Sapphire Foods India Ltd (SAPPHIRE) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day. You all have been connected to Sapphire Foods India Limited Q2 FY27 earnings conference call. The call will begin shortly. Please stay connected.
Moderator: Ladies and gentlemen, good day, and welcome to Sapphire Foods India Limited Q2 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Purohit from Sapphire Foods India Limited. Thank you, and over to you, sir.
Sanjay Purohit (Sapphire Foods India Limited): Good afternoon, everyone. Welcome to the quarter 2 FY '27 business performance highlights of Sapphire Foods. You all must have a copy of the presentation that we uploaded this afternoon. We delivered the best quarter of revenue growth, 20%, and adjusted EBITDA growth, 39%, since the COVID period, that is, since the last 16 quarters. Our quarter 2 revenue was 885 crores, as I said, up 20%. We added 15 KFC restaurants, one Pizza Hut in Sri Lanka. Our total restaurant count was 100 1,086 as of 30th September. Consolidated restaurant EBITDA was up 21% YoY. Margin was 11.5%, up 20 basis points. Consolidated adjusted EBITDA was 62.4 crores, up 39% YoY, and consolidated adjusted EBITDA margin was 7.1%, up 100 basis points. Consolidated EBITDA was 128.6 crores, 14.5%, and this grew, again, 21% YoY. Consolidated adjusted PBT was 12 crores or 1.4%, and consolidated PBT, which is post Ind AS, was minus 60 lakhs or minus 0.1%. I just wanted to give some context to what we are thinking as a organization at the moment. We are facing a difficult inflationary environment. That inflation is right across all our cost lines, starting with food inflation, start ting with minimum wage inflation in many states. Minimum wages have increased quite substantially, led by, say, Karnataka, where minimum wages have gone up by 26%. Our utilities costs have also increased significantly, gas as well as electricity. This inflationary environment is faced by every other every consumer company.
Sanjay Purohit (Sapphire Foods India Limited): for us, it translates into pressure on costs. For the consumer, also it translates into pressure on discretionary income, and in such environment, typically you find consumers going a little easy on spending on discretionary income categories. Therefore, driving growth is of primary concern in a environment like this. Our mindful emphasis has been on driving transaction growth, and through transaction growth same-store sales growth, and we've done that through compelling value offerings and also spending additional marketing money behind these value offerings. That is the reason why we've delivered our best quarter of growth. And if this growth sustains over a period of time, while perhaps in the coming quarters there might be pressure on margins, we believe that we can recover costs. Recovering growth is more difficult, and therefore, the foot is on the accelerator pedal to drive growth first and foremost. Let me now look at KFC. I am on slide number 19. KFC SSSG was 14%. But after we factor in the Navratri change of dates, so this year Navratri is in quarter three whereas last year was in quarter two, we get an upside because of that. If I factor that into account, we are close to double-digit SSSG. Now this again has been the best SSSG that we have seen over the last several quarters. What is heartening about this is that our dine-in, takeaway, or internally we call it DTA, dine-in plus takeaway, is higher than delivery. So our own asset, consumer coming to our own asset, that growth is higher than delivery. And this is again backed by a very mindful consumer recruitment strategy as we have outlined. This recruitment strategy, which is either focusing on everyday value at 99 or at 149 in Tamil Nadu, or disruptive abundant value on select days, is driving transaction growth, and we've also invested further marketing money over and above what is typically committed to promote this consumer recruitment. This is enabling KFC to drive to drive 14% SSSG, 26% overall SG, and after factoring Navratri, close to double-digit SSSG. I move to You can see some of the pictures of the offers, of the promotions, everyday promotions, as well as of the innovations. Digital kiosks, we continue to drive implementation in-store, and today we are 80% of our restaurants have digital kiosks. Now I'll hand it over to Vijay to take us through the financial numbers on KFC.
Vijay (Sapphire Foods India Limited): I am on slide number 25, which gives channel-wise sales mix. Dining and takeaway mix improved to 57% for KFC. This is on back of aggressive entry value promotions and offers in dining and takeaway exclusively. In terms of SSSG, 14%, but adjusted for Navratri impact, as Sanjay mentioned, high double-digit. Overall revenue growth of 26% for KFC. Gross margin improved to 67.7%, up by 50 basis points over last year, and restaurant EBITDA came in at 14.5%, up by 70 basis points over last year. And this is, as Sanjay mentioned, despite high inflationary scenario on energy specially and to some extent on raw material as well. Slide number 28 gives you four-year and five-quarter trend.
Vijay (Sapphire Foods India Limited): This is now fourth consecutive quarter of positive SSSG for KFC. And the heartening part is that this is on back of strong transaction growth and that too driven especially in dine in and take away and this augurs well for the brand as we move forward.
Sanjay Purohit (Sapphire Foods India Limited): Let's come to Pizza Hut and I'm on slide number 30. The Pizza Hut SSSG of 5% is the highest that we have seen in the last seven quarters. SSTG as in transaction, same store transaction growth is double-digit and includes positive transaction growth even in dine in and takeaway, again backed by value offerings, late night, additional marketing spends. From a, you can see some of the innovation that we have launched the three in one, triple spice pizza, some of the value promotions and Vijay will take us through the financials.
Vijay (Sapphire Foods India Limited): I am on slide number 34, channel-wise sales mix for Pizza Hut. Here the delivery mix has improved from 50% to 52% in the quarter and dine-in and take-away came at 48%. SSSG grew by 5% for the brand, this is highest in the last seven quarters and overall revenue growth improved to 7%. Gross margin was up by 190 basis points at 76.3% and restaurant EBITDA we made a loss of 2.8%. This was largely impacted by high inflation on energy cost, especially in case of Pizza Hut, more than even KFC, this brand got impacted. Slide number 37 gives you four year and five quarter trend. Now this is second consecutive quarter of positive SSSG for the brand and that too with double digit SSTG and that's the most encouraging part, including positive SSTG for dining as well. And this gives us confidence as we move forward.
Sanjay Purohit (Sapphire Foods India Limited): Sri Lanka business continues to deliver same-store sales growth. This quarter, we came in at 5% SSSG. Inflation, however, is a challenge in the short-term given the fall out of the Middle East war. However, we remain confident as in previous instances of when the economy has faced a challenge, the strength of the brand in the country has, and our focus on driving growth has resulted in stronger performance as the economic condition improved. There are several innovations that you can see on page 39 where we launch the pasta pizza and then some of the branding and promotions. We open one store in Dehiwala. And, Vijay just take us to the numbers.
Vijay (Sapphire Foods India Limited): Slide number 42, Lanka business channel-wise sales mix. So mix was largely stable, dine-in and takeaway at 61% and delivery at 39%. SSSG of 5%, and overall revenue growth of 9% in LKR terms. Gross margin largely remained stable, and restaurant EBITDA came in at 12.5%, impacted significantly by high energy and wage inflation that country has seen over last few quarters. Slide number 46 gives four year and five quarter trend. And while SSSG continues to be healthy, inflation has certainly created short-term margin challenges.
Sanjay Purohit (Sapphire Foods India Limited): In conclusion, when you look at our quarter two results, we have delivered again the best quarter of revenue growth, 20% and adjusted EBITDA growth of 39%. KFC, 14% SSSG, close to double digit factoring the timing shift of Navratra. Pizza Hut India, 5% SSSG, 7% overall revenue growth. Sri Lanka, 5% SSSG, 9% revenue growth. When we look in the future, cost inflation, we believe will peak in quarter three. However, we will be cautious from a pricing perspective because driving growth is paramount. Again, I want to repeat what I said in the beginning, in such inflationary environments, while there might be pressure on
104 more turns of this transcript: log in to Stocksigma to read the full call.