Thank you, Nirav. Welcome to Jubilant FoodWorks Q4 and FY26 earnings call for investors and analysts.

We are joined today by senior members of the management team, including our Chairman, Mr. Shyam S.

Bhartia; our Co-Chairman, Mr. Hari S.

Bhartia; our CEO and MD, Mr. Sameer Khetarpal; and our CFO, Ms.

Suman Hegde. Please note that this earnings call is scheduled for a duration of 45 minutes, and we will commence directly with the Q&A session.

Along with the financial results, we have also released a letter to our--

Nirav, am I audible now? Is it better?

Thank you. Please note that the earnings call is scheduled for a duration of 45 minutes, and we will commence directly with the Q&A session.

Along with the financial results, we have also released a letter to our shareholders, in which we have shared our outlook and have already answered certain pertinent questions about the performance. Hence, the participants are requested to limit the scope of discussion to only strategic questions, and count of questions to only two.

If you wish to seek any accounting clarification, kindly get in touch with the investor relations team later. A cautionary note before we move ahead: some of the statements made on today's call would be forward-looking in nature, and the actual results could vary from such statements.

I will now hand over the call to moderator to begin the Q&A session. Thank you.

Yes, sir. Good evening, Sameer and team.

You have highlighted in detail about the like-for-like performance. I just had one question to it with two sub-parts, that if I look at even the two-year CAGR, there has been a deceleration from 9% to 6% from Q3 to Q4.

Even if you bifurcate it both for dine-in, which is anyway sitting on a low base or that is not the case, and even with delivery that is say fallen from 28% YoY growth to 10%. If you could just give more clarity and detail about the sequential deceleration.

I understand the long-term 5% to 7%, but the sequential deceleration and both the sub-segments.

I think, again, see quarter-on-quarter is more noise, Nihal, right? Therefore, what we should look at is a full annual number, which actually for two years has been closer to 7%, right?

I think the double click on dine-in is more important, right? I think delivery continues to grow strong, right?

That's number one. That is our strength.

We continue to have very strong operating metrics. We continue to see strong like-for-like growth.

There are two underlying headwinds which are there, which we've called out, dine-in, takeaway. Second was the average order value drop.

The average order value drop because we have very consciously moved to match the competitors on the minimum order value of ₹99. Just to recall, our minimum order value was ₹149.

To gain market share, to make sure that we are building a business for longer term and acquire new customers, we have very consciously taken a call to reduce minimum order value from 149 to 99, and as a result, there was a drop in the average ticket size. That is the subtext to it.

Therefore, I'm not too worried on the variation of 9% to 6%. The real challenge to solve is the dine-in and takeaway sales.

Understood, Sameer. The other thought is that how was the discounting trends during this quarter?

To your dual goal of 5% to 7% growth and the 200 basis point margin improvement, can they be achieved simultaneously?

Yes, I think great question, right? From a priority standpoint, we prioritize growth.

From a growth standpoint, we prioritize volumetric growth, because we are building a business for the long run. You are absolutely right.

If you drop the minimum order value, it puts additional headwinds towards margins. We believe in our business where almost more than 50% of the cost is fixed cost, growth is the biggest driver of margins.

Hence, I continue to remain optimistic about driving both growth and margins. Just to remind you, there is the drag of new businesses like Popeyes, Hong's, and Dunkin', and we have taken very conscious calls to focus on few areas and drive profitability.

That drag or dilution is actually ahead of the plan. Again, I continue to be optimistic on achieving both growth and margins.

Sure, Sameer. I'll have more questions.

I'll just come back in the queue. Thank you.

Thank you, Nihal.

Hi, team. Must compliment you on the shareholders' letter.

It was extremely nicely done. I just had two questions.

First, Sameer, on this the outlook as we speak. You have cited that there are some near-term headwinds.

There is competition that has changed. Wanted to understand how do you look at store additions in this context and what is the pace that you would be more comfortable with as we go forward would be the first question, and I'll come in the second later.

Avi, I think if I just cut the noise from all what's happening, right? There is one truth that Domino's has gained share.

It has gained share in the category. It has gained share in the QSR space.

We have a separate panel of 50,000 customers run by Nielsen. They're also indicating that we have gained share, and we have gained share materially in pizza as a category.

This allows us to expand more aggressively. This allows us to penetrate more and invest more in brand building, right?

From a store addition standpoint, I also check how the new stores that we have opened are doing. From all accounts, right, store addition, expansion is not a worry.

We have guided about 230 to 250 kind of restaurants this year.

We have mentioned that in the letter.

Okay. No, where I was coming from, Sameer, maybe I'm just clarifying on this question.

It was not on the quantity, but also on the type, because as we can see, delivery is where the growth has been. Does that require a reset in the way we look at store additions?

Does that mean we kind of look at change in capex? Hence, that's where I was coming from.

That was the underlying question. I'm sorry for not clarifying.

No problem, Avi. See we are constantly calibrating and learning, right?

If you look at our go-to model in large metros is actually a delivery carryout store, right? Unless and until it is a mall, if there is a food court or something.

We are opening more delivery carryout stores, which are about 600, 700 sq ft. When I joined the company 4 years ago, there were a lot of store approvals we were giving, which were 1,500, 1,600 sq ft.

Don't do that even in tier 3, tier 4 stores. We have also resized and remodeled our kitchens to be more efficient and put more seating space in front of the--

We are constantly calibrating our store format, store model. As a result, our capex per store has actually reduced year-on-year.

In fact, nearly 3 years in a row by 20%, right? It has come down by 20%, and we are constantly calibrating that.

There are places where, in fact, we also realized that we need to add more seats, we are also doing that. That's a constant exercise, Avi, in the company.

Got it, sir. Just a follow-up on some bookkeeping questions, in particular, on the gross margin.

You've seen a very healthy sequential margin expansion at the gross margin side. The drivers of it seem to be more stable and sustainable.

Does that mean that we should kind of look at this 75.5 as the more steady-state run rate as we go forward? That was the first part.

The second part is, if you could also give us just what is the inflation levels that we are looking at in the input cost so that we can better understand the near-term margin pressures? That's all from my side.

Avi, we had actually mentioned, if you recall, in our earnings call about three or four earnings calls ago that we'll improve the gross margin, right? This was a conscious choice we had taken.

For example, we had taken calibrated price increases in Volcano pizza. We had worked on our cost.

We have reduced wastages materially. We launched Big Big Pizza, launched sourdough pizza.

We launched some of the other more premium products. By a conscious effort of wastage reduction, launch of premium products, mix changes, and calibrated price increases, we have increased the margin.

That bit has happened. In terms of inflation, I think, at least, I don't have a very good handle on at this stage because the numbers are moving very quickly.

We've been hit the most in the energy cost, all right, which is very real, where the cost of LPG has increased, cost of PNG has increased. That is one additional calibration that we have to do in our system between electric ovens and gas-based ovens.

We are doing that. That is the biggest piece which has been hit.

If tomorrow a war were to die down and things were to go back to normal, we also know that the energy prices are at an all-time elevated level, it can also come down. It can work on both sides.

I think at least near-term inflation pressure is higher. To what extent, it's been very hard to deliberate, Avi.

The energy is definitely to the tune of 100 to 120 basis point or that hit we are already beginning to see come into the P&L.

Sorry, sir, I'm sorry, I missed you. You said 100 to 120 basis points hit from energy, right?

That's correct.

The price increases are around 1.2 percentage, so that should kind of help that offset.

We are taking price increases, right?

Suman, go ahead. Energy is, but also there are a couple of other things.

Commodities, I think we're all wait to see how it plays out in this. Right now, some amount of commodity inflation has come, but as you would all well understand covering the consumer sector that if petrol, diesel prices go up and as logistics cost goes up, across the board commodities will see further inflation.

We are also trying to model that, but we'll have to wait and watch while we continue to drive, of course, efficiencies at our end. The other big headwind which has been coming our way and, again, something we'll have to see how it materializes as consumer inflation goes up in the market is wage inflation, right?

That's also hit us. About 11 states have already increased minimum wages as the fiscal year started, plus the labor code also brought in further headwinds on the labor inflation.

Those are the two inflations which are already in. If I look at it back to your question on saying 120 bps on energy, we have taken 120 bps of pricing, although the pricing, of course, doesn't flow through into the margins to that extent, less than one flows through, but we also have other headwinds.

We do believe that in the near term, there might be some compression. Coming back to your point on structural improvements, they will stay the course.

Wastage reductions, improvement in mix and looking at the premium part of our portfolio, looking at productivity and better scale benefits from sourcing, that will continue to flow through and hopefully help mitigate some of the inflation coming our way.

Got it. The ranges that you could kind of give us on labor, that's the only broad request if possible or not?

On labor?

On labor, because you said 10 to 15 basis points or if I remember 10 to 20 basis points impact from the labor code, I'm just trying to appreciate the extent of the impact. It doesn't seem large.

That's why I was coming from. Is that understanding correct?

Yeah. Sorry.

Yes, labor code, but I'm getting into the math help you out with that. There are a few things on labor costs which are coming our way.

One is, of course, labor code, and absolutely right, is about 20 odd bps. The minimum wage increases that we have seen across some of the states that have already gone live, out of the 29, 11 have announced and we'll wait and see some more.

That's another 20, 30 bps, which is there. Then even the delivery mix headwind, right, we're sat at 76% delivery mix on that, and that's another inflation headwind on the labor cost, yeah?

There are three or four elements to it, which takes it higher than the 30 bps only on account of the labor code which we had indicated in the past.

Got it, Suman. That's all from my side.

I'll come back in the queue for other questions. Thank you very much, folks.

Hello. Yeah.

Thanks for taking my question. My first question is, through some of our channel checks, we saw that you took some price increases in April, which have been rolled back.

Could you walk us through what you observed during the period that led to the rollback? Dhruv,

there has been no prices which has been rolled back in April or anything. I think our price increases are very calibrated after 14 to 16 weeks of strong experimentation.

I think I can't recall something that has been rolled back.

No, we haven't rolled back anything. Is there any specific instance which makes you say that, Dhruv?

Some of my order history, in April, the garlic breadsticks, the ₹10 price reduction I saw in May versus my order in April.

That was a very store-specific and discounting-specific. We do a lot of this recalibration of prices, but at an overall level, there's not been any of that changes that have happened.

Good

you're spending time in ordering. No rollback.

We don't anticipate anything like that.

Okay. My next question is, as you mentioned that we are seeing inflation in some of the raw materials, milk price has gone up, and with petrol and diesel going up.

How should we think about SSG and margins going forward?

SSG, we've given our commentary already, right, on Q1 and see the longer term or the annual number, 5% to 7% remains. The quarter one, we've already given, it's running better than Q4.

In terms of margins, actually, we are modeling ourselves, Dhruv. There is things are changing very rapidly.

Suman spoke about the three elements where there is inflation, i.e., energy costs, labor, and commodities, right? On all three counts, what we are doing is to, of course, first tighten our belts and not pass on everything to the consumer, and the resultant will have to pass on to the consumer after doing a thorough calibration of price increases.

Okay. Yeah.

Thank you so much.

Hi, Sameer. The optimism doesn't fade, but the numbers are saying something else.

The way the story is panning out in terms of the war and everything along with the margin pressure, if I see your results this time around, right, the cost of goods so purchase have slowed down drastically from Q3 to Q4. I just want to know if that is sustainable, because I'm assuming Jan, Feb would have been very good for you in terms of the raw material inflation.

However, from March onwards, it would have started giving you jitters, right? Do you see similar trajectory in the month of April and May as well?

I think gross margin is sustainable. I think we answered that before.

I think your assumptions are incorrect when you say Jan, Feb, and March. I don't know where you have the data from.

At least in our P&L, it doesn't say that.

Okay. In terms of the margin, right?

We already read the shareholders' letter that there would be short-term margin pressures. I understand that one of the aspect of this is war and how the global economy pans out in terms of the energy cost and everything.

Do you see margin pressure for next couple of quarters or just one or two quarters at best, and then all the initiatives which the company is taking will get us back to 20%-plus margins?

Aditya, I think at this point in time, it's very difficult for anybody to anticipate, right? Every day the inflation numbers change.

We do hope that it'll stay only for the next couple of quarters, but if you guys have a view of the industry players, I'm sure you'll have a better view on that. Very difficult to predict.

Can't really give you a guidance of that sort at this time.

I think the broader story is Domino's is gaining share. The 5% to 7% is what the business we are building.

If we do that, we have enough levers to get back to the margin that we have projected.

See, Sameer, I understand that, and I completely appreciate the honesty behind all the statements which you're making, right? The Q4 like-to-like growth is only 0.2.

I'm hoping that Q1 wouldn't be that bad, right? That is well understood, right?

However, only if you provide some calibrated view about margins, right, and then only we can actually go ahead and reprice any inputs which we have at our end, and that is why the question around that, right? Q4 cannot be a benchmark.

A 0.2% like-to-like growth is not a benchmark. Q1 you will definitely do good, right?

If for the entire year, like-for-like growth has, like one of the other participant pointed out, Q3 to Q4 has been lower, obviously, because of LPG issues, but LPG also now there are news floating around that LPG, there is a shortage, you will see significant cost on that front. Now, that is precisely the reason of the questions around that, right?

If the company hasn't calibrated it yet, it might be a good idea if the company can come back and at least give some guidance on the margin front, because every other competitor of yours has said the same. However, they have given some margin guidance, which is off from where they are, right?

With Jubilant, we expect the transparency to be very high considering how the company works and performs.

Aditya, I would like to correct on that. I think it's the long question, but we have said there's going to be short-term margin pressure.

We've been quite transparent on what's the kind of inflation, margin pressures we're seeing on energy. We've also talked about labor.

Commodities, we're seeing muted right now. I think at this stage, any company that we're speaking to, and we also track all the companies and competitors, I think we'd be very hard-pressed for anybody to say what will be the kind of inflation that will hit, right?

Of course, we've internally calibrated our numbers, but the way the dynamics of the market are moving, we're having to recalibrate our numbers every two days. Right?

Of course, we have been transparent. There are all the structural initiatives on getting the margins expansion going then.

In our note also, we have said the long-term margin guidance on 200 bps holds, and we'll try as quickly to get to that elevated numbers, but short-term pressures exist. Now, will it be for a quarter, two quarters, three quarters, I think at this stage is anybody's guess, right?

I don't think that takes away from the fact that, of course, the management is more concerned on ensuring that we keep calibrating this to do judiciously what needs to be done on pricing, on cost austerity measures, and to ensure that we still manage our consumer franchise, right? I hope that answers, but if there's more detail on specific cost of goods purchased, we can take it offline.

No, sure. Absolutely.

See, that's what I'm saying, right? You are not able to quantify whether it's for one quarter, two quarters, three quarters, right?

That does not give enough clarity, and it has nothing to do against you whether you are calibrating it or not. It's just that how the market dynamics are.

Then pricing pressure, competition, and everything, I'm just reading the shareholders' letter and which is why I'm asking because it doesn't give enough visibility. Either we go ahead and say that the initiatives will do this and will help us gain X amount versus Y amount as on the cost side, right?

Any which ways, I'll take this offline for other participants as well. Thanks so much for answering.

Thank you.

Hi. Thanks for taking my question.

My question was pertaining to the cost inflation, right? From a commodity standpoint, it will be largely equivalent for other QSR chains versus yours.

From an LPG perspective, you've got a significantly higher exposure towards LPG versus pizza category. Second, of course, is the employee cost as well, right?

You have got your own delivery fleet. You run your own fleet, which means that the inflation, wage inflation cost, again, the petrol cost is also hitting you.

From that context, what is the kind of negative impact one can see on the margins? Again, I know it's not possible to quantify, but can we say that it will have a significantly higher negative impact on margins versus your peers?

Actually, no, and Suman can add. Firstly, like-for-like growth will help.

Second is a large part of our fleet is actually electric, right? I think, therefore, we believe we have an advantage versus rest of the market.

Number three, I think there is an impact of LPG that we are calibrating and part of it, we have already mentioned in our newsletter, we've passed back to the consumer to the tune of 1.2%.

Right. What is the potential for moving these LPG-based outlets towards electric?

What percentage of the outlets currently would have gone to electric or what is the kind of opex of running the outlets on electric basis? How can this number change?

Let's say if this war were to continue for the next three, four months and the inflation pressure is very high on LPG as a commodity, would you move to electric? Is the opex cost higher?

Is it possible, firstly, to shift a large share of your outlets towards electric?

I think we're constantly doing that. The teams have done an amazing job of converting LPG to electric.

We've developed our own solution kits. We've also been able to import quite a lot of electric ovens, and we are also converting very quickly to piped natural gas, and there is a mandate from the government to convert to piped natural gas.

From a business continuity standpoint, I don't see any risk, right, unless and until I'm surprised by the extent of war and control of LPG in India. I think the teams have done an amazing job of managing the situation.

From a price standpoint, there was a positive delta towards LPG, but with the LPG price increasing and on commercial cylinders, actually the delta between electric and the LPG is no longer there. We will be able to shift.

I think I want to assure the investors, and we've released two two circulars also earlier, that the impact of LPG availability was very minimal on business operations. On the cost, we've already said it impacts to 120 basis point.

We've already passed on the pricing to the tune of 120 basis point to the customers, and there are other initiatives in the work. I think this should assure you that as a team, we have the wherewithal to continue to grow at the desired pace we want and also improve our margins barring one or two quarters.

We will not do knee-jerk price increases. That is out of the table.

Otherwise, we know what needs to be done on the margin front too.

Sir, if I may just squeeze in that bring me to the last question. Apart from the Dunkin' Donuts business, which is being hired, or apart from lower losses in Popeyes that you may see going ahead, what are the structural margin levers that you're building for the next 2 years for Domino's India?

What should one pencil in the levers that could drive margin improvement to 200 bps in the next 2 years?

The biggest lever is the growth, right, which covers for inflation, the like-for-like growth. Second is the gross margins, have you seen already improved, right, on account of better management of operations.

We've already launched premium products, which have better margins. Then there are several productivity initiatives at work.

In fact, our supply chain cost has been lowest ever, right, in the history of this company. We believe there is even more juice over there.

Our logistics cost, actually, we believe can improve further. Again, and I can go on and on, this is my favorite topic.

There are enough productivity levers that exists across large line items. We are opening 250 stores every year.

Therefore, we are able to go back and renegotiate with our landlords because this is giving them annuity rental income. There are several levers that we are pulling, which and therefore, feel confident to meet our numbers on the margins, too.

Got it. Thank you.

That's from my side.

Thank you.

Hi, team. Just had a simple question.

I think during the World Cup final day, checks suggested that our systems were down for 6 hours, maybe in the second half of the day, which impacted the sales to an extent. My question is, sir, what is the probable impact in case the channel checks are true?

Sir, what steps are we taking that such incident is not repeated in future? Thank you.

Firstly, the information is correct. The systems were not down by 6 hours.

Incorrect. Incorrect.

The systems were not down. There was a minor downtime on our app, but rest of the system was working, and we recovered very quickly.

There was not even a notable impact in that week that is noteworthy of calling out over here. Systems are very stable, please don't worry on this one.

Sir. Thank you.

Thanks.

Nihal, am I--

Yes,

Nihal. Just one follow-up.

Thank you so much. Just one follow-up on the market share bit that you mentioned that as per the Nielsen panel, you've gained market share both on dine-in and delivery.

The only data point let's say we track is that if we look at aggregators, which is say sort of the larger QSR basket, that this is sort of the first quarter where the divergence in growth has been this much versus say Domino's and say the aggregators. Just your comments on that.

Good question. I think firstly, the data that we track is only for delivery, right?

That's the most accurate data available to a consumer research. I was referring to that.

I think when I was saying that among the 30-odd players that we track, we have gained share among that. Those are largely QSRs, which will go to almost 3.3%, 3.4% of market share.

I was mentioning against that. You're right.

The aggregators have grown faster than the delivery of Domino's. That bit I agree, which would only indicate that the QSR as a basket has not grown as fast, and therefore, the aggregators are getting growth from other non-QSR players or premium players is what my sense is.

I don't have their data, and we have plans to increase our delivery growth rate.

Understood, Sameer. That was it.

Thank you so much.

Hi. I just wanted to clarify on the gross margin bit a little bit.

See, the reason why the confusion stems in is we've seen almost a 5% realization decline, which means that the underlying cost of goods have essentially reduced. Does that mean that the expansion is more to do with the 19 the move towards 99?

If you could just throw some light on that, please? On how do you reconcile the decline in realizations with the expansion in gross margin, please?

Or is that method also inaccurate? Thank you.

Can you just maybe explain, Avi, that when you say expansion in gross margin,

because

you'd like to talk about EBITDA, right?

No. The gross margin has gone up 100 basis points from 74.5% to 75.5%.

Correct.

Your realizations have gone down by 5 percentage points, which means that the cost of materials have to go down by almost about 8%, 9% give or take percentage points. I'm just trying to understand how is this kind of reconciling?

Is it because the move towards the cheaper or the lower price point is actually towards better gross margin products? Because the comment that you made about premium products, mix improvement should have also helped realizations.

That didn't pan out, but the margin panned out. I'm just wanting some help on how to reconcile these two.

Avi, maybe it's a more nuanced question. Can I suggest we take it offline?

No problem, sir. No problem,

sir. That's fine.

No, we have a breakup, but I think it's a reconciliation point. Maybe you can pick it up with Apaar.

I will do that. That's all.

Thank you very much.

Thank you, Avi.

Thank you, everyone, once again for joining the call and for listening patiently. For any other further questions, please reach out to the investor relations team.

You will find the recording and transcript of this call on the investor relations page of our website very soon. Thank you, and have a very good evening.

Thank you.