Company Update : Devyani Ltd By Motilal Oswal Financial Services Ltd
DEVYANI acquires majority stake in Sky Gate Hospitality
Devyani International (DEVYANI) has announced a strategic acquisition of an 80.72% controlling stake in Sky Gate Hospitality Pvt. Ltd., the owner of brands such as Biryani By Kilo (BBK), Goila Butter Chicken, and The Bhojan.
Transaction Highlights:
* Acquirer: Devyani International Ltd.
* Seller: Sky Gate Hospitality Pvt. Ltd.
* Deal Value: INR4.2b
* Consideration: Equity swap via preferential allotment of DIL shares (@INR ~176.78/share), leading to a ~1.93% dilution for existing shareholders
* Expected Closure: By May 2025
Sky Gate Portfolio - Sky Gate operates a multi-brand platform with 100+ outlets across 45 cities, including ~35 dine-in locations. The company operates five brands — BBK, Goila Butter Chicken, The Bhojan, Get-A-Way (Peanutbutter), and Krazy Kebab Co. As part of the acquisition, DEVYANI will integrate three core brands: BBK, Goila Butter Chicken, and The Bhojan, while the remaining two will be disinvested over the next nine months.
BBK:
* Premium biryani chain with a differentiated ‘dum-cooked in handi’ offering
* Cook-to-order model, delivery-first with pan-India presence
Goila Butter Chicken:
* Premium North Indian cuisine brand founded by celebrity chef Saransh Goila
* Healthier butter chicken variants and a wide array of Indian main courses
The Bhojan:
* Affordable, pure-veg meals and snacks brand
* Targets high-frequency, value-conscious consumers
Strategic Rationale:
* Enhances DIL’s positioning in the Indian cuisine segment, complementing its existing QSR portfolio
* Provides access to the INR200-250b largely unorganized biryani market with high growth potential
* Leverages the existing cloud kitchen infrastructure, enabling cross-utilization across DIL’s food court and delivery networks
* Potential for margin expansion via operational synergies (supply chain, finance, HR) and maturing store base
* BBK remains loss-making due to accelerated expansion, but improving gross margins and DIL’s back-end strengths pave the way for profitability
* Enables DIL to scale its non-Yum! portfolio in a disciplined manner, enhancing brand diversification and long-term growth visibility
* Financials: Sky Gate recorded revenue of INR1.3b/INR2.2b/INR2.7b in FY22/FY23/FY24. The company is currently operating at a loss. In FY25, the company recorded sales of INR2.8b from the three brands under acquisition.
* Outlook - The acquisition offers a high-growth runway for DIL in Indian cuisine, supported by BBK’s strong brand equity, Goila’s premium appeal, and The Bhojan’s affordability. Near-term earnings may see limited impact due to dilution and integration costs, but long-term strategic benefits remain compelling.
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