Ladies and gentlemen, good day, and welcome to Devyani International's 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 and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anup Pujari from CDR India. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and thank you for joining us on Devyani International's Q2 FY24 earnings conference call. We have with us Mr. Ravi Jaipuria, Non-Executive Chairman of the company, Mr. Raj Gandhi, Non-Executive Director, Mr. Virag Joshi, CEO and Whole-Time Director, Mr. Manish Dawar, CFO and Whole-Time Director, and Mr. Rahul Shinde, CEO, Yum Brands, and Whole-Time Director of the company. We'll initiate the call with opening remarks from the chairman, followed by key financial highlights from the CFO. After that, we will have the floor open for our question and answer session. Before we begin, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier. I'll now request Mr. Ravi Jaipuria to make his opening remarks. Good afternoon, everyone. I warmly welcome all of you to the earnings conference call to discuss the business performance for the Q2 and H1 of the financial year 2023-24. I'm pleased to share that DIL has maintained its store opening pace. We opened 115 new outlets in H1, taking the store count to 1,358 as on 30th September 2023. Out of 115 stores in H1, we have opened 68 stores in quarter two across our brand portfolio. We are making consistent progress in investing in our core brands and expanding our reach to cover our target customers to capitalize on the available growth opportunity in India. We are now present in more than 240 cities in India. The consolidated revenue for DIL stood at INR 819 crore for the quarter, with a growth of 9.6% on a year-over-year basis. India business witnessed a growth of 12.4% over the same period of the previous financial year. For H1, the consolidated revenue was INR 1,666 crore, with a growth of 14.7% over H1 of the previous year. Quarter two is seasonally a low quarter for the QSR industry. Apart from that, quarter two also saw an extended one month of Shravan period, where a sizable part of Indian population turns to vegetarian food consumption for a temporary period of time. As you are aware, Nigeria, one of the countries that we operate in, saw very significant currency devaluation in the previous quarter. As a result, we have seen an all-round impact on Nigerian economy. The devaluation has led to a contraction in the local disposable income levels and, hence, lower discretionary spending and consumption. We may have to support our Nigerian business financially, given the local situation, for the next couple of years, until the local situation stabilizes. We continue to introduce a range of new menu additions and innovative campaigns for our core brands. The market response and consumer acceptance to these new offerings is positive. Our innovation pipeline remains healthy and strong. High inflation across industries and categories from a macroeconomic perspective has led to a short-term impact on consumer sentiment and depressed consumer spending in the last few quarters. Despite this, our performance is resilient, and we continue to invest in the business for long-term growth. Looking ahead, we are hopeful that the rebound in consumer spending will take place in the next few quarters. We are poised for success in the dynamic and evolving QSR landscape by optimizing menu pricing, reducing wastage, cost controls, and improving operational efficiency. To sum up, our store addition strategy stands as a testament to our belief in the long-term potential of the Indian QSR industry. As we actively grow our presence, we are strategically positioned to tap into the vast opportunities, ensuring sustainable growth and value creation for our stakeholders. With the ambitious goal of reaching 2,000 stores by 2026, we are on track to inaugurate 250-275 new outlets in the current fiscal year. This ambitious expansion, coupled with our commitment to customer satisfaction and innovation. positions us for success in the dynamic and evolving QSR landscape. With this, I would like to conclude my address and now hand over to Manish for the financial highlights. Thank you. Thank you, Mr. Jaipuria. Good evening, everyone. A warm welcome to all of you, and thanks for your valuable time for attending the Q2 FY 2024 earnings conference call, our ninth such call since the listing in August 2021. In Q2 FY 2024, we opened 68 new stores across our brand portfolio. We now have a footprint of 1,279 stores across our core brands, with a total store count of 1,358 stores across DIL. This consists of 594 stores for KFC, 539 stores for Pizza Hut, and 146 stores for Costa Coffee in our portfolio, as at the end of quarter 2 FY 2024. Our store distribution in India continues to remain marginally in favor of non-metro designations, at 51% of the total store count. Operating revenue for quarter 2 FY 2024 stood at INR 819 crores, representing a 9.6% year-over-year increase. This was supported by a strong growth in the new store openings. Indian business witnessed a growth of 12.4% over the same period of the previous financial year. As you all know, for the QSR industry in general, Q2 is seasonally a low quarter. Apart from that, Q2 saw an extended 1 month of Shravan because of the lunar calendar adjustment. During this period, the consumption of meat comes down in the country. Further, there is competition emerging in the pizza category at the local and regional level. We are also seeing some marginal consumer preferences shifting in favor of non-pizza category within the larger QSR space. This is being observed mainly because of the after effects of inflation, where the consumers have tried to balance their wallets and downgrade to lower entry points within the QSR industry. In our view, this phenomenon is probably temporary in nature. The Nigerian economy, where we have DIL operations, is currently in a difficult phase. The local oil prices have shot up multifold, coupled with very significant currency devaluation in the previous quarter. This has resulted in a contraction in the local disposable income levels and hence a dent on discretionary spending and consumption. This has led to an all-round impact on our Nigerian business performance as far as the revenue and the margins are concerned. We may have to support Nigerian business financially, given the local situation for the next couple of years, until the local situation stabilizes. All of the above has impacted the overall consolidated performance of DIL. Slightly lower SSS and ADS numbers have resulted in lower brand contribution margins in quarter 2 FY 2024, at 15.4% versus 18.2% in the previous quarter because of the deleverage. Reported EBITDA post-Ind AS for Q2 of the current financial year was INR 159 crores, with margins at 19.4% versus INR 173 crores in the previous quarter. Company operating EBITDA on a pre-Ind AS basis was INR 95 crores versus INR 111 crores in the previous quarter. Operating EBITDA margin at 11.5% for the quarter was lower by 1.7% on a quarter-on-quarter basis. During the quarter, we also got the final approval from NCLT for merger of our two wholly owned subsidiaries, and the financial results of these subsidiaries have been consolidated into the standalone results. Because of this consolidation, we had to take some impairment of goodwill appearing in the subsidiary books, and the same has been reflected as the exceptional item in the current quarter P&L. At the same time, this consolidation has also resulted in a one-time gain arising out of the deferred tax recognition as part of the tax expense line in the P&L. Profit before tax for the quarter stood at INR 19 crores versus INR 13 crores in the previous quarter. Taking the discussion to our core brands, KFC in India added 13 new stores in quarter two FY 2024, reaching a total count of 540 stores at the end of the quarter. Average daily sales for Q1 FY24 was INR 109,000 versus INR 117,000 in the previous quarter. Sorry, my pardon, it was quarter two, actually. Revenues at INR 509 crores grew 14.9% on a year-on-year basis. Gross margin for KFC at 69% was consistent. Brand contribution margin at 19.4% for the current quarter was lower by 1.7% on a quarter-on-quarter basis, mainly due to adverse leverage arising out of lower ADS across the portfolio. On-premise consumption was 61% versus 63% in the previous quarter. During the quarter, Pizza Hut added 14 new stores. Revenues at INR 184 crores was flat quarter-on-quarter and grew 1.5% on year-on-year basis. ADS was slightly lower at 39,000 for the current quarter. Gross margins for the quarter came in at 75.7%, with an improvement of 0.8% versus the previous quarter. Brand contribution was INR 14 crores for the quarter, with the margins at 7.7%, which was lower by 2.4% on a quarter-on-quarter basis, mainly due to higher marketing and ADS deleverage impact. Costa Coffee added 23 new stores during the quarter, reaching a cumulative store count of 146 stores as of September twentieth. Quarter 2 FY 2024 revenue was at INR 35 crores, with a growth of 7% on quarter-on-quarter and 57.4% on a year-on-year basis, driven by expansion of new stores. Gross margin was 76.3%, slightly lower versus the previous quarter because of slightly marginal adverse mix. Quarter 2 FY 2024 brand contribution stood at 14.6%, lower versus the previous quarter. The new stores take some time to stabilize and reach the maturity level, hence, the rapid expansion of Costa stores has impacted the overall brand performance. We expect this to stabilize as we go along. To conclude, we want to reiterate our commitment to our ambitious growth within the Indian QSR market. We have a target of reaching 2,000 stores by 2026, a milestone that signifies the tremendous potential and demand for our brands. I'd like to highlight that the entire organic CapEx required for this expansion is primarily being planned through our internal funds. Our ability to self-finance this growth underscores the financial strength of DIF. Furthermore, despite our aggressive expansion, we have remained focused on maintaining strong financial performance. As we continue to expand, we remain committed to sustainably increase the ROCs, reflecting our emphasis on prudent financial management and creating a long-term value for our shareholders. On that note, I would like to request the moderator to open the forum for any questions or suggestions that you may have. Thank you very much. Thank you, sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. 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 will wait for a moment while the question queue assembles. We have the first question from the line of Tejas Shah from Spark Capital. Please go ahead, sir. Hi, and thanks for the opportunity. My first question pertains to the demand environment in general. You specifically called out precedent category, but just wanted to know, post post-Adhik Maas and then Shravan, have you seen any revival? And I just want quality to comment, if you can. And the whole expectations which were built up around QSR categories within booze from World Cup and all, have you seen any of those materialize in any form for the sector? Tejas, see, obviously, we will not be able to talk about the specific numbers, but if you look at, let's say, quarter three versus quarter two, it's seasonally a very strong quarter compared to quarter two. We are having a World Cup, which obviously, is having some impact whenever the big matches are there. At the same time, we have Diwali in this quarter, we have Christmas in this quarter. Whereas, let's say, in the previous quarter, while let's say Adhik Maas not only impacted the non-vegetarian category, but you also know that, I mean, the population will typically try and consume the food inside the home. So that also there is a small shift, which kind of impacts the overall performance. Therefore, from an overall perspective, quarter three should be a better quarter than quarter two. Sure. And second, on KFC, when we see the gross margin, expansion versus a gross margin movement versus margin movement, it slightly looks, not in tandem. So just wanted to know, is there any one-off or, or is there any, additional cost headwind that has come in that particular franchise? Tejash, there's no headwind as such. If you remember our previous comments, we have said that as far as KFC is concerned, the basket on raw material and packing materials is very stable. If at all, it's probably slightly in our favor. But at the same time, in the last quarter, we had also said that as we continue to open more store, more stores, we need to address the population, which is not currently covered by KFC. And therefore, we need to introduce the value layers. And we talked about a test market on KFC Lunch. We talked about the test market on the KFC Snackers range. So it's a little bit of mix, but overall, there is nothing to worry as far as the KFC gross margin is concerned. Okay. That's all from my side. I'll come back in a few times. Sure. Thanks so much, Tejash. Thank you, sir. The next question is from the line of Saurabh Kundan from Goldman Sachs. Please go ahead, sir. Hi, sir. The first question is on KFC. Your SSG went from -1% in the previous quarter to -4%. But when we look at the other KFC franchisee, they were 0% last quarter and 0% this time as well. So could you help us understand the deterioration in your case? And I'll come to my next question later. So Saurabh, as you know, I mean, we have different geographies between the two franchisees carved out, and we are very strong in South. And typically, the Shravan month, Shravan, a traditional month or Shravan period, has a higher impact in South India versus the other parts of the country. Because in West, it's probably lower versus even the rest of the country, because what we've seen typically, it's South, followed by North, and then that's where the West and South comes in. So because of our presence in South, and the mix of the stores, depending on where they are located, that's the reason you see a differentiated performance between the two franchise partners. So this is in our view, obviously. So therefore, that is how it is. Sure, sure. Understood. And so the next question is on this JV announcement that you have done. I know it's a bit early, but still, if you could just share with us, maybe the revenue potential or whether the economics of these food courts are going to be similar to your current store standards, or are there going to be additional cost lines involved? Anything that you can mention on the JV will be appreciated, yeah. Saurabh, we'll not be able to share the business plan as of now, but you know that the government has announced a modernization of Indian railway stations. And if you look at the intent from the Indian government, they want to modernize the railway stations to match with how the airports look and feel is. And therefore, given that announcement and the fact that there are so many introductions of fast-moving trains, and the entire train rack are getting upgraded, we see this one joint venture to be giving us a big opportunity. And we also know that, as the railway stations modernize, government is going to be allocating space for the food courts on the railway stations. And that's the reason we formed this JV with somebody who had great experience as far as working with the railways is concerned. They have their existing businesses, and it's going to be a big big asset and big plus for us. But again, remember that all of this, there is a public tender process that is going to be conducted by Indian Railways. And therefore, we will have to bid each and every railway station and food court as it comes along. But we have our expertise on somebody who knows the Indian railway system very well, has a great experience of dealing with the railways, and then we bring in our established brands, and we bring in our expertise of running the operations at the food court. So therefore, it's a win-win situation for both of us. So depending on when the announcement takes place, as far as the modernization is concerned, in terms of the specifics that I'm talking about, and when government tenders out in what shape and form, so that's the reason we are not able to kind of give you the exact numbers. But to your other question, in terms of will this, in terms of top line, be in line with the rest of the food court portfolio? We think it could be in line or it could be slightly better because it's attractive, very high traffic. Right. Understood. Understood. One last question on Pizza Hut. As now, I understand your performance is actually better than the other franchisee, and the question is, it's still negative and, are there any, initiatives that you are going to take, or you are more or less relying on the macro to turn or Pizza Hut to start posting better or positive same-store sales growth? See, we've taken initiatives in terms of, the new menu introduction, in terms of premiumizing the overall menu that we have. We've taken some initiatives in terms of additional promotions, in terms of value layers, in terms of, additional marketing spends. So obviously, I mean, we cannot sit quiet, in the current situation, and therefore, we expect that later when the market turns, we will see better than the proportionate results. Because all of these initiatives are kind of getting rolled out, and they would start showing the results, as we go along. Right. Thank you very much, sir. Thank you. Thanks, sir. Thank you, sir. The next question is from the line of Nihal Mahesh Jham from Nuvama. Please go ahead. Yes. Thank you so much, and good evening, Manish. The first question was, I think the opening comments you mentioned about pricing. So are there any pricing adjustments in IP brands? There is no pricing adjustment, Nihal, in the current quarter. So that's helpful. Second, another question on Pizza Hut itself. What, what I noticed is obviously there's been a significant deceleration in the brand margins, and that is very much commensurate with what you've been highlighting about the competitive intensity and maybe a preference shift away from where, you're seeing more preference towards, some of the other QSR, categories. Just, if I were to ask you that even when I compare it versus, the market leader, the deceleration in the SSG or maybe the ADS performance has seen a much sharper fall, and that, in a way, points to a much sharper market share loss for Pizza Hut as a whole, if they looked at for you or for the other franchise. What are those specific aspects beyond competition and the category which would have impacted the overall market that is specifically impacting Pizza Hut in your opinion, Manish? Nihal, see, in our case, if you remember, around the same time last year or a little later, we had introduced the Fun Flavour Pizza, and therefore the comps are a little different. So as that one-year anniversary kind of goes out for the Fun Flavour Pizza, we will start to see the improvement on the, on the SSG numbers. Because it was, the Fun Flavour got introduced when the, when the inflation was almost, almost at its peak, we saw a huge downtrend or a downshifting for the consumers from premium category to value layer category. And, and as we kind of go along, we try to address that. We try to bring down the mix of the Fun Flavour. We've introduced some new, new menu, to the premium pizza. So all of that is showing results. Therefore, we expect in the next couple of quarters, it should kind of get better. That's helpful. Just one final question was, you did announce a first tie-up with PVR in the middle of the quarter. Just would it be significant in terms of how the potential could be? I'm assuming it will be a lower-margin business, given its ability to be arrangement, but just your comments on the same. Yeah, it will be slightly lower-margin business, as you allude to, Nihal. Right now, we are in the test market phase because PVR also wants to upgrade in terms of their offerings at the food counters that they have within the premise. So right now we are in the test market phase, which will continue maybe for the next couple of months, and then we will take a final call, and then we can discuss our plans also in detail. Sure, Manish. Thank you so much. I I appreciate it. Thank you, sir. The next question is from the line of Ashish Kanodia from Citi. Please go ahead, sir. Hi, Manish. So, the first question was more around demand. So, you know, 2Q and again, this time 3Q, we still have, you know, someone who had Shravan, and then 3Q, we will have, you know, Shradh as well. But, and, you know, satisfying maybe a YOY comparison is difficult, but just wanted to get your sense that, you know, when you look at just the pure underlying demand on, you know, non-festive days and non-Shradh days, on non-Shravan days, you know, what are you thinking? Is it, you know, that the demand environment is, you know, muted, similar to what it was maybe a quarter or two back? Is it deteriorating or is it kind of improving? Just, you know, wanted to get more sense around the, you know, underlying demand rather than more some specific period or a Shravan specific case. Ashish, see, there are two ways to look at it. I mean, on some specific days, obviously, we see some big numbers coming in, and that shows the indication that the consumers are there, they are wanted, they've formed their habits, and they want to come back, and so on and so forth. At the same time, if you see, on an overall basis, there was this announcement on the savings ratio in the country, and the savings are currently sitting at almost all-time low. Now, that shows the consumers, the consumerism in the country is setting in, because, if you go back, let's say, 10, 15 years, savings probably was one of the biggest priorities as far as the Indian population is concerned. So, therefore, now the spends are higher on the durables. We are seeing the premium category doing well. The savings are lower. All of that is kind of positive. At the same time, we also need to understand that we've come out of hyperinflation and the consumer wallet sizes have remained the same. So it'll take a couple of quarters for the consumers to fully come back and we are still seeing some job losses in the IT sector. So overall, we are very bullish, but obviously, there are these, as you call it, or as I call it, the minor irritants or the bumps which are there, which will get sorted out as we go on. Sure, Manish, that's helpful. The second thing, specifically on KFC, you know, if I look at the ADS between the on-premise and off-premise, you know, the on-premise decline in ADS, you know, both on a quarter-on-quarter basis and on a YOY basis is much severe versus what you have seen in the off-premise ADS. So, any specific thing or is it just you know, a seasonality or something like that? See, we are in the middle of World Cup and the other things. So obviously, leading up to that, people start to kind of order, and you will see even in the current quarter also, the delivery ratios will be slightly higher, depending on how many weekends are there or or what kind of festivals are there, or what kind of particular days are there. But otherwise, as I've kind of pointed out in the past, I mean, for QSR, the bias remains slightly in favor of delivery, because, see, it's a fast food consumption item. And if, let's say, we are fully back to working from office post the COVID phase and all, the preferences are coming back, as far as home delivery is concerned. Sure, Manish, and just last week, you know, you talked about financial support for Nigeria. So just wanted to get a sense in terms of, you know, like from what kind of, you know, financial support you see you are kind of building in from a, you know, year-to-year perspective. See, we will not be able to give the exact numbers, Ashish, because we don't even know the extent of how deep it is. So because Nigeria, if you look at the fuel prices, they've shot up by almost 4-5 times. The currency has got devalued by almost about 64% in the previous quarter. And Nigeria is a dominant import economy, and there's a huge amount of transport reliance. So all of that has kind of impacted the consumers a lot. But the business continues, so the profitability of the business has come down. Because of our small store expansion requirements, we are just kind of putting a line in place. So it's not going to be big amounts. It'll be a small amount in the overall context of the DIL size. But since, in the past, we've stated that Nigeria is completely self-sufficient, and therefore we are pointing it out very clearly that Nigeria could need some financial support for the next one or two years. Oh, sure, Manish. Very Very helpful. Thank you so much, and all the best. Thank you so much. Thank you, sir. The next question is from the line of Devanshu Bansal from MK Global. Please go ahead, sir. Yes, sir. Hi, thanks for the opportunity and best wishes for the upcoming festive season. Sir, Manish may have maintained that we'll be continuing the expansion through internal accrual. So wanted to check on what kind of margin recovery is built in our model for KFC and Pizza Hut for the upcoming years. Devanshu, see, if you look at, let's say, the good days of KFC, we used to get to a brand contribution level of 20-21%. And, let's say, once the entire situation is stable, we've... I mean, the overall macro is started to fire back. We are pretty confident that we'll be able to get back to those numbers. I'm not saying it will happen immediately. It could take a few quarters, but we are confident that KFC can get back to those numbers. For Pizza Hut, Manish? Pizza Hut will take a little longer time, because Pizza Hut, the issues are slightly different versus the KFC. And therefore, Pizza Hut probably will be a little longer journey. Got it. Manish, we also have a higher rural exposure versus the rest of the pack. So wanted to understand how is the trajectory among rural region versus the urban region, any color that you can provide here? So Devanshu, let me slightly correct you, that we do not have any exposure to as we define the rural areas. So, because, I mean, I agree with you that we have higher exposure as far as non-metros or maybe tier 2 or tier 3 cities are concerned, but we are not even close to touching rural. Because if you look at, I think, overall QSR industry, we are probably addressing about what, 15%-16% of the population, and, which is far away from, where the rural India is. So, but having said that, if you were to ask me, is there a differentiated behavior between, a metro versus a non-metro? It is not so much, the, the trends are very similar. If at all, the hunger and the aspiration is stronger in smaller towns, and that's a good situation for us. Because if you see, I mean, if India has to develop, then non-metros have to develop faster and the smaller towns have to develop faster. Therefore, the way we look at our business, we are absolutely well positioned to capture that growth phenomenon. Fair point, Manish. Last question from my end. So prior sort of indicated implementation of this, kitchen solution called, Dragontail. Any outlook here, as in, do we also sort of plan to implement this, going ahead? So we are also working on that. And it's an overall solution. Dragontail, I'm sure you must be aware, is owned by Yum!, and they had acquired Dragontail a few years back, which kind of obviously optimizes the delivery times and the time it takes for a rider to come to the store versus the handing over of pizza to her, which kind of ensures that we are able to deliver a better quality pizza to the consumer with a lower delivery time. So we both are working on that initiative, and it will get rolled out simultaneously for the. Got it, Manish. That's it from my end. Thanks for taking my questions. Thank you. Thank you, sir. We take the next question from the line of Shirish Pardeshi from Centrum Broking. Please go ahead. Hi, Manish. Good evening. Thanks for the opportunity. Two questions in the beginning. Uh. When we see, there is a consumer sentiment which are weaker, burger segments are doing a little better than the pizza category. So does that mean, that, if the last year Diwali or quarter three was weaker, so base is absolutely nine, and I'm, I'm giving the context, because last five quarters, Pizza Hut has seen a consistent decline in ADS, and also in terms of, the SSG. So in that base, and given this events, and the festive season and momentum, which is picking up, do we think we will report a positive SSG in quarter, three, or we will be still in a negative territory? I know it is too hypothetical at this time. See, I will not be able to give you any numbers as far as the current quarter is concerned and what- So will it decline further or will it remain, less than 10%? That's what the question is. So well said, Shirish, but, see, overall, as I said, I mean, it was around the Diwali time. I think probably I'll have to just check my exact timing. We had introduced the Fun Flavour Pizza and, and it was part of the quarter, and therefore, we will be able to cycle out of this whole thing, from quarter four onwards. And that's where we see that things will probably turn. But otherwise, on a macro level, there's nothing wrong with the pizza category. If you see any of the environments where hyperinflation has taken place, not only in India but any part of the world, people try and downgrade to the lower entry segment. That's the reason why we are saying, as you pointed out, with the burger category, because that's a lower entry point into the QSR sector, and therefore, the consumers have switched into that. But on an overall basis, there's no reason, because if you look at the entire concept behind premiumization and upgradation and all, so we are very confident that the population or the consumers will come back. It's only a temporary piece that we are seeing. That's helpful. My second question on the post-Ind AS EBITDA, we are around 19.9%. But in this quarter, particularly when I look at our employee cost has gone up by 26% and other expenses ahead of our revenue growth. So is there any one-off, and when how should we look at the employee cost for the rest of the year? Because I, other expenses I can understand that could be temporary. See, there are multiple things which is happening in the employee cost, Shirish. One is obviously as we continue to expand in terms of the number of stores. So if you look at, let's say, a year-on-year comparison, our stores would have gone up, I think, by almost about 25%-26%. And so employee costs will not go in the same proportion, but there is a large component of the employee cost increase, which is because of the overall store openings. And because of the lower ADS, obviously, the delivery steps in, and your ratio looks kind of slightly adverse versus where it would have been. Secondly, between, let's say, the year-to-year numbers, we've also seen an increment cycle, not only for the supervisory and the management staff, but also for the team members, because of the minimum wage inflation. So, so that comes in as a increment. And if you remember last time, quarter four, we had said that we've taken a provision on account of statutory bonus because of the payment of bonus act, and now we started providing for that on a regular basis. So that is the other impact which is getting in. So therefore, if you have to ask me what is that one time? There's no one time as such, but the moment, let's say, we kind of cycle through out, let's say, once this whole year passes and we've started providing for the statutory bonus on a monthly basis, all of those pieces will kind of cycle out. As we continue to kind of see the improved sentiment and macro and the ADS numbers improve, we will see the ratio getting better as far as the employee cost is concerned. Wonderful. Just last question on the JV with R.K. Associates. Now, this has happened between DIL and R.K. Associates. So that means, more than Yum! Brands, we are also looking at opening food courts with the other brands, our own brands also? See, if you look at Chili's, our current food courts also, like for example, we operate a food court at the Mumbai airport, we operate food courts in Delhi, some of the highways and all. We do deal with the brands outside the Yum portfolio. And we've taken specific approval from Yum for dealing with these brands, and therefore, that will continue into the new setup as well. Okay. That's helpful. Thank you, Manish, and all the best. Thank you so much. Thank you, sir. Before we take the next question, a reminder to all the participants, if you wish to ask a question, you may press star and one on your touchtone telephone. We take the next question from the line of Dhisha from Anvil Share & Stock Broking. Please go ahead. Hello, sir. I just had a question on Costa Coffee. I wanted to understand if you had taken any price hikes on your products considering the price of milk in the last six months? In the last six months, Dhisha, we've not taken a pricing fees. Obviously, the milk prices have risen in some pockets, which has impacted the margins. We've seen a very small similar phenomenon on the coffee beans also, but we've not taken a pricing fees, as yet. Just, could you elaborate your pricing strategy? Does your pricing strategy of Costa differ from region to region? And also, is there any room to increase the prices of Costa considering that a millennial is willing to pay or is willing to support today? We do not have a region-based pricing, but we do have a pricing which is based on the channel. So for example, the airports would see a premium pricing versus the normal Costa outlets. At the same time, for example, if we are present in a premium mall, that could see a slight premium versus the normal pricing. And we are indexed to Starbucks as far as the pricing strategy is concerned, and we try and maintain that. But at the same time, we also need to balance out, because as you know, I mean, the consumer sentiment is weak for the last few quarters because of hyperinflation and we've seen the overall impact on the QSR industry as well. Hence, we are kind of holding ourselves back as far as the Costa pricing is also concerned because in any case, we want to address the deeper market here. We want to kind of enlarge the consumer base for Costa Coffee. So therefore, we've not taken any pricing fees yet. Thank you so much, sir. That's very helpful. Thanks. Thank you. The next question is from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead, sir. Yes, hi, thanks for the follow-up opportunity. Manish, sequentially, there's a significant drop in head office cost for us. So is it a usual phenomena where Q1 is a higher sort of head office cost and then things normalize in the rest of the quarters? See, typically, in quarter one, you have the impact of increments which is there. But otherwise, there's nothing specific. And as kind of, it kind of go along, it normalizes. So... But otherwise, there's nothing specific to call out as far as corporate office is concerned. Okay. So current levels are, should sustain then? Yeah. I mean, we are hoping as let's say the, the ADS comes back, the leverage will be better because it's a fixed cost, as you know, and therefore, as a ratio, it should start to increase. And plus, we do have to take some cost initiatives also, that is what we are currently working on. Thanks a lot, Manish. Yeah, thanks. Thank you. We take the next question from the line of Dhiraj Mistry from Antique Stock Broking. Please go ahead, sir. Yeah, hi. Thanks for the opportunity. So I would like to ask a question. I am aware that you have targeted for 2,000 store by the end of 2026, but the mix change, like, the store addition between KFC and Pizza is going to be similar or it would be different from the long term as well as from the near-term perspective? See, we've talked about this in the past. KFC is going to see a stronger store addition, and we've talked about that KFC in terms of the net new stores will see almost between 20-150 stores getting added every year. Whereas Pizza Hut, we've brought down the guidance from where it was around the IPO time, because obviously we are seeing and we've always said that we have a dynamic store expansion strategy. So depending on what the environment is, and what is happening on the brands, we continue to adjust that, so. Okay. Okay. Second question is regarding profitability of Pizza Hut. So, if our TGS goes back to, like, two quarters back, like somewhere around 46,000 or 48,000, our profitability is likely to improve by ten to get back to 10% or it would remain in single digit only? See, we would not like to speculate on where the ADS number could go, but what you're saying and the scenario you're painting, if the ADS numbers go back to the same numbers, you can see the similar brand contribution levels getting achieved. Okay. Okay. The reason why I was asking that is that, because of, you highlighted that there's a downtrending which has been witnessed in Pizza Hut. Will that significantly impact the profitability if even if the ADS goes back to the original level? We've taken steps to kind of address that mix, because when we introduced this, we saw a rapid mix in favor of the fun flavor or the lower price category, because we are in the middle of a hyperinflation scenario. We've taken conscious steps to kind of bring consumers back to the premium category. We've taken some price initiatives also, we've taken some mix initiatives also. Therefore, and again, let's say 47,000 is not going to happen overnight. So by the time we hit that number, we think things should be normal and we should be able to get close to the same brand contribution level or similar brand contribution levels. Oh, okay. Okay. Sir, next is regarding last quarter you highlighted presentation on Vaango also, and in this quarter you have discontinued that. Can I—Can you highlight some reason for that? See, Vaango is a small business of the compared to the overall DIL, size. I mean, it is about, I think, what, about less than 3% of the overall DIL. So there was a strong demand from the analysts and the investors that we would like to see the, Vaango numbers. So it's not that we are not going to be, showing the numbers, but, what we thought maybe once every few quarters, we'll be able to give you the Vaango numbers so that you are able to, see how the business is progressing. So it's not that we've completely stopped. It could well be once every year or coinciding with the year-end, that we will, give the Vaango performance regularly. And if you see in terms of the store numbers, we've kind of, given the Vaango store numbers also. Yes. Since it is a small part, and that's the reason we thought that, I mean, from analysts and the investors perspective, to save their time. Okay. Thank you. That's it from my side. Thank you so much. Thank you, sir. The next question is from the line of Marut Chaudhry, an individual investor. Please go ahead, sir. Hi, team. Can I ask a question in Hindi? Hello, am I on mute? Maruf, you are, but you're not very clear, so I think maybe you need to bring your phone closer to, closer to you. Okay, now, can you hear me? Maruf, sir, are you on a speakerphone? Yes. Now, can you hear me? Can you please switch to your handset, sir? Your voice is sounding muffled. Now it is okay? Yes, better. Please go. I'm asking, can I ask question in Hindi? Sorry, Marut, can you please repeat? We are not able to get you. Can I ask question in Hindi? Sure, absolutely. Feel free. No problem in it. So sir, my question is on Costa Coffee. Like, we have started Costa Coffee, we have just started Phoenix Costa, all the stadiums outside. But why did we start it in November? The World Cup started from October, so we were not there earlier. Plus, we are still serving only in three stadiums. So this is the question. So we have started in Mumbai and Kolkata, and we have opened kiosks there as far as the stadiums are concerned. Because we have not done this before, we want to experiment, we want to see, and we are opening new channels. So for example, we have done a test case with a stadium, but not all the matches are covered. We have also talked about collaborating with PVR to introduce Costa there. We are We are also doing it in airports. So the whole idea is to experiment, test what is successful, what is not successful, what is that the consumer demand is, and accordingly, we expand it, and then we bring it into the regular strategy. Okay. That was my question. The World Cup match is over, and the last 12-13 days it has just started. Okay, great. Thank you. Thank you, sir. The next question is from the line of Saurabh Kundan from Goldman Sachs. Please go ahead, sir. Yeah, just a quick questions on Pizza Hut. So, is there a very large divergence between your Pizza Hut SSFE in the states that you're present in? Are some states really very bad versus others, or is it across the states, similar across the states? It's similar across the states, across metros, non-metros. I mean, obviously, there are some pockets, they're always an exception, but largely the trends are very similar to Saurabh. Okay. And another question, sir. If I remember correctly, in the previous quarter call, Pizza management had mentioned that, Pizza Hut will return to mid-teens margins in a couple of quarters. If I understood your comments today correctly, now you're saying that it might take a little bit longer, for that to happen, is it? Yeah. Because we've seen continuing weakness, and as I said, I mean, it's a matter of what ADS levels can we get to, and as you start to see the ADS improving, because we've managed to arrest the decline through our initiatives on marketing, on promotions, on menu introductions, and so on and so forth. So as you see the ADS coming back and ADS improving, you will see the margins also kind of moving in tandem. Great. Thank you. Thank you, sir. The next question is from the line of Ashish Kanodia from Citi. Please go ahead. Manish, so on Pizza Hut, you know, as you recalibrate your store expansion for maybe, you know, next two years, three years even, you know, maybe macro plus competitive intensity. I mean, you know, when you maybe, you know, interact with the brand owner, maybe with Yum! Brands, you know, is there a discussion or thought that maybe, you know, instead of kind of, you know, reducing the store expansion, you know, maybe Yum! Brands can kind of support in terms of lower royalty, et cetera. Because, I mean, at the end of the day, it boils down to, you know, ROCE and cash flows and, you know, opening more number of stores, I mean, opening less number of stores makes sense because demand is weak. But whenever demand kind of picks up, you know, having by kind of density of stores, of course, helps, right? So has there been any discussion or do you think this is a feasible model to work on? Ashish, see, we and Yum! are continuously engaged as far as any of the brands and the businesses are concerned, right? So therefore, let's say if you look at the introduction of value layer, if you look at, let's say, optimization of the pizzas, if you look at the new menu introductions, all of that is in collaboration with Yum!, and they are also equally concerned as to what is happening to the brand and the brand performance. So similarly, for example, we've also seen that, I mean, while we spend additional money on marketing, Yum! has also kind of pitched in with the additional marketing money from their side. So, so it is not just that it's only our baby. I mean, we work in parallel, and we work together to kind of ensure that Pizza Hut comes back, so. But it would. I mean, what I'm just trying to understand is, you know, for example, they kind of have, you know, some benefits in terms of accelerated store expansion, right? And at a time when sentiments are weak and then, you know, this is a time when brands normally invest to promote much stronger, right? So, I mean, and one way, you know, in which Yum! can, you know, help in it, you know, ultimately, everyone's decision there, but to have lower royalty rates and, you know, kind of leaves more in the pocket of maybe the franchisee partner to drive that, you know, aggression. So just wanted to... I mean, I understand that it's, you know, start discussing, but do you see this as a feasible model, if that has to happen? So, Ashish, we are engaged with Yum!, but obviously so far there is no output as far as royalty discussion is concerned. But again, I mean, your point is absolutely valid. Because see what happens, let's say when the ADS is down and the brand is this thing, I mean, obviously their income levels also come down through the royalty because it is a percentage to revenue. It's not a fixed royalty. But your point is absolutely valid. We are engaged with Yum! on that, so let's see how it goes. Sure, Manish. Thank you so much. Thanks so much, Ashish. Thank you, sir. The next question is from the line of Jaykumar Doshi from Kota. Please go ahead, sir. Hi, thanks for the opportunity, and, my apologies. I've joined the call late since Jay said his question was already answered. I'll go back. Now my question is, Manish, when I sort of, you know, when you look at your store portfolio, so let's say in two years you've gone up from 300 stores to 540 stores in KFC, FY 2022 versus FY 2024. And that two years back, brand EBITDA margin was 22.4%. Right now it's down 300 basis points. Gross margins are almost comparable. So for the original 250-300 stores that you had, the portfolio stores you had two years back, has store-level profitability or EBITDA improved, it has remained at a similar level? I just want to understand, you know, the numbers that we are looking at in profitability front, is that largely the drag of new stores, or is it also slightly lower profitability in, you know, stores versus what you used to do two years back? In the course. Sure. There they see there are multiple things at play, when you look at, either of the brand performance. So for example, when you look at obviously, we've doubled the store count. The new stores take, time to mature. They take time to reach the overall brand averages in terms of the top line and the bottom line, and that impacts the overall, mix. The old stores are stable, they are performing well, but at the same time, we are also, seeing, the external or the macro factors, in terms of the inflation, in terms of so on and so forth, which kind of impacts the overall portfolio. And, and we've seen the inflation is not just on the food side, it is all across, which has impacted the consumer sentiment, which has impacted the consumer wallets, and therefore that kind of impacts the old and the, and the new stores. Similarly, for example, if let's say we take new initiatives in terms of value layer, that new initiative will be kind of taken at all the stores. So overall, therefore, I mean, the portfolio is doing well, it is getting stronger. And, and if we all believe in the KFC opportunity in this country, I think we are in a good place. Sorry, I have a couple of follow-up questions, connected question. So when I, when I, you know, when you look at, when you think about the next two or three years now, you know, inflationary pressure, at least for KFC, is almost entirely eased. Gross margins are tracking at a fairly decent levels. So do you see, you know, EBITDA brand, EBITDA margin, remain at these levels as you continue to add 125 stores a year? Or, will it move up directionally, a little, up, or will it sort of, can it go down further? Yeah, as the new stores mature and as the macros kind of improve a little bit, we are confident the ADS will improve. And as the ADS improves, the leverage that we are seeing currently, will kind of go off, and that's the reason. So I kind of addressed this question earlier on also, that as the ADS improves, if you see in the past, you've seen KFC brand contribution, coming in at 21%-22% level. And as the ADS improves, macros improve, we think we will be able to kind of flip those numbers, back again. SSS recovery will contribute to margin expansion there. Yeah, SSS recovery, because again, remember that as the base is trending, the new store as a percentage to the base and in terms of dilution also keeps coming down. So therefore, that is also going to be helping the brand on an overall basis. And final one, on KFC portfolio, you know, now that you are at 550 stores and you continue adding another 150, 50 per year. So, are you seeing any impact of cannibalization at all, on some of your existing stores? Or it's still, you know, there are enough white spaces, you know, that you see that will ensure that you don't, your existing network does not just cannibalize the new stores. It's a combination of both, because, for example, it really depends as to where are you opening the store. So for example, as we go deeper into the metros, because metros are big consumption hubs, we do see some kind of cannibalization in the neighboring stores. But overall, as a metro, it, it kind of does not. If you go to a new town, if you go to smaller city, there is no impact at all. So it's a combination of, various, kind of factors. On an overall basis, we think India has a huge potential as far as KFC is concerned, because of the macro in terms of, the non-vegetarian population, the chicken consumption amongst the non-vegetarian population, and so on and so forth. So, so therefore, if you were to consider that, we are, we are very, very highly underpenetrated as far as the current KFC penetration is concerned. But there is this small impact which is kind of there depending on where you're opening the store. Thank you so much. Thanks so much. Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments. Thank you so, so much for your participation in our quarterly results presentation call. We do hope that we have been able to manage all your questions, to answer satisfactorily. Should you need any further clarifications or would you like to know more about our company, please feel free to contact our investor relations team. Thanks again to all investors, and thanks for your time to join in our growth story. Thanks. Thank you. On behalf of Devyani International, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you so much.