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Shares of Devyani International Ltd, the largest domestic franchisee for Yum Brands (KFC & Pizza Hut) and the sole franchisee for Costa Coffee, gained 6 per cent on February 21 as 5.3 crore shares, representing a 4.4 percent stake, in the quick service restaurant operator changed hands in a block deal.
The stake was sold at a floor price of Rs 164 apiece, a marginal discount of 1.2 percent from the previous close.
While Headlinebharat.com couldn’t ascertain the buyers or the sellers, a CNBC-TV18 report said Yum Restaurant India Private Ltd is the likely seller, divesting the entire 4.4 percent stake in the KFC operator. Citigroup Global Markets India is the sole book-running lead manager.
The report came at a time the QSR industry is seeing weak unit economics, across dine-in and delivery formats. Despite these industry-wide difficulties, KFC has shown resilience in managing the crisis effectively, Motilal Oswal Securities said in a recent note.
“On the other hand, PH has been struggling, partly attributed to intense competition in the market. Store expansion plans remain buoyant for Devyani despite near-term industry challenges. The overall guidance of reaching 2,000 stores by FY24 remains on track. We maintain a cautious stance due to the ongoing demand challenges in the near term. The recent correction in the stock partially covers up the near-term pressure,” it said. We reiterate our BUY rating on the stock with a target of Rs 195,” it said.
The Yum stake sale is believed to be valued at Rs 814.80 crore and Citigroup Global Markets India is believed to be the sole book running lead manager (BRLM).
A recent Elara Securities report suggested Devyani International was actively working on enhancing its delivery performance and fostering closer relationships between its stores and delivery services. It was planning to expand presence of Pizza Hut and KFC outlets that are specifically geared toward delivery. This included collaborating extensively with delivery aggregators to leverage the fast-growing online delivery segment.
“In case of Pizza Hut India, it has shifted focus toward a delivery-centric model while maintaining strategically located dine-in and flagship stores. The accelerated expansion of delivery-focused stores has resulted in significantly improved delivery times, which, in turn, has enhanced overall consumer experience. This transition from large dining-oriented stores to smaller, delivery-focused formats has not only positively affected unit-level performance but also has facilitated a faster nationwide expansion,” it said.
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