Devyani International Q4 FY26: KFC leads the recovery as the group prepares for a merger-led scale-up

Devyani International Limited closed Q4 FY26 with a sharper operating narrative than earlier quarters: KFC in India returned to positive same-store sales growth, the international business crossed a new quarterly revenue milestone, and the company reiterated its timeline for the proposed merger with Sapphire Foods. Financially, the quarter showed strong growth in revenue, even as profitability remained pressured at the consolidated level for the full year.

In Q4 FY26, consolidated revenue from operations rose 18.5% year on year to INR 1,436.9 crore. EBITDA for the quarter was INR 229.5 crore, translating into a 16.0% EBITDA margin. The company reported a loss after tax of INR 9.8 crore in Q4. For FY26, revenue from operations reached INR 5,611.5 crore, while the company reported a loss after tax of INR 42.5 crore, reflecting the weight of depreciation, finance costs, and operating deleverage in parts of the portfolio.

The operating footprint expanded through FY26, with Devyani ending March 2026 at 2,256 stores globally, after adding 217 net new stores during the year. Management described this as calibrated expansion, with an emphasis on protecting unit economics and improving store quality.

KFC India: dine-in focus drives the best SSSG in 14 quarters

KFC India was the key bright spot. In Q4 FY26, KFC India reported revenue from operations of INR 585.5 crore, up 14.6% year on year. Same-store sales growth was +4.9%, the strongest in the last 14 quarters as highlighted by management. Brand contribution margin improved to 17.0% in the quarter.

A key management takeaway from the call was a deliberate shift in channel strategy. The company indicated it reduced online promotions and increased the intensity of in-store value propositions to give customers a stronger reason to dine in. Management stated it is monitoring whether this improvement sustains and noted that early trends after the quarter were encouraging.

Operationally, the network stood at 783 KFC stores in India at year-end.

Pizza Hut India: consolidation continues while operations reset

Pizza Hut remained a weaker piece of the India portfolio. Q4 FY26 revenue from operations was INR 169.2 crore, and same-store sales growth was -3.7%. Management attributed the quarterly negative brand contribution primarily to operating deleverage from lower same-store sales.

The strategic direction for Pizza Hut was clear and numeric: management stated it is not planning to add any net new Pizza Hut stores in calendar year 2026 and will focus on portfolio consolidation and operational discipline. In the call, management also spoke about going back to basics on the product and quality stack, including reassessing dough, cheese, and toppings, along with store staff retraining and customer experience work.

International business: revenue crosses INR 500 crore in a quarter

The international operations delivered another quarter of scale-up. Q4 FY26 international revenue from operations was INR 503.3 crore, up 20.0% year on year. Brand contribution for the quarter was INR 89.0 crore, and brand contribution margin improved to 17.7%.

Management highlighted strong growth in Nepal and continued momentum in Thailand. The international store count ended Q4 at 399.

Own brands and franchisee brands: BBK turnaround and cost pressure in coffee

The own brands segment reported Q4 FY26 revenue from operations of INR 91.1 crore. Management stated that Biryani By Kilo has moved from loss-making to positive brand contribution and that the company has initiated measured offline expansion through smaller Express formats under test. The investor presentation also notes that own brands stores include 20 BBK express format stores.

The franchisee brands segment, which includes Costa Coffee, reported Q4 FY26 revenue from operations of INR 53.7 crore. Management highlighted that elevated coffee and cocoa prices pressured input costs and reduced gross margins year on year, though the portfolio continued to generate brand contribution.

Financial snapshot

Merger with Sapphire Foods and leadership changes: the DIL 2.0 agenda

The proposed merger with Sapphire Foods remained central to management commentary across the presentation and the call. The chairman described it as a combination of two scaled and complementary platforms, expected to unlock synergies, strengthen execution, and expand geographic reach. Management stated the process is progressing as planned, with filings completed with stock exchanges and the CCI filing to follow post approvals. The company reiterated its expectation to complete the merger by the end of the current fiscal year.

Alongside the merger, the company outlined a management team refresh. In the call, the CEO described hiring for key skill gaps including a CTO, a CMO who will also oversee Pizza Hut operations, and leaders for Costa and smaller brands, along with a newly announced COO. The stated objective is to build a future-forward organization driven by technology, automation, and data-led decision-making.

A visible operational marker of this technology push was the disclosure that more than 80% of KFC stores now have digital kiosks. Management also referenced DIL Commerce as a unified technology platform intended to strengthen execution and customer engagement.

Store expansion guidance and portfolio pruning

For FY27, management guided to approximately 200 to 225 net new stores as DIL on a standalone basis, with KFC expected to contribute roughly 100 to 110 of these additions, and the rest driven by Costa Coffee, Biryani By Kilo, and international operations.

The company also communicated portfolio pruning decisions. Management stated it has decided to discontinue Tealive in India and Thailand and expects this to happen in the next quarter. In addition, management acknowledged that the negative store count in Q4 was driven by the closure of loss-making stores and a reset of business development strategy toward higher-quality store additions.

Risks discussed: gas disruption and commodity inflation

The call also surfaced operating risks. Management discussed a significant gas supply disruption linked to geopolitical events, stating the impact was managed with minimal business disruption but that some issues persist. The company is evaluating electrical equipment and dual-fuel options, and it cited steps taken in Biryani By Kilo to reduce dependence on gas.

For the coffee portfolio, management explicitly noted the inflation in coffee and cocoa prices as a factor impacting gross margins.

Takeaways

Devyani International’s Q4 FY26 message was about momentum and preparation. KFC in India delivered a measurable SSSG recovery driven by a shift back to dine-in value and tighter promotion governance. The international business scaled to a new quarterly revenue level with improving contribution margins. At the same time, Pizza Hut remains in consolidation mode, and the group’s FY26 loss underlines that topline growth has not yet translated into consistent consolidated profitability.

The next year is likely to be defined by three measurable milestones that management itself has put on the table: completion of the Sapphire Foods merger by the end of the current fiscal year, delivery of 200 to 225 net new stores in FY27, and evidence that the KFC SSSG recovery can sustain beyond a single quarter. The discontinuation of Tealive and ongoing closure of loss-making stores also signals a willingness to prune, even as the company pursues scale.