Sky Gate buy gives us entry into cloud kitchens: Devyani International

Devyani sees cloud kitchens as new growth avenue, aims to turn Sky Gate profitable within a year and integrate its brands into food courts and kitchen network

Devyani International, which recently acquired Sky Gate Hospitality, said on Friday that the move will help them tap into the high-growth cloud kitchen market in India, even as it plans to invest an additional ₹90 crore in the business on top of the acquisition cost of ₹519 crore.  

 

"We see good synergy with Sky Gate Hospitality as all three of its brands easily fit into all our food court locations. Since we work with third-party brands, we will start replacing those with these new brands in locations where we see more efficiencies coming in on a per square foot basis," Virag Joshi, chief executive office and whole-time director, at Devyani International, told analysts in an earnings call after announcing the company's March quarter results. 

 

The acquisition is expected to be completed within the next couple of weeks and the company intends to turn the loss-making business profitable within a year. 

 

Devyani International is the largest franchise partner of Yum! Brands, which owns quick service restaurant brands like KFC and Pizza Hut along with British coffee chain Costa Coffee.

 

Last month, it acquired Sky Gate Hospitality, which owns Biryani by Kilo, and other cloud kitchens like Goila Butter Chicken and Bhojan. 

 

"Additionally, they have a network of cloud kitchens and we are evaluating if we can add our brands to that network. So, the synergies work both ways and we are bullish on this entire portfolio," Joshi added. 

 

He noted that the acquisition would create a third leg in terms of revenue generation for the company which was seeing slower growth in its other brands including KFC and Pizza Hut. 

 

"We're in discussions with Yum! We’re hopeful that the brand (Pizza Hut) can be turned around. We have to make the tweaks as far as innovation, value offerings, and communication are concerned,” Joshi said, adding that the company expects to come up with the plan by next quarter.

 

It added that it will expand the number of New York Fries restaurants after opening the first store in Mumbai. Devyani partnered with three international brands like New York Fries, Tealive, and Sanook Kitchen in FY25. 

 

When asked about commodity price inflation, Joshi said that the company does not plan to undertake any price hikes as the overall consumption environment remains sluggish. 

 

Executives were hopeful of a rebound in consumer spending in the coming quarters on the back of tax breaks given by the government to spur consumption. 

 

In the March quarter, the company reported a 16 per cent year-on-year hike in revenue from operations to ₹1,212.6 crore from ₹1,047 crore. However, its net loss widened 99 per cent to ₹14.7 crore from ₹7.4 crore in the year-ago period. 

 

The company opened 257 net new stores in FY25, compared to 539 stores in FY24.