Biryani on the menu, can one dish revive a QSR giant?

As investors crave domestic growth to navigate global turbulence, they are assessing whether this culinary champion can become the likely flavour of choice to counter global market jitters.

At a time when the US tariff tantrums keep global markets on the edge, experts are hopeful of a pickup in Devyani International Ltd’s (DIL) business as it plans to add biryani to its menu. The quick-service restaurant (QSR) operator is in talks to acquire Sky Gate Hospitality (SGH), which operates the brand Biryani By Kilo (BBK).

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Devyani will hold a board meeting on 24 April to finalise its acquisition plans, following which it will gain access to SGH’s three other brands – Goila Butter Chicken, The Bhojan and Get-A-Way – along with BBK. 

Kotak Institutional Equities noted that the deal is likely to be financed by fresh equity issuance by Devyani, equivalent to the value of the deal.

In fact, experts noted that DIL might have struck the deal at an opportune moment since the market’s animal spirit currently remains tamed, ruling out heady valuations for the acquisition

Given BBK’s rising popularity, they added that this move might be a smart bet for DIL, especially as it struggles with falling sales in its KFC and Pizza Hut outlets across India.

Growth recipe

DIL, the largest franchisee of KFC and Pizza Hut in India, continues to battle a stubborn urban demand slowdown, which has led to a continuous decline in its same-store sales growth (SSG) for almost eight quarters now. Same-store sales measure comparable sales in existing stores over a period of time and are a key metric to gauge consumer appetite for fast food.

“With retail inflation hitting a six-year low in March and effects of the income tax cut starting to play out from April, urban consumption is likely to bounce back in FY26. Since QSR is a small-ticket segment, we might see a pickup in demand here first," pointed out Devanshu Bansal, research analyst at Emkay Global.

Bansal expects DIL’s SSG metrics for KFC and Pizza Hut to bottom out in the March quarter (Q4FY25), creating a favourable base for a mid-teen organic earnings growth in FY26.

Hence, experts noted that DIL might be a strong candidate for playing the domestic consumption theme in the medium term, especially when people are shunning tariff-exposed sectors. They pointed out that the recent bouts of market correction have also brought the stock’s price to attractive levels.

DIL’s biryani move further strengthens this investment thesis, according to some. This is because BBK’s curated menu of Hyderabadi, Lucknowi, and Kolkata biryanis, along with kebabs and curries, caters to a broader palette, and they have adopted a decentralized model wherein each biryani order is cooked separately at the outlet, ensuring superior food quality. 

This has helped BBK generate a loyal customer base and deliver much better average daily sales (ADS) than peers like Behrouz Biryani and Biryani Blues, noted a recent Kotak Institutional Equities report. Currently, BBK sees average daily sales worth ₹60,000, contributing to about 75% of SGH’s total average daily sales.

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Moreover, Devyani is already about to launch three new QSR brands in India this month—Tealive, New York Fries and Sanook Kitchen—to cater to shifting consumer tastes for trending items like bubble tea and pan-Asian cuisines. Entering the biryani market through an established business will further ensure steady ADS numbers for the company, experts said.

Kotak Institutional Equities further believes BBK has enough structural levers to achieve meaningful scale in the medium term. Devyani’s larger pan-India presence will further widen its customer base. 

Under DIL, the brokerage expects BBK’s profitability to improve, which is currently loss-making. This would be led by cost synergies between the two companies, where BBK’s corporate overhead and raw material sourcing costs are expected to come down post-acquisition.

Further, “we expect (BBK's) store additions to pick up pace through new standalone restaurants, stores at food courts operated by Devyani at malls, airports, highways and overseas expansion in the medium term," the report added.

A bland dish?

However, not everyone is convinced. Sachin B. Bobade, analyst at Dolat Capital Market, noted that India’s ₹20,000-25,000 crore biryani market is extremely fragmented, where consumer taste is highly localised and sensitive. Hence, he said a broad-based pan-India approach might not work out for DIL.

“Jubilant (FoodWorks) tried entering the biryani market in the past, but it failed, because customers tend to stick to local players for biryani, who offer (the product) at much lower price points. They now deliver through online platforms as well. So, the competition is intense," Bobade noted.

“Moreover, biryani is a relatively small-ticket item, and corporates like DIL have high overhead costs. Hence, adding biryani to the roster might not improve their profitability either," he added.

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