Ladies and gentlemen, good day, and welcome to the Devyani International's Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity, anyone who wishes to ask a question may press star and one on their touchtone phone. To remove yourself from the question queue, you may please enter star and two. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on their 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 Q3 FY 2024 Earnings Conference Call. We have with us Mr. Ravi Jaipuria, Non-Executive Chairman of the company, Mr. Varun Jaipuria, Non-Executive Director, 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 will initiate the call with opening remarks from the chairman, followed by key financial highlights from the CFO. Following this, we'll have the forum open for a 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. A warm, warm welcome to you all to our earnings conference call to discuss the business performance of DIL for the third quarter and nine months of the Financial Year 2023-2024. At the onset, I feel very excited to share with you all that we have successfully completed the acquisition of Restaurant Development Company Limited, RD, one of the franchise partners of KFC in Thailand. This has led to addition of 283 KFC stores as of December 31st, and 274 stores as of September 30th, to our overall store portfolio. We have also maintained the store expansion free pace for DIL. We opened 94 net new stores in quarter three across our brands portfolio. With this, we have added 209 net new stores in the nine-month period, taking the total store count to 1,452 as of December 31st. With the Thailand acquisition, our total store count now stands at 1,735. Please note that, the Thailand deal was completed in January 2024. We are making steady progress in investing in our core brands and expanding our reach to cover our target consumers to capitalize on the growth potential in India. We are now present in more than 250 cities in India. The consolidated revenue for DIL stood at INR 843 crores for the quarter, with a growth of 6.6% on a year-to-year basis. Over the same period, our largest business, DIL India, witnessed a growth of 9.2% from April to December, cumulative nine months of the year. The consolidated revenue was INR 2,509 crores, with a growth of 11.9% over the same period of the previous year. Consumer sentiment remains subdued despite quarter three traditionally being a strong and festive quarter. We have also seen the impact of certain international geopolitical events on the American brands that we deal with. The Nigerian currency continues to weaken post a significant devaluation couple of quarters back, again impacting the current results of DIL. Overall, we believe that we have the weak consumer sentiment and depressed consumption spending is temporary and short-lived, and we are optimistic about witnessing a recovery over the next few quarters. Amid these challenges, our operating and financial performance has remained stable, and we continue to invest in the business for long-term growth. To successfully navigate the dynamic and evolving QSR landscape, we have implemented multiple initiatives this year, including optimizing menu pricing, reducing wastage, enhancing 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 our Indian QSR industry. As we actively grow our presence, we are strategically positioned to tap into this vast opportunity, ensuring sustainable growth and value creation for our stakeholders. We are on track to inaugurate 250 to 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 ever-changing QSR sector. We had previously set ourselves an ambitious goal of reaching 2,000 stores by 2026. You'll be happy to note that following the completion of the Thailand acquisition, we are confident of achieving this major milestone by the end of the calendar year 2024. With this, I would like to conclude my address, and I now hand over to Manish for the financial highlights. Thank you very much. Thank you, Mr. Jaipuria. Good evening, everyone. A very warm welcome, and thank you for your valuable time for attending DIL Q3 FY 2024 Earnings Conference Call, our tenth call since the listing in August 2021. In quarter three FY 2024, we opened 94 net new stores across our brand portfolio. We now have a footprint of 1,371 stores across our four brands, with a total store count of 1,452 stores across DIL. This consists of 647 stores for KFC, 570 stores for Pizza Hut, and 154 stores for Costa Coffee in our portfolio, as at the end of quarter three of FY 2024. Our store distribution in India continues to remain marginally in favor of non-metro destinations, at 52% of the total core store count. We have added seven new cities in quarter three. As Mr. Jaipuria noted earlier, having completed the Thailand acquisition, our total store count now stands at 1,735 stores as at December end. As a result of this acquisition, the total store count for KFC stands at 930 stores out of the total store portfolio that we have. Having announced the transaction in December 2023, we completed the Thailand acquisition as of 17th January 2024, and we will start consolidating the Thailand numbers from quarter four of FY 2023-24. Therefore, next quarter you will see Thailand getting consolidated for approximately two and a half months. We see Thailand as a great opportunity market for DIL. Apart from KFC, we do see the potential to introduce new brands from our existing portfolio over a period of time. The existing Thailand business and the team provides us with a strong foundation from that perspective. Coming back, the operating revenues for quarter three FY 2024 stood at INR 843 crores, representing a 6.6% year-on-year increase. This was supported by new store openings. The Indian business witnessed a growth of 9.2% over the same period of the previous financial year. The October-December quarter saw a subdued sentiment within the FMCG/mass discretionary consumer sector, marked by a visible pullback in consumer spending. This period, traditionally buoyed by festival spending, saw some contraction in consumer enthusiasm, reflecting broader economic concerns and a cautious approach to mass discretionary spending. The impact of this cautiousness extended beyond traditional retail and included the QSR sector as well. We have also seen a strong correlation of some of the international geopolitical events on our business because of some large American brands that we partner with. Post a strong currency devaluation in quarter one, the Nigerian Naira has seen further deterioration and further weakening. As you all know, Nigeria is a highly import-dependent economy, and the currency impact has resulted in a contraction in the local spending power. As a result of this, we have seen an all-round impact on our Nigerian business performance as far as the revenue and the margin circumstances. The currency impact because of the restatement of dollar-denominated liabilities has been captured as part of Pre-Ind AS EBITDA, and the same has affected the DIL consolidated results as well. Stated earlier, we have to support the Nigerian business financially, given the local situation, for the next couple of years until the local situation stabilizes. The gross margin for the consolidated business was flat on a quarter-on-quarter basis and improved by almost 130 basis points over the year-on-year quarter. However, the deleverage in top line, as a result of lower ADS numbers across KFC and Pizza Hut, has led to the impact on brand contribution margins. The brand contribution in quarter three stood at 15.4% flat versus the previous quarter. Reported EBITDA, which is post-Ind AS for quarter three for the current financial year, was INR 146 crores, with the margins at 17.4% versus INR 159 crores in the previous quarter. Consolidated operating EBITDA on a pre-Ind AS basis was INR 79 crores versus INR 95 crores in the previous quarter. Operating EBITDA margin at 9.3% for the quarter was lower by 2.2% on a quarter-on-quarter basis. This is mainly on account of the booking of Forex loss as a result of the further weakening of Nigerian currency and the ADS deleverage impact. Taking the discussion to our core brands, KFC in India added 50 new stores in quarter FY 2024, reaching a total store count of 590 stores as at the end of the quarter. Average daily sales for quarter three FY 2024 was INR 104,000 versus INR 109,000 in the previous quarter. Revenues at INR 524 crores grew 14.1% on a year-on-year basis. Gross margin for KFC at 69.4% improved by 40 basis points over the previous quarter. Brand contribution margins at 19% for the current quarter was lower by 0.4% on a quarter-on-quarter basis, mainly due to deleverage arising out of the lower ADS. On-premise consumption was 60% versus 61% in the previous quarter. During the quarter, Pizza Hut added 30 new stores. Revenue at INR 180 crores was lower by 2.2% on year-on-year basis. ADS was INR 37,000 versus INR 39,000 in the previous quarter. Gross margin for the quarter came in at 75.8%, flat versus the previous quarter. Brand contribution was INR 11 crores for the quarter, with margins of 66.1%, which was lower by 1.6% on a quarter-on-quarter basis, mainly due to ADS delivery impact. Costa Coffee added eight new stores during the quarter, reaching a cumulative store count of 154 stores as at 31st December, 2023. Quarter three FY 2024 revenue was at INR 40 crores, with a growth of 14.6% on quarter-on-quarter basis, and 36.4% on year-on-year basis, driven by expansion of new stores. Gross margin was 77.2%, improvement of 0.9% versus the previous quarter. Quarter three, FY 2024 brand contribution stood at 14.9%. As you all know, the new stores take some time to stabilize and reach their maturity level, hence, the rapid expansion of Costa stores has impacted the overall brand performance. We expect this to stabilize as we go on. To conclude, we want to reiterate our commitment to our ambitious growth within the Indian quick-serve market. We have set a target of reaching 2,000 stores by 2026, a milestone that signifies the tremendous potential and demand for our brands. With high acquisition, we will be able to meet this target by end of calendar year 2024. The Thailand acquisition will result in external debt in the books of DIL. On a consolidated level, the Thailand debt will also get consolidated once we start to consolidate the balance sheet, as we consolidate the numbers from next quarter. The gearing ratio remains in a comfortable zone despite Thailand acquisition and consolidation. As we continue to expand, we remain committed to improving our financial performance, reflecting our emphasis on prudent financial management and creating 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. Thank you very much. We will now begin the question and answer session. A nyone 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 only while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Vivek Maheshwari from Jefferies. Please go ahead. Hi, good evening, team. First question is on Pizza Hut. Given, you know, where the brand is in its journey, why or a "decline," you know, in ADS to a level that it has come to? And the fact that, you know, you have added stores at an overall level, unlike, let's say, KFC, where you have added stores and revenues are increasing despite decline in ADS. In case of Pizza Hut, that has not happened. What are your medium-term aspirations or, you know, ambitions over here with this brand? Hi, Vivek. So Pizza Hut, while we've added 30 stores in the quarter, but you would have seen that overall our additions are much lower compared to what we have guided and what we've added in the past. So we are cautious about what is happening on the Pizza Hut. We also recognize that there's a strong competition which is emerging. However, we've taken steps in terms of the visibility for Pizza Hut as a brand. We've taken steps in terms of the in-store, store experience as far as the consumers are concerned, and therefore, we are confident that Pizza Hut, top line and the ADS numbers will come back once the overall macro sentiment improves, and we will start to kind of trend in line with the overall category growth. Okay. Manish, you know, there is also, you know, concern for your competition that the aggregators have actually, in a way, democratized and the pizza, you know, offerings have gone up quite a bit. In such a setup, I would have thought that, you know, that you would have, you know, better chance, you know, because of whatever, product fatigue or brand fatigue or, you know, you are a challenger brand, so you could have also participated in that. Where are you on this, you know, on this issue, versus, you know, the competition and the fact that the market is probably getting a bit fragmented? So if you see, Vivek, typically, for example, post the COVID time, the local competition virtually got eliminated because of the various constraints that the overall business was under. Whereas now we are seeing that is coming back, and therefore the food aggregators have a good opportunity from that point of view. Overall, from our strategy point of view, as we said earlier, that for example, during the hyperinflation time, we introduced Fun Flavor Pizza, and we saw down trading happening within our portfolio. We have compensated that through the premium end side. We've also compensated by reducing the number of offerings that we've had on the Fun Flavor side, and that's how that gives us the comfort that we will be able to kind of come back on Pizza Hut. Okay, got it. That's useful. And on the KFC side, Manish, likewise, the ADS at, let's say, INR 104K, which is, which is, I think, lowest, at least in the last 12, 13 quarters. Do you think that third quarter captures, you know, the worst, and ADS should not go down any further? Or do you still think that things are tough and, s orry, yeah. See, Vivek, the overall macro environment continues to be challenging. One, obviously, is from the consumer spending part, and then on top of that, as we've discussed in our comments, we've seen some bit of impact on the American brands as well because of the overall, global geopolitical situation. And, we've analyzed our numbers, we've seen a very strong correlation between what is happening outside to what is happening with the brand. So therefore, we are more in the process of consolidating and kind of making sure that we kind of grow from here. But, we will need to kind of see when the macro environment improves, and it'll take a couple of quarters by the time it stabilizes. Got it. Got it. And last one, Manish and Mr. Jaipuria, you know, big picture on Thailand, how you are thinking about what is the aspiration over here? What will be the medium-term, you know, thought process in terms of growth and profitability? Anything that you can talk about now that the merger is, now that the acquisition is done? So Vivek, from our perspective, Thailand gives us a good opportunity. One, obviously, it is an Asian economy. It is still not a developed economy as the Western world or Singapore, or for example, some of the Middle East countries. So there is a great scope for growth in Thailand. Second, if you look at from the economy perspective, the way the exchange rates and the interest rate environment is, it is lot more benign versus what we've seen in India. At the same time, if you look at the local consumption from the perspective of outside home food consumption, the incidence in Thailand is sitting at almost about 8x to 9x in a week. This, I'm talking about Thailand as an overall country versus, let's say, if we were to compare that to India, given our target population, which is roughly about 12%-15% of the Indian population, and that incidence sits at once in 35 days to 40 days. So from that point of view, economically, it's in a good zone. The growth potential is still available. Poultry is a dominant consumption medium as far as the meat consumption is concerned, and that is true with some of the Asian markets. KFC is a market leader in that country, with close to almost 1,000+ stores. McDonald's, which is number two, is a distinct number two at about 25%-30% of the store count. So we saw Thailand as a great opportunity. We also see that within that, there is an opportunity to introduce our own brands in Thai portfolio. And that's the reason we are bullish and we did the deal. And on an overall basis, despite all of that, it was a great valuation. I mean, you've seen the multiples that we've acquired this business at. So that is where our confidence stems from as far as the Thailand deal was concerned. Got it. And just one small follow-up. In terms of margins, I think that business is about 15%, give or take, whereas India margins are about 20% at Brand Contribution level. So what is the, you know, what is the thought process on the margin bit? Over a period of time, Vivek, we are very confident we'll be able to get to the India levels. And please remember that Thailand, as an economy, is highly tourism dependent. And if you look at the data, the COVID impact is still there. They have still not fully recovered from tourism perspective as well. So as the kind of overall tourism recovers, the brand numbers start to improve, the leverage would also come in, the positive leverage would also come in for the brand. Therefore, in our view, the margin levels should improve from where the numbers are. And again, that is what gives us the opportunity to acquire the business at the multiples that we've managed. So I mean, you have to balance it out and take a holistic view from that perspective, right? Got it. Got it. Just as, and you know, a feedback from some investors who have this, you know, worry that the Thailand foray doesn't in any way represent your concern or whatever the slowing QSR and Devyani's position in India. So that's just one thing that, you know, some investors have expressed concerns about. I don't know if you can address it here or not, but, yeah, that's about it. Thank you very much. Sure. So we are not slowing down on India, and obviously, India is an independent strategy, and it's not that, the Thailand acquisition will impact whatever plans or the growth aspirations we have, for the Indian business. So that will continue, but at the same time, given the current environment, it's a good hedging bet as well. Got it. Thank you. All the best. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in this conference, please limit your questions to two per participant. Should you have a follow-up question, you can rejoin the queue. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead. Yes, sir. Hi, thanks for the opportunity. Sir, I wanted to check as in this calendar year also, we are targeting aggressive store expansion. So, are formats like Pizza Hut, Costa Coffee, sort of generating enough free cash flow to sort of support this expansion that we are planning to? Devanshu, they are. Obviously, KFC has not changed the comparative model, whereas Pizza Hut has got impacted more than KFC. But please remember, our view is, if we are bullish as far as the Indian overall potential is concerned, then we have to continuously invest because this business is a store-by-store business. You have to build brick by brick, store by store. So it is not that once, let's say, the India potential kind of emerges, we'll be able to kind of say that we can add now 3,000 stores in a year together. So we have to be at it. At the same time, as we've kind of alluded in the past, that we follow a dynamic store addition strategy. So we've kind of tapered down Pizza Hut a little bit. We've increased KFC a little bit. So if the current situation continues, we will kind of adjust some bit of numbers here and there. But overall, I mean, our investment is more from a long-term point of view, and we still believe that as far as Indian market is concerned, the long-term potential is huge and QSR is under-penetrated and therefore, we need to invest. Got it, Manish. And from margin perspective, while there was a SSSG decline for both formats, KFC, Pizza Hut, but in KFC, we have been sort of able to deliver a relatively better margin performance compared to Pizza Hut. So wanted to check, is there any kind of a difference in operating models for the two brands, where costs are more variable for KFC vis-à-vis Pizza Hut? See, the leverage impact or the de-leverage impact, whatever you may call it, is much stronger on Pizza Hut. Because if you look at the KFC ADS numbers, they are much stronger, whereas Pizza Hut are lower numbers, and therefore a small change as far as the top line is concerned, impacts the margin more dramatically. So let's say once we are able to cross those threshold levels, even Pizza Hut also will kind of get into that zone. But to that extent, KFC is insulated. KFC is a better business, obviously, and that is one of the considerations that we factored when we got this Thailand opportunity, that it was a good KFC opportunity, and therefore, that was the other decision-making element that we had in our mind. Got it, Manish. Manish, can you also talk about the funding of capital required for Thailand, as in, how, where is the capital going to be raised, and what is the interest rate associated with that? The total value of the business was about INR 1,060 crores, and we've disclosed that in the Thailand presentation that we did. Out of that, DIL is investing INR 340 crores, roughly, and that is what we borrowed locally from the banks in India. Temasek, represented by Camest, is investing another about INR 325 crores, INR 330 crores, and therefore, they are participating with us at Dubai level. And then there was a local debt which was sitting in Thailand. That is what we've replaced with a lower cost debt now as part of the deal, and therefore, that gives the advantage to the local folks. That's fine. Got it, Manish. Thanks for taking my question. Thank you. The next question is from the line of Saurabh Kundan from Goldman Sachs. Please go ahead. Yeah, hi, thanks for the opportunity. So is there a way to quantify the gross margin. Sorry to interrupt. Mr. Kundan, your voice is not that audible. In case if you're using the speaker mode, may we request you use the handset mode, please? Yeah. Is it audible now? A bit better, thank you. Saurabh, Saurabh, it's slightly better, but if you can move closer to the mic, that'll be fine. Yeah, yeah. No, my question was whether if you can quantify the geopolitical impact you were talking about on KFC and on Pizza Hut. Saurabh, see, in the middle of the macro environment that we have in terms of what is happening on the inflation, what is happening on the consumer spending and so on and so forth, now, obviously, it is difficult to quantify and therefore we can draw correlations, and we've seen a very strong correlation between the two. So, maybe we can talk about this more in detail in one-on-one sessions, but there is a strong correlation available. Right. Right. So the second question is on Pizza Hut. Just wanted to know, is there a minimum target committed to Yum! Which is, is that why the expansion can't be completely paused? I'm not suggesting completely pause it, but just theoretically, can it be completely paused? See, theoretically, you can completely pause it. And obviously, let's say when we work with Yum!, there are targets defined, and we've been kind of working with these targets for the last 25 years, 26 years, and we've never, ever defaulted on those targets. So, so therefore, I mean, that is not such a, such a big worry. It's, it's a fact that we believe in the business, it's a fact that we believe in the brand, and that's the reason we are expanding. Okay. So just one last question: Where in the reported P&L is the Nigerian currency impact recorded? It's about 2% of sales, is it? Yeah, it is, it is. It's a good point that you've raised. So, if you look at, let's say, a few quarters back, we used to report the, I mean, when the devaluation had set in, we had reported this, as discussed with the auditors as a set. Whereas now, because it is business as usual a nd although not official devaluation, but the currency is still weakening, we've actually merged this with our, overall operational numbers. So let's say when you look at our, presentation of the numbers, it sits as part of the overall G&A, which is the brand and corporate G&A, which is the difference between the brand contribution and the pre-op, pre, interest EBITDA. That's the reason you're seeing the expenses at an elevated level, because it has an element of a number coming out of Nigerian currency. Right. Right. Thank you. Thanks so much. Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead. Hi, sir. One quick accounting-related question. If I basically derive your corporate or common costs by deducting the restaurant EBITDA margin from the total company's EBITDA margin, that number around INR 50 crores is much higher than your usual run rate of around INR 30 crores. So can you explain that? So Percy, as I said, this number accounts for the Nigerian currency devaluation impact also. So therefore, that's an exceptional item, which earlier used to be below EBITDA, there is now. How long will this continue, Manish? How many more quarters we will see this unallocated or corporate costs at this inflated level? See, I will not be able to predict as to how the currency behaves going forward. Assuming that the currency is remaining where it is today, then will you see the, i s this a permanent rebasing upwards, or it will annualize and the cost will come down at some point of time? No, it is. Let me just give you some numbers so that you're able to understand it better. So pre the devaluation, the Nigerian naira to a dollar was roughly around 450-460, somewhere in that range. Post the devaluation, it got pegged at about 660-670. Whereas currently, it is sitting at almost close to 900+. So, so it's a very significant devaluation which has happened. But just to give you a broad guidance in terms of what is the normalized number, as far as the EBITDA is concerned, you can take roughly at about 5% on the current top line basis. This would include whatever currency impact is there? No, no, this is without the currency impact. Okay. Okay. Now, my question was that supposing if this remains around INR 900 crores, do you see this extra INR 20-odd crores continuing into perpetuity, or does this annualize and come down? I just wanted to understand the accounting of this. Sure. So if it remains at a 900 level, you will not see a further impact, and therefore, as far as the NGN is concerned, it will revert to the original level and same as the balance sheet. Okay. Okay. Okay. Because we've taken the impact of INR 900 crores at all line levels and already factored that in. Okay, so this will come down by which quarter, i mmediately in Q4, or it will take a couple of quarters for it to come down? You're talking about the currency? Yeah, this extra INR 20 crores in the corporate costs is what I'm talking about. Let me just elaborate it better. Let's say next quarter, if the currency remains at 900 then you will not see further impact in the books. Okay, so then it will come back to the original INR 30 crores, 35 crores kind of a number? Exactly. If, let's say, the currency comes down to, say, NGN 700 level, you will see the benefit coming in. If the currency goes to, let's say, NGN 1,000 level, you will see the hit coming in. Understood. Very clear. Secondly, I just wanted to ask on Thailand. See, it's a good acquisition in terms of the valuation, and the good part is that it's a decent margin business already. You don't have to do any major surgery on it. But just wanted to understand from growth point of view. See, KFC is a very, very strong brand, already very high market share in the QSR space. From here on, increasing market share, even if it does, is not going to be a major delta. Secondly, as you mentioned, the eating out frequency is also decently high, so I don't know how much upside there is on that also. And there are many stores also. So in terms of increasing number of stores, I don't know if that is a big lever. So would I be right in assuming that Thailand will not be a very high growth geography for you? Hello? Sorry to interrupt. Ladies and gentlemen, the management line has been dropped. Please stay connected while we connect the management line back. Ladies and gentlemen, thank you for holding the line. The management line is connected. Sorry, gentlemen, we got dropped, so we are back. So, Percy, should I continue? Sorry, I didn't know, Manish, if you heard my question. Were you able to hear it? So yeah, so maybe you can repeat, no issues. Yeah. So I just wanted to understand on Thailand. One is that the brand already has a pretty high market share. Secondly, the number of KFC restaurants are also sort of decently high. And thirdly, the number of eating out occasions are also much higher than what they are in India. So in light of all this, would I be right in assuming that this franchise will not be a fast-growing franchise for you? So let me explain you the dynamics of Thailand, Percy. So as part of the overall diligence and acquisition, we had got an independent market study done in terms of what is the potential for KFC in Thailand. And that study indicated that we can actually double the store count. I'm talking about KFC as a brand and not RD as a company. So if let's say there are total about 1,000 KFC outlets in Thailand, over the next 7 years to 8 years, we can actually double that count. So this is what the market study indicates. So therefore, that is one potential. Second, if you look at, let's say, when we talk about outside home consumption, which I said is almost sitting at 10 times, this is not the consumer that is coming to QSR or HD. So let's say, for example, when we talk about outside home food consumption, this would include the street food, this would include the fine dining. This would also include, let's say, if you were to pick up a sandwich from a 7-Eleven or let's say a Marks & Spencer, for that matter. So over a period of time, as the income levels grow, the consumers will keep on graduating and will keep on uptrending to the premium brands and to the KFC, because it already is a very strong brand there. At the same time, if you see the dominant, contributor to the street food also in Thailand is fried chicken. And as the consumers upgrade, they would come to KFC, and therefore, all of that, kind of gives us the confidence that, from a growth perspective, the opportunity is still there. Right, sir. That's all from me. Thanks, and all the best. Thanks so much, Percy. Thank you. The next question is from the line of Jay Doshi from Kotak. Please go ahead. Mr. Doshi, your line is unmuted. You can please ask your question. Hi, thanks for the opportunity. My question is on Thailand acquisition and broader framework. So with this acquisition, you know, international contribution to EBITDA will be over 25% or so. I know India business EBITDA is depressed at this point of time. But do you have a sort of framework in mind where, you know, or would you keep, you know, consider or evaluate more opportunities in, the YUM ecosystem outside of India? Is there a threshold that, you know, international, may not cross 30%, 35% in the medium term in terms of future investments? There is a strategy. As we said earlier, we are not diluting as far as the India strategy is concerned, and there's no change as far as the India growth aspiration is concerned. You would have noticed that there are multiple questions that even in a subdued macro environment, why is that we continue to invest? Because we believe in the long-term potential of this country. Having said that, I mean, Thailand came up. It was a great deal. We managed to structure it well. It was addition to where India sits. It has an opportunity from other brands perspective also. So therefore, we've not laid a framework. Our focus continues to be India. So we, as of now, we are not evaluating anything else. There is nothing else on the table to kind of evaluate. So that is where we stand as far as the overall piece is concerned. Thank you. That's clear. Second is, I know, I mean, there is a lot of noise in numbers, geopolitical sort of headwinds as well as weakness. But when you look at your January numbers, SSSG or December, that the base was weak. By any chance, can you give us some color if you were to adjust this for, adjust it for geopolitical headwinds that you probably may have? Is there a sort of a further deterioration in SSSG trends on a even on a weak base, or is it similar to what it was in September, August, September, or is there any optical improvement in SSSG? So Jay, obviously, it is kind of too early to talk about the January numbers. But overall, as you know, I mean, the geopolitical events that you're talking about. Hello? Yes, we can hear you now. Mr. Doshi, just please hold on a moment. Ladies and gentlemen, the management line is dropped again. Please stay connected while we connect them back. Ladies and gentlemen, thank you for patiently holding. We have the management line connected back. Mr.- Thank you so much. Sorry, Jay, we got this. No worry. Sure. Okay, so that, so that was all my, my questions have been answered. I think you basically mentioned. So thank you so much. Thank you. Thank you. The next question is from the line of Nihal Mahesh Jham from Nuvama. Please go ahead. Yes, thank you so much, and good evening. So my first question was that, if I look at KFC last quarter, you know, we had the impact of COVID mask, where we still delivered a decent performance, and maybe the expectation was that despite the base, being favorable and the fact we don't have the impact, the performance would have improved. So is it just in your experience, the worsening of the macro situation or any other specific factors which has led to, say, the worsening of the SSSG performance for KFC specifically? I think it's a combination of macro elements and also obviously in terms of the spending power, in terms of what is happening on the lending side. If you look at the overall consumer debt, it is sitting at almost all-time high. So there are multiple macro events which are kind of there. And then as we talked about, I mean, there's this whole geopolitical event which is there. So I mean it's a combination of various macro situations which is kind of impacting the overall performance. Understood. Related question on Pizza Hut. Now, with clear funding in the base, you did highlight that some of the initiatives that we are taking in terms of maybe increasing the visibility of the brand. What else, in your understanding, at least if you look at the competitor data and the performance, are the missing points which you can improve, which can get, say, Pizza Hut, say, back to the trajectory we've seen a few quarters back? So in terms of missing points, Nihal, as such, there are no missing points. But as you know, I mean, the local competition also is kind of getting very significant. And with Zomato and Swiggy obviously kind of extending their reach and helping the local competition to some extent, that is also impacting the overall brand. And then, of course, the macro elements that we talked about KFC, they get applied to Pizza Hut also equally. So it is not that the pizza category is isolated category and therefore the macros are not impacting. If at all, I mean, I would say the section is more on non-pizza category than the pizza category. Got it. Just one final question, if I may, that, when we look at the dynamics you mentioned about why you went ahead and acquired, the KFC operations in Thailand, this kind of a framework maybe even applies to some of the other Southeast Asian countries are not African, because you don't have say a currency issue here also. So if you apply the very framework, are you then wanting to explore some of the other opportunities available o r would it be that once the Thailand acquisition, you know, it justifies or we see the results, will you go ahead and look at the next leg of international acquisitions for us? Nihal, see, every country is different, every business is different, every brand is different. How they are positioned in the local market is different. And overall, let's say for example, obviously, we will not be able to compare what some of the other acquisitions or some of the other players have kind of resulted and what their experience is. So our, I mean, we are bullish for the reasons that I've explained on the call earlier. And let's see how it pans out. As I said earlier, I mean, as of now, we are not evaluating anything else. Our focus obviously is India, and the focus is to kind of understand and learn the Thailand business, integrate it with the Indian business, and make sure that we are able to kind of leverage on the opportunities which are there in Thai market, both from margin as well as the top line and the new brands that I talked about. So there is an agenda for Thailand as well. So we are focused right now on that only. Got that. Thank you so much, Manish sir. Wish you well. Sure. Thank you. The next question is from the line of Tejas Shah from Avendus Spark. Please go ahead. Hi, thanks for the opportunity. Manish, you spoke about consumer sentiment being one of the reasons for the challenging ADS for KFC and Pizza Hut. But surprisingly and positively, we are not seeing the same trend playing out in Costa. So would you say that the competitive landscape has a higher weightage for the drag down there versus, let's say, in something like Costa, where perhaps it is, I'm just assuming it is relatively better. See, coffee penetration versus a pizza penetration or versus a chicken penetration is sitting at a very different level, right? And, and we are highly under-penetrated as far as Costa is concerned. And at the same time, for example, if you look at Costa has a good presence at the airports and high footfall location. And, and from a travel perspective, the airports are doing well. So therefore, to that extent, Costa is kind of less impacted versus the other categories. Is it that after, let's say, 200, 300, 500 store benchmark as we go along, the ADS potential for the incremental store actually drags down the average? No. Let me explain to you what I, s o let's say, for example, if you look at the presence of Costa Coffee at the airports, for example, right? So if you look at our airport performance versus a high street performance for Costa is very different. So the high street performance of Costa would mirror what is happening in KFC and Pizza Hut. Whereas the airport performance for Costa is very different, and the airport presence for KFC and Pizza Hut is much lower compared to what Costa's presence is. So that is what I meant. Okay. Second, in this quarter, have we closed any closed down any store across different formats? We have closed some stores for Pizza Hut. As we've kind of guided in the past, that our store closure target is always under about 6%-7% of the new stores that we open, so we are well within that. The vintage of the stores that we have shut down, were they opened after the COVID or before COVID? It's a combination of both. Okay, okay. And, and lastly, despite the subdued consumer sentiment that you called out, our store expansion is getting accelerated. A nd it also kind of, as you said, that it qualifies your belief in that turnaround is imminent. Any quantitative data that you look at to get that confidence, or is it just a cycle that you're hoping that it will turn around at some stage? See, I agree with you that we are bullish on the store expansion, but we have kind of tapered it down as far as Pizza Hut is concerned, because we are seeing a higher impact on Pizza Hut. So if you remember around the IPO time, we used to talk about even IPO and post that almost for whatever more than a year, we were targeting Pizza Hut to open almost 30+ stores every year, every year. Whereas now we are talking about opening maybe 60-70 Pizza Hut stores. So we have tapered it down, and therefore, to that extent, we have adjusted the opening numbers. On an overall basis, if you look at, let's say, Costa, we've upped the numbers, which kind of compensates for that. On KFC, we've upped the numbers a little bit. Therefore, from a portfolio perspective, what you're saying is right. But within that, we are kind of adjusting the numbers to whatever is required to be done. Got it. That's all from my side, and all the best for coming quarter. Sure. Thanks so much, Dheeraj. Thank you. The next question is from the line of Dheeraj Mistry from Antique. Please go ahead. Yeah, hi, sir. Good afternoon. So my question is again back to Thailand. So you have already mentioned what kind of growth and all, you would be envisaging from Thailand, and I think it's an immense growth opportunity. So my question is related to funding of that growth. Whether the Thailand business is enough cash flow generating business, where there would be no additional capital requirement would be required, or whether it will be self self-funded from Thailand business itself? It will be self-funded from Thailand. And again, as I said, we have to kind of get into greater details of the business. But the models that we worked out, one, as far as the store expansion strategy is concerned for Thailand, they'll be able to self-fund it. At the same time, whatever debt also is sitting in the books of Thailand, they will be able to repay that also from the cash flows that they are generating. So let's see, we have to because it's just been about couple of weeks when we've completed the transaction. So we have to do some more work, but as of now, it appears that we will be able to kind of put Thailand in a self-funding zone. Okay. For other geography, like Nigeria is facing right now, a headwind, but in future down the line for other international business, let's say for Nepal or Nigeria, whether there that would require future funding from the India's cash flow, or it would be again, if there is no enough cash flow generation from that business, we will take a pause on that, their expansion. See, even Nigeria and Nepal also, we've talked about in the past, that they are kind of self-funding in terms of whatever expansion they are doing. So Nigeria, we've got into this situation because of the unforeseen and very, very significant currency devaluation, and that's the reason we are talking about some funding. Otherwise, let's say once this, the situation stabilizes, even Nigeria also will be self-funding only. And, and that is how it was in the past as well. Okay. Sir, last question on Pizza Hut. Like, despite if I look at competitors' data, their SSG decline as well as ADS decline is much lower than what we have witnessed. So despite Fun Flavor Pizza, we have been kind of losing market share to the market leader. What kind of strategy you are trying to play, apart from Fun Flavor Pizza, to increase footfall or gain market share in that Pizza Hut segment? Overall, Dheeraj, as you know, I mean, despite the fact that pizza is the largest category in the Indian QSR space, it is still a growth category, right? And relative to each other, what you're saying is right, but there's a strong emergence of local players, and they're also kind of fueling the entire growth in the category. So our strategy is mainly around innovation and value as far as pizza market is concerned, and that is what I have alluded to earlier. The brand still remains a strong brand as far as the consumer recall is concerned. The customer experience is great from a dining perspective. So therefore, that's what gives us the confidence that we should continue to kind of expand Pizza Hut. Oh, okay. Sorry, but one last question from my side. Like KFC, in this quarter, we have added 50 stores, so we have witnessed gross margin expansion on a quarter-on-quarter as well as on YoY basis, but EBITDA margin has contracted a bit. Is this EBITDA margin contraction purely because of the store addition, what we have done during the quarter or is there any other factor as well? It's mainly coming out of delivery, Dheeraj. Because, for example, as you know, and you've seen, the ADS has come down and the SSG has come down while we've managed to maintain the margins. But overall, because of these two reasons, the delivery is also set in, and that is what then kind of gets impacted as a result for the fixed expenses, and that's how it is. Okay, thank you. That's it from my side. Sure. Thank you. Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead. Mr. Pardeshi, your line is unmuted. You can please ask your question. As there is no response from the line of current questioner, we'll move on to the next. The next question is from the line of Majeed Ahamed from Smart Sync Investment Advisory Services. Please go ahead. Yes, yes. Thanks for the opportunity. So my first question is, what's your view on Nepal market? I'm seeing there is a slow growth there in the market, and what's your plan there is? So Nepal, Majeed, as you know, is a small country and has a very limited opportunity. We operate both KFCs and Pizza Huts in the Nepal market. We've got about 25 stores across our brand portfolio, and from an opportunity standpoint, that market presents about 2 stores to 3 stores a year. So it's not a huge opportunity versus India, and it gets managed largely out of the eastern region from India, so there are no big overheads that we incur. But on its own, it's a great market. KFC is a very strong brand, so therefore it kind of works very well for us. Okay. Thanks for the response. One more question that I have is, what's your view on Vaango? Like, there's no any store addition and anything is not happening there, like, any thoughts, like, any thoughts can be given on Vaango? So Vaango is a good, medium to long-term bet. And as you know, I mean, the Indian food brands are difficult to scale up because of highly regionalized flavors and highly domesticated flavors, and therefore, Vaango, we are building cautiously. So, so there is a value proposition that we are creating with Vaango, and we are kind of optimizing all of that. In the long term, we believe that as the overall dynamics for QSR play out, there is a strong potential for, for Indian brands also and that is how we are building, Vaango. Thank you. Thanks so much. Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead. Yeah. Hi, Manish. Hi. Just, just a quick question. I think, we have been in the business for many years, and we understand the consumer psyche, how it is moving, and what is. S o we could, do lot of things around Pizza Hut, but I was a bit surprised on the KFC part of the business, with the, negative SSG. So what is it that, I mean, those, the external factors are important, but in terms of value layer, what we have introduced, but this time it has not responded. So my therefore straight question is that, is it that the niche consumer is not attractive finding a solution for moving to KFC? I mean, I understand Pizza Hut will have a problem, but these all factors are not working. So what is it more needs to be done? Shirish, see, you come from consumer background, and you know that the consumer brands take number of years to kind of get built with a particular proposition, right? So, so to your question in terms of what is happening, obviously, there is a macro level environment which is kind of impacting KFC as well, and that is the reason the numbers are where they are. But to your other point, from a lunch perspective, we've introduced the lunch, but it will not happen overnight. We are bullish that there is a space available, and therefore, we will be able to capitalize on that space over a period of time, but it'll get built, and we are very confident about it. If you were to look at our Wednesday proposition, we've been at our Wednesday proposition for a number of years now, and that is today how Wednesday has become a very, very sizable contributor to our weekly sales. So, therefore, I mean, from a consumer perspective, you have to introduce, you have to optimize, you have to be at it, and that's how we are approaching KFC. Shirish, sorry, your voice. Sorry to interrupt. Mr. Pardeshi, your line is not clear. We are not able to hear you at all. Hello? Yes, Mr. Pardeshi. Sorry, we are not able to hear. Can we move to the next question, please? Sure. The next question is from the line of Latika Chopra from J.P. Morgan. Please go ahead. Yeah, hi, thanks for the opportunity. I missed a part of this conversation, got dropped off. Not sure if this was, you know, considered. But I had a question on Pizza Hut. You know, the off-premise revenues, you know, seem under a lot more pressure than the on-premise revenues. Anything specific that you want to call out here? Latika, sorry, your voice is breaking a lot. Hello, is it better? It is better, yeah. Hello? It is better, Latika. Can you just please repeat your question? Thanks. For Pizza Hut, it seems the on-premise, you know, off-premise sales actually were under pressure in the quarter versus on-premise sales. Anything specific, you know, that drove this kind of trend? If you look at our overall off-premise has remained at the same level as a percentage to the overall brand sales. So I think the off-premise has gone up by about one percentage point versus, let's say, the previous quarter, and therefore, there's nothing. It's overall directionally the ADS is lower, and it is getting contributed from both the channels, which is off-premise and non-off-premise. Okay. I was comparing with, you know, probably to any other growth on a YY basis. So that's why I was just trying to understand, you know, why the share kind of moderated by a percentage point. Yeah. Because as far as Pizza Hut portfolio is concerned, our trends, if you were to look at, I mean, it's part of our presentation also, they have pretty much remained the same between off and on-premise. Okay. The second thing was, you know, could you, you know, give us, maybe I missed this earlier, any specific opening targets that you have in mind for FY 2025, and the split across the core formats? I know this number could, you know, be dynamic depending on the demand situation, but at this point, how are you thinking about FY 2025 store openings? So as we've said in the past, Latika, we are looking at overall about close to 275 or maybe 250 to 300 stores. That's a little larger bracket for 2025 also. And the broad constituent will be about 120 to 130 for KFC, another 70-80 for Pizza Hut, 50 stores to 60 stores for Costa Coffee. So that's the broad constituent that we are looking at. At this point, we are maintaining that rollout plan and will keep reviewing it every quarter? Yeah. Okay. Yeah. Okay. And the last bit, if I may, you know, I understand there was an impact due to some of those external factors that you alluded to for KFC and Pizza Hut, but in your assessment, if you adjust for them and you look at the underlying SSG, you know, what impacted that more? Was it, you know, a reduction in average ticket size, or was it reduction in footfalls? You know, adjusting for those external factors to the best possible assessment for KFC and Pizza Hut. Yeah. And also, if you could also talk a little bit about the product mix, that would be useful. Thank you. Sure. So, for the external factors that we've talked about, it's largely we are seeing very clear correlation with the transactions because the transactions have dipped to that extent. So, that there is a trend and a correlation available, and that is what has resulted in the overall impact as well. So, as far as APC is concerned, obviously it is kind of trending better versus the transactions in this quarter. All right. Thank you so much. Sure. Thanks so much, Latika. Thank you. Ladies and gentlemen, that was our last question for today. I would now like to hand the conference over to the management for closing comments. Thank you, Chairman, and all the investors, analysts who have been on the call. I do hope that we have been able to respond to your questions satisfactorily. Should you need any further clarifications or would like to know more about our company, please feel free to contact our investor relations team. Thank you once again for your time today to join us on this call and participate in our growth journey. Thank you very much. Thank you. Ladies and gentlemen, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you so much.