Devyani IPO: KFC, Pizza Hut operator to launch offering tomorrow. Know the lot size, issue size and price band

2) Public Issue

The initial public offering comprises a fresh issue of Rs 440 crore, and an offer for sale of 15,53,33,330 equity shares by investor and promoter.

Investor Dunearn Investments will sell 6,53,33,330 equity shares, and promoter RJ Corp will offload 9 crore equity shares through offer for sale. The offer includes 5.5 lakh equity shares for company's employees.

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3) Price Band and Fund Raising

Devyani International, in consultation with merchant bankers, has fixed a price band at Rs 86-90 per equity share for its public offer.

The total fund raising comes to Rs 1,838 crore at higher end of price band.

4) Lot Size and Reserved Shares for Investors

Investors can bid for a minimum of 165 equity shares and in multiples of 165 equity shares thereafter. Retail investors can invest a minimum of Rs 14,850 per lot and the maximum investment would be Rs 1,93,050 for 13 lots as they are allowed to invest up to Rs 2 lakh in an IPO.

The company has reserved upto 75 percent of total offer for the investment by qualified institutional buyers, 10 percent by retail investors and 15 percent by non-institutional investors.

5) Objectives of the issue

The company will utilise the net proceeds from its fresh issue towards repayment of borrowings (Rs 324 crore), and general corporate purposes.

The offer for sale money will go to selling shareholders.

6) Company Profile

Devyani International is the largest franchisee of Yum Brands in India and is among the largest operators of chain quick service restaurants (QSR) in India, on a non-exclusive basis, and operate 696 stores across 166 cities in India, as of June 2021.

Yum! Brands Inc. operates brands such as KFC (a global chicken restaurant brand), Pizza Hut (the largest restaurant chain in the world specializing in the sale of ready-to-eat pizza products) and Taco Bell brands and has presence globally with more than 50,000 restaurants in over 150 countries, as of December 31, 2020.

The company began relationship with Yum in 1997, with commencement of operations of first Pizza Hut store in Jaipur. It operated 284 KFC stores and 317 Pizza Hut stores, having an extensive presence in 26 states and three union territories in India as of June 2021.

In addition, it is a franchisee of the Costa Coffee brand (a global coffee shop chain with over 3,400 coffee shops in 31 countries) in India, which is owned by Costa, and operated 44 Costa Coffee stores as of June 2021. Despite the ongoing Covid-19 pandemic, it has continued to expand its store network and in the six months ended March 2021, it opened 109 stores in core brands business.

Its business is broadly classified into three verticals that includes stores of KFC, Pizza Hut and Costa Coffee (core brands) operated in India. Stores operated outside India primarily comprising KFC and Pizza Hut stores in Nepal and Nigeria are under its international business, and certain other operations in the food & beverage industry, including stores of own brands such as Vaango and Food Street come under other business vertical.

It has a strong presence in key metro regions of Delhi NCR (comprising Faridabad, Ghaziabad, Gurgaon, Delhi and Noida), Bengaluru, Kolkata, Mumbai and Hyderabad.

Core brands business, together with international business contributed 94.19 percent to revenue from operations in FY21.

7) Strengths and Strategies

a) The company has portfolio of highly recognized global brands catering to a range of customer preferences.

b) It is a multi-dimensional comprehensive QSR player.

c) It has presence across key consumption markets with a cluster-based approach.

d) It has been able to leverage substantial operating synergies across the brands it operates.

e) It has disciplined financial approach with focus on cash flows and returns.

f) It has distinguished board and experienced senior management team that has significant experience in all aspects of company's business.

Strategies

a) It intends to strategically expand store network of core brands business.

b) It intends to continue to improve unit-level performance.

c) It intends to focus on delivery channel for core brands.

d) It will continue to invest in technology to maintain its competitive advantage, and focus on improving overall technology infrastructure including digital and delivery capabilities.

8) Financials

Devyani International reduced its loss in FY21 to Rs 62.98 crore from Rs 121.42 crore in FY20. Revenue in same period declined to Rs 1,134.84 crore from Rs 1,516.4 crore.

Revenue from KFC brand increased to Rs 644.26 crore in FY21 from Rs 609.13 crore in FY20, but Pizza Hut's business dropped to Rs 287.9 crore from Rs 417.4 crore and Costa Coffee's revenue declined to Rs 21.4 crore from Rs 81.96 crore in the same period.

Total gross margin from core brands business improved to 69.87 percent in FY21 from 69.55 percent in FY20.

9) Promoters and Management

Ravi Kant Jaipuria, Varun Jaipuria, and RJ Corp are the promoters of the company, having 75.79 percent shareholding as of now.

Among public shareholders, Dunearn held 14.07 percent stake in the company, Yum India 4.57 percent, Khandwala Finstock 1.89 percent, and Sabre Investment Consultants LLP 1.52 percent.

Ravi Kant Jaipuria is a Non-Executive Director and Chairman of the board of the company. He has over three decades of experience in conceptualizing, executing, developing and expanding food, beverages and dairy business in South Asia and Africa.

Varun Jaipuria is a Non-Executive Director of the company. He has 12 years of experience in the soft drinks industry and has also completed a program for leadership development at the Harvard Business School.

Raj Pal Gandhi is a Non-Executive Director of the company. He has over 28 years of experience with one of group companies (Varun Beverages) and has been instrumental in strategizing our diversification, expansion, mergers and acquisitions, capex funding and institutional relationship. He also has experience in the field of finance and accounts. Prior to this, he has worked with Electronic Trade and Technology Development Corporation, and Uptron Powertronics.

Virag Joshi is the Whole-time Director (President & CEO) of the company. He has been a key strategist in expansion of Pizza Hut, KFC, Costa Coffee outlets from a small base of five restaurants in 2002 to 600 plus outlets in last 19 years. He has been earlier associated with Indian Hotels Company, Domino’s Pizza India, Milkfood, and Priya Village Roadshow.

Manish Dawar is the Whole-time Director and Chief Financial Officer of the company. He is a Chartered Accountant and a member of the Institute of Company Secretaries of India. He has worked in various corporate setups including Reebok India, Reckitt Benckiser, Vedanta, DEN Networks and Vodafone India.

Ravi Gupta, Rashmi Dhariwal, Naresh Trehan, Girish Kumar Ahuja, and Pradeep Khushalchand Sardana are Independent Directors on the board.

Rajat Luthra is the chief executive officer of the KFC business of the company. Previously, he has been associated with Hindustan Lever, Barista Coffee Company, Celio Future Fashion. Domino’s Pizza India, Essar Telecom Retail, Quality Inns India, Sterling Catering Services, and The Mobilestore Limited.

Amitabh Negi is the chief executive officer of the Pizza Hut business of the company. Previously, he has been associated with Specialty Restaurants, Dominos Pizza India, PICK ‘N’ EAT, Dodsal Corporation, Amalgamated Holdings, Serge Enterprise, Sbarro Restaurants (India), and Yum Restaurants (India).

10) Allotment, refunds and listing dates

Devyani International will finalise the IPO share allotment around August 11, and the funds will be refunded or unblocked from ASBA account on August 12, 2021.

Equity shares issued will be credited to the demat accounts of eligible investors on August 13, and the trading in shares will commence with effect from August 16.

Kotak Mahindra Capital Company, CLSA India, Edelweiss Financial Services, and Motilal Oswal Investment Advisors are the book running lead managers to the issue.