DIL returns to pre-tax profit as operating EBITDA rises 34%

Devyani International Limited returned to profit before tax of Rs 5.7 crore in Q2 FY27 from a Rs 27 crore loss a year earlier, as operating earnings before interest, tax, depreciation and amortisation rose 33.9% to Rs 125.1 crore. Revenue from operations increased 10.4% to Rs 1,519.4 crore despite inflation pressures cited by management.

How did DIL return to pre-tax profit in Q2 FY27?

DIL returned to a quarterly pre-tax profit because operating EBITDA grew faster than revenue and margins increased from the prior year. Operating EBITDA was Rs 125.1 crore in Q2 FY27, against Rs 93.4 crore in Q2 FY26, while its margin rose to 8.2% from 6.8%.

Revenue from operations reached Rs 1,519.4 crore, up from Rs 1,376.8 crore in Q2 FY26. Gross margin increased by 70 basis points, with one basis point equal to one-hundredth of a percentage point, to 68.5%, and brand contribution rose 22.7% to Rs 197.6 crore.

Reported EBITDA, a separate measure from operating EBITDA in the presentation, rose to Rs 228.6 crore from Rs 194.3 crore. Its margin increased to 15.0% from 14.1%, while profit before tax moved from a Rs 27 crore loss to a Rs 5.7 crore profit; the presentation does not give a line-by-line reconciliation between EBITDA and pre-tax profit.

The quarter was lower sequentially in absolute revenue and operating EBITDA. Q1 FY27 revenue was Rs 1,580.5 crore and operating EBITDA was Rs 151.1 crore, compared with Rs 1,519.4 crore and Rs 125.1 crore respectively in Q2 FY27, although Q2 showed year-on-year margin expansion.

What drove DIL's sales growth and store additions?

DIL's Q2 sales growth was accompanied by 70 net new units, meaning gross additions less closures, taking the global estate to 2,325 stores at September 30, 2026 from 2,255 at June 30, 2026. India added 68 net units during the quarter, while international operations added two.

KFC added 50 net new India stores, lifting its estate to 844 from 794 at June 30, 2026. The Yum Brands portfolio, comprising KFC and Pizza Hut, added 56 stores; franchisee brands added five, DIL's own brands added seven, and food courts and airports had no net additions.

Management said India same-store sales growth, or SSSG, ranged from 4% to 9% across its brand portfolio except Pizza Hut, whose performance improved sequentially. KFC India reported 4.4% SSSG in Q2 FY27, reversing a 4.2% decline in Q2 FY26, while Costa and Biryani by Kilo each recorded SSSG above 8.0%.

KFC India revenue rose to Rs 642.4 crore in Q2 FY27 from Rs 572.3 crore a year earlier, though it was below Rs 684.2 crore in Q1 FY27. On-premise sales accounted for 56% of KFC India revenue, up from 54% in Q2 FY26, and the chairman described group growth as transaction-led with rising on-premise sales.

DIL linked customer recruitment to value-led products, including the Rs 99 KFC Krisper meal. Pizza Hut launched its Triple Spice range and Biryani by Kilo introduced Sattvik Biryani, while India store count reached 1,923 at September 30, 2026, compared with 1,796 at the end of Q2 FY26.

Which DIL business grew faster in H1 FY27?

DIL's international business grew faster by revenue in H1 FY27, while India remained the larger business in rupee terms. India revenue increased 12.0% year on year to Rs 2,093.5 crore, while international revenue increased 16.9% to Rs 1,031.8 crore.

India operating EBITDA rose 31.1% to Rs 146.4 crore from Rs 111.6 crore, and its margin increased to 7.0% from 6.0%. The segment had 1,923 stores at the end of Q2 FY27, 7.1% more than the 1,796 stores at the end of Q2 FY26.

International operating EBITDA increased 42.1% to Rs 129.7 crore from Rs 91.2 crore. Its operating EBITDA margin was 12.6%, compared with 10.3% a year earlier and 7.0% for India in H1 FY27; international store count rose to 402 from 379.

At the consolidated level, H1 FY27 revenue was Rs 3,099.9 crore, up 13.4% from Rs 2,733.7 crore. Reported EBITDA rose 21.1% to Rs 483.4 crore and its margin increased by 100 basis points to 15.6%, while the chairman cited first-half pre-tax profit of Rs 29 crore against a Rs 24 crore loss in the previous-year half.

What could affect DIL's performance in coming quarters?

DIL faces food, fuel and wage inflation, according to the chairman, who also cited pressure on household budgets and job losses related to artificial intelligence adoption. Management expects discretionary spending to remain under pressure as food inflation firms and interest rates begin to rise.

Higher same-store sales and cost management helped mitigate raw-material and wage inflation in Q2 FY27, according to management. Consolidated gross margin was 68.8% in H1 FY27 versus 68.0% in H1 FY26, but Q2 gross margin of 68.5% was below Q1 FY27's 69.1%.

The chairman also said heightened inspections by food authorities disrupted store operations during inspections. Management supported tighter hygiene and operational controls but said consistent application was necessary, identifying a separate operating issue from inflation and consumer demand.

DIL's stated response is sharper value at entry price points, consistent marketing and efforts to bring guests back into restaurants. The Rs 99 KFC Krisper meal and the 56% on-premise sales mix at KFC India in Q2 FY27 are the specific product and channel indicators disclosed alongside that approach.

Conclusion

DIL's Q2 FY27 results show a shift from a pre-tax loss to profit as operating EBITDA increased 33.9%, ahead of 10.4% revenue growth. Store expansion, positive same-store sales at KFC and other India brands, and higher brand contribution supported the result, while international operations delivered the faster first-half revenue and operating EBITDA growth rate.

What to watch next is progress toward management's FY27 target of 200 to 220 net new store additions, after 70 additions in Q2 FY27. Management also said pre-merger preparation was progressing and that it had received Competition Commission of India approval, while inflation, discretionary-demand pressure and inspection-related disruption remain unresolved factors.