Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Jajodia from Jubilant FoodWorks India. Thank you, over to you, sir. Thank you. Welcome to Jubilant FoodWorks Q2 FY 2022 earnings conference call for investor and analyst. We are joined today by senior members of the management team, including our Chairman, Mr. Shyam Bhartia, our Co-Chairman, Mr. Hari Bhartia, our CEO, Mr. Pratik Pota, our CFO, Mr. Ashish Goenka, and our Group CFO, Mr. Arvind Chokhany. We will commence with key thoughts from Mr. Hari Bhartia. Mr. Pratik Pota will follow him with his perspective on JFL's progress on the quarter ended 30th September. After the opening remarks from the management, the forum will be open for the questions and answers. As you may be aware, on 30th September, we announced our intention to increase our shareholding in DP Eurasia through a reverse book build process. Investors wishing to ask questions in relation to this should note that as the reverse book build remains open to the shareholders of DP Eurasia, we are unable to comment further on this matter. We would request you to refer to our publicly available announcement in this regard. A cautionary note, some of the statements made on today's call could be forward-looking in nature, and the actual result could vary from the statements. A detailed statement in this regard is available in Jubilant FoodWorks Q2 FY 2022 results release and earnings presentation, both of which are available on the company's website under the investor relations section. I would like to now invite Mr. Hari Bhartia to share his views with you. Thank you, and over to you, sir. Thank you, Deepak. Good evening, everyone, and welcome to our Q2 earnings call. I hope all of you and your families have been keeping safe. It looks like COVID-19 is coming under good control in most parts of India and, of course, it is supported very well by the vaccination effort of the government. Indian economy has continued to make solid progress, and we also see food service industry being set for strong growth in the remaining quarters of this year. We come to you with a renewed sense of optimism, and I'm happy to present the company's record performance with the highest-ever revenue, strong profitability, and highest-ever store expansion in a single quarter. After a difficult quarter one, our operating performance improved further as mobility restrictions were being lifted. While the percentage of operational stores reached almost 95%, there was also a noticeable uptick in demand, which more than compensated for the lost operational hours on account of closed stores. The dine-in channel showed encouraging signs of recovery, with orders and revenue coming back through the quarter, albeit still being below the pre-COVID-19 levels. The delivery and takeaway channels continued to do well and help us drive our strong overall revenue recovery. Notwithstanding the challenging situation on inflation, which we have been facing in the food industry, we have delivered a strong EBITDA margin. Our store opening accelerated once again after the difficulties in quarter one, and we opened 63 new stores last quarter, including 3 new stores in the Sri Lanka market. I am pleased to share with you that India became the first Domino's market outside the U.S. to cross the milestone of opening 1,400+ stores, now with a total of 1,435 stores. Notably, this is our current assessment in the medium term. As we have said before, we continue to see a potential to open more than 3,000 stores in India. During the quarter, we announced some key strategic initiatives which are in line with the company's stated goal of building a multi-brand and a multi-country food business powered by technology. With more than 25 years of experience in Domino's India, we hope to add value and learn from best practices in the key international markets. As we have announced, we have proposed to increase in the direct shareholding to 90% in Jubilant Golden Harvest Limited, which holds franchise of Domino's in Bangladesh. Also we have launched reverse book build subject to the final result to increase indirect shareholding to 49.9% in DP Eurasia, which holds franchise for Turkey, Russia, Azerbaijan, and Georgia. We at Jubilant continue to see strong potential for growth in all our international markets. Overall, we were happy with our all-round performance last quarter. Moving forward, we are excited about the future growth prospects and will continue to invest judiciously in what will become the future drivers of growth. With this, I would now like to invite our CEO, Pratik Pota, to continue this discussion by sharing his perspective and insights. Thank you, Mr. Bhartia. Good evening, everyone, and thank you for joining us on the call today. I'm pleased to share our results for Q2 FY 2022. We reported a very strong quarter. Revenue from operations was at INR 11,007 million, up 36.6% versus prior year, and up 11.6% versus the pre-pandemic levels of Q2 FY 2020. The revenue growth was driven by a recovery in the dine-in channel and continued momentum in the delivery and takeaway channels. When compared to Q2 FY 2020, growth in delivery and takeaway channels stood at 36.8% and 72.2% respectively. Dine-in recovery was muted at 46.9%. While we grew across all town classes, the growth was much stronger in the non-metros and in the smaller towns. EBITDA stood at INR 2,860 million, up 33.2% versus Q2 FY 2021, and EBITDA margins stood at 26%. This, we believe, was a strong performance in the face of continued inflationary pressures. Profit after tax came in at INR 1,215 million, a growth of 58% over last year and a margin of 11%. We opened a record 55 new Domino's stores during the quarter and entered nine new cities, taking our tally to 1,435 stores in 307 cities. As committed, we remain on track to open between 150-175 Domino's stores in this financial year. Our continuing focus on improving the customer experience yielded good results. Our delivery service KPIs improved significantly, both sequentially and year- on- year, with an increased number of orders being delivered under 20 minutes. This led to an encouraging improvement in customer satisfaction levels as reflected in our NPS. Continuing our focus on driving our digital agenda, our app installs increased in the quarter and were 7.2 million. Our own app sales grew significantly faster than aggregators, and a dominant share of our revenues continues to come from our own assets. On our emerging brand portfolio, we opened five new stores, two each for Dunkin' and Hong's Kitchen, and one for Ekdum!. In Dunkin', we are focusing the brand on a coffee first strategy that will help drive frequency and build greater stickiness. Hong's Kitchen showed and delivered a strong performance with an encouraging same-store growth and increase in order count. Our total store count for Hong's Kitchen stands at 13, all of which are in Delhi NCR. We are also progressing well towards our target of launching Popeyes in India within this financial year. Turning to our international business in Sri Lanka, we delivered a very strong quarter with record revenues and a growth of 88.4%, led by a delivery growth of 200.2%. Notwithstanding the inflationary and the currency pressures, we delivered a strong double-digit EBITDA margin in the country. Our OLO contribution in Sri Lanka increased significantly from 26.6% last year to 63.9% last quarter. We also opened three new stores during the quarter, taking the total network count in Sri Lanka up to 31. In Bangladesh, too, our performance was extremely encouraging. We delivered a growth of 33.3% on the back of delivery growth of 82.1%. During the quarter, as you're aware, we initiated the process of increasing our shareholding in Jubilant Golden Harvest Limited to 90%. The Bangladesh market has low QSR penetration and tremendous promise. We are confident that we are well placed to lead and participate in this category growth. Looking ahead, we believe that the food service category, driven by the growth of the organized sector, the growing preference for trusted brands, and increased omnichannel adoption, is entering an exciting period of innovation, market making, and sustained growth. JFL is extremely well placed to lead in this exciting phase of growth with its broad-based strategy articulated earlier. We are confident of growing into a strong multi-brand, multi-country food business powered by technology and thereby creating value for all our stakeholders. With that, I would like to call upon the moderator to open the floor for the Q&A session. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Edelweiss. Please go ahead. Yes, sir. Congrats. My first question is on the store expansion. Will it be fair to say that now the upper limit is more likely, given in the last four quarters, three quarters have seen 50-55 store openings? First quarter has already seen 75 stores, and with normalcy coming, will it not be fair to say that 175 also can get reached? Mr. Abneesh Roy, we lost your audio. If you can repeat your question, please. Sure. Is my voice clear? Yes, sir. Now we can hear you. Okay. My question is on the store openings. Will it be fair to say that now the upper limit of the guidance, say at 125 stores, that will be more likely given in the last four quarters, three quarters have seen 50-55, and first quarter has already seen 75 stores. With normalcy now far more there in terms of openings and demand also being robust, won't your guidance be more at the upper limit rather than lower limit? Thank you for the question, Abneesh. I think as you're aware, Abneesh, in the last two quarters, it's been a tale of almost two cities. Quarter one was when we faced the sudden and the full fury of the second wave. We slowed down the expansion and then, of course, in the last quarter, we saw normalcy return, like you said, and therefore we could open 55 stores. Our intent would be to move ahead and try and sustain this momentum, and therefore to be, like you said, towards the closer end of the band that we have guided on. Even as I speak, I'm keeping my fingers crossed because it's hard to tell for sure how COVID will play out in the next two quarters. Our intent will be to absolutely move ahead and open as many stores as we can. There will be that external factor, or there could be that external factor beyond our control, which might slow us down. Our intent would certainly be there to push closer to that limit. Sure. That's helpful. One follow-up on this. Nine new cities added in Q2 and 26 in the last quarter, which is, I think, a very impressive number. Could you discuss what kind of cities and what kind of response you have seen, any new micro-market you have entered, or is it largely the suburbs or the top 20, 30 cities only? No, that's a very good question, Abneesh. I think that the cities that we are entering now are Well, not Tier 2, Tier 3, Tier 4 cities. We are seeing the consistent pattern across all of these store openings and all of these new entries, is that we see a very encouraging response from customers. We see, across all channels, delivery, dine-in, and takeaway, a very clear adoption and very clear acceptance of Domino's. As you can imagine, in all of these markets, there is universal brand awareness, and people are typically waiting for the brand to make an entry. If I give you an example of the kind of towns we are entering in, just to give you some color. We've entered a market in Telangana, called Karimnagar, a 3 lakh population town. We've entered a market again in Andhra Pradesh, called Eluru, again, 3.5 lakh population town. Jalna in Maharashtra, Muktsar in Punjab. Those are the kinds of markets we are entering, which are really markets which haven't seen any QSR, any organized QSR, and we are the first organized QSR play. In more than 150 towns actually, Abneesh, we are the only QSR present, and these are the markets where we are the battering ram that tries to open the market. Our experience has been very positive. There's a fair amount of pent-up demand that comes out and shows up when we launch in these markets. Experience has been fairly positive. Sure. My second question is on the demand going ahead. Yesterday, the two FMCG companies said in some of their home consumption, for example, sauces, jams, et cetera, there is a slowdown. You also gained in the last ONE year because of the trust factor. A lot of the local cuisines, local stores are shut. As the normalcy returns in India, whatever is shut, will everything come back? How do you plan to still grow at a reasonable level? Consumers clearly will have much more options, and we will also like to try new stuff because we are also bored of the same two, three options which we have been trying in the last one year. Abneesh, from our perspective, the way we see the category, This is a difference that you have to keep in mind, which will be versus any other FMCG category. Our category has extremely low penetration levels. We are at a very low frequency level. Therefore, this is a period that we believe there will be market expansion and market growth, both through increase in penetration as also increase in frequency. As COVID-19 happened, We saw dine-in come under pressure, We saw that slack being picked up by delivery. Therefore, we are seeing more of normalcy and more of mobility come by. Delivery corrects moderately, It holds up much more and at much more elevated levels compared to the pre-COVID-19 levels. To answer your question, we do not expect to see any demand compression. Quite the contrary, actually. Given the way COVID has played out, there is a much greater demand for brands, especially in food which can be trusted, whose quality standards are known. We are seeing actually a very encouraging trend of demand sustaining across all channels, across all tiered towns. As I mentioned in my opening remarks, even in the Tier 2, Tier 3, 4 towns, where delivery was a much smaller part of the mix earlier, as dine-in has reopened, we are seeing delivery sustain at higher levels. We do not see a challenge as of this point of time on demand. Not at all. Sure. My last question, a small one on Bangladesh. If I see OLO data, Bangladesh is standing out. In India, we are at 98%. Sri Lanka also, OLO has gone up from 26%- 63%. In Bangladesh in the last one year, it has fallen from 68%- 63%, which is well below India levels also. Why the fall has happened in Bangladesh? Abneesh, this is a good question. I think one reason for the elevated levels same time last year was the fact that on account of COVID, a lot of the call centers and the contact centers were closed and there was almost a forced adoption of the online ordering channel. As that has reopened, a lot of our traffic and the revenues actually have moved to the voice channel as well. That said, our attempt is to very clearly build our online channel aggressively and invest in growing our own assets. One nuance that I want to call out, which is different in Bangladesh from India, is that in Bangladesh we do not work with aggregators. All of these revenues that you see and contribution that you see from OLO are entirely from our own assets. Our clear strategic goal is to make sure we grow our own assets and make sure that we drive a much larger share of revenue through our OLO. Sorry, you had a question, Abneesh. I didn't hear that. Yeah. Any particular reason for not working with aggregator in Bangladesh? No, it's just a phasing. We just need to make sure we agree on the right commercials which are win-win, which works from them and which work for us. Sir, that's very helpful. That's all from my side, sir. Thanks a lot. Thank you, Abneesh Roy. Thank you. Before we take the next question, a reminder to the participants. In order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. Should you have any follow-up, you may be requested to rejoin the queue. The next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead. Hi, team. Congrats on a good set of numbers. My first question is during COVID times, what you had mentioned earlier is that the average bill value had increased, but the number of bills cut per store had reduced. With COVID almost out of the picture, where do we stand in terms of normalization? Are we back to pre-COVID levels in terms of average value per bill and number of bills cut per store? Where do you expect this to stabilize? Thank you for the question, Percy, and I think in many ways that's a really important data point for us to keep tracking regularly. I'm pleased to report that we have seen a very encouraging recovery in order levels, in our order count. We are almost now close to our pre-COVID levels of orders at the system level. We expect that trend to continue as dine-in becomes more normalized. On the ticket size, yes, there is a moderation in the ticket size given the channel mix changing and given dine-in reopening. The ticket remains higher, partly because of the fact that we have introduced delivery charges last year which weren't there in the pre-COVID period. That was one. The other one was that even today, the mix that we have is more biased towards delivery compared to pre-COVID, which obviously influences the APO and the ticket a little higher. Ticket is still higher compared to pre-COVID levels. The recovery is close to pre-COVID levels now, and we expect that trend to continue and we expect order count to build further going forward as dine-in reopens. There'll be no lasting improvement in the average bill value. Once the COVID situation absolutely normalizes, the bill value will also return to pre-COVID levels, except for the increase in delivery charges and some price increase. Well, there'll be two counts on which the ticket will be higher than the pre-COVID levels. One, of course, is the delivery charges. The other one is the fact that our delivery mix has increased significantly compared to pre-COVID levels across different town classes. Even as dine-in becomes more normalized, we expect delivery to stay elevated. Therefore there will be a shift in mix in favor of delivery. We've already seen that happen. We believe that will sustain. Therefore, that will again flow through in form of a higher ticket. Those are two temporal reasons. If I look at more strategic ways of driving ticket, two or three things that we're working on. One is cinemaization. You've seen some of the innovations that we've done in the last quarter in that direction. You will see us do more of that going forward. The second theme that you will see us working on is personalization. When a customer uses our app and our assets to transact, he will see a very personalized experience, will again allow us to attach more items and drive higher tickets. Those are the themes that will play out in addition to the points that I made earlier. Another thing I wanted to ask is, during COVID times, you have done very well in terms of making your business model such that you did not face too much of damage from the operating deleverage because the costs were variabilized, et cetera. Assuming that COVID is behind us and we see a ramp-up in sales and same-store sales growth, which is now close to zero or 2% CAGR, let's say that ramps up to a 5%-7% kind of number in the near future. Is there any way we can get operating leverage on our margins? Now that the business model has changed, we should not expect operating leverage to come into the margins? Percy, certainly as revenue growth comes back, as things normalize, there'll be some impact of operating leverage. We also need to keep in mind that we are seeing inflationary pressures, and they will play out over the next few quarters. While there is some moderation in this quarter compared to the previous quarter. It's hard to have a prognosis on how inflation trends will play out over the next few quarters. There could be some headwinds there, number one. Number two, we'll clearly need to make investments in driving improved customer experience, in driving better product quality and service quality. Of course, we need to invest in driving our digital and our technology experience. Between operating leverage coming our way and some of these investment stroke costs, it's hard to tell where margins will end up. Obviously the attempt will be to make sure we deliver robust and sustainable EBITDA margins going forward. Okay. That's all from me. Thanks and all the best. Thank you, Percy. Thank you. The next question is from the line of Chirag Shah from CLSA. Please go ahead. Yeah. Hi. Good evening, and thanks for taking my question. My question was on the cumulative app downloads. Mr. Shah. Hello. Sir, sorry to interrupt. If you can take the phone off speaker, please. Yeah, my phone is off the speaker. Am I audible? Is it better now? Yes. Okay. The question was on the cumulative app downloads. In the last year, we have seen a very impressive app downloads, practically 27 million-28 million additions to the cumulative downloads, practically a 65% growth. Trying to understand this a little bit better. What is the consumer engagement strategy once the consumer app is downloaded? Are these gross or net downloads? I'm not sure how many of these downloads are active and transacting users. Your thoughts on the same, and what's the activity type data analytics once the app is downloaded, please? No, thank you, Chirag. Thank you for the question. I think I heard most of it. Let me respond, and if I'm missing out, please feel free to ask a follow-up question. Sure. Yes, we have seen a significant increase in the last one year on our app downloads and our app installs, and that's because over the last five to six quarters, we have very deliberately and very consciously increased both the quantity and the quality of our performance marketing spend. We have driven a higher traffic, higher downloads, and that's showing up the numbers that you talked about. What is very encouraging is that the app installs are leading to a very clear and a very encouraging increase in monthly active users, and within that, in the transacting users. There is a very clear flow-through. The numbers that you see reported there, to respond to your question, are gross numbers. There are some uninstalls. The very encouraging part is that we are seeing a month-on-month sustained increase in both the active and the transacting users. Our engagement with people who download our app starts pretty much on the first day through a welcome message, then we make sure that we walk them through a very clear life cycle to get them to transact first. Having transacted first, we walk them through into building that frequency. There is a very clear playbook defined by the marketing team on guiding the customers through their life cycle and through their life stage to make sure that we get as many customers as we can to be becoming high-frequency customers with a high lifetime value. Sure. Just one follow-up question that I had on the volume numbers that you mentioned. If I look at the system-wide sales today for this quarter, it is up 11% over Q2 FY 2020 levels. Now, since FY20, we have had an introduction of delivery fees, some increase on the delivery fees that we did recently for the fuel cost pass-through, which should be reflecting in this 11% growth number. In that context, how should we think of volume growth during this period, right? You mentioned about higher tickets that you've had for the stores, but the 11% number, does that add up to that higher volume numbers? No, Chirag. It goes back to the question that was asked, I think by Percy earlier. Yeah. Our recovery has been driven during the COVID period more by the strengthening of the ticket which compensated partially for the drop in the volume of the order count. However, for the last two quarters and especially in the last quarter, and even within the quarter, the second half of the quarter, then the more recent period, we saw a very encouraging return of the orders. As we exited the quarter, the order recovery was almost back to pre-COVID levels. We almost had the same level of order count as we had pre-COVID levels during the exit of the second quarter. Going forward, and this is obviously an important quarter. There is more normalcy, improved mobility, less restrictions, plus the festive period. We expect order count to come back strongly in this quarter and to start showing positive growth over pre-COVID levels. Sure. I think that's very helpful, but if I just can put that question a little differently, right? While on the revenue numbers it seems like there is a good normalization that has happened, would you say that the volume numbers versus the pre-COVID numbers have kind of stabilized and come back? Sorry, Chirag, wasn't very clear. Would you say what? The volume numbers, while the revenue numbers have staged a very smart recovery, right? Would you say that the volume numbers are back to the pre-COVID numbers? I just answered that question, Chirag, that as we look at Q2 gone by, we saw a very strong and a very consistent and very encouraging trend of order recovery. As we exited the quarter, order count and order recovery was pretty much back to pre-COVID levels. Sure. Thank you, Pratik. Just one last question, if I may. We've been running this scheme of improving the delivery time from 30 minutes- 20 minutes, the Speed Scheme. You, I think, touched upon a little bit on that, but if you could just elaborate a bit around where are we in terms of getting to the 20-minute delivery number? Yeah, Chirag. I think we have a very clear work stream in that improving our operations, KPIs, and our delivery experience to our customers. One big element, of course, of that is time taken to deliver the order. Yeah. We have seen a very consistent and a very strong improvement in our delivery time. Most of our orders now get delivered absolutely bang on time and under 30 minutes. We also have kicked off a plan to move to faster delivery and we are seeing an encouraging trend again of greater number of orders being delivered within 20 minutes. I must clarify in the same breath that the faster delivery happens as you're aware, not on account of either making food ahead or speeding on the road. It happens on the back of having tighter geographies and more compact store areas, and therefore reduced drive times, which allows us to deliver the same order faster. We are seeing a significant improvement in orders being delivered on time, and that is reflecting, like I said earlier, in improved customer satisfaction levels. Okay. Sure. Thank you, Pratik. Thank you so much. Thank you. Thank you. The next question is from the line of Manoj Menon from ICICI Securities. Please go ahead. Hi, team. Just a couple of questions. One, when I look at the expansion thought process which you have, which is broadly about 10 odd% on the base, and also observing that there are many other QSR brands who are also looking to expand at the same time. When I look at the history, this is probably the first time when almost every, I would say, entrenched or known brand would be looking to expand at the same time. I also understand that there is a tailwind of the market opportunity, which is probably visible in many other foods and food services business. Just trying to understand from your point of view, how are you looking at it? This is not about FY 2022, this is also about FY 2023 and FY 2024, just about the medium term. How do you look at the expansion opportunity? It can also result in a situation of significant, let's say, what happened with our company itself five years back of maybe expanding a little more than required at a particular point in time. No, thank you, Manoj. If I am able to sort of understand your question, you're referring to potentially competitive intensity increasing with all other QSRs also expanding faster. If I can respond to that, I think we are at a stage of evolution in the category, Manoj, as you know, where the more innovation that comes by and that consumers see, the more will be the trial and adoption of the category across towns. We have very low penetration as a QSR segment. We have our frequencies of consumption of non-homemade food is very low compared to even neighboring markets and peer markets in Asia. The headroom for growth is tremendous. I think the more activity and the more innovation that consumers see, the better it will be in driving category creation and category building. We do not expect to see any headwinds or any challenges on account of these activities and these entrants. As you're aware, Manoj, is that we have an extremely well-developed playbook when it comes to dealing with competition. You saw that on vivid display in FY 19 and FY 20 when there was possibly the most intense of competitive headwinds that we saw from aggregators. In the midst of those competitive headwinds, Domino's was able to not only hold but also grow market share. We believe that the category opportunity is what we need to keep in mind. We need to be aware of what's happening in the competitive space, but our focus needs to be firmly on the consumer and on the changing consumer behavior and the changing consumer expectations. Many of the things that we're investing behind, for example, faster delivery, for example, digital, for example, premium products, are exactly towards those changing consumer expectations and trends. As long as we focus on the consumer and make sure that we are delighting her and delighting him at every moment of truth, I don't think we need to worry about the competitive segment. In any case, like I said, those are good for the category and good for category creation. Thank you, Pratik. I was actually looking for this sort of confidence because I remember again, five years back, the narrative of at least amongst majority of consensus about maybe in sell-side, about Swiggy, Zomato being a disruptor versus this is actually a tailwind. I do remember that we were probably the minority at that time. Understood. I'm just trying to understand whether the same playbook I can apply even today. Thank you for that. The second question, or rather the sub-question here actually, is that when I look at the number of cities which you are present in currently versus the number of cities which the two, which is only two left now actually, which is Swiggy and Zomato are present. While nine new cities is a welcome number, is it not underwhelming? You were at around 200 odd cities versus they had 500 plus. I understand that you are a QSR. They are maybe addressing a very different market out there. Even when I do look at Swiggy and Zomato very closely as an analyst, kind of say that, look, they also rely a lot on the hero restaurants, right? In that context, how do I think about your expansion? It seems that you're still prioritizing expansion in the larger existing cities versus the entering new cities. What is the thought process here? Manoj, let me reframe the question a little bit. I think rather than look at the number of cities as an underwhelming number, the way I would reframe it is to say that in 55 stores that we've opened, 46 of them have been in cities where we already have a presence, which means from an opportunity point of view, we continue to see abundant opportunity in markets like Mumbai, markets like Bangalore, markets like Delhi, and the other towns. We also see opportunity in the towns that we aren't present in right now. This is what we mean when we say that the category is going to see sustained tailwind and sustained growth over the next few years. When it comes to prioritization and when it comes to choosing stores and choosing where to open our stores, I think we have possibly a problem of plenty rather than a scarcity of opportunity. I think that's a good place to be. Going forward, you'll see a balancing. You'll see us balancing the need for us to go deeper and closer to customers in existing markets and opening up new beachheads in towns where we aren't present in. That will always be a balancing act. In some quarters, we will hopefully delight you. In some quarters, we may underwhelm you, like you mentioned. I think for me, the encouraging context that is underlined is that there is opportunity in all kinds of towns. Understood. Just one second, last question here is, when I look at the outside of Domino's, the activities or if I can call it as the diversifications or extensions which you have done, maybe extension is the right word, actually. How do I think about the template which you're following? There is Dunkin', or rather there was Dunkin' which was started earlier, then there is Hong's and there is Bangladesh opportunity, there is Sri Lanka, there is Eurasia. There is also a ChefBoss, which was tried out last year. At one level, I do truly appreciate the entrepreneurship because it's all about trying out multiple things and playing the probability game. If you could just help us understand about the templates which you have internally of let's say the newer ventures which you are attempting. It'll be very helpful if you could talk about, let's say, how you have staffed the M&A teams and kind of, let's say, are there specialists who are looking at these aspects? Some of the qualitative HR comments also would be super helpful. Thank you. Thank you, Manoj. Let me answer the question at a slightly broader level. You heard us articulate very clearly our strategy for growth, which involves, first of all, building a dominant Domino's business in India and ensuring we get to our bull's-eye target of 3,000 stores soon. We talked about building and curating a portfolio of brands. Of course, our portfolio of brands that we have currently, which is Hong's, Ekdum!, Dunkin', and ChefBoss is towards that. We talked about as well that we want to grow our international business and international footprint and strengthen our presence there. We talked also about building and investing in our digital and data capabilities. All of this towards a goal of becoming a multi-country, multi-brand food tech business. The investments that we are making are very thought through, very specific, and all of these investments are strategic and in one of these four or five themes that I spoke about. Our capital allocation strategy is very clear and based on what we expect to see as strategic returns over in the future. Of course, the board has complete oversight on this. There's a lot of debate and discussion when we look at new opportunities. We decide only those which we see to be clear strategic fits for us as a business. Of course, you're aware that we've got a very strong balance sheet, and we have strong cash reserves. We don't have debt. Therefore, we are fairly confident, Manoj, of being able to invest behind these strategic core drivers as we deem necessary. We have a team, a small team, but a dedicated team that is focused on looking at these opportunities. Many come up for discussion. Many of them get passed over, and only a few get into the shortlist and get into a point where we believe that there's merit in going ahead. This is a continuous and ongoing process, and we're getting better as we go along. Understood now. Fully. Thank you, sir. All the very best, and good luck. Thank you. Thank you, Manoj. Thank you. The next question is from the line of Vivek Maheshwari from Jefferies India. Please go ahead. Hi. Good evening, everyone. I hope I'm audible. Yes, we hear you. Yes, we hear you. Great. Thank you. Continuing from the earlier one, I also have a similar question because as I have attended, obviously, your conference calls over the years, and I'm seeing increasingly, focus on multi-brand, multi-country. Multi-brand is still an experiment. It's a low investment. You can experiment with a few stores, et cetera. Multi-country, although you have answered in your earlier response, but my simple question is, do you have a target, let's say, of the revenues or of the total capital employed, how much could be deployed overseas? That's one big concern that we keep hearing from a lot of investors, and if you draw parallel to a lot of FMCG companies or even for that matter, telecom company, et cetera, the experience has been very tough, either because of country risk, political risk, or currency risk and so on and so forth. Can you just give any number in terms of target beyond which you will not take your overseas business to? Vivek, rather than give a target, let me give you one sense of comfort and one commitment that nothing that we do will lead to us under-investing in growing the Domino's business in India. We are very, very excited with the potential that Domino's has in the country. We are nowhere close to our 3,000 store target that we see very clearly in our line of sight. We see opportunity, as I mentioned earlier, both in existing towns where we want to get closer to our customers, deliver faster, as also in markets where we don't have a presence yet. There are 700 towns in this country with more than 1 lakh population. We're present in more than just about 300 of them. There is a huge runway to grow the Domino's business in India, and we are completely cognizant of that. Even as we focus and even as we go out and build a multi-brand, multi-country portfolio, our priority will remain on ensuring that we invest and grow the Domino's business in India. That is something we will not dilute our focus on. Sure. That completely we understand. The only thing is, if you can still guide something like, what the overseas capital employed, beyond a particular percentage you are not looking at, or revenues. Anything that you have on that front will be really helpful. Maybe not today, but in future, if you can give some insights into that, I think investment world will particularly appreciate that bit because that is one key question we keep getting from investors that the fact that where the valuations of the stock are, it's for the India business premium. It's not for what you try to do overseas. No, Vivek, if I can Pratik, if I could just add here. Of course, we'll give you a sense of that how much capital we will employ in the international business. Probably what you have seen is our first expansion was in the Domino's brand in the adjacent market, which was in Sri Lanka and Bangladesh. I think the results are quite encouraging for us. As we stated earlier, we see a potential of about 150 stores immediately in the next two to three years. Our investment in DP Eurasia also was because it was a dominant brand in Domino's. Now, what do we bring in? We bring in our learnings from India into these markets. The investment that we are making in technology In product development, in supply chain. Some of them can be quite well applied in these international markets also. We are leveraging that. Our focus on international growth is more around our experience in Domino's. Let me tell you, Domino's, whichever country that it has operated in, it has created huge value for the investors as well as for the operators who are doing it. Because of its huge strength, being good in food technology as well as leader in delivery, and I think these two things continue to be very important. Our international growth is, as you probably have seen, is purely around the strength in Domino's. Got it. Thank you for the insights. My second question is, Pratik, on two cost sides. One is the material cost on, let's say, gross margins, and the second is employee cost. In both, is it fair to assume that the next couple of quarters we'll see reasonable inflation? At least on the manpower side, that's what our checks are suggesting. Can you comment on both gross margins as well as employee cost? No, sure, Vivek. I'll answer the question then request Ashish to add. On gross margins, what you see reflected in the P&L is the impact of food inflation and commodity inflation mitigated by the pricing things that we took earlier this year, and productivity. We saw an inflation trend play out versus same time last year on all commodity, on dairy, on oil, on packaging, et cetera. Versus quarter one of this year, sequentially, we saw some moderation on dairy prices, which helped mitigate the continued inflationary pressures in oils and packaging, et cetera. Going forward, again, it's a function of how inflation will play out, but we expect dairy to be moderate. As you know, Vivek, in our business, dairy has a huge salient to cost. We expect dairy to be mitigating the inflation that we are seeing in the other commodities. That will be something that will help mitigate the impact. Ashish, do you want to come in on the gross margins here before I go to the personnel cost? Yeah, Pratik, you're right. As we have been doing in the past, we will continue to drive productivity across lines and especially on fleet costs, we will continue to drive our food waste down. That should also help us cushion the impact of any inflationary headwind that we are facing. Got it. Thank you. On your question, Vivek, on the personnel cost. The personnel cost that you see there reflect in the P&L is the sum total of accumulation of a few broad themes. The first one is that we brought in a very sharp focus on manpower productivity, and we saw an improvement, especially in delivery productivity, over the last few quarters and in the last quarter in particular. The second theme that's showing up there is the increased deployment of business associates in our delivery fleet, our delivery manpower, which are basically gig employees. The cost of the gig employees get booked in the manufacturing other expenses cost line. They don't show up in the personnel cost line. I'll talk about the cumulative impact in just a minute. There's also obviously the impact versus last year of operating leverage. There is some cost impact, as you can imagine, of the annual increases and increments. What you see reflect there in the P&L is a sum total of all of these themes. Now, even if I look at the personnel cost, including gigs and normal employees, there was a significant productivity versus same time last year and versus quarter one. Certainly, there will be some increase in the manpower requirement in Q3, given the festive period. We do not expect to see a material headwind on personnel costs. Ashish, over to you. No, I think we have covered it well, Pratik. I totally agree with what you said, that we would probably continue to see these levels because most of the inflationary impact, particularly on personnel costs, have already been factored in this quarter. We should see it sustained at the current levels. Got it. Thank you very much. This is useful. Wish you all the best. Thank you, Vivek. Thanks. Thank you. Thank you. Next question is from the line of Avi Mehta from Macquarie. Please go ahead. Yeah. Hi, sir. Sir, I actually had a different question from what the earlier participant, Vivek, asked. You called out that inflation is kind of coming off. You highlighted that employee costs are under control, productivity. Would that not mean that from a margin point of view, things should only kind of rise from current level? This is probably the bottom. I'm not asking about quantum. Yeah, I mean, just a directional sense. I can't see any headwind per se. That's why I'm just trying to understand. You were worse off in first quarter when you said they called it out. It's better now. Just any comments would be helpful, sir. No, Avi. As I mentioned in my response to, I think it was Percy, I think, and Vivek, of course. I think there will be some impact of operating leverage as revenues come back. There will also be, however, the need for us to ensure that we continue to invest in driving and improving the customer experience. There'll also be the need for us to ensure that we stay competitive in case there's an increase in competitive intensity. There'll be also a need for us to ensure that we keep having our products measure up to customer expectations as they are evolving, as they're growing. There will be the pulls and the pushes on margin. Of course, our attempt will be to make sure that we drive margins and make sure that we hold up margins at least. It's hard to say right now whether equation will balance out. Sorry, Pratik, just finally. If I may just add to that, Avi, We continue to face the inflationary headwinds. As you are aware, crude itself has been hardening. We are seeing almost 40%+ inflation over last year on both petrol and diesel, which is impacting our delivery cost. We are also seeing inflationary headwinds on packaging cost, other commodities other than cheese. There are these inflationary headwinds which we'll continue to counter. As you rightly said, some of the actions that we have taken may cushion the impact of some of these inflationary headwinds. I was just pushing back that you highlighted these same points the last quarter, and you actually delivered this quarter. I am not able to understand. Is this just being conservative that you're doing? That's where I was coming from. That was the only point. I can't see any headwind. Maybe I'm missing it out because, Pratik, the points that you highlighted are something that you already do. It's not something new. There's some additional headwind on margins, how I would see it, and leverage will clearly play out as recovery trends. That was where I was coming from. I appreciate that perspective. Thank you. The second point I just wanted to have on the demand side, and this is a near-term sense. From an SSS growth on a two-year CAGR, this quarter is more or less flattish. Has this moved back closer to the 3Q, 4Q levels, in September? If you could kind of give us a sense on what is the underlying demand trend as we exited the quarter or even in October. Thank you. Sure. Just to make sure I got your question right. You're asking about how this holds up versus, compared versus the trend in Q3 of last year, right? I'm looking at the same-store sales growth. We did almost about if I look at -20% was the base that we were working with. We saw almost about 26% kind of number, which means If I look at it from a FY 2020 perspective, we are up close to about 1% or half a percent on a two-year basis. If I look at the same number on the third quarter and the fourth quarter when recovery was panning out, that number was more like 2% or 4% on a CAGR basis, 2%-3%. I was just trying to understand it's September, close to that 2%-3%, if I look at a two-year basis, because that I thought would be better to get away from this noise of YoY given COVID-19 is there. Thank you. Yeah. No, you're right. I think we are seeing strong momentum come back on a same-store basis also, especially in delivery and takeaway channels. Of course, as you can imagine, dine-ins still remains a bit of a drag. If I look at the numbers trending out, even as dine-in becomes more normalized, we see even at the same store level, delivery and takeaway revenues and growth holding up. They come off a little bit of the elevated levels of the lockdown period, but they hold up reasonably well even after full resumption of dine-in. September is kind of reflected. This quarter, did it have an impact of June, July, or was this 0.5% more or less represented across the three months? Was there an increasing trend? Was there a volatile trend? Maybe that would kind of help answer that question. Yeah. No, I think we clearly saw improvement over the quarter play out in the dine-in channel mix and the dine-in growth because in the month of June coming off the worst impact of the COVID second wave, there was a little bit more of reservation about going for dine-in consumption. That improved over the quarter. Overall, I would say the momentum was strong right through the quarter. Okay. That's all from my side. Thank you very much. Thank you. Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead. Hi. Thanks for the opportunity. My question is, in the markets where you're seeing a full recovery in dine-in, where is delivery settling? It is 10%, 15% higher than the pre-COVID levels or much higher? We haven't commented on the precise number. I would refrain from doing so even now. I think the encouraging part is that the delivery revenues hold up significantly higher than the pre-COVID levels, and it helps drive a much more balanced mix, especially in the smaller towns, in the Tier 2, 3, 4 towns, which had a much higher dine-in bias pre-COVID. Even as things have gone back to normalcy in the dine-in front, we have seen delivery revenues and delivery mix, the channel mix, hold up. I don't want to sort of comment on precise numbers there, we haven't done so in the past. These higher numbers are reflective of a very fundamental and very significant behavior change in the smaller markets, which is what gives us so much encouragement. Understood. Would you be able to give us some color on the roadmap or scale-up of Hong's Kitchen from here on? I think in the recent conversation you indicated you're quite confident of the format and model and yeah. I think on Hong's Kitchen, I think we have seen, as I mentioned in my opening remarks as well, a very encouraging trend play out. Both our new stores of Hong's Kitchen and the earlier stores have done well and have shown strong recovery post-COVID. Therefore, based on these learnings and based on this experience, we intend to invest in two things. One is increasing brand awareness in Delhi NCR, and B, running a calibrated expansion of the network both in Delhi NCR and outside. You will see us doing that over the next few quarters. Hong's Kitchen, as we talked about in the past, has a very important role to play because it is in the middle of the market, in the space between the unorganized or the street side Chinese food market and of course, the casual dine or the fine dine Chinese market. That space is a large opportunity and a large vacuum there, and Hong's plays there. Again, all the data that we are seeing on customer feedback, our own experience, our own revenues, we are seeing that this opportunity is going to be quite exciting in the future. We will be scaling up the brand progressively, albeit in a calibrated way, in the future. Understood. Thank you so much. Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Hi, thanks for the opportunity. First question pertains to the inflationary headwind that you spoke at length about. Any plan of making pricing interventions and any read-through on consumer sentiments as of now to absorb price hikes? Would you be able to save or retain rental savings that you would have got last year once the normalcy comes back? First, two questions on margins. Tejas, on your first question on the headroom for pricing, you will recollect that we took a small pricing earlier this year, and that has gone down and settled down. We, as a QSR brand that is focused on a very value-conscious consumer segment, we make sure that our proposition is one that is offering superlative value for money to our customers. We know that our role is to grow the category, to recruit new customers, to grow frequency and build new occasions. This is something that we are very conscious of. Therefore, we walk a very fine line in ensuring that there is great value for money, at the same time, while defending margins and making sure we have the right margin profile. Going forward, in case inflationary pressures continue and we see the need to take a price increase, we certainly see elbow room for us to do so, but that will be something we look at only as a last resort, given the importance of providing value for money to our customers. Sure. On rental. Yes. Tejas, on the rental, I think during the course of last year, as you're aware, we went to our landlord partners and requested them to give some concessions given the nature of the headwinds that we were facing. We were grateful that most of our landlord partners saw the merit and agreed to some rent concessions. As the situation has become more normal, those concessions have become lesser, as you can imagine. Going forward, even as we try to drive rent productivity, the COVID-related concessions will probably not be there. That doesn't mean that we don't drive productivity in rent. We'll continue to do so, but the COVID-related savings will not come by. Ashish, you want to add to this? No, you're right, Pratik. Nothing to add. Then last question on, Pratik, historically, as a team also, you have got it very right on the expansion opportunity. Empirical evidence also suggests that you saw opportunity of 1,400 stores when we all have our doubts. Now when you actually guide for 3,000 stores and when we step back and look at the other retail formats and lifestyle part of the consumption basket, at current count, you are already the largest penetrated single-brand retail network in the country. In fact, I would believe 50 stores more than Bata now. You actually explained at length that there is an opportunity and how we are seeing opportunity even in sub-100,000 or sub-300,000 population towns also. When we see the size of opportunity some of those other categories have, which is INR 30,000 crore-INR 40,000 crore category and still they are not able to make a case for more than 1,400-1,500 stores. When we see our category size, pizza in particular, Domino's, or the cuisine that it is catering to, somewhere the size of the market and the penetration that we are going for does not add up. Just wanted your insights on the same. Tejas, I'm afraid I cannot presume to speak for the other categories and other brands. I can certainly speak for what we see. Hello. Yeah, sorry. We see, Tejas, a profusion of opportunity, both in existing large towns and in markets where we don't have a presence or a footprint right now. As I mentioned in one of my earlier responses, when we venture these new towns, we have been, if anything, surprised by the positive response that we have elicited. We do not see any scarcity of opportunity in driving market penetration and driving the footprint in these smaller towns. Yeah. That's very helpful. Thanks, and all the best. Thank you. Thank you. The next question is from the line of Nishit Rathi from CWC. Please go ahead. I'm sorry, where is the question from? I couldn't hear that. Nishit Rathi. Nishit. Thank you. Hi, Pratik. Congrats on a great quarter. Just wanted to get your thoughts. I think if I heard it right, you said you feel confident on not only advertising for Hong's, but also taking Hong's outside Delhi NCR. Did I get that right? Nishit, yes, on Hong's. Having now built a reasonably strong footprint in Delhi NCR, we would like to invest in building brand awareness and driving trials. That's Stage 1. In Stage 2, yes, we will be taking the brand in a calibrated way outside of Delhi NCR into new markets. Just little bit more color out there, Pratik, because this is very heartening to hear because the biggest challenge that we always faced in Hong's was we always knew the market was there, and you were looking to crack, A, the unit economics, B, the ability to replicate the taste and the offering across different things, right? Because it was a very manpower-intensive kind of a business and you wanted to get it extremely right before you really do that. Is it fair to assume that you're broadly there, and now it's just a matter of just finding the right location and replicating it across? Nishit, I would say certainly we made very encouraging progress on addressing the issues that we encountered early in the Hong's Kitchen journey, whether it's in terms of ensuring food consistency, ensuring that we have as much of the scaling done in the stores as possible, ensuring that we have the right unit economics, like you said. We have made very encouraging progress, and that's what gives us the confidence to move ahead. I would still say there is room for us to get even better, certainly, we've had our share of learnings over the last year and a half. Pratik, can I push my luck? Would you share any kind of number, because this is an extremely exciting opportunity? Would you like to share any kind of numbers? Maybe not now, maybe three years out, something that you will be disappointed not seeing how it's doing. No, Nishit, I'm not surprised you're pushing your luck, knowing you. I'm sorry, Nishit, we cannot share numbers. I totally understand, Pratik. I wish you all the best. Thank you. We are delighted. Thanks a lot. Thank you, Nishit. Thank you. Ladies and gentlemen, we will take one last question from the line of Aditya Gupta from Goldman Sachs. Please go ahead. Hi. Good evening. Just back on the recovery path for dine-in and delivery. Just doing some back-of-the-envelope math from the numbers you've given out on the slide deck. Is the delivery sales on a quarter-on-quarter basis largely flattish, and the improvement that we have seen on the top line mostly driven by dine-in sales, or is there something I'm missing over here? No. Aditya, I think, look, quarter-on-quarter trends in absolute revenues, they are sometimes not reflective of the entire story because of two or three reasons. One is, of course, seasonality in our category. B, what we have seen in the last few quarters in terms of the COVID-19 impact. It would be unsaid and I think incorrect, more appropriately, to sort of call out the absolute numbers of delivery or any channel performance over the last few quarters. I think the underlying theme, which is what you're hearing us call out, I think it's important to acknowledge that, which is that we are seeing greater momentum sustained. We are not seeing delivery letup except for a minor correction even as dine-in resumes. We are seeing small towns embrace delivery much more strongly than what they did pre-COVID-19. We are seeing behavior change happen. We are seeing consumers embrace delivery takeaway even as dine-in comes back. We are seeing consumers embrace online methods of ordering, including using our own app. There is a very fundamental structural shift that we believe is happening in the category, and the numbers may or may not reflect that given the noise that I spoke about earlier. I think we are seeing a behavior which is fundamentally different from what we had pre-COVID. There is certainly much greater adoption of delivery, absolutely, clearly, and unambiguously. Got it. Helpful. The last bit on competitive intensity. I think you called out last quarter that there was some increase in competitive intensity. What are we looking at now and ahead of the festive season? Do you think the competitive intensity is rather benign, or are you expecting a pickup in that ahead of the festive season? Aditya, I think the competitive intensity that we are seeing is nothing out of the ordinary and nothing that we believe is cause for concern. This is the normal intensity that you see in any business. Like I said earlier, I think some competition is good. In fact, any competition is good because it helps us drive excitement in the category, stoke demand, and drive more and more trials, and therefore more and more category creation. Given the fact that this is the festive period, there will be more intensity and more activity from various QSR players. I think it is great news for the category, and we are not deterred by it. Got it. If I may squeeze in 1 more. I think on the delivery charge with fuel costs going up significantly, is that a number you guys plan to tinker around with? Is that a fixed kind of a number on a per order value now the way it has been segregated now? Would that number keep changing as and when fuel costs change? Aditya, as you're aware, we took a small increase in delivery charges earlier this year, and that was partly to compensate for the increase that we saw in fuel and overall cost inflation. I think we are comfortable where the charges are positioned right now, and we do not feel the need to make any changes, at least in the immediate future. Got it. That was very helpful. Have a good rest of the evening. Thank you, Aditya. Thank you. I would now like to hand the conference over to the management for the closing comments. No, thank you. Thank you so much. I wanted to sort of call out and appreciate the fact that all of you took time out to join on the call today. I know that there were a variety of questions, and I really hope that we were able to answer most of them. In case you have any follow-up questions or any clarifications that you would need, please feel free to reach out to Deepak or to our investor relations team, and we'll be happy to respond. Thank you. Have a good day and week, in advance, wish you a very happy Diwali. Thank you. Ladies and gentlemen, on behalf of Jubilant FoodWorks Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines.