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Devyani International Limited (DIL), the largest franchisee of Yum Brands, on July 19 announced that it has received market regulator Securities and Exchange Board of India’s (Sebi) nod for its Initial Public Offering (IPO). The firm had filed its DRHP with Sebi on May 19, 2021.

The IPO would comprise of a fresh issue of Rs 400 crore and an offer for sale of up to 12,53,33,330 shares by a wholly-owned subsidiary of Temasek Holdings (Dunearn Investments Mauritius Pte) and RJ Corp. As per sources, the IPO size would be about Rs 1,400 crore.

Devyani International, operates core brands such as Pizza Hut, KFC, Costa Coffee besides its own brands such as Vango and Food Street. The QSR (Quick Service Resturants) company has 692 stores in 26 states across 155 cities in India, Nepal and Nigeria.

DIL commenced its relationship with Yum in 1997 with its first Pizza Hut store in Jaipur, it’s also a franchisee of the Costa Coffee brand and currently operates 297 Pizza Hut stores, 264 KFC stores and 44 Costa Coffee as on March 31, 2021 in India. Between March 2019-2021 the core brand stores saw a CAGR (compounded annual growth rate) growth of 13.58% from 469 stores to 605 stores and the company attributes its success and continuous growth effort to its 9,356 employees.

Devyani is the single largest QSR company in India to be listed on Swiggy and was amongst the largest QSR companies in India to be listed on the Zomato platform in 2019 and 2020.

Kotak Mahindra Capital Company, CLSA India, Edelweiss Financial Services, Motilal Oswal Investment Advisors are investment bankers appointed to the issue.

QSR players

While IPO frenzy investors will seize every opportunity, they get to benefit from the ongoing IPO rush. Here is a look at how QSR companies listed on the exchanges are performing

Jubilant FoodWorks & Burger King have been multibaggers from this sector. While The restaurant industry which is facing burnt of lockdown has a very bright future, as India’s spend on food consumption is 1/4th of India’s GDP. Of this only 10% is on food services (delivery and dine-out) vs. 54% for the U.S. and 58% for China. With much busier lifestyles, higher disposable incomes and quirky food choices this gap is going to narrow from here.

According to a report released by Kotak Institutional Equities India’s organized food services market is expected to grow at about 10.5% CAGR to US$37 bn (Rs2.8 lakh crore) over FY2020-25E, capturing a 46% market share, up from 40% at present. Within the organized segment, chains can potentially grow at 13% CAGR to US$9.5 bn (Rs71,600 crore), capturing 12% share in the overall food services market and a 26% share in the organized food services market, up from 9% and 23%, respectively.

“Bottom-up analysis of the market opportunity for western QSRs (Quick Service Restaurants) across 541 districts in India indicates potential for over 50% store growth by FY2025E,” stated the report.