8%. Okay. Yes. What if the SSSG improves, how what kind of these margins will look, especially in new stores? The new store doesn't come into SSSG, but Mm-hmm. New store should have a normalization of vintage, which should improve our margins. The new store moves to a mature store after three years or after two years? two, two years is how we calculate this. Okay. So then these post-industry margins, once the SSSG improves, can go back to, like, what we have done, 18.5%-19% in Q3 for a mature store, if my data is right? Q3, I think, should be better than that. Q3 should be 20%+. Oh, okay. Okay. I mean, Q3 also is seasonally strongest quarter for us. True, true. Yeah. By year-end, what is our target number of stores that we want to do? So right now, we are 290 combined. So what would be our target by end of the year to reach? It will be anywhere between 240- 245. 240. Last question from my end, sir: So what is the per store CapEx for a Toscano and for a Salt? It's around INR 3 crore for both three. They are slightly premium, so, CapEx per store is slightly high. Okay. Yeah, got it. Thank you. Thank you. Thank Thank you, Khush. Thank you very much. Ladies and gentlemen, that was the last question for today's call. On behalf of Barbeque Nation Hospitality Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.