Top QSR firms to invest ₹5800 cr, add 2,300 stores in two-year expansion drive, says Icra
1 min read 20 Apr 2023, 12:44 PM IST- The expansion strategy will target large and small cities alike, capitalizing on increased affordability and consumer demand for fast food.
PremiumNew Delhi: India's top quick-service restaurant (QSR) companies are poised to add approximately 2,300 stores between FY23 and FY25, fueled by an estimated ₹5,800 crore capital expenditure, according to a recent note by ratings firm Icra Ltd.
The expansion strategy will target large and small cities alike, capitalizing on increased affordability and consumer demand for fast food.
Icra's report evaluated the combined plans of five major domestic QSR players in the organized segment, including Jubilant Foodworks Ltd, Devyani International Ltd, Sapphire Foods India Ltd, Restaurant Brands Asia Ltd, and Westlife Foodworld Ltd.
Jubilant FoodWorks has announced its intention to open 250 Domino's pizza chain stores in India within the next 12-18 months, with a planned ₹900 crore capex. The company also aims to expand its Popeyes chain nationwide, targeting 3,000 Domino's stores in the medium term. Westlife Foodworld, operator of McDonald's outlets in south and west India, revealed plans to add 250-300 stores, primarily in small towns, over the next five years. The firm expects to double sales to over ₹4,000 crore, investing ₹1,400 crore towards network expansion, store re-imaging, and technology advancements.
Suprio Banerjee, vice president & sector head of Corporate Ratings at Icra, cited favorable demographics, steady urbanization, rising per-capita GDP, and significant headroom for QSR penetration as key factors driving investment in the industry.
The majority of capex is anticipated to be funded through internal accruals and cash reserves, raised via pre-IPO and IPO routes over the past two fiscal years.
The projected capex for FY23-25, excluding refurbishment costs, stands at ₹1,800 to ₹2,000 crore per annum, nearly 2.5 times the levels seen in FY20 or pre-pandemic figures, Banerjee noted.
The domestic QSR industry experienced a robust revenue recovery in FY23, backed by evolving food consumption habits, favorable demographics, enhanced purchasing power, consistent urbanization, and new store openings. Icra estimates an impressive 30-35% year-on-year revenue growth for FY23 and forecasts a still-strong but moderated 20-25% growth in FY24, driven by increased demand and rapid store expansion.
The rating agency, however, warned of potential risks, including a new pandemic wave or significant purchasing power reduction due to high inflationary interest rates, which could impede growth in the sector.