KFC-operator Devyani International to buy Biryani by Kilo, shares jump 4%
Shares
of QSR operator
Devyani International
, which runs outlets of brands like
KFC
, Pizza Hut and Costa Coffee, rallied up to 4 per cent to Rs 172.65 on
BSE
on announcing plans to acquire
Biryani by Kilo
.
Following the announcement that Devyani will hold a board meeting on April 24 to consider and approve definitive agreements and issuance of equity shares on a preferential basis to for acquisition of controlling equity stake in
Sky Gate Hospitality
, operating restaurants under the brand 'Biryani by Kilo, and other brands,
Emkay Global
upgraded the stock to buy and raised target price to Rs 200.
"The upgrade is led by potential value creation in the likely acquisition of 'Biryani By Kilo' (BBK) and possible return of a mid-teen growth for the India business in FY26E (vs 7 per cent in FY25). Commencing operations in FY16 in Delhi-NCR, BBK has now scaled up to ~100 stores in 45 cities, and seen revenue CAGR of 55 per cent (FY19-24) to ~Rs3bn. The
biryani market
is a large but highly unorganized one which offers scope for continued growth," Emkay's Devanshu Bansal said.
In addition to its topline, Devyani's operational excellence, synergies, and the RJ Corp Group's ability to conclude acquisitions at attractive valuations make a case for strong value creation.
Kotak Equities analysts said Sky Gate Hospitality has revenues of about Rs 300 crore (FY2025) from 106 restaurants (of which 65-70 are cloud kitchens) across 40+ cities.
"We estimate the acquisition valuation to be at 2-2.5X EV/sales and funded via equity issuance
by Devyani. We like DIL's foray into biryani—a large, delivery-friendly F&B category that offers an opportunity to scale a QSR biryani brand, notwithstanding local competition and regional taste preferences," the brokerage firm said, reiterating buy call with a target price of Rs 190.
Besides Biryani By Kilo (BBK), Sky Gate also runs a few other brands like Goila Butter Chicken, The Bhojan and Get-A-Way.
"We like this acquisition as (1) biryani is a Rs 200-250 bn category, which is highly fragmented and delivery-friendly (the most popular dish on delivery platforms, with Zomato/ Swiggy delivering 91/83 mn biryani orders in 2024), (2) BBK has fared well among biryani QSRs and has superior ADS, (3) SG founders would continue to run this business for the foreseeable future," Kotak said.
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