Devyani International Q1 FY27: Growth returns, margins hit a new high

Devyani International Limited (DIL) started FY27 with a strong quarter, extending the momentum it built in the second half of FY26. In Q1 FY27, consolidated revenue from operations rose to INR 1,580.5 crore, up 16.5% year-on-year. Profitability improved as well. Consolidated EBITDA reached INR 254.8 crore, with an EBITDA margin of 16.1%, which management described as the company’s highest ever.

The quarter’s tone was defined by two parallel narratives. The first was operational progress. Same-store sales growth (SSSG) turned positive across most of the portfolio, and brand contribution expanded at the consolidated level. The second was caution. Management repeatedly highlighted the volatility in the operating environment, citing cost inflation in LPG and wages, and broader macro risks such as crude oil and currency pressure.

Consolidated performance: better brand contribution, higher operating EBITDA

DIL’s consolidated gross margin improved to 69.1% in Q1 FY27 versus 68.2% in Q1 FY26. Brand contribution margin expanded to 14.2% from 13.1% a year earlier. Management attributed the improvement to better contribution delivery across brands and effective control of overheads.

Operating EBITDA was also highlighted as a key milestone. The company reported operating EBITDA of INR 151.1 crore, up 38% year-on-year, implying an operating EBITDA margin of 9.6%.

A key strategic takeaway from the quarter was the company’s deliberate rebalancing toward dine-in. Management stated that delivery, at current levels, has begun to cannibalize dine-in sales. As a result, marketing spending and promotions have been recalibrated to drive dine-in visits through exclusive campaigns and offers.

KFC India: positive SSSG and higher dine-in salience

KFC remains the largest contributor within the India business. In Q1 FY27, KFC India revenue rose to INR 684.2 crore, up 11.7% year-on-year. SSSG improved to 3.3%, and average daily sales (ADS) in Q1 FY27 was reported at 98,000 per store per day.

Channel mix continues to shift in line with management’s stated priorities. Off-premise mix declined to 43% in Q1 FY27 from 46% in Q1 FY26, while on-premise increased to 57% from 54%. Management described the dine-in shift as a key lever for both growth and profitability.

Margins for KFC India also strengthened. Gross margin improved to 69.4% from 67.1% a year ago. Brand contribution rose to INR 115.4 crore and brand contribution margin was 16.9%.

On the concall, management linked the next leg of margin expansion to ADS improvement. It reiterated that moving KFC ADS toward 105,000 to 110,000 is a meaningful threshold for higher contribution margins, though it acknowledged that inflation and macro conditions can shift the economics over time.

Pizza Hut India: a reset in progress, with store rationalisation continuing

Pizza Hut remains the most visible drag in the India portfolio. In Q1 FY27, Pizza Hut India revenue was INR 184.3 crore. While SSSG remained negative at minus 2.2%, management noted that it was sequentially improving.

Gross margin stayed high at 76.3%, but the brand posted a brand contribution loss of INR 3.6 crore. Management attributed the weak contribution to operating deleverage and higher costs, despite gross margin strength.

Store count continued to decline, with Pizza Hut stores reducing to 626 as of June 30, 2026 from 639 as of March 31, 2026. Management described this as part of an ongoing right-sizing effort.

Importantly, Pizza Hut’s recovery is being positioned as structural rather than tactical. Management said the brand is in a back-to-basics reset focused on product, ingredients, and innovation, and also stated that a stronger push behind Pizza Hut is expected in FY28 after the proposed merger with Sapphire Foods.

Own brands and franchise brands: BBK and Vaango show traction

The own brands portfolio, which includes Vaango and Biryani By Kilo (BBK), continued to show improving trajectory. In Q1 FY27, own brands revenue from operations was INR 97.8 crore and brand contribution was INR 9.9 crore, implying a brand contribution margin of 10.2%.

SSSG was positive for both major own brands: BBK reported SSSG of 7.2% and Vaango reported 7.1%. Management also highlighted experiments in format expansion. BBK Express, described as a small box, lower capex format, is being tested in food courts. The company is also testing BBK in dine-in and airport locations, and plans a vegetarian portfolio test during Shravan and Navratri.

Franchise brands, which include Costa Coffee, reported revenue of INR 54.9 crore in Q1 FY27. Costa Coffee’s SSSG was 10.2%. However, management noted that higher input costs impacted the gross margin for this segment.

International business: another quarter of 20% plus growth

DIL’s international business remained a key growth driver. In Q1 FY27, international revenue from operations increased to INR 523.0 crore, up 20.7% year-on-year. Brand contribution improved to INR 94.9 crore and the brand contribution margin expanded to 18.2% from 16.7% a year ago.

The company ended Q1 FY27 with 400 international stores, adding 2 net new stores in Thailand, while Nigeria saw a net reduction of one store. Management stated it has been happy with Thailand’s performance and would be open to evaluating expansion opportunities if approached, though it clarified that no formal process was underway.

Management priorities and merger timeline

Management outlined five priorities for the remainder of FY27: execute store openings as per guidance, maintain positive SSSG, improve efficiency via technology and cost control, strengthen organization depth, and prepare for the merged entity.

On the proposed merger with Sapphire Foods, the chairman stated that approvals from NSE and BSE were received in June, and that the process remains on track with a stated target to complete by end of FY27.

Takeaways from Q1 FY27

DIL’s Q1 FY27 results reflect a business that has regained operating momentum, with growth and profitability improving together. The most important drivers were positive SSSG across much of the portfolio, improving KFC profitability, steady international execution, and a clear strategic push to rebuild dine-in economics.

At the same time, management’s commentary underscores that the environment remains uncertain. LPG and wage inflation, macro volatility, and the need to structurally fix Pizza Hut remain central variables for the year. The next few quarters are likely to be evaluated through a simple lens: whether the dine-in strategy sustains ADS improvement and whether the company advances toward merger completion while keeping execution steady across brands.