Devyani International to invest Rs 1,000 crore ahead of IPO; ropes in former KFC India MD Shinde

RJ Corp-promoted Devyani International Ltd (DIL), which holds the franchise rights for 350-plus KFC and Pizza Hut stores in India, plans to invest Rs 1,000 crore, as it plans to expand operations that may include the acquisition of some of the KFC outlets currently operated by American chain Yum! Brands that owns the brands.

The company has hired former KFC India managing director Rahul Shinde as executive director, as it looks to accelerate presence in a sector that is growing 15-20% annually.

DIL president Virag Joshi said the company was working on an aggressive expansion strategy but didn’t comment when asked if the plan included the acquisition of stores operated by Yum. Globally, Yum is transferring its owned outlets to license holders as part of an asset-light business model.

“We are gearing up for explosive growth across brands and concepts, with an Rs 1,000-crore investment over the next five years, resulting in doubling of jobs in India. The growth is being supported by talent acquisition,” Joshi said.

In fact, DIL is already into an expansion mode through the inorganic route as it prepares for an initial public offering of shares.

Over the past six months, it acquired KFC and Pizza Hut stores from smaller independent franchisees.

The biggest share of KFC’s operations in India is split between two franchises: Devyani International and Samara Capital.

Joshi said DIL’s plans included setting up 150-200 stores each for Pizza Hut and KFC over the next four-five years. “We are increasing the footprint of KFC and Pizza Hut through new stores, ahead of our planned public offer next year,” Joshi said.

Roping in Shinde, who last year had relocated to the US as global CFO for Yum’s Taco Bell business, is in line with the strategy.

In his new role, Shinde will head operations of KFC India, Nepal and Nigeria, and will oversee new acquisitions of international brands under DIL’s portfolio.

“The intent is to bring the Yum experience to enable brand growth within the franchise set up and more effectively balance business and brand success. This involves strong support to the Yum team on driving brand conversation through asset and operational execution, both within India and overseas,” Shinde said.

On its own, Yum operates 90 KFC stores in India. It could be looking to divest these to existing partners as part of the global strategy to refranchise the asset-heavy operations. In the fourth quarter of 2017, it had accelerated its franchise owners to 97% and said it was committed to becoming at least 98% franchised, and to own less than 1,000 company-owned restaurants by the end of 2018. Analysts say refranchising would facilitate shareholder returns, operating margins and brand push.

DIL, which was set up in 1996, has invested Rs 700 crore, backed by Temasek Holdings, in the business so far. Other global brands under the DIL franchise include UK chain Costa Coffee and Singapore-based TWG Tea under which RJ Corp has made its debut in Europe.

In its January-March earnings report, Yum said KFC and Pizza Hut India delivered double-digit same-store system sales.

Source:-https://economictimes.indiatimes.com/industry/cons-products/food/devyani-international-to-invest-rs-1000-crore-ahead-of-ipo-ropes-in-former-kfc-india-md-shinde/articleshow/64925346.cms

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