Devyani International To Sell Shares At Rs 86-90 Apiece In IPO

Devyani International Ltd. aims to raise Rs 1,838 crore through its initial public offering as the operator of KFC, Pizza Hut and Costa Coffee stores in India plans to lower borrowings.

The three-day IPO, opening on Aug. 4, is priced at Rs 86-90 apiece. It comprises a fresh issue of Rs 440 crore and a Rs 1,398-crore offer-for-sale by private equity Investor Dunearn, and promoter group RJ Corp., according to its red herring prospectus.

The company is valued at Rs 10,822.70 crore at the upper end of the price band. The issue constitutes 17% of the post-IPO equity capital.

Devyani plans to use proceeds from fresh issue to repay borrowings worth Rs 324 crore. Its total borrowings stood at Rs 463.3 crore as of March 2021. After the share sale, promoter and promoter group will own close to 59.8% in the company.

The business of Devyani International — a subsidiary of Ravi Jaipuria’s RJ Corp., the bottler for PepsiCo Inc. in India —is broadly classified into three verticals:

  • Core brands that include KFC, Pizza Hut and Costa Coffee stores in India.

  • International brands: stores operated outside India, primarily comprising KFC and Pizza Hut in Nepal and Nigeria.

  • Other brands: operations in food and beverage industry, including own brands such as Vaango and Food Street.

The company has non-exclusive franchise rights to set up KFC and Pizza Hut stores in India, except in captive markets where Yum India has these outlets. Over the last three years, Devyani has acquired 73 KFC stores from Yum India, the domestic arm of the global quick-service restaurant chain Yum! Brands.

“There are few captive stores left. Yum has 20 stores in Hyderabad which is used by them to undertake testing of product innovations,” Ravi Kant Jaipuria, non-executive chairman of Devyani International, told BloombergQuint in an interview.

The company has changed its policy on store sizes, especially KFC and Pizza Hut, after the Covid-19 pandemic impacted in-dining services, he said, adding it has opted for smaller-sized outlets for KFC and Pizza Hut as delivery-based services rose to nearly 70% of the revenue.

Devyani has moved away from fixed lease rentals for its properties to revenue sharing, he said. Lease rents, according to him, have been renegotiated on favourable terms and are now in the range of 10-12% of net store revenues.

  • The Delhi-based QSR chain, with a concentration of outlets in the northern belt, has 284 KFC, 317 Pizza Hut and 44 Costa Coffee stores as of June 30.

  • The franchisee has renegotiated a revised development agreement with Yum for store expansions starting 2022 to 2026. The details of the store expansion were not shared.

  • It had entered into an agreement in 2019 with Yum India and RJ Corp. to infuse capital into the company at Rs 43.33 apiece. Yum has invested Rs 230 crore to get a 4.7% stake in the pre-IPO shareholding of the company. The shares were allotted to the investors, including promoters, in March 2021 at Rs 43.33 apiece.

  • The company saw its revenue from operations fall 25% over the year earlier to Rs 1,134.83 crore in the fiscal ended March 2021. Its Ebitda stood at Rs 179 crore, while operating margin was at 15.8%.

  • Devyani recorded a loss of Rs 57.7 crore in FY21.

  • Revenue from core brands stood at Rs 953.5 crore and constituted 85% of the total revenue.

Watch the full interview here:

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