• he Restaurant industry is the only industry that is not allowed the benefit of input tax credit and hence has to bear the burden. This sudden change in the regulation by the Government has led to a substantial increase in cost of opera ons and also becoming detrimental for expansion and growth because of increase in project costs making it unviable.
  • Your company continued to face challenging environment during the year under review primarily attributable to reduction in discretionary spends of consumers as a result of inflationary trends, uncertainty in the markets on account of the lingering effects of demonetisation and confusion around GST, increase in lease rent and all other operational costs due to reversal of input tax credit. This resulted in same store sales growth remaining in the negative territory due to lower foo alls during weekdays.
  • Some of the other factors that played a major role were extended break-even period in some of the new restaurants, impairment of Investment and Receivables, reversal of Deferred Tax Asset, Share of Loss in Joint Venture company all of which resulted in a loss during the financial year 2017-18.
  • Despite adverse economic factors and structural changes in the taxation regime in the country, your Company continues to combat the same focussing on innovative offerings to enhance guest experience together with it’s efforts on cost rationalisation for improving operational efficiency.
  • The Indian food industry landscape is dominated by the unorganised sector, is experiencing a gradual shift with the expansion in the market share of organised players. Owing to the large consumer base and significant growth potential, the food service market in India has attracted a large number of foreign players to launch their opera ons. International as well as domes c organised food service players are looking to expand their operations in India by opening new outlets, engaging in partnerships, employing more manpower etc., which would help fast track the growth of organised food service sector in India.
  • The market segment of the organised food service industry is dominated by Casual Dining Restaurants with 60% market share followed by Premium Casual Dining Restaurants at 15% and Quick Service Restaurants at 12% while Cafe chains at 8%, Fine Dining Restaurants at 3% and Frozen desserts and ice-creams form 2%.
  • POH, (Progressive Oriental House) as continuation of our determination to lead in Chinese and Pan Asian Market in India, the Company has launched a new boutique oriental restaurant. The restaurant is targeted towards crème de la crème and High Networth Individuals, who are looking for newer flavours and experience.
  • Gong, sacred chinese gongs are inscribed with the Mandarin chinese characters called Tai Loi, which means, happiness has arrived. GONG- Modern Asian takes you to a new level of happiness with its high energy ambience that is a contemporary take on traditional Japanese temple architecture and diverse Asian flavours that are prepared using western cooking techniques and presentations to take you journey through the mysterious culinary traditions of the Far-East.
  • Hoppipola which was launched to attract younger genera on has seen one more outlet opened during the year. It is an All Day Bar serving finger food, bar nibbles and innovative mocktails. Its target market is those of young-at-heart.
  • The new restaurants which are being launched are of a more compact size to reduce the fixed cost. Similarly, every aspect of cost is being looked into and measures to further enhance efficiencies are being implemented. 
  • GDP growth, primarily fuelled by consumption, is expected to touch a respectable mark of 7.5% in 2019, up from 6.5% in the previous year. An improvement in the macro-economic fundamentals is expected to spur demand by improving the overall consumer sentiment in the financial year 2018-19. The Company expects demand to pick up as and when the disposable income in the hands of consumers increases due to pick up in economic activity and various government initiatives in the areas of ease of doing business, accelerating the growth of the industry through single window clearance, reduction in number of licenses required, infrastructure, further opening of FDI, targeting in a on for monetary policy, smart cities campaign, urban development, encouraging start-ups and skill development etc.
    The Company with its set of brands in different cuisines, formats and segments is well placed to leverage the opportunity in food and beverage domain.

 

My view: Company has shown signs of revival in the Dec 2018 quarter. Whether the strong profitability sustains or not, remains to be sign. Risk reward seems to be favourable at the moment and if the new brands such as POH, Gong etc take off, the payoff can be huge.
Related interview: https://www.youtube.com/watch?v=UCIFy8jaTgk

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