Q1 21/22

Aug 13, 2021

Ladies and gentlemen, good day, and welcome to the Westlife Development Limited Q1 FY 'twenty two Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Divanshi Dhruva, Managing sorry, Manager, Investor Relations. Thank you, and over to you ma'am. Thanks, Margaret. Welcome everyone and thank you for joining us on Westlife Development Limited earnings conference call for the quarter ended 30 June 2021. We are joined here today by Mr. Amit Jhatia, Vice Chairman Ms. Mittal Jhatia, Director and Mr. Pankaj Jumta, CFO and VP, Finance and Accounts for Westlife Development Limited. Please note that our financial results of the presentation had been mailed across to you and these are available on our website as well. I hope you had the opportunity to browse through the highlights of the performance. We shall commence today's call with key thoughts from Amit, who will provide a strategic overview, which shall be followed by Smith A. We will take a look through the key business initiatives with overall operational progress, the impact and response during the 2nd wave and the strategic imperatives that Pankaj will cover analysis of the financial performance and highlights during the review period. At the end of the management discussion, we will have a Q and A session. I request to all the participants that due to the current uncertainties, members of the management are joining the call remotely and there could be some time lag when responding to your queries. I urge you, therefore, to kindly bear with us. Before we start, I would like to remind you that some of the statements made or discussed on this call today may be forward looking in nature and must be viewed in conjunction with the risks and uncertainties we face. A detailed statement and explanation of these risks is available in this quarter's press release, investor presentations and in our annual report, which is available on our website. The company does not undertake to update these forward looking statements publicly. With that said, I would now like to turn over the call to Amit to share his views. Thank you, and over to you, Amit. Thank you, Devanshi. Good evening everybody and hope you and your families are doing well. I'm happy to share that the business is firmly back on track. Revenues are building strongly, brand trust is rising consistently and our convenience channels are accelerating at an unprecedented pace. These are the building blocks for brand McDonald's and have firmly entrenched us in the marketplace. We are excited to chart the next phase of growth as we all learn to live with the challenges of COVID-nineteen. QSR by definition is driven by impulse and convenience. As consumers discovered new ways and means to experience the brand, our convenience channels have accelerated. Based on our experience of the last 18 months, these positive changes are here to stay. This is very strongly reflected in our recent results. Even with severe restrictions on in store dining, our sales in July 2021 were almost the same as July 2019 pre COVID. Additionally, there are some positive tailwinds for the category towards the organized sector. Consumers are increasingly choosing trusted brands with high standards of health and hygiene, which puts us in a strong position. The future lies in being an omni channel brand that's available whenever, wherever and however the consumer lives. In the last few years, we at Westlife have invested substantially in our digital capabilities that have been pivotal to our off premise business growing leaps and bounds in a sustained manner. We are also focused on building a realistic competitive advantage by understanding side by side performance through extensive research. We have taken the time during the pandemic to reorient the portfolio and are using GIS tools to identify large growth opportunities for the bank. We will continue to grow in our core cities and also expand our footprint in Tier 2 towns that have presented a significant opportunity for growth. Finally, our menu continues to be an important lever for the brand. As you are aware, last year, we launched our fried chicken product. This has further accelerated our journey of chicken leadership. We believe this product has the potential to add about INR 50 lakhs per store per annum and also strengthen our meal proposition. Globally, McDonald's Corporation has the highest average volume across 30,000 plus stores led by servicing all dayparts and menu segments and we hope to tread a similar path. We believe we are firing on all cylinders including brand, cost, menu and access. With this, we are confident of charting accelerated growth and creating new benchmarks for the industry in the coming quarters. I now hand over to Smita to take you through the highlights of quarter 1 FY 2022. Thank you, Amit, and good evening, everyone. I hope all of you and your loved ones are safe and healthy. I am happy to share that business has bounced back strongly. Our strategies of survival and revival have helped us develop a definitive playbook that has been our business resilient to external environment to a large extent. This is strongly reflected in our results. Despite all challenges due to Wave 2, we saw more than 176% growth across revenues and SG. Our business continued to hold strong notwithstanding the lockdown. Our new cost structure and robust revenue recovery have been pivotal to our performance with convenience channels creating new benchmarks. Revenues from our convenience channels have been consistently rising over the last one year. In the quarter under review, overall convenience jumped over 300% y and y. This was driven by delivery, drive thru and on the go. Revenues from drive thru that is our key competitive advantage grew by 115% by on by and 52% quarter on quarter. Mug delivery continued to rally and grew close to 200% buy on buy and 36% quarter on quarter. It touched a new high yet again in June 2021. This in spite of dine in restrictions easing in the month. It has been heartening to see off premise consumption grow consistently even as restrictions around on premise have been easing. It is now apparent that there is no cannibalization and this in fact is incremental revenue driven by new habits, new customers and new brand use cases adding to our top line strength. This presents immense growth for us. Consider a simple data point. In July 2019, before COVID, our revenue stood at INR130 crores, where 70% was through dine in and only 30% through our convenience channel. Now fast forward to July, our revenues are close to 90% of July 2019 even with continued dine in restrictions. In fact, we have seen 100% recovery in all markets outside Maharashtra that continue to be under strict COVID restrictions even in July. The interesting thing to note is that 62% of this is convenience led. Even as malls continue to remain muted, drive thru and high streets have completely recovered. This makes us believe that when all formats are open, we will be pegged for accelerated growth. With this strong foundation, we will pace ahead with confidence in the coming quarter with our key levers of menu and product leadership, accelerating the omni channel and digital presence and finally, network expansion and reinvestments to keep the brand model. In order to dominate the snacking and meal occasion this quarter, we launched some very powerful campaigns, including the BTS meal that got unprecedented response from our customers. We also booked in Rashmika Mandana, a popular film star, as our brand ambassador in the South to build stronger brand resonance. With a compelling proposition, we are ready to dominate the 5,000 crore fried chicken market. Technology and digital acceleration continue to be the cornerstone of our strategy. We have been leveraging technology to offer enhanced customer experience. Our digital channels are continuing to outperform despite dine in restrictions easing up. We are building digital sales in store also by leveraging our McDonald's app, a unique offer engine that provides personalized offers. The app has over 5,000,000 total number of downloads, a 45% jump year on year. In the quarter under review, our total guest counts on our app tripled Y on Y, reflecting enhanced customer experience and value. And finally, on the network, we continue to invest in the business by both reimaging our existing stores as well as opening new ones. We have added 7 McCaffes and 11 Experience of the Future Restaurants in the quarter. In fact, we had 5 new stores ready to open during the quarter, of which we have already opened 2 in July and many other are underground bring. We are also expanding our network in non core and emerging cities. We are guided by our commitment to scale for good and have been taking definitive steps to positively impact the environment and society that we operate in. Over the last years, we have gone through various ESG led initiatives, not only reduced our carbon footprint, landfill and energy waste, but also enhanced operating efficiencies and saved costs. This includes usage of energy management systems, production of biodiesel from used cooking oils and eliminating of single use customer facing plastics. As a direct impact of these initiatives, in the last financial year alone, we have saved close to 7,500 tonnes of carbon emission through our proactive steps, which is equivalent to planting close to 350,000 trees. We have also been working towards fostering inclusion across all our brand touch points. I am happy to share that Eat Equal, our campaign around special packaging for our customers with limited upper hand mobility has bagged several recognition. And last but not the least, we have concluded the 1st round of vaccination for all our employees, while over 1,000 have been fully vaccinated. We have also announced a comprehensive COVID support program to ensure physical and emotional well-being of our employees. With this, I now hand over to Pankaj, who will take you through the highlights of our financial performance. Thank you, Smita. Good evening, all. I hope you and your loved ones are keeping safe. We have entered FY 2022 on a formal footing. Our sales has been a whopping 176% growth on a Y o Y basis amounting to INR259.2 crores. The same store sales growth has jumped 183% on a Y o Y basis. This is on back of the historical high made by our delivery and other convenience channels. Let me share some key highlights with you. Our convenience channels that includes delivery, drive thru and on the go consolidatedly grew by 202% of which delivery grew by 200% and 36% on quarter on quarter basis. June 21 was a solstice for us and we witnessed the highest ever sales in delivery. Drive throughs have grown by 115 percent Y o Y and 52 percent on quarter on quarter basis. Even on the go has been consistently growing at a robust pace. We saw a steady buildup in the in store business and July has been even a stronger uptick. In fact, as I said earlier, we are happy to share that in July we have seen 100% recovery in all the markets outside of Maharashtra and 100% recovery in all drive thru and high street stores. This means convenience is here to stay and with the steady build up of tine in volumes, we will chart accelerated growth in the coming quarters. We have complemented our revenue growth with continued cost leadership. We have maximized our supply chain efficiencies, continue to rationalize food costs. As a result, we have maintained 65.4% during this quarter, representing a 2 18% growth over the last year. We continue to target meaningful margin expansion and are tracking towards our long term margin objectives, demonstrating our ability to accelerate value regardless of the environment. We have a revised cost structure in place and are continuously improving our operational efficiencies. As a result, we have seen a 204% improvement in our restaurant operating margins that stood at 9.8% for the quarter and our operating EBITDA stood at 2% which represents a 112% improvement over the same quarter last year. What I would also like to highlight is that with the recovery of volumes in the month of June, our restaurant operating margin zoomed to 16% for the month and consequently operating EBITDA jumped to 9.2%. And hence, we believe that with the volume recoveries gaining pace, we are heading for strong and sustainable margin expansions. Throughout the pandemic, we kept a razor sharp focus on maintaining a stronger balance sheet and robust liquidity position by optimizing our treasury and working capital. FY 2022 has turned out and we are confident that we will only accelerate from here on. Our relentless focus on internal improvements and driving synergies across our portfolio will help us extend our continued best in class track record. As we go ahead, our priorities are clear, growing our footprint, accelerating our convenience channels and maintaining fiscal discipline. We are in a strong fiscal position to deploy our capital for business expansion. The pandemic has thrown some real good real estate opportunities for us and like Amit said, we see a great potential in the Tier 2 cities that have shown greater resilience. We will increase our presence in these cities over the next few years in addition to the metros. With this, I will now hand it back to Amit to take you through the outlook for the coming quarter. Thank you. Thank you, Pankaj. Volatility is the order of the day, but with our strategic framework, we believe we are very well positioned to navigate through these challenges and continue growing market share. We will continue to make big bold moves and keep pushing the envelope on innovation and customer experience, thereby making the brand a true millennial brand. With business back on track, we will pick up our pre COVID pace of reimaging restaurant and expanding network. While we continue our strong focus on our 6 key markets, our network in Tier 2 towns are consistently growing, opening up huge opportunities for us, which we will effectively tap into. We will also continue to make significant investments in strengthening our technology backbone, which we believe will be a key business driver from here on. With this, we are confident about our continued market leadership on the back of brand equity, menu innovation, cost leadership and technology. I now open up the call for questions. Thank you. Thank you very much. We will now begin the question and answer The first question is from the line of Avi Mehta from Macquarie. Please go ahead. Hi, Amit and team. Thanks again for the opportunity. I just wanted to start with your comment on the convenience bit. I mean, it seems convenience is a new normal. Given that is the expectation, could you share if you're exploring any change in the store edition or store format to suit that demand more? And could you share the guidance what we should kind of build in for the year forward? Yes. Thank you. Thank you, Ali. Basically, in terms of the store format, first, we have been consistently and continuously sort of incorporating the fact that there's more and more external business. Many, many years ago, we had adapted for takeaway. So we have 2 windows just like a drive through. We have consistently improved our drive through ability so that we can push more cars through the window. And as delivery business kept picking up, we wanted to ensure that delivery riders are not consistently coming in and crowding around the front counter, which impacts customer experience. So that kind of work we've already done. I think the key question everybody does ask is about store size. And like we mentioned before, I don't see us reducing the size at this point in time. My point is that we obviously want to take our average unit volume per annum. We still want to grow that by 50% to 100% over the next 5 to 10 years. And I feel that even if in store remains 30% to 40% of the business, it's going to be a much larger business size to start with per restaurant. And therefore, while even globally we are thinking and talking about it, there is no immediate shift in the size of the store format at this point in time. In terms of store addition, I think for us real estate competitive advantage is very important. It has played out very well. I mean, we can see the fact that we have drive throughs and the fact that we were very well penetrated in the retail locations rather than being only mall dependent has worked extremely well for us. However, we do believe that we are seeing a new buzz in Tier 2 cities. We think it is here to stay and we believe that therefore from the 25 to 30 store openings that we are doing, we've had a complete relook at the whole market over the last 18 months. We view GIS software, we've used a lot of research that we've been doing on side by side performance. And we believe that the potential overall in our territories about 1,000 restaurants. And however, it's got to be mined in an intelligent manner. So we are hoping to be able to push the envelope to between 3040 in the coming years and therefore accelerate our pace of opening as we go along. We do believe that there is an opportunity in the organized sector now, which has sort of accelerated over the past. Okay. Okay. And where are coming from as you rightly kind of alluded, it was essentially on the store size and if that reduction can drive ability to kind of add it at a faster pace. That is what I was trying to understand. But I got a sense that you're looking right now at 25% but this is under discussion. The second question Yes, so, Abhi, I'm sorry to interrupt you. You see, my point is we have seen enough global markets where we've gone with smaller sizes and then it comes to bite you after 10 years. And you know the one thing that you cannot change is the size of the store. You can change the decor, you can change the layout, but the size of store is not in your circle of influence. Even earlier, over the 25 years, we've experimented with everything. And the thing is that size is not just saving a little bit on the rent takes away from our ability to get to say IN crores or IN crores per restaurant per year. So I'm sorry, I just wanted to add that. No, no. That's very helpful. That's very clear, Amit. The second bit I wanted to ask is on the guidance for the EBITDA margin, which we had kind of earlier called out, mid teens to mid teens number is what we were kind of planning, but that was a pre India's number. Now, while you've given a reconciliation, I realized that you have not given the India's adjusted financials the way you were giving last quarter. So, would you be able to kind of give us an updated guidance on margin on a reported basis or could you guide us how should we look at from an FY20 from a 2023, 2024 perspective? Okay. That's an excellent question, Avi. So we maintain so for example, if I were to take just June sales and because it's been so volatile and uncertain, I think June, even though there were too many COVID restrictions, still is a more stable month. So for example, in June, even with all the restrictions, our sales were more than November 2020, which was a Diwali month and by then restrictions had kind of reduced a lot. So firstly, that was very heartening to see in terms of sales. In terms of margin, let's forget about Indes, but restaurant operating margin in June as a month was 16%. So very, very solid even though sales were still much lower than what they should be normally. So we still maintain our guidance that we will be as per the old accounting standards, we will be at the mid teens, low to mid teens in EBITDA margin by 2023, FY 2023 is what we have talked about. So we can still feel that we will get there and what we will do is we move towards what the industry is doing the rest of all our QSR peers, where we are just going with the accounting standard, but we will try and add in our MIS some sort of a reconciliation so that you can refer back to the pre Indias as well. So Amit, just a request, if I may. The slide that is there in the presentation, which gives the Indias adjustments, if you could continue with that, that would be extremely helpful to help us appreciate how that how we are kind of on that path. That was the only request. No, thanks. It will be great. Thank you. The next question is from the line of Gaurav Jagani from Axis Capital. Congratulations on a good set of numbers in COVID impacted quarter. So my question is with regards to the other expenses, specifically the G and A expenses. And if you see while the sales at QOQ have declined, but their occupancy and other expenses haven't declined much. So is there some one off there that you would like to call out there? See, I mean, you've got to understand that it's a very volatile uncertain quarter. And there are restaurants where we have fixed rentals. There are restaurants where it's revenue share. And all the landlords because this came up quite suddenly, right, we were not able to get everything at that time. So I personally feel that it's not the right quarter to judge that. I think what is important is if you look at last year, or the quarter ended March 2021 versus that if you look at G and A, I think we've done quite well even though this time around there were no salary cuts, no deferments, nothing like that. I don't know if that answers your question, but I personally feel it's not the right comparison given so much uncertainty what was on, what was not on, some landlords have supported, some have not supported. So looking at it as a percentage of this quarter may not be the right one. Sure. So I will get you, I mean that the percentage of sales would not be the right metric there. My question was largely absolute number, but I get your sense that this might as you get more concessions maybe ahead, this might come down. Will that be right understanding in that sense? Yes. As a percentage, it will come down because sales already, for example, in July have continued to grow. And with the announcement of Maharashtra that from 15th August, they are going to permit in store. I think that is going to help us dramatically. You have to understand that each market becomes very volatile, sometimes on, sometimes off, sometimes shut down on weekends, which is the core part of our business. So it becomes very difficult to negotiate with landlords accordingly and that too in a short space of time. Sure, Sumit. Got it. And so my next question is with regards to the store opening guidance. I mean this time you specifically alluded to all these stores opening in the Tier 2 cities where you are seeing great opportunity and also you alluded that you would be now looking to 30 to 40 stores per year. So is that you are upping the guidance in terms of the store opening from the 25 to 30 earlier that you were envisaging? Yes, absolutely. We do believe so. I mean, we've used this pandemic to really look at the portfolio. And when we look at the portfolio, it is based on facts and data. And this data cannot be collected sort of in a year. So when you look at Mumbai, we have 100 restaurants in Mumbai. 100 restaurants is very, very, very strong penetration. So if I further go into a mini market of Andheri, there are say 8 restaurants in Andheri. Now when you put the 9th restaurant, if you don't know where customers are coming from and where they are going, you if you don't know where customers are coming from and where they are going, you tend to cannibalize into other restaurants. So with all this work that we have done, we have found that there is yet pretty much gap in every market. Also with what's happened, a number of restaurants have sort of shut down as well. There's a shift towards organized. The delivery business has sort of increased. More recently, our chicken launch has made ourselves more relevant in certain markets in South India as well. And looking at all of that and especially Tier 2 as well, where I've been very selective in the past, we've sort of upped our guidance around that. Sure. So that's great. So just a follow-up to this, would there be any change to your CapEx guidance? And if you can guide us anything on that, given the fact that you've also highlighted that you will be investing more on the tech front as well. So what would be the CapEx roughly for this year and the next year, if you can help us out? And that would be for you. The INR 100, INR 150 crores range, again, this year because we lost the Q1 in openings, we yet believe we should be in the INR 20 to 25 range. We are going to push ourselves as hard as we can over the rest of the quarter, 3 quarters. And then if there's a 3rd wave and again construction stops, then it is what it is. But we are pushing for between 20 to 25. Now if it is 20, 25, you know that we spend roughly INR 2.5 to INR 3 crores per restaurant. So you can do the math accordingly. If you are able to get between INR 30, 40, it's still over the 100 and it's still, I would say, INR 120 crores. Plus, if you take everything else, it will not exceed INR 150 crores. So the INR 100, INR 150 crores guidance stays. Got it. That's it. Thank you. And that's all from me. Thank you. Thank you. The next question is from the line of Parshi Pankaj from IIFL. Please go ahead. Sir, the fried chicken launch that you have and you mentioned that you think you can garner about 50 lakhs per store from fried chicken. So is this INR 50 lakh incremental or I mean, INR 50 lakhs is from fried chicken, but of course, it would cannibalize some part of the other menu. So just wanted to understand in light of this, how much if let's say there is a complete normalcy from the COVID front, FY 'twenty three, what would be your sales per store kind of a target? Yes. So it's a good question. I'm talking of incremental sales, not cannibalized sales. That is part number 1. Part number 2, we've always maintained that our average unit volume target was to first achieve between INR 6,000,000 to INR 6,500 crores. So we were at INR 5,500 crores pre COVID and the target was to get to between INR 6, INR 6,500. In our Investor Day in 2018, we had given 3 levers, which was delivery, McCafe and menu. Delivery has way outperformed and I think it's here to say. And that alone, this is the important part, what I'm going to tell you that the incremental business of convenience that we've got between delivery, on the go, takeaway and drive through, right. Even if in store comes back to 80% of what it was, that's a 10% same store sales growth. So I'm expecting at least another 50 Lakhs per restaurant per year to come out of that. And chicken, I gave you an indication. So it means almost a 1 crore, which kind of takes us to the 6, 6.5 crore per restaurant target that we have talked about for our Vision 2023. Okay. So this INR 6,000,000 to INR 6,500,000 crore is for fiscal 2023 itself, right? FY 2023 was our vision, that was our vision. Obviously, some part of it depends on normalization of COVID. But Including a completely normal COVID scenario, would you say that FY 'twenty three can achieve this target? I mean anywhere between 6, 6.5, yes. Okay, okay. Understood. And secondly, I wanted to understand in terms of menu innovation, you have done this fried chicken and you've done several other menu innovations also in the last 2 to 3 years. So would you say that see, of course, this is a continuous process and it will continue even 10 years down the line. But would you say that the main gaps in the portfolio are now sort of plugged and incremental menu innovation is not going to be as big bang as what it was earlier? I feel thankfully that's not the case. I think even if you look at Global McDonald's after operating for 70 years, still menu plays a significant role in the way we are able to grow our business. Even after 70 years, McDonald's globally continues to deliver same store sales growth and the average unit volume even after 70 years, even in very, very developed market continues to grow. And therefore, I believe that menu innovation just does not stop. We've also just touched the tip of an iceberg on so many categories. More recently, we launched our gourmet burgers. The response for the gourmet burgers has been absolutely tremendous and yet we haven't even marketed it completely. It's only available on delivery, but wherever we've launched it, the incremental volume per restaurant has been very, very nice. So all I can say is menu innovation even 10 years from now will continue to be as robust as you see it today. In the food business, it never stops. Right, sir. That's all for me. Thanks and all the best. Thank you. Thank you. The next question is from the line of Kapil Jagasya from EDELWEISS. Please go ahead. Thank you for the opportunity, sir. Decent set of numbers. So, therefore, I heard it right. You have, research for, you know, opening around 1,000 restaurants. So, if we even if we go by the increased guidance of opening 30 to 40 stores, So these 1,000 restaurants would be fulfilled in that like how much time? Like we are right now at 305 stores or so. So that would take a tremendous amount of time. Yes. So the answer to that is that there is an absorption rate factor there as well. So while there is 1,000 restaurant possible, so I'll give you an example of you take Ahmedabad, take Tuna, take Bombay, any of these markets, we've been around for a while. So let's say, I'm just making up the numbers to make my point, so don't go by the numbers themselves. But you take Ahmedabad, right? We have 20 restaurants, 25 maybe. I think basically we own that market. Can Ahmedabad not be 35 to 40 restaurants over the next 5 to 10 years? Absolutely, it can be. But can I open all of the 10 together tomorrow? Absolutely not. So what happens if there is an absorption rate, frequency of eating out continue to rise, brand relevance rises for the consumer in that market for our brand. So all of these factors are there. So basically, even though the gap is there, again, Mumbai, while let's say we can do 200 restaurants in Mumbai, but I cannot even if real estate was available, I cannot snap my finger and open 100 tomorrow. An example is you take Andheri, right? So let's say we have 8 restaurants in Andheri. We started with 1, then we put 2. But if we could have put all 8 together, it would have taken a lot of money would have been lost and we would not have got the average unit volume and we would have had to shut down. So there is an art and a bit of science in this and based on whatever our knowledge is that is the potential. Earlier many, many years ago in one of our investor calls we had talked about 800 restaurants and I had said how the 800 restaurant changes. 800 restaurants become 1,000 because of per capita income growth, it becomes on real estate growth, it grows based on relevance of brand, frequency of eating out, purchasing power and all of these. So there are many, many factors involved with that. I hope I'm able to explain what I I hope I'm able to answer your question. Yes, yes, yes, definitely. That was very helpful. And just one bookkeeping question from my side. Other income has dropped on a Y o Y basis. So would it be because of securing lower rent rental levels this quarter? Pankaj will have to answer that. Yes, that's right. Okay. So going forward, we should be modeling this number for the rest of the year? Yes. So as we were saying earlier, we will keep on sharing the index and the adjusted numbers, so that you can get a visibility on a quarter on quarter basis. Okay, great. That was very helpful. Thank you for asking all the questions. Thank you. Thank you. The next question is from the line of Jay Kumar Doshi from Kotak. Please go ahead. Hi, thanks for the opportunity. I want to know what are your thoughts on Delco format. So I got your and I understood your we understand your viewpoint in response to the question we asked earlier. But today when you open large stores, you can't cover the entire city very well from a delivery opportunity perspective. So as a consumer, there are pockets in the city where delivery from McDonald's can take maybe 25, 30 minutes, which if it's cut down to 15, 20 minutes, you'll be able to capture a larger pie of the market. So what is your thought on attempting or trying out with pure Delco stores and some of your peers are planning to do so or already started to do so? And what will be the safest if you were to open from a return ratio perspective? Is it viable or do you think it's not viable economically? Sure. Yes, thank you for the question. It's not that we've not tried or attempted or thought about Delcos. I go back to my old point that I've made many, many, many times that McDonald's is a high volume company and our average unit volume comes from servicing all dayparts, different menu segments, etcetera, etcetera. If I would have gone just on penetration alone without considering long term, today we would not have been able to bring McCafe in every single restaurant. Imagine if you have 1800 square foot restaurants where the kitchen takes a large part of it and you don't have even capacity in the kitchen because the tighter you make it, the tighter your cold chain and all that starts suffering. And 5 years later, you will see problems. So we have seen very, very difficult real estate markets globally. And when we benchmark those markets, every time we've gone to penetrate the city with small mark those markets, every time we've gone to penetrate the city with smaller formats, yes, it has never panned out. The telco model has been tried by McDonald's in many markets. Yes, the world keeps changing every day. But even with that, the CapEx does not drop significantly enough to give us the return that we are looking for. And now coming back to the other aspects, see with 100 restaurants in Mumbai, I feel we capture pretty much 95% of the city. As we are going to open new stores, the delivery market is going to be incrementally small. And we'd rather capture that delivery market with the opening of the restaurant because I go back to my thinking, my point I always make is 1 plus 1 plus 1 is equal to 5 is equal to 7. And what I mean by 1 plus 1 plus 1 is that when you have the in store business, you add to that takeaway on the go, drive through wherever possible and delivery. On top of that, you add McCafe. On top of that, you add breakfast. Yes, our return as a business is always much better with that. So I mean on the call that's the best I might be able to explain to you, but we've looked at this regularly and we will continue to look at it. So the answer what I'm saying is it's not that we are ignorant about what a Delco can do or cannot do, but whatever we've seen so far and even globally there's a lot of work and discussion around this. But at this point in time only Delcos look very unlikely at least for Grand McDonald's. Perfect. Now the idea of asking this question was Sorry, I'll just also add that we pretty much have 100% coverage of say Mumbai city with the 100 restaurants that we already have. Correct. So idea of asking the question was on one side you are super bullish on the convenience opportunity and confident that it will continue to stay. So there is a permanent structural change in the consumer habits as far as ordering is concerned. And the other side, you are sort of relying on the experience globally of success of Delco based on pre COVID era where delivery had not taken up delivery is not as mainstream as it is today even in the Western world. So maybe over 1 or 2 years we will get to know where it settles eventually. But there are enough markets in the world today where delivery even pre COVID was 60% of their business, by the way. And I can offline tell you which markets they are. So remember, we do over $5,000,000,000 to $10,000,000,000 of sales and delivery globally. And we have almost $100,000,000,000 of system wide sales. We have quite a bit of an understanding on how that works. And convenience is not only about delivery and delivery is no structural change by the way. It's an incremental use of the customer where they can order outside food at home as well, which in India has grown substantially because of what it is. If you go to Singapore, you go to Indonesia, you go to many of the Middle Eastern markets, 40% of the restaurant business was delivery even pre COVID. Maybe today that has become 60%. So my point is that, firstly, any brand that lives in the past will not see tomorrow. And if you recollect my comments in the past, you have to keep evolving every day. And we are a brand that is built on evolution and innovation, and we are going to continue to lead that. So I take your point and I hope you get my point as well. Definitely, sir. That's very helpful. Second question is, can you talk a little bit about success of Magdi in fried chicken globally and any success stories there and Hello? Hello? Hello? I've lost you. Mr. Doshi, we have lost the audio from your side. Hello? Am I audible? Yes, I am audible. Right. Could you talk a little bit about success of Magdee and contribution of fried chicken Magdee sales globally? And what is the initial response that you have seen in the stores where you have launched early on in terms of average unit volume? And just a final follow-up, this RUB50 lakh per store, do you think that's a potential across your portfolio or that is largely in South and perhaps not so much in Ahmedabad or Mumbai? So firstly, you might notice that I'm very cautious with my comments and I only make comments when I firmly believe in what they are. So firstly, globally, McDonald's is very strong in chicken by the way. And I mean, with our $100,000,000,000 in sales, we still might be the largest chicken company in the world yet. In Southeast Asia, we do very strong business in all of Asia rather around fried chicken and particularly Malaysia, Indonesia and many such markets. We are pretty much number 1 also in that category. So in India, I have always chosen to go step by step. So even if you look at nuggets, chicken nuggets, while globally it's a core McDonald's offering and people swear by our nuggets, but yet we brought chicken nuggets only in around 2,008, 2,009, almost 10 years after we had opened. So I believe chicken in South India, of course, is a 5,000 crore market and we believe that this is now the right time to start playing in it. But I believe that there is similar potential in West as well. Actually, in my opinion, it's much more than 50 lakhs, but I always believe that there is a step by step approach. So that's how we think about it. It is an all India opportunity. It's not just limited to South. Although South is slightly more skewed towards chicken. So then South could be, for example, 75 lakhs per restaurant per year, but I'm giving you a bit of an average for our West and South period. Thank you. We lost this line. So we'll move to the next question. The next question is from the line of Amish Agrawal from Sabuda Siladhar. Please go ahead. Yes. Hi. I have a couple of questions. My first question is on the chicken segment only where I mean if you are indicating 50 lakhs or maybe going up to 75 lakhs sales. If first of all, how would you compare yourself vis a vis, say, one of your other global competitors like JSP because that company is having a run rate of around RMB 60.5 crores per store in India and chicken is a major product. So how do you look at then your sales in the longer term? Or is there a big difference in the product offering or the way you can say KFC as a store is positioned in the minds of consumer? See, this has nothing to do with KFC or anybody else. Chicken is a segment in the country and I'm only talking of fried chicken, but we have our McChicken burger, which may in itself do over 100 of crores of sales. I'm not even talking about that. We have the McChicken spicy, which by the way people swear by and has led to significant increase in our business when we launched it. We have chicken nuggets, we have chicken wings, we have chicken this and we have chicken that. Fried chicken was a category we decided to launch only couple of years ago. And it's not that we did not know what to do with it because globally we have a pretty strong position in that particular area. But it was just you got to do the right thing at the right time. And menu and business evolves every day. You don't sort of you can't put all the 1,000 products at one shot because consumers also get confused. So in the last 2 to 3 years, we've invested in step by step improving and increasing our chicken menu like we did with burgers. So more recently, we launched our gourmet burgers. Why didn't we do it 20 years ago? Because it is relevant today and it was not relevant 20 years ago. So I feel that it has nothing to do with anybody else. The important thing is that as a protein, yes, chicken is an important protein. McDonald's has played a significant role from 1996 in this market and we are continuing to expand this opportunity and continuing towards our chicken leadership. So that is how at least I see it. And like I said, the 50 75 lags that I'm talking about has to do only with fried chicken. And by the way, irrespective of organized sector, there is a very, very large unorganized sector market of Fried Chicken that exists particularly in South India and East India. And we are sort of eyeing that as well to bring all those customers into the organized sector pool. Okay. So if I go by what you're saying, then can you share with us what is the proportion of the non veg to veg sales in our total food sales as of now? We don't generally share the breakup, but I mean just to give you a bit of a sense, it's normally fifty-fifty. Okay. Okay. It's not that easy an answer but broadly. Okay. Okay. That's helpful. And Amit, my second question is regarding the restaurant operating margin. So what sort of a number should we look at it in the medium term, say, if we are looking at say 1, 2 years down the line, particularly FY2023 and beyond on a pre India basis? Yes, sure. So basically, we've said restaurant operating margin, we define our restaurant operating margin very clearly and quarter and restaurant operating margin doesn't have any play with India as 116. So at least at Best Life, we've been consistent with it from 2013 since we sort of listed. So on that on restaurant operating margin, 16% to 18% is really what we are sort of shooting for. And if we are able to get to that 16% to 18% range, we are talking of operating EBITDA between 13% to 15%. So on FY 'twenty three onwards, I don't give guidance, but I'm saying trend wise, that's where we are heading. Okay, sir. Thanks a lot. Thank you. Thank you. The next question is from the line of Vishal Kununya from Sirmalbank. Please go ahead. Yes. Thank you. Thank you for this opportunity. My question is again on the margin front, the operating margins for the quarter. If I look at the cost items and if I just compare it with 2Q of FY 'twenty one where the top line was actually lower than what we did during this particular quarter. I understand that employee costs have slightly gone up as well as rental costs might have also gone up. But is there any other cost that you see for this quarter, which might have not been there at a significant level in 2Q, 3Q, maybe in the terms of advertisement spends towards this new category or maybe doing some spends behind the stores, which are not operational for the quarter, but you might have spent during this particular quarter to open it in the next quarter. So any thoughts on that front? So I'll let Pankaj take that question, but I'll only give you one bit of information that I've sort of gone by. Firstly, the 2nd wave came pretty abruptly and suddenly. Secondly, it was more severe than the 1st wave. And thirdly, to me what was important was Intune, where still there were very severe restrictions, but our sales were better than November and our restaurant operating margin was at 16% and our operating EBITDA was at 10% in that month. And that clearly tells me that the cost structure continued to stay where it needed to be. But obviously, there were no employee cutbacks this time. There was no salary impact. In fact, we sort of rewarded our people to work with us through the whole of last year, which was a very, very difficult year. But Pankaj might give you more specifics if he might be even if he has anything to add. No, just to add because of the high volatility in this quarter, so percentage to sales is not the right way to look at it. But if you see the growth of the P and L line items in operating costs, SG and A, food costs, etcetera, they have been significantly lower than the sales growth of 176%, which establishes the revised cost structures in place. And as Amit said, with the June recovery, we were already at 16% restaurant operating margin and EBITDA 13% 10%. Okay. And secondly, when you talk about the fried chicken market and getting shares from the unorganized market, what I believe is the unorganized market is purely a fried chicken market and not a fried chicken, breaded fried chicken market. So would it be easy to convert those consumers to a breaded fried chicken market? I mean, from our point of view, we've seen in other markets like Malaysia, etcetera, where it happens over a period of time. So for example, what happens is, like I always say this and I truly believe, I believe that the more burger players advertising burgers, stocking burgers and making burgers available increases the penetration of burgers in the country, right? And slowly, I talked about how we will bring new users into the market. Similarly, I do believe that in the fried chicken market, the same thing is going to happen as more and more people offer it, make it affordable, people do start moving up. And as they move up the value chain, they start then coming towards breaded, etcetera. So there are yet many examples of breaded like if you go to Empire in Bangalore, which is one of the most popular sort of fried chicken markets, it is all coated, right? And the breading quality or type may be different, but it is still breaded. And in our case, we have created a unique coating, it's called the ghost chili, coating and consumer sort of feedback even before we launched it. On a scale of 10, it was average 9.5. I mean, below 9, we did not get a single score. And now that is reflected in the sales that we are seeing in the market as after sort of this time because of the pandemic, we could not advertise it. But as people are experimenting it, we are continuously seeing a rise in sales in this particular product. So we do believe that we will convert over time bring new users into the McDonald's fold. And last point I want to make is just like McCafe. Previously, when you wanted to have coffee before McCafe, McDonald's was not in your consideration set to start with, okay? Similarly, if you wanted to go for fried chicken, which has its own set of sort of customers, McDonald's was never in the consideration set with us having launched the fried chicken and as the awareness for that increases, as people try the product, yes, we will come in the consideration set of the consumer and that alone will give us a certain amount of business and the rest of it will come through an unorganized and through competition of organized sector. Sure, sure. Understood, understood. Just lastly, in the Southern market where the where you have obviously started with the fried chicken portfolio, how many bps would a person buy for to basically consume a particular bucket of fried chicken? And what are the margin benefits when you do you see along with the fried chicken when they consume the dips? Thank you. So we don't sort of I mean it's too minor a point to be honest, Vishal. I mean it's not going to change the game substantially. For us right now it's about people tying the product. The numbers two thing is to bring McDonald's in their consideration set when they think of right chicken. And it's a step toward what we call chicken leadership that we've been able to achieve in many of the markets. So that is currently what the focus is. We don't obviously discuss individual margins, But to me, it's about taking average unit volume up and that in itself, in our opinion, will lead us to margin growth in terms of operating EBITDA and restaurant operating margin. Sure. Thank you. Thank you. Thank you. The next question is from the line of Darya Shah from OhF Portfolio Equity Research. Please go ahead. Good presentation. I have two important questions. The first one is that when we hear about Jubilee and Burger and the others looking at store expansion of 75 to 100 per annum, Westlife at 25 to 35 range appears pretty modest and makes look like a defensive stock in a hyper aggressive sector. How should we look at it? And what are the the are they taking away the market potential from you and are you feeding potential market share to them? So we don't believe so. We have seen many firstly, it's about average unit volume as well. And rather than do 1,000 square foot stores that do INR 2 crores or INR 3 crores in average unit volume, just to show that we have 1,000 stores is not our strategy. We have seen very large players, many of whom you are talking about. Just announcing that I will do 700 stores, but my view does not change the game. You will see this progress drive that we consistently through the period of 2013, 2014, 2015, 2016, 2017, where everybody else was shutting stores, but we were adding 25 to 30 stores. And there is an example of some of our competition from whom we've learned. They were at 400 stores in 2014 and they are at 400 stores in 2019. Yes, maybe today they are at 450 stores. So my point is just because you're opening 70 restaurants a year is not material. Let me put it differently. Suppose I can be INR 10 crores per restaurant and INR 300 stores could take me to INR 3,000 crores right there. So I feel there is a balance between the 2. And I think the jury is still out there over time to tell us. We are it's about market share finally. It's not about number of stores. And currently in the markets we operate, we lead in market share. It's about penetration. It's about the number of consumers that are using you per store. So for example, in 100 stores in Mumbai, if I can do average unit volume of INR 9 crores per store, let's say, I'm making this up, the INR 9 crores means obviously I'm serving a very large base of customers. So why should I build 200 stores to serve the same INR 9 crores average unit volume? You understand what I mean? If the average unit volume of the 200 stores is INR 4.5 crores, why should I put another 200 crores of CapEx? So please first see the HRPL and Westlife performance over a 10 year horizon in terms of how we've grown our stores and how everybody else has. And I'm not saying they are good or bad. I'm just saying you see the difference. Finally, when you look at 35 stores, the 35 stores or 30 stores is for half the country as well. Okay. So I mean you got to factor that in as well. So I think I've made my point. Just to add, there is a substantial difference in the AUV of McDonald's stores versus competition. So when we open one store, it is equal to almost 2 stores. So you can also compare like that. So it's the national presence and plus the AUV difference. So globally, there were at some point more one other brand than McDonald's, yes? So McDonald's had 32,000 restaurants and that other chain claimed that they had more restaurants than McDonald's. But McDonald's sales were €100,000,000,000 or that time maybe €70,000,000,000 and this other chain was $15,000,000,000 right. And McDonald's made say $8,000,000,000 in profit and the other chain made sort of no profit. So my point is it's not about number of stores, it's about the right quality of stores, the right average volume, the right location, real estate competitive advantage, like how we've got drive thrus. It has made a significant difference how we've been able to penetrate High Street versus only being in malls, all that matters. Right, right, right. No, got it. That's a very useful insight. So just to follow-up on this, hypothetically, what will make you look to store expansion above, say, INR 50 crores? I mean, what is the constraint here, if at all? Constraint is the Indian market because, 1, the frequency of eating out is still the lowest in the world. Number 2, the per capita income is lowest in the world. The ability of the consumer to spend money as you can see in any category, forget USR, is the lowest in the world. But yes, we have population. So you can say we have a 1,000,000,000 people and therefore we should have 10,000 restaurants. But I would love to see somebody build 10,000 restaurants. I gave the example earlier on the call that while Endava I'm just using these numbers to make my point, the numbers have no relevance. Let's say, Endava can take 50 restaurants. Actually by the way, if you show me another brand that has 100 restaurants in Mumbai, yes, of our standing in our category, there is nobody that has 100 restaurants in Mumbai. And to make 100 restaurants in Mumbai and make money in the 100 restaurants in Mumbai, I feel clearly reflects on what the brand is all about. Of course, we have chosen to go on an inside out strategy. And therefore, as we get into smaller cities, and by the way, we are in 40 small cities as well outside of the 6 core metros, But we own our 6 core metros and that's been our strategy. So my closest competitor in Mumbai would have 30 restaurants. You understand? So you got to look at the quality of real estate, you got to look at the diversification. But to answer your question, it's about growth in frequency of eating out. It's about the economy growing. Economy can grow at 4% GDP and then you expect that we can grow faster than that is tough. For us, it's about sustainable growth, yes. Right. That's very useful. And Amit, my second question is that, as shareholders, we have noticed that whenever the Best Buy stock crosses 450, there is a little bit of regular promoter selling, which ends up being an overhang. Now we have seen the practice in the other companies where the promoters have given an indication in terms of how much they want to sell for whatever reason and up to what point. That gives us some kind of visibility as to what to expect. Can we expect something similar out of you? Absolutely. And we have been saying this in all our calls. So there is a lot of pressure on us to increase liquidity. And every time some very good global investors want to buy, we start getting calls and pressure from a lot of people to help with liquidity of the stock. So we have made a stated goal that we are currently at I think about 57% or so. We've said over the next 3 to 5 years, we want to come down to about 53%. So over time in the right manner with the right disclosures, we want to sort of help get the stock to the liquidity that all our peers who recently listed have got. So that's really what it is. And we are quite upfront that we want to get to about 53% over the next 3 to 5 years. Okay. Thank you very much, Amit. That's very it. That's all. Thank you. Ladies and gentlemen, to your back of strength, that was the last question. I now hand the conference over to Mr. Amit Dhatia for closing comments. So thank you very much everybody for being on the call. Appreciate your questions and patience to hear our answers. Have a lovely weekend and stay safe and we meet again in the next quarter. Thank you. On behalf of Westlife Development Limited, that concludes the conference call. Thank you for joining us and you may now disconnect your