Devyani International Limited IPO Details and Review

Devyani International IPO: Key Details

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Company Information

Devyani International Limited, incorporated in 1991, is the largest franchisee of Yum Brands (KFC, Pizza Hut) in India and are among the largest operators of chain quick-service restaurants (“QSR”) in India, on a non-exclusive basis, and operate 655 stores across 155 cities in India, as of March 31, 2021, and 696 stores across 166 cities in India, as of June 30, 2021. In addition, they are a franchisee for the Costa Coffee brand and stores in India.

Their business is broadly classified into three verticals that include:

• Sores of KFC, Pizza Hut and Costa Coffee operated in India (Core Brand Business);
• Stores operated outside India primarily comprising KFC and Pizza Hut stores operated in Nepal and Nigeria (“International Business”); and
• Certain other operations in the F&B industry, including stores of their own brands such as Vaango and Food Street (“Other Business”)

Revenue from the Core Brands Business, together with the International Business, represented 83.01%, 82.94%, and 94.19% of the revenue from operations in Fiscals 2019, 2020 and 2021, respectively

Competitive Strengths

• Portfolio of highly recognized global brands catering to a range of customer preferences;
• Multi-dimensional comprehensive QSR player;
• Presence across key consumption markets with a cluster-based approach;
• Cross brand synergies with operating leverage;
• Disciplined financial approach with focus on cash flows and returns; and
• Distinguished Board and experienced senior management team.

Company Strategy

• Strategically expand store network of Core Brands Business
• Continue to improve unit-level performance
• Focus on delivery channel for Core Brands
• Invest in technology and focus on digital capabilities

Proceeds from fresh issue of Devyani International IPO will be used to:

• Funding longterm capital expenditure requirements and
• General corporate purposes

The proceeds from the Offer for Sale shall be received by the Selling Shareholder (i.e. Rivendell PE LLC).

Devyani International IPO: Financials

Devyani International IPO: Comparison with listed industry peers

Devyani International IPO: Risks

• They rely on arrangements with Yum for KFC and Pizza Hut stores that comprise a significant majority of the business, and termination of or inability to renew these arrangements will have a material adverse effect
• They have incurred losses in Fiscals 2019, 2020 and 2021, resulting in erosion of net worth
• Their Statutory Auditors have included certain adverse remarks/ qualifications/ matters of emphasis in Audited Consolidated Financial Statements
• The operation of stores/ outlets under the Core Brands (“KFC”, “Pizza Hut” and “Costa Coffee”) depend on their respective material agreements, which impose certain restrictions, limitations, and other obligations

For complete internal and external risk factors, you can refer to the RHP of the company.

Devyani International IPO: Registrar and Lead Managers