Thank you very much. We will now begin the question -and-answer session. The first question is from the line of Percy Panthaki from IIFL Securities.

Just wanted to understand the margin drivers for KFC for the coming couple of years. So you have already increased margins on a year-on-year basis by, let us say, 130-140 basis points, now stands at about 17%, which was the same in Q4 . So, there is one step-up which has happened. Wanted to understand what would be the drivers for increase from this current 17% level in the future? Two sub-questions to this. One is in terms of drivers, what is it apart from SSSG? Assuming that SSSG remains at a 3%-4% level, I am assuming that you might not get much of a leverage from that. So, are there

any drivers apart from SSSG in case that does not kick in over and above what we are seeing right now? And second is, what sort of basis points can you shave off through these other initiatives over the next couple of years?

Percy, as I have mentioned in the past, the key driver for improving the Brand Contribution margin remains the ADS number, I have also indicated in the past that, let us say, once we cross a threshold of 105,000 ADS to 110,000 ADS, we will be able to cross 20% Brand Contribution margins in KFC as we have demonstrated that in the past. So the key lever for ADS, as you know, is a combination of SSSG in the existing stores, as well as the quality of new stores that we are opening, so that we are able to start the new stores at a higher ADS number. This is a combination that can give you the higher ADS and therefore the better margins. At the same time, we are also focusing on our dine-in channel. They need to be promoted better versus the delivery channel, and therefore, we are taking the requisite steps. We have experimented in this quarter and we have seen some positive results on the dine-in channel. So, that will be another lever that can push the margins up. These are a few of the levers. And then obviously, as the ADS goes up, you get the operating leverage benefit , and therefore, that automatically helps with the margins as well.

Understood. So this 105k to 110k ADS, that might also be a moving target, right? Right now, if you reach that number, you will make 20% margin. But supposing if you take a few more quarters to reach that, in the meanwhile, your cost structure will also inflate at the same time. So maybe if this is delayed beyond a few quarters, then even at that ADS, which you are talking about, the 20% margins may not come through. So , how are you looking at that time frame in that sense, that is what I am asking?

So Percy, you are right because all of our discussions is basis the current environment. What happens tomorrow by way of inflation, who knows . But you are right. And your observation is right that this is in the current context. And again, it is not that we have not seen inflation in the past . It is not that we have not seen the, whatever the wage increases or the reset in the past, but we have managed to bring in the efficiency in the business. And that is a continuous process. And therefore, we have to be at it . The ideas are always there, and we continue to improve business and manage the business much more efficiently. The other leverage point that we have just started is this whole technology a doption, which is where we have been weak. And that will take a few quarters by the time we start to realize the benefits. And when I say a few quarters, I am saying a few quarters after the merger because right now, we are building the technology platforms.

Understood. And sorry to belabour this point, but just because this is the biggest part of your business, just wanted to understand this better. This 105k to 110k kind of ADS, how many quarters down the line or how soon do you think you can achieve that given the macroeconomic construct? Not assuming that, let us say, crude goes haywire and consumer demand falls or anything, just in the current context, how long do you think you can achieve that?

Percy, as I said, we are looking at a SSSG of about 5% to 6% for KFC. And therefore, if I were to take that, obviously, it will be almost like 1.5 -2 years kind of scenario. But again, as you are saying, the macros also play a very important role. And we have also seen in this business that there could be some cycles where, let us say, on an average, you get better SSSGs and then there are some quarters where it is kind of depressed, but in general, we look at about 5% to 6%.

Understood. And on Pizza Hut, before the merger happens, is there anything else that can be done to sort of accelerate the ADS on Pizza Hut further?

See, Pizza Hut, as I said earlier, and even in my commentary today, Pizza Hut is all about going back to basics. And therefore, we are working on the product. We are working on the ingredients. We are working o n some innovative ideas and so on and so forth. So that will take some time. And obviously, that will help us to stand in good stead over the long-term.

The next question is from the line of Vivek Maheshwari from Jefferies.

Continuing with what Percy asked, first on the KFC bit, you did mention about dine -in salience going up. So, in the last few quarters, we have seen this number like creeping up a bit. We are at about 57%. Do you think, you can go back to like 60%-65%? Is that what your target is in coming quarters?

Vivek, see, it is difficult to fight the consumer point of view on convenience. And we have seen that, let us say, for example, by regions, North typically is a market where convenience plays a very important role and consumers prefer delivery. So, I do not think that we will be able to get to 65% in the near future, but our target remains to get to a number of 59%-60%.

Interesting. And Manish, just maybe a very basic or a naive question. But see, a lot of your dishes are pre-prepared, and I know there is some activity at the store level. So even if, let us say, delivery margins are low and it is lower for 2 reasons . One is the coupons and the discounts and the other is the delivery cost. But as long as at an outlet level, it is adding incremental rupee or dollar to store, you should try to maximize on

both. Is that understanding correct, or there are capacity constraints, which is why you have to choose one over the other?

So, Vivek, this hypothesis used to play when delivery was new, and I am talking about, let us say, post-COVID period, because that was giving us net addition in terms of top line, and on an incremental basis, it made sense . Whereas today, delivery as it stands today, it is actually eating into the dine -in sales. And that is the reason we are making concerted effort to make sure that the consumers come back to dine -in because that is where you can have the best customer experience. That is where your food tastes the best. That is where you can get the full flavours and everything. And therefore, our endeavour is that people should come back to dine -in stores and enjoy food better there.

The next question is from the line of Avi Mehta from Macquarie Capital.

I just wanted to check with you on the stable demand trends and better understand that. Does that mean the basis will also be factored in when we look at the same-store sales growth or you are implying that the same-store sales growth should remain at current levels for the formats? So just if you could explain that first . And the second bit, just on the delivery versus dine -in. We have now focused on dine -in, and it is emerging as a key driver of growth. I just wanted to get your thoughts or your opinion. Say, a couple of years down the line, should we expect to see this shift in salience across delivery and dine -in across formats, or is this more of a KFC -specific phenomenon, given that pizza is inherently a lot more dine-in oriented? So, any format related nuances that one should be aware of? These are my 2 questions.

Avi, let me address your second question first. See, the point is, convenience is very important for a consumer and hence, that is where delivery comes in. Now at the same time, as brand owners, as operators, we need to give good reasons to consumers for them to come to the store. And if, for example, as I have mentioned in the past, if, let's say, the consumer is getting the same offering sitting at home at times at a cheaper price, why would they want to come to the stores, right. And whereas you have invested and you are operating a complete infrastructure. And hence, we need to kind of make sure that our offerings are available for dine-in customers in a different manner versus our delivery customers. Our pricing proposition remains in sync that a dine-in customer gets the best deal. And obviously, along with the best deal, they get a better experience. So that is how we have kind of focused on, and that is how we are repositioning the entire piece. And we have seen that as long as you give a good reason to the consumer to come into the stores, they do come into the stores. Obviously, ev ery region, every state, every city, we have seen that consumers behave differently. But in general, we

have seen consumers responding to it.

Then this is not format -specific. It is a broader principle that we encourage the consumer to come in and get a better deal.

Absolutely, yes. That is the fundamental hypothesis.

Got it. Clear. And the first bit, Manish, how should I look at that? Just a clarification , when you say stable demand trends, do you mean that the basis have to be factored in when we look at the environment ? Basically, is this also reflected in the Q2 performance till date?

Yes, it does. So I will tell you what we mean by fundamental stable demand trends. One, obviously, you would have seen in the past, let's say, when we were undergoing the negative SSSG trends, there used to be big days which were becoming bigger. And then suddenly after those big days, the demand would suddenly drop very significantly. Whereas from that point of view, we have seen the drop is not happening so significantly or the big days are becoming bigger. So that is one thing. Obviously, the other indicator is SSSG. Third, as I said, we have taken initiatives, and we have seen customers respond to that. So that is another indicator. At the same time, we are also measuring in terms of how the new stores in the new geographies are performing. So that is the other vector which is available to measure how the trend is kind of moving. So these are some of the levers that we use to kind of figure out whether the demand is fine or not.

So, does it mean SSSG is similar-ish in Q2 till date to what we witnessed in Q1, or has it seen an improvement? That's what I'm just trying to better understand.

See, obviously, Q2, it is too early to say because we are still in the month of July. In Q2 there is a different drag effect from a Shravan perspective as well. Because last year, the Shravan was at a different timing. This time, it is kind of starting, tomorrow or day after. So obviously, that lag effect is also there. But otherwise, broadly, in terms of trends, we have seen a positive trend in the month of July, and we are on track.

The next question is a follow-up from the line of Vivek Maheshwari from Jefferies.

My question is on the KFC SSSG bit. If you leave aside this quarter and the previous quarter, your Same Store Sales have been negative for a long time. What is holding you back from giving a very positive outlook on SSSG, let's say even above mid-single digits? Is it the macro that you still worry about? Or is it the aggregator concern? Why, despite such a low base after almost 13 quarters of negative SSSG, is your commentary

not more positive than it currently is?

So Vivek, fundamentally, as you know, macro seems to be tough. You know what is happening on the rupee dollar. You know what is happening on the oil pricing. And we have seen the result of all that in LPG prices. LPG availability was a big constraint, although we have kind of managed to mitigate. But we have seen huge availability issues as we kind of went through the cycle. And even now also, it is not that macros are behind us. There is some news or the other, which kind of keeps coming in. So it is very important for a very, very bullish kind of view that it should be a stable situation, which we are not seeing. And therefore, in the middle of all of this, whatever efforts we are making, we are seeing the results. And hence, I would say that it is the kind of approach that we have taken .

Perfect. That helps. And lastly, on the Pizza Hut bit, what do you think is the issue, whatever, let's say, is it the action that Yum! has taken? Or is it the brand issue or the execution issue probably at your end or is it the market context? I mean when I look at your margins, for example, are at 76%, I know Pizza has far higher margins than, let's say, Burgers and KFC. But is there a case to offer more value to customers? While your entry price points are very attractive, as we move up the menu, the prices actually go up. And if you look at the aggregators, there are options available at lower or better price points. So what exactly is the issue, i s it execution, the market context, higher margins, or competition? What do you think is holding Pizza Hut back? And is it really worth putting more energy behind this brand?

Vivek, the way we look at Pizza Hut as a brand, and to be honest, I have maintained this for the last many years, there is nothing wrong with Pizza Hut as a brand. When I say nothing wrong, means that despite whatever has happened or not happened, Pizza Hut has continued to remain the number 2 pizza brand in the country on a national basis, right. Domino's is number 1 and Pizza Hut is number 2. We have seen multiple brands coming in, tried scaling up and then kind of dying down quietly. Pizza Hut, the biggest issue was the structure, which is what we have discussed in the past, the entire 3-way structure between us, Sapphire and Yum! in terms of decision-making, in terms of the initiatives, in terms of innovation and so on and so forth. So obviously, that will get corrected as the structure kind of eases out when we get the merger approval. But at the same time, because of that, there were issues on decision -making, there were issues on innovation. So we have started to correct the innovation piece. We have started to correct the basics by the time the merger takes place, at least we are in that readiness position to push Pizza Hut. But having said that, to your other challenge in terms of the margins are high and therefore, why not? Pizza Hut, the fundamental

problem remains the ADS. The ADS is very low versus the competition. And the ADS cannot be improved unless we give a differentiated offering in terms of innovation and at every price point. So entry price point is just not the only means. You need to be available at all the price points. You need to have the right price laddering and so on and so forth. And that is something that we are already working on.

So basically, FY28 is when you will put all your energy behind the Pizza Hut once the 2 entities come together?

That is right.

The next question is from the line of Devanshu Bansal from Emkay Global.

Congratulations on strong performance. Sir, I had one question , I wanted to check , there is renewed global thrust for KFC brand. So there is a lot of new strategy around boneless snacking, sauces, beverages as well as store refurbishment, right? So I wanted to check if some of it is due to happen in India? Are we already working on some of these initiatives?

So all of that will happen in India as well, Devanshu. So broadly, they have taken 3 initiatives globally. One is on the beverages, there is a sub-brand called “Kwench”, and we are already discussing in India to experiment with “Kwench”. And if that experiment is successful, we will roll i t out nationally. The second one is around sauces and the third one, as you said, is around the boneless piece. So one after the other, all of those initiatives will come to India. India is part of the pipeline.

Any maturity level for them, Manish, if you would like to highlight as where are we in terms of implementing this?

See, as I said, we are already in discussions with “Kwench” because we have to make sure that the product gets optimized for the Indian condition and the Indian taste and all. So “Kwench” has already done that. At the same time, we also have to look at the capex, which gets involved in the new rollouts because obviously, the Western markets look at capex very differently versus the way we look at it. So “Kwench”, I would say, most of the homework is done from a capex perspective and from product optimization perspective. And out of the 3, this was the most difficult piece. So therefore, we are planning in terms of when the test launch will start. But the other pieces are relatively simple. Let's see once “Kwench” gets established, that is whe n we will start with the other 2.

Got it. Second question, I wanted to understand on Thailand business . How has the experience been so far? And currently, we are one of the 3 franchisee partners there. Are you open to further expanding your territory in these geographies?

So we have been very happy with the Thailand results, Devanshu. And you can see the way the numbers have evolved for the international piece, both from top line as well as bottom line perspective. And therefore, we are keen on the current offering, which is there in Thailand. Let's see how it progresses because right now there is no formal process which has been launched. No one has approached us, but we will be keen to look at it.

Understood. And sir, lastly, for our own brands, Vaango and Biryani By Kilo are seeing very healthy ramp -up. So I wanted to check if you could provide some outlook on expected growth and profitability for these 2 brands?

So Biryani By Kilo, Devanshu, as I said, we have managed t o achieve the turnaround. The Brand Contribution has turned positive versus negative when we acquired the brand. We are also testing Biryani By Kilo in a dine -in format through our food courts. We have seen good response. We have also launched Biryani By Kilo at couple of our airport locations, again, to test it out. So there are these multiple tests which are going on. During this whole Shravan and Navratri season, we are also planning to test the vegetarian portfolio, a sattvic vegetarian portfolio for Biryani By Kilo. So there are multiple initiatives which are on. We are very bullish on Biryani By Kilo. And our objective is to make sure that this brand gets to INR 1,000 crore brand in the next few years. Coming to Vaango, again, as I have said in the past, we are very b ullish on the South Indian space. It is the healthiest food, works across dayparts of the year. We need to stabilize the product a little bit. So that process is currently on , but otherwise, Vaango continues to do well.

The next question is from the line of Praful Kumar from Dymon Asia Capital.

Many congratulations on delivering two cons ecutive strong quarters despite a tough macro environment. A couple of things. One, Manish, starting with a new slate . Can you talk about in terms of what is the mandate from the promoters? What are you trying to build for the next 3 to 5 years in India? And talk about the leadership team that you have built for the last 3 to 6 months. So what are the key roles that have been assigned to people and the gaps that you see, the skill set, the management, how you intend to fill those gaps over a medium term? That is the first question. Secondly, on the merger, what are the key timelines and what are the milestones you are looking at? And in the backdrop, what are the preparations you are doing to ensure that you deliver on the

synergies and how the sustainability of the brand is bui lt? Yes, secondly, on the timelines and merger strategy.

Sure. Okay. Let me give you the promoters' view first. They are very bullish on the business. And you know that Devyani comes from a very, very strong promoter background and therefore the investment has never been an issue. It is a matter of how well we are able to perform and therefore how well we are able to convert the opportunity on the ground. You have seen the success with Varun Beverages already, which is another listed entity from the same group and the promoters feel Devyani can be another Varun over a period of time. So that is how we approach it from a promoter's perspective. Coming to the team, as I said, we have hired a new COO, we have hired a new CTO, the new Chief Marketing Officer and so on and so forth. The entire leadership team is in place now. They are settling in well. Obviously, the joining has been anywhere from about, let's say, 2 to 3 weeks to about 2 months. It will take time for the new team to kind of come, settle, gel together and start to perform. But we are very happy with the initial results that we have seen. Obviously, it brings in a very different view. It brings in a new energy in the business, and that is helping us, and that is also getting translated into the numbers. Coming to the merger piece, we are on track. We had indicated that the merger will be through by FY 27 end. As of now, I think we are on track and therefore it should happen. Merger synergies, again, we do not see an issue in terms of readiness. It was very important for us that the new team joins in, the new team settles in so that the integration becomes easier. And that we have demonstrated because the new team is already in place. The other big lever that we need to sort out before the merger is this entire technology piece, which again, we have talked about in the past, and we are making progress as per the plans. And we are hopeful that , that piece also should happen before we get the merger approvals and the integration starts post that. So far, so good. We are on track and we are making good progress.

Okay. Just one last thing, any key hires on the tech side? You had mentioned that this is an area of focus. Maybe you could also share some background on the key people who have joined as part of the technology buildout?

We have hired a new Chief Technology Officer. I do not know whether you have seen the announcement or not. So this person comes with a very strong background from the QSR industry, having worked in India as well as overseas. And he has demonstrated those capabilities and deliveries elsewhere. At the same time, rather than building our full-fledged new in-house tech team, we have decided to build a core team in -house and then outsource the buildout to Cognizant Technologies. So there fore, as a combination of these two, we are very confident that we will be able to achieve a faster

rollout and we should be on track before the merger.

The next question is from the line of Naman Mawandia from Sanghavi Family Office.

So majority of the questions are answered. But just wanted to get some more sense on our own brands portfolio, like Vaango and Biryani By Kilo, the INR 1,000 crore aspiration that you just mentioned. What are the step -by-step outlook tha t we have? What are some near-term measurables around it? And how do we keep on seeing that the execution is on same line? Secondly, on the own and franchise brands, including Costa, there is a very sharp SSSG increase. So is it majorly because of the pric e increases that we are seeing taken on the menu? Or is it something else? So these are the 2 questions.

Sure. So let me first address the Biryani By Kilo question and our own brands. See, the way we look at the entire Indian food category or the Indian food space or the QSR or the food services industry, howsoever you may call it, if you look at the per capita consumption or the incidences of consuming food outside the home is very low in India. And today, the consumers are coming out to experience something that they are not able to kind of cook and experience at home. And therefore, the entire push towards the Western brands is because the consumers feedback is that for them, the healthiest food is at home, the Indian food is at home and so on and so forth. But as the country grows, the per capita income grows, there are more women coming into the working population, we will see that the Indian food categories will also start to explode. And if at all, we believe that in a mature market like India, I am talking about 15 to 20 years from now, the Indian food category outside home will be a far bigger category than the Western food category. And therefore, we have started to prepare ourselves from that point of view. Coming to biryani specifically, if you look at the overall biryani market today, and I am talking about the organized as well as unorganized market, this category is stated at anywhere between INR 30,000 crore to a INR 40,000 crore number. Just the biryani category. It is the largest ordered online item on all of the platforms that we have seen in India. Yet if you look at the big brands in the biryani space, the biggest brand would be about INR 300 crore, INR 350-odd crore. And amongst the bigger brands, it is Biryani By Kilo and there will be one or two more competitors. And therefore, it offers a huge space for consolidation, for standardized product offering, addressing the right consumer need there. And that is how we are so bullish on biryani. Similarly, South Indian space also, South Indian food category is a very large category, again, split between organized and unorganized. But from an organized play perspective, overall, it is small. And t herefore, similarly, there are other opportunities available in terms of North Indian food and so on and so forth. And hence, we are

working on a strategy to expand the Indian food portfolio as well.

The next question is from the line of Chetan Thacker from M3 Investment Private Limited.

Yes. So just wanted to understand since you are seeing some bit of shift towards dine- in, does that necessarily change the capex intensity o f the business? Because we had earlier moved from larger-format stores to slightly smaller-format stores. And now that dine-in is again being repositioned, does that change the capex intensity of the business?

Not at all. Remember, when we talked about the shift that we spoke earlier, and let me give you some numbers so that you are able to understand the context. If you look at pre-COVID or around the COVID time, KFC delivery used to be less than 10%. And it has gone up to almost at about 45% - 46% level today. So therefore, the numbers that we are talking about are relatively very, very small in terms of the changes that we are saying. The fundamental correction in terms of reducing the store sizes were driven by the fact that we moved from virtually a no delivery brand to almost a 50% delivery, that is where the entire format changed . Today, we have excess capacity available in our stores, whereby we can easily make the shift without incurring additional capex. And at the same time, from a basic brand standard perspective, whatever minimums that are there from Yum! side or our side, they are enough to accommodate the near-term shift that we are talking about. At the same time, if you go back and dial back the numbers earlier, there were fewer stores . Today, the number of stores of KFC or Pizza Hut for that matter are multiple of what we used to be around the COVID time. So obviously, the overall throughputs are also smaller from that point of view.

So even the incremental store opening will not necessarily mean incremental higher sizes of store. It will relatively be optimization of the store between dine-in and delivery. That is how we should look at it?

Absolutely. Not much change in capex, so whatever format we are opening currently, that is what is going to be happening for future also.

And sir, from a Pizza Hut perspective, how are we strategically now looking at that business in terms of menu refreshes and getting people back to Pizza Hut or getting Pizza Hut on mindshare of people?

So, as I said, we are working on setting the product right, working on some new product propositions, innovations and so on and so forth. So obviously, this has some lead time. Sandeep, who is our Chief Marketing Officer, and he also looks after Pizza Hut

brand, is working on these things. We are making good progress. So therefore, by the time, let us say, the merger happens, we will be ready with the entire recipe. And then once the fundamental structure is sorted, that is where we will really push for Pizza Hut as a brand.

Understood. And sir, from an integration perspective between Sapphire and Devyani in terms of the back end, is it largely in sync and should not be that big an issue? Or are they on two separate systems and can take some more time?

It should not be a big challenge because the IT systems are largely similar. I do not know whether you are aware or not, technology used to be controlled by Yum! and both of us were on the same stack. The processes on both sides are very similar. So therefore, integration will not be a big challenge.

Thank you very much. That would be the last question for today. I would now like to hand the conference over to the management team for closing comments.

Thank you very much. We hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the Company, please feel free to contact our Investor Relations team. Thank you once again for your interest and support and for taking the time out to join us on this call. Thank you very much once again. Disclaimer: This is a transcription and may contain transcription errors. The transcript has been edited for clarity. The Company takes no responsibility for such errors, although an effort has been made to ensure a high level of accuracy.