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Analyst Meet / AGM - Analyst Meet

Expansion plan remains on track despite pressure on discretionary spending

Speciality Restaurant

04-Jul-2013, 03:37
In interaction with Anjan Chatterjee MD
Key highlights

The company has 96 Restaurants as on Mar'13 and opened 4 more in Q1 FY'14 and 50 of them are Mainland China. About 60% of revenue come from its flagship brand Mainland China, 10% from Oh! Calcutta and Sigree each and rest from other formats.
Average churn for Mainland China is about 1.5 and average bill per table is about Rs 675. For Oh! Calcutta, the average is about 1.02. For FY'14, the churn depends a lot more on how the corporate spending happens as while week ends are full, the weekdays needs lot of help from corporate spending. The returns are very high in international markets as they work on high margin.
Internationally, company has 1 Restaurant in Bangladesh and will roll out few in JV format in Dubai, 1 in Africa and also probably in US as well in FY'14.
Various initiatives have been taken by the company to save on costs. Instead of hiring, work has been distributed among existing employee through incentives, technology has been used like I pads being used instead of menu card so price and items can be changed frequently and does not require printing. Also suppliers have been made aware of the situation and are working with us closely to restrict the landed costs of raw material for us to the extent.
Discretionary spending and lack of confidence within India, is hurting the sales for the company to a certain extent. For example with by and large no bonuses being paid to IT professionals, sales in Banglore and Karnataka is very much affected.
Company so far has not taken any price hikes, but the hike is surely to happen may be in H2 FY'14. Also company came up with regular and large portion platters, so to some extent that helps.
Company still had about Rs 120 crore money left as on Mar'13 and will be used for roll out of restaurants. About 16 new such restaurants are planned for FY'14. As per the management, while macro environment is challenging, it will not remain for long. And being debt free, surplus cash and current environment gives those low rentals and other favorable conditions when cash is being paid upfront. So the expansion program remains intact despite challenging macro environment.
For FY'14, while the company is trying all its best to increase the cover per restaurants, macro is very challenging. Various ad and festival campaigns will be initiated in FY'14 to create more brand awareness. Sigree and small outlets will be a part of Tier 2 and 3 cities.
Through cost control and price adjustments, focus will be given to retain the operating margins at the current level, which is very difficult to maintain otherwise, as food inflation is yet not seen coming down.
Overall, there can be some quarterly variations, but annually and on long term basis, the company is expected to report strong growth.