Devyani International Q2 results: Net loss at ₹21.9 cr, revenue up 12.6%

Devyani International, which operates KFC and Pizza Hut restaurants in India, reported a quarterly loss on Thursday, as demand across its portfolio remained under pressure.

Popular fast-food chains have been struggling to grow their same-store sales in India, as they deal with stiff competition from local restaurants at a time when urban demand is in early stages of recovery after a long lull.

Firms have been relying on discounted combo deals and new launches to generate demand, while adding stores to capture market share.

Devyani International, which is a franchisee of U.S.-based Yum Brands, reported a net loss of ₹21.9 crore ($2.49 million) in the three months to September end, compared with a profit of  ₹170,000 a year ago.

The firm launched a chickpea burger at KFC, priced at less than a dollar, and a three-topping pizza at Pizza Hut to lure in consumers.

Its revenue from operations rose 12.6 per cent to ₹1,377 crore, as the company added 263 stores from a year earlier, taking its store count to 2,184 units.

Yum Brands said on Tuesday it has begun a strategic review of the struggling Pizza Hut chain, whose sales have lagged that of Yum's other portfolio restaurants Taco Bell and KFC.

Devyani said that the Indian government's sweeping goods and services tax cuts have had "a very minimal" impact on the quick-service restaurant category.

At KFC, same-store sales fell 4.2 per cent, while for Pizza Hut, they fell 4.1 per cent from a year earlier.

Devyani's Ebitda margin declined to 14.1 per cent in the second quarter from 16.3 per cent a year ago, in part due to the acquisition of Biryani by Kilo chain-owner Sky Gate Hospitality, which has been operating at a loss.

In October, Devyani's peer Sapphire Foods, reported a wider second-quarter loss and said it would halt Pizza Hut expansion in India after the chain's same store sales fell 8 per cent.