Devyani International Files DRHP To Raise RS 1,400 Crore via IPO

Overview of the company

As bourses continue to operate at lifetime highs, companies are looking to tap into liquidity flushed markets and secure high valuations for their IPOs. A number of Quick Service Restaurant IPOs have been knocking at the market regulator SEBI’s door looking to raise easy money from the market.

In December last year, Burger King’s IPO hit the market while Barbecue Nation’s IPO was listed in April. The newest kid on the block to fall for the IPO fever is Devyani International Limited, the largest Indian franchisee of Pizza Hut, KFC and Costa Coffee. The company has filed a Draft Red Herring Prospectus with SEBI aiming to raise Rs 1,400 crore via its IPO.

Objectives

• As per the DRHP, the investor selling shareholder Dunearn Investments (Mauritius) Pte Limited, which is a completely owned subsidiary of Temasek Holdings and RJ Corp limited, is looking to raise Rs 400 crore and is also making an Offer of Sale of up to 125.33 million equity shares.
• Devyani International Limited plans on using close to Rs 358 crore towards resolving debt and other corporate purposes. Devyani International Limited is also the largest franchisee of American fast-food multinational Yum Brands.
• The relationship of the company with Yum Brands dates back to 1997 when it opened its first Pizza Hut restaurant in Jaipur. The tally now stands at 297 Pizza Hut restaurants across India. As of March this year, the company also operated 44 Costa Coffee stores across India and 264 KFC stores in India.
• The business of the company is not limited to India alone. Its presence spreads to countries like Nepal and Nigeria as well. The company also runs other brands like Vaango, Food Street, Masala Twist, Amreli, Ckrushh Juice Bar and Ile bar. Devyani International runs a total of 692 stores across 26 states.

Financial results of Devyani International:

• In the latest financial year, Devyani International’s 94.19% revenue stemmed from its core business brands from India and overseas. Out of these sales, delivery accounted for almost 71%, an increase of 51.15% from FY20.
• Between the two fiscal years of FY19 and FY21, the stores of the core brands registered a CAGR growth of 13.58% expanding from 460 stores to 605 stores. The company currently boasts of 9,356 employees under its wings.
• Covid-19 has led to a substantial decline in revenue of restaurant, tourism and travel business across India. However, even during the pandemic, the company has shown grit and grace under pressure by starting 109 stores across its core brands in the last 6 months. Sensing a disruption in business practices, the management teams of KFC and Pizza Hut braved adverse situations and were prime players when it came to rolling out contactless delivery in May 2020 and June 2020 respectively.
• Devyani International Limited is one of the largest QSR companies to be listed on the Swiggy and Zomato platform in 2019 and 2020 respectively.

Other key takeaways

• Led from the front by Ravi Kant Jaipuria who is the promoter of RJ Corp, the company has been scaling new heights. Virag Joshi, the President and CEO has also been instrumental in expansion efforts of the company which have been aided by Manish Dawar, whole-time director and by Rajat Luthra- the Chief Financial Officer of KFC. Amitabh Negi, the CEO of Pizza Hut also contributed to the growth of the company.
• Kotak Mahindra Capital Company Ltd, Edelweiss Financial Services Ltd, CLSA India Pvt Ltd, Motilal Oswal Investment Advisors Ltd are the investment bankers in the IPO.

Covid’s impact on restaurants in India

The pandemic dealt a body blow to the businesses of restaurants across India. However, it was QSR chains that were the quickest to recover by perfecting the delivery, takeout, drive-through and on-the-go models. A high-ranking functionary in the management team of one of the largest QSR chain in India indicated that his company had been able to achieve 7 to 10% organic growth during the pandemic and the business of the firm was operating at 70-80% of pre-pandemic levels.