Monsoons, pricing key in FY16: Speciality Restaurants

Two important aspects which will determine the company's performance this year are pricing and monsoons.

The company will also be converting its Mainland China flagship brand to Mainland China Asia Kitchen in specific cities, said Mohta.

Below is the transcript of Rajesh Mohta's interview with Ekta Batra & Mangalam Maloo on CNBC-TV18.

Mangalam: Your topline grew at 9 percent this quarter year on year. Could you indicate what the same store sales growth was?

A: As far as fine dining restaurants are concerned, we do not track our same stores. Looking at the numbers primarily, the discretionary spends pressure have been reflected and sporadically certain geographies of our country where we have Mainland China etc. We have seen weekdays pressures there, but considering the growth path which we already had on Mainland China, we had tried to refresh our brand which has given us additional footfalls but overall the numbers have been negative.

Mangalam: What were the footfalls for this quarter?

A: Prudently, we had not increased our menu prices. The idea behind primarily to hold footfalls into our restaurants, which have been the key element for us; that is the only reason why we find the margins under pressure, but we continue to maintain price.

However, whenever there is an opportunity where we find there is an upswing on the discretionary spends, more particularly during weekdays with corporate coming in form of spending, we would do it at an appropriate time.

Ekta: Can you give us a sense in terms of what the raw material prices look like for you this quarter because your margin saw a bit of deceleration. Could you take us through that?

A: We had expected that with the beginning of the new financial year the prices would be moderating in the month of February and March when we go out for our annual process. But the unseasonal rains during February and March had an impact on us. We are looking forward to some moderation after the monsoon when the prices might reduce. We may consider the margins accordingly, which got pressurised because of this particularly in the last quarter and going forward.

Mangalam: A word on FY16. You said that there was a consumer discretionary spending pick-up, which was muted in this year and this quarter as well. How do you expect FY16 to be going forward?

A: We are keeping our fingers crossed on the monsoon, on the price front and looking forward for change in ground reality impact. The moment discretionary spend pressure is reduced; we will look forward for better quarters to come in.

Ekta: Because of this discretionary expenditure that you are still tentative on FY16. Do you then think that you are going to hold back in terms of any price increase going into FY16 or do you think you can push a bit? Could explain the competition dynamics to us as well?

A: On pricing front, we had market driven effort and we would not like to pinch the pocket of the guest at any point of time. We want guests to come into our restaurants repeatedly. It is a balance between what we are trying to absorb and what we are trying to get from the guests. The taxes etc. have also increased, so we will have to balance that depending upon how the spending pattern, pan India.

Ekta: Are you looking at other parts of your business. I do understand that you have opened two different restaurants in Pune, Hoppipolla as well as Sigri Global Grill. Do you think that you could expand in these two segments more aggressively because they have different price points and hence a different type of demand?

A: The whole idea of opening Sigri Global Grill is that we would like to get into an Indian umbrella brand, which is Sigri Global Grill pan India. So, what has been done over a period of time on Mainland China, we would cater to Sigri Global Grill pan India basis which would become a power brand for us despite Mainland China being our flagship brand.

Hoppipolla is more like sweating of assets for us. Wherever we had certain terraces etc and where the rentals were not there. We started with a concept in Bangalore and now we are extending to other cities and find there is a growth path to that segment as of now.

Mangalam: A word on you exiting the stake from Love Sugar Dough (LSD). Could you give us a sense why you do that and what is the scene going forward as well as desserts are concerned?

A: There are two things. We entered into a shareholders agreement with an understanding that we would be expanding in phase manner and when the business plan was drawn, there were constrains of capital from the partners. So, we backed out and did not go ahead with LSD.

Ekta: Can you leave us with some stats in terms of which of your restaurants are seeing the maximum growth at this point in time and which one has the maximum growth potential according to you in FY16? Which one are you more confident on taking expansion forward for?

A: Mainland China continues to be our flagship brand and we have refreshed Mainland China as Mainland China Asia Kitchen. However, efforts which have gone in for the development and refreshment of the brand is paying dividend to us. We have already opened two Mainland China Asia Kitchens in Mumbai and we have opened in Chennai now. We are going ahead with conversion of few of our Mainland China in specific cities to come so that the focus is moving from Mainland China flagship brand to Mainland China Asia Kitchen.