Devyani International reported a 17% rise in Q1 FY27 revenue to Rs 15.8 billion, fueled by growth in KFC and other brands. Investors are weighing this expansion against the upcoming merger with Sapphire Foods and a broader sector slowdown.
Devyani International, one of the largest franchisees for KFC and Costa Coffee in India, reported a consolidated revenue of Rs 15.8 billion for the first quarter of the 2027 financial year. This represents a 17% year-on-year increase, supported by healthy growth in same-store sales across its major brands. The company’s performance benefited from a 3% same-store sales growth at KFC, while its other brands, including Costa Coffee and BBK, recorded growth exceeding 7%.
Strategic Expansion and Merger Progress
The company is currently focused on a strategy that combines new store openings with efforts to increase dine-in sales and operational efficiency. A major event for shareholders to track is the proposed merger with Sapphire Foods. Management has indicated that the merger process is on track and is expected to reach completion by the end of the 2027 financial year. This combination is intended to create a larger entity with improved operational reach and potentially lower costs through shared resources.
Financial Outlook and Sector Trends
While the Q1 revenue growth shows operational progress, market analysts have updated their valuation outlooks for the company. Brokerage firm Anand Rathi recently maintained a positive stance but adjusted its valuation multiple for the company, moving from 18 times to 16 times its expected earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). This change reflects a more cautious stance regarding the overall restaurant sector, where analysts anticipate potential softness in performance for the 2025 and 2026 financial years.
Investors should monitor how the company balances its aggressive store expansion with the need to maintain profit margins in a competitive market. The integration of Sapphire Foods will be a critical monitorable, as the success of the merger will depend on the company's ability to unify operations and realize the expected synergies without significant disruption to ongoing business. Additionally, the company's ability to manage costs amidst potential sector-wide pressure remains an important factor for long-term financial health.