UNIVERSITY OF MUMBAI

ALKESH DINESH MODY INSTITUTE FOR FINANCIAL AND MANAGEMENTSTUDIES

SUMMER INTERNSHIP PROJECT REPORT

ON

“EQUITY ANALYSIS ON INDIAN QSR INDUSTRY”

BY

NILESH GOTE

Under the guidance of

CMA Kailash R. Gandhi

In partial fulfilment of Summer Internship for the award of the degree of

MASTERS IN MANAGEMENT STUDIES

(2021-23)
CERTIFICATE OF INTERNSHIP
 ACKNOWLEDGEMENT

I, Nilesh Gote, would like to take this opportunity to express my profound gratitude and deep
regards to all the individuals who have helped and guided me in delivering my best for this
project.

I am very grateful to Dr. Smita Shukla (I/C Director, University of Mumbai’s Alkesh
Dinesh Mody Institute for Financial and Management Studies) for having permitted me
for this internship program to get industry exposure.

I would like to acknowledge Dr. Aruna Deshpande (Associate Professor, MMS

Coordinator) for her constant support and guidance throughout.

I would like to utilise this opportunity to thanks Mrs. Kavita Mishra Pandey (The
Placement Officer), for her continuous support and guidance throughout the Internship
process.

I express my gratitude towards CMA Kailash R. Gandhi for whom I attained my summer
internship at KRG. Under his guidance, I could complete the project being undertaken on
“KRG Strategy Consultants Private Limited” successfully in time.

I would also like to express my gratitude towards the faculty members of ADMI for
their valuable support during the entire tenure of this project and helped me in delivering my
best.

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 Executive Summary

The main aim of this project is to do equity research on Quick Service Restaurants sector and
to find out the opportunities of investment in these sectors where returns can be maximized.
Indian Economy being one of the fastest developing economies in the world, companies in
India are growing at faster rate as compared to their growth rate a decade back. As
companies grow their shareholders are benefitted with good dividend and capital
appreciation on investment in equity shares of such companies. Number of
companies listed in stock exchange (BSE & NSE) has been increasing every year with new
IPOs coming in the market. In India people are realizing that equity has potential to give
highest return as compared to other investment avenues however people are not aware how to
do equity valuation, they just invest in shares based on tips given by brokers, friends or
family members. Investing in equity shares based on tips is not the true investment but it is
clear gambling with your money which many of us would not like to do with our hard-earned
money. Equity valuation begins with analysis of the sector in which you want to make
investment; if the sector looks positive then analyse various companies in the sector. A
Company is analysed fundamentally to check its performance and financial strength.
Technical analysis is used to decide the right price to buy a stock so that higher return on
investment can be generated. The report describes various aspects of the stocks and focus on
the various opportunities and threats that have emerged as result of change in the
regulatory environment. The Objective of the project is to find out the risk of changes in the
regulatory environment. The objective of the project is to find out the risk and return
perspective of the stocks of different sectors. In doing so I have various selection techniques
for the purpose of selecting the company’s products we have used the main selection
analysis in fundamental analysis for Jubilant Foodworks Limited, Westlife Development
Limited and Restaurant Brand Asia. The intention behind such an analysis is that to analyse
the competitive advantage of the company by knowing the resistance and support
level for the company’s which is particularly helpful in identifying areas of
development. I have conducted a detailed study of various real economy snapshots
to consider the growth opportunities of the economy as a whole. Also, I have
done the financial strength analysis of the company’s because to know how it
is efficient in financial way. In this section I have done the fully study of the
Jubilant Foodworks Limited, Westlife Development Limited and Restaurant Brand Asia. I
have also done SWOT Analysis for these three companies with strengths, weakness,
opportunity, and threat of each of the companies. The SWOT analysis would also
provide an overview to an investor regarding the future certainty and uncertainty. At last I
have done a analysis of these stocks and had predicted which company is best for Investment.

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 Table of Contents

1.Executive Summary……………………………………………………....04

2.Internship Objective.…….…………………………………………...….06

3.Chapter-1 (About Company)…………………………………………….07

4.Chapter-2 (Introduction to Equity Research)…………………….……09

5.Chapter-3 (Data Analysis)………………………………………..…..….12

6.Conclusion………………………………………………….….………….36

7.Bibliography………………………………………………………………37

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Internship Objective

 The sophisticated understanding of a Sector or a company.

 Industry Analysis: To analyze a particular industry by learning its past trends,
demand-supply mechanics.
 Competitive scenario. Regulative environment and future outlook.
 Company analysis: To analyze a company by collecting info related to the company's
profile, products and services, its financial statements, and its competitive advantage,
and the future outlook of the organization.
 Financial Statement Analysis: To analyze a company's financial statements to
understand the overall health of an organization as well as to evaluate financial
performance and business value.
 Valuation: Valuation is less of a science and more of an art. Hence, which model
would be most appropriate given the type and quality of data available.
 Presentation and Report Writing: A group presentation of the candidates at the end
with a detailed report by each individual who works on the project.

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 Chapter-1
About the Company

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Knowledge Resource Group (KRG) is professionally managed new-age business advisory
organization offering a wide range of specialized, multi-disciplinary professional services,
which are critical for the growth of the organization and that meet the immediate as well as
the long-term business needs of clients. Our value proposition lies as much in the
phenomenal range as in the piercing depth of our globally benchmarked solutions, that
empowers our client businesses with a competitive edge in a fast-evolving market place that
demands ability and agility in the same breath.

Our services include Cost Audit and Assurance, Cost Transformation Services, Virtual CFO
Services, Research and Data Analytics services, Automation and Wealth Management. We
thrive on challenge and are problem solvers based on custom approaches backed by data,
which are critical for the clients’ growth in order to help them compete successfully in a
rapidly changing market place. We place paramount importance not only on quality and
technical excellence, but also in practicality.

Mission

To achieve Client Satisfaction by providing Excellent, Innovative, Value-Added Services as

well as Technology Oriented Solutions on TIME

Why KRG 

As a vibrant Management Consultancy organization, we strongly believe that KRG’s growth

is the derivate of the growth of KRG’s Clients. Our passion for sharing knowledge, working
as a team, optimizing resources for the growth of the clients distinct ourself from other.

Clients turn to KRG, when they want to be sure of success and work. KRG has built a track
record of successful delivery in some of the most demanding and high profile situations. And
with KRG’s collaborative style of working, not only does management achieve the results
that it is seeking, but it gains other benefits as well.

 Results-driven –
 Flexibility
 Organizational culture – we blend with the organization culture prevailing
 Team work
 Service

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 Chapter-2

INTRODUCTION

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Introduction
Equity is typically referred to as shareholder equity (also known as shareholders'
equity), or owners’ equity (for privately held companies), which represents the amount of
money that would be returned to a company’s shareholders if all of the assets were
liquidated and all of the company's debt was paid off. Equity is found on a company's balance
sheet and is one of the most common financial metrics employed by analysts to assess
the financial health of a company. Shareholder equity can also represent the book value
of a company. Equity can sometimes be offered as payment-in-kind. Equity research refers to
the analysis of a company’s fundamentals, financial statement analysis, financial
modelling, and scenario building for equity recommendations. Equity research
divisions work both for the sell side and the buy side of a brokerage firm. ER analysts
monitor the market and analyse the market trends and their effects on companies and stocks.
The main goal of ER is to provide insight and in-depth analysis of a sector, company or stock
and use this information to assist investors in allocating their funds properly.

Types of Equity
Stockholders’ Equity

Stockholders’ equity, also known as shareholders’ equity, is the amount of assets

given to shareholders after deducting liabilities. Stockholders’ equity is common for
businesses structured as corporations. To see how much money is available for a shareholder
distribution, look at shareholders’ equity.

Owner’s Equity

Owner’s equity refers to the amount of ownership you have in your business. You can
calculate owner’s equity by subtracting your liabilities from your assets. Owner’s
equity shows you how much available capital your small business has.

Owner’s equity is most common for a sole proprietor or business partner

Equity Research Process

Equity research process comprises of multiple steps.

 Economic Analysis
 Understanding Industry or sector analysis
 Company Analysis for investment purpose
 Financial Statement Analysis of a Company
 Performing Financial and Valuation
 Writing Report showing the result of analysis
 Presentation or recommendation.

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Application
Firms involved in investment activities require equity research. Examples are insurance
companies, pension fund companies, asset management firms, etc. All the above firms invest
heavily in equity markets with an aim to receive good returns for their clients. Hence, it is
very important for them to conduct an in-depth analysis of a stock or a sector before putting
their client’s money into it. They completely or partially depend on the reports or suggestions
generated by equity research analysts to make informed decisions. Therefore, these firms
either have a dedicated equity research team in their organization or outsource this work to an
independent research firm

Objectives
The objective of equity research is: -

 To justify the current investment in the chosen securities.

 To understand the movement and performance of stocks
 To recommend increase/decrease of investment in a particular security
 To provide an overview of the various industries of different sectors and
analysing the stocks of that sectors.
 To study about some of the major players in different sectors which has
good investment prospects

Scope of Study
The main aim of equity research is to analyse the market trend and observe how it is affecting
companies’ earnings and their stock value. It focuses on a stock or a sector as a whole and
captures all the information of the stock (or companies in a sector). It includes a
review of its historical financial performance, forecast of its future financial
performance along with supporting arguments for the estimates and finally a recommendation
whether to buy or sell the stock.

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 Chapter-3

Data Analysis

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Industry Overview
India’s Food Services industry has come a long way from what it was before 1990s, when the
number of organized brands were very few and included home-grown brands like
Haldiram’s, Nirula’s, Honest, Sarvana Bhavan and UK-based (now South Africa-based)
Wimpy. The market otherwise was dominated by unorganized players. The revolution in this
sector began in mid-1990s with organized players like McDonald’s, Domino’s, KFC, Baskin
Robbins, etc. starting to open their outlets in the country. With the entry of these international
brands, segmentation based on offerings and service started in India. The Indian Restaurant
and Food Service Sector has seen continuous growth at a strong rate year by year. According
to the Technopak report, the market size of food services in India in Fiscal 2015 was INR
2,86,500 Cr and it reached INR 4,23,600 Cr in FY20. They projected the market size to grow
at 9% CAGR over the next five years and reach INR 6,50,500 Cr.

The sector is classified into two divisions, organized and unorganized market based on
organized operations, accounting transparency, and outlet penetration. Any food services
outlet that does not comply with these characteristics will fall in an unorganized market,
which will include dhabas, street stalls, trolleys, and hawkers. The food services outlets that
comply with the above characteristics will fall in an organized market and can be
subcategorized as chains (more than three outlets across the country) or standalone outlets.
Chains are divided into sub-segments: fine dining (FDR), casual dining (CDR), PBCL (pub,
bar, club, and lounge), quick-service restaurants (QSR), cafes, and frozen desserts/ice creams.
The table below shows the market share of different Indian food services markets in Fiscals
2015 and 2020 and the expected market share in Fiscal 2025 as per the report by Technopak

Format Market Share Market Share Market Share

FY2015 FY2020 FY2025P
organized Market 68.1% 59.5% 47.3%
Unorganized 23% 28.4% 35.5%
Standalone
Market
Chain Market 6.1% 9.4% 14.9%
Restaurants in 2.8% 2.7% 2.4%
Hotels

Market Structure

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The table below shows the market share of different Indian food services markets in Fiscals
2015 and 2020 and the expected market share in Fiscal 2025 as per the report by Technopak.

Format Market share Market Shares Market Shares

FY2015 FY2020 FY 2025P
organized Market 68.1% 59.5% 47.3%
Unorganized 23% 28.4% 35.5%
Standalone
Market
Chain Market 6.1% 9.4% 14.9%
Restaurants in 2.8% 2.7% 2.4%
Hotels
Source: Technopak Research & Analysis

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The following table shows the CAGR of each of the chain food services sub-segments
between FY15 and FY20 and their expected CAGR between FY20 and FY25:

Format CAGR 2015-2020 CAGR 2020-2025

Quick Service 19% 23%
Restaurants
Casual Dining 19% 18%
Restaurants
Café 8% 8%
Frozen Dessert/ Ice 16% 15%
Cream
PBCL 22% 17%
Fine Dining Restaurants 3% 1%
Source: Technopak Research & Analysis

India’s food services industry, which has grown by 8% over the years, is expected to grow at
a higher rate by ~9% over FY20-25P

7000
156
(Rs.bn)
6000 966

5000
115 116
2309
4000 105 397
95 350
88 285
75 80 236 1096 1203
3000 204 935
175 820
150 722
605 660
2000
3075
2225 2381 2535 2519
1000 1835 1950 2076

0
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY25P

Unorg. Market Org. Standalone Chain Market Restaurants in Hotels

Source: Technopak, Nirmal Bang Institutional Equities Research

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About the Quick Service Restaurants (QSR)
The Quick Service Restaurants (QSR) are the major contributors in the organized market
under the restaurant and food industry. It has fast-food cuisines which require minimal
preparation time, minimal table services to fulfill the needs of youth and working
professionals. These food items are delivered through quick services and the prices are very
competitive which are differentiating factors of these special types of restaurants. QSRs
generally target people from the age group of 16-35 years. The average spending of a person
in QSRs is in the range of INR 75-250.

The segment has the potential to grow in India as it is a very significant segment of the Indian
Fast-food services. Also, the availability of cheap labor makes India a favorable destination
for the development of the QSR Industry. India has a large number of international QSRs
with franchise rights of various companies. The major players in the QSR are Jubilant
FoodWorks Limited, Westlife Development Limited, Sapphire Foods India Pvt Ltd, Burger
King India Pvt Ltd, Subway System India Pvt Ltd, etc.

The varying consumption preferences and rise in millennials provide a huge growth
opportunity for QSR Industry. Youth and working professionals are shifting more towards
the food that is readily available in a shorter duration. The restaurant industry was the worst
hit after the pandemic followed by the lockdown that led many restaurants to close their
businesses. But QSRs started to change their policies and took necessary measures to fulfill
the needs of their customers post lockdown. They stopped taking delivery orders from their
portals and started partnering with Swiggy and Zomato to ensure a contactless delivery while
following all the safety protocols. The QSR market experiences various growth drivers and is
therefore expected to rise in the future as well.

The growing Indian market is still fully untapped to international QSR companies. These
companies have majorly targeted the Tier I cities but in past few years, they have started to
grow their network in Tier II & Tier III cities as well. The distribution of QSR outlets is
majorly driven by demographics, higher disposable income, and ease of accessibility across
geographies.

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Market Share by Revenue

21%

47%
6%

11%

10%
5%

Domino's Subway McDonald's KFC Burger King Others

Source: Technopak Research & Analysis

Impact of COVID-19 on QSR

When the COVID-19 pandemic began, dine-in services were mostly shut down due to the
lockdown. QSRs were already equipped with the delivery services long before the COVID-
19 crisis and were able to follow the government guidelines and instructions. Dine-in services
were affected but the QSRs were able to generate revenue by enhancing their delivery
services. Consumers are also found ordering online from the reputed QSRs through their
delivery services because they were keen to focus on hygiene and following all safety
standards. The situation also allowed QSRs to grow the new sales channels such as drive-
through, on-the-go, and takeaway. In March 2020, when India went on a complete lockdown,
the entire food service sector saw a 31% downfall in the size of the market in comparison to
the pre-COVID levels for Q4 FY20. They started to grow at the end of May and QSR was
first among the organized market to start recording sales. QSRs had to demonstrate and
emphasize on strengthened hygiene and safety measures for food delivery services to gain
back the consumers’ confidence and trust.

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Drivers of QSR

Online Food Ordering, Food Delivery & Takeaway

The channels such as deliveries and takeaways will be the biggest growth drivers for QSR.
The delivery platforms such as Swiggy and Zomato have grown by 50% CAGR. Zomato
recorded the highest Gross Order Value (GOV) of INR 2981 Cr in 3Q FY21 and during the
nine months ended December 31, 2020, 69.3% new customers were acquired by them, and
that too without any paid advertisements. Because of the pandemic and strict restrictions, not
only customers but the restaurant industry was affected as well and they didn’t have enough
resources to run their business. Aggregators like Swiggy and Zomato came to their rescue
and the restaurant owners didn’t hesitate to reach out to them to grow their customer base and
increase their sales during the pandemic.

Encouring Demographics
The age group 15-
64 years is an
earning
population of the
country which 63.74% 67%
saw an increase
from 63.74% in
2009 to 67% in
2019. According
to the CIA World 31.24% 26.62%
Factbook, India 6.38%
5.02%
has also a lower
0-14 Years 15-64 Years 65+ Years
median age of
28.7 years in 2020 2009 2019
as compared to
the global economies which imply a higher number of working people making it a perfect
market for QSR to grow. Increasing expenditures and spending among youth will boost retail
sales in India.

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Increasing Urbanization
More population of India is
moving from rural to urban
at a faster pace. It is
estimated by 2025, 37% of
India’s population will be
living in urban centers, 71% 69% 67% 65%
75% 73% 72%
contributing between 70-
75% of India’s GDP. An
increase in urbanization will
lead to higher disposable 35%
27% 28% 29% 31% 33%
income and that will result in 25%
a growth of eating-out and
1990 1995 2000 2005 2010 2015 2020
ordering-in. The situation
will give a boost to QSRs Urban Population Rural Population
and provide them the
opportunity to grow at an exceptional rate.

Changing Disposable Income Leels

The Indian economy is growing which is resulting in a boost in the income levels which is
further leading to an
increase in disposable 20.67
19.28 19.96
income. The income
levels are expected to 16.96
15.49
rise more in upcoming 13.81
years which will allow
the consumers to spend
more. According to the
Ministry of Statistics
and Program
Implementation, the
disposable personal 2015 2016 2017 2018 2019 2020
income rose from INR
Disposable Pesrsonal Income (In INR Cr)
13.81 Cr in 2015 to
INR 20.67 Cr in 2019
but it saw a decline in 2020 because of the pandemic. But it is expected to rise again once the
situation gets better which will provide a lucrative opportunity to the QSRs

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Changing consumer lifestyle
Eating out is becoming a habit among youngsters, rather than just an occasion or an event.
Consumers are not only bothered about enjoying a meal but also to experiment with new
cuisines. According to Technopak, an urban individual couple spends a total of 9 days eating
out in one year. The young population is increasing year by year with the increase in their
income levels has led to a shift in their food buying habits. Their busy and hectic lifestyle
making them opt for ready-to-eat food with much convenience. With technological
advancements, food delivery is becoming a faster and easier option. The young population is
ready to explore regional and international cuisines on different outlets, based on the reviews
shared on social media.

Age Group Eating-out Ordering-in Average Average

Frequency/ Frequency/ Spend per Spend per
Month Month Outing (₹) Order (₹)
15-24 yrs 2.3 0.9 230 124
25-34 yrs 1.9 0.7 225 118
> 35 yrs 1.5 0.3 303 107
Source: Technopak Research & Analysis

Internet Penetration
Not only youth people from every category can access high-speed internet in Tier-2 and Tier-
3 cities because of the cheapest internet connections in the world. The demand for fast food is
on the rise as the customers are preferring online orders through vendors like Zomato and
Swiggy in non-metro cities. QSRs are also expected to expand their presence here to meet the
growing demand. As per the report by the Internet & Mobile Association of India (IMAI) and
Nielsen, rural India had INR 22.7 Cr active users, 10% more than urban India’s about INR
20.5 Cr as of November 2019. The table below shows the internet and smartphone
penetration in India in FY19 and FY20:

Category FY17 FY18 FY19

Internet Users (in 455 535 627
Mn)
Smartphone Users 100 340 408
(in.Mn.)

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Company Analysis
Jubilant Foodworks Ltd.
Jubilant FoodWorks one of India’s largest
food service companies. It operates Shareholding Pattern (%)
Domino’s Pizza, Dunkin’ Donuts, Hong’s
Public
Kitchen, and Ekdum! brands in India. Apart 10%
from Domino’s Pizza operations in India, it
is also present in Bangladesh and Sri Lanka. DIIs
16% Promoters
The company was incorporated as Domino's 42%
Pizza India and opened its first store in Delhi
in 1996. Later, in 2009, Domino's Pizza FIIs
India's name was changed to Jubilant 32%
Foodworks. Currently, the company has got
1567 outlets of Domino's Pizza all over
India and it has got its presence in 337 cities
in India. Recently, Jubilant Foodworks has
also launched its own homegrown brand
with the name Hong's kitchen. Hong's kitchen specializes in Chinese cuisine so as of now,
there are four outlets of Hong's kitchen. If we discuss the market cap of Jubilant Foodworks
then as of now the market cap of jubilant food works is 33,876Cr

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Fundamental Analysis

Revenue (Rs. Cr.)

4396
3912
3557
3296
3018

2018 2019 2020 2021 2022

Revenue (Rs. Cr.)

Net Profit (Rs. Cr.)

428

317.9
278.7
230.5
196.2

2018 2019 2020 2021 2022

Net Profit (Rs. Cr.)

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 Profitability Ratios (%)
37.3

29.61
25.38 24.95
21.61
20.27
22.3 16.23
19.08 19.6
16.13
14.08
10.71 9.84
6.49

2018 2019 2020 2021 2022

ROE ROCE ROA

Margin Growth (%) Growth (%)

25.49 26.16
24.06
85.88
18.16
15.34 62.05
9.74 18.05 32.74
8.92 10.22
6.5 7.09 6.96 -15.67

2019 2020 2021 2022

-12.32
-17.32
2018 2019 2020 2021 2022

EBITDA Margin % Net Profit Margin (%) Net Profit Growth (%) Revenue Growth (%)

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 Liquidity Ratios (X)
1.49

1.21
1.07 1.35
0.97 1
1.07
0.93
0.82 0.83

2018 2019 2020 2021 2022

Current Ratio Quick Ratio Debt/Equity Ratio

Valuation Ratios
165.94

82.82
69.3
59.54
44.9
39.12
32.87 28.66 30.84
19.83

15.93 15.17 17.38 27.08 17.9

2018 2019 2020 2021 2022

P/E Ratio P/BV Ratio EV/EBITDA

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SWOT Analysis

Strength Weaknesses

 Company with Low Debt  Promoter Stock Pledge

 Decline in Net Profit with
 High Piotroski Score
falling Profit Margin
Companies with strong
financials  Declining Net Cash Flow :
 Strong cash generating Companies not able to
ability from core business - generate net cash
Improving Cash Flow from
operation for last 2 years

Opportunity Threats

 RSI indicating price strength  Stocks with High P/E

 Increasing Trend in Non-

Core Income
 Degrowth in Revenue,
Profits and Operating Profit
Margin in recent results
(QoQ)

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WestLife development Ltd.
Westlife Development operates a chain of ShareHolding Pattern (%)
McDonald’s restaurants in western and
Public
southern parts of India through its subsidiary 10%
Hardcastle Restaurants Pvt. Ltd. (HRPL).
McDonald’s operates through various
DIIs
extensions such as standalone restaurants, 23%
drive-thru’s, 24/7 restaurants, McDelivery, Promoters
dessert kiosks. The brand extension includes FIIs 57%
McCafe, McBreakfast, and McDelivery that 10%
have helped the company to create a portfolio
that builds brand differentiation and brand
value.

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Fundamental Analysis

Revenue (Rs. Cr.)

1539 1557
1390
1126
976

2018 2019 2020 2021 2022

Revenue (Rs. Cr.)

Net Profit (Rs. Cr.)

21.29
12.86

2018 2019 2020 2021 2022

-7.35 -1.67

-99.42

Net Profit (Rs. Cr.)

Growth (%)
206.08
65.55 10.4 -36.29 59.88
21.93 98.32
23.54
2018 2019 2020 2021 2022
-134.52

-1252.65
Net profit Growth (%) Revenue Growth (%)

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 Margin Growth (%)
13.8
12
8.5
6.8
4.8
1.13 1.51
-0.47 -0.1

2018 2019 2020 2021 2022

-10.08

EBITDA Margin % Net Profit Margin (%)

Liquidity Ratios (X)

0.5
0.42
0.4
0.32
0.3 0.26
0.23 0.23
0.2

0.1

0
2018 2019 2020 2021 2022

Current Ratio Quick Ratio Debt/Equity Ratio

Profitability Ratios (%)

14.73 16.28

8.72
5.12
2.37 3.64
-1.27 -0.09
1.38
2.07 -0.36
2018 2019 -0.41 2020 2021 2022
-5.76
-9.39

-20

ROE ROCE ROA

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SWOT Analysis

Strength Weaknesses

 Good quarterly growth in  Decline in Net Profit with

the recent results falling Profit Margin (QoQ)
 Growth in Quarterly Net  Promoter decreasing their
Profit with increasing Profit shareholding
Margin (YoY)  Book Value Per Share
 Company with Low Debt deteriorating for last 2 years
 Company with Zero
Promoter Pledge

Opportunity Threats

 Rising Delivery Percentage  Degrowth in Revenue,

Compared to Previous Day Profits and Operating Profit
and Month, Strong Volumes Margin in recent results
 Street Favorite: High (QoQ)
Analyst Rating with at least  Increasing Trend in Non-
20% upside Core Income
 Stock with Low PE

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Burger King India Ltd.
ShareHolders Pattern (%)
Burger King India Limited is a subsidiary of QSR
Asia Pte Ltd. which is promoted by F&B Asia
Ventures (Singapore) and BK AsiaPac. The Public
company has variety across food offerings, 22% Promoters
including burgers, wraps, rice, beverages, sides, DIIs 41%
8%
snacks, shakes, and desserts across breakfast,
FIIs
lunch, dinner, snacks time, and late night
29%

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Fundamental Analysis

Revenue (Rs. Cr.)

944
838

630
493
377

2018 2019 2020 2021 2022

Revenue (Rs. Cr.)

Net Profit (Rs. Cr.)

2018 2019 2020 2021 2022

-38.28

-82.23 -76.57
-92.95

-173.91

Net Profit (Rs. Cr.)

Growth (%)
90.86
64.44 67.34
32.95
53.45 -41.22 46.56
2018 2019 2020 2021 2022

-44.19

-100.03
-127.13
Net Profit Growth (%) Revenue Growth (%)

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 Margin Growth (%)
14.28 13.02 11.73
8.79
4.95

2018 2019 2020 2021 2022

-6.04
-9.1 -9.84

-21.74

-35.17
EBITDA Margin % Net Profit Margin (%)

Liquidity Ratios (X)

2.5 2.25
2.19
2

1.5 1.26

1 0.38 0.51

0.5

0
2018 2019 2020 2021 2022

Current Ratio Quick Ratio Debt/Equity Ratio

Profitability Growth (%)

1.15 -6.7
-0.65 -0.94

2018 2019 2020 2021 2022 -3.21

-7.03 -4.76
-4.15
-6.39
-11.25 -12.17
-15.33

-25.82
-28.63 -27.8

ROE ROCE ROA

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SWOT Analysis

Strengths Weaknesses

 Company with No Debt  Promoter holding decreased

 Book Value per share by more than -2% QoQ
Improving for last 2 years  Promoter decreasing their
 Company with Zero shareholding
Promoter Pledge
 FII / FPI or Institutions
increasing their
shareholding

Opportunity Threats

 Street Favorite: High  Increasing Trend in Non-

Analyst Rating with at least Core Income
20% upside
 Stock with Low PE
 RSI indicating price strength

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 Key Risks

 COVID-19 Pandemic & Lockdown:

The outbreak of COVID-19 pandemic around the world followed by strict lockdown
has caused a significant impact on the QSR sector. The pandemic has also changed
the consumer lifestyle as they now prefer more on ordering online rather than going to
restaurants. The cases have started rising again all over India when things were
getting back normal. The present situation would adversely impact the restaurants and
QSR businesses in the medium term (3-6 months).

 Negative Advertisement of Junk Food:

People mostly parents perceive junk food as a non-healthier option. Pizza, burgers,
sandwiches, and other related items are the major products of the QSRs. These food
items become the target of negative advertisement which impacts the QSR brands in
the long run.

 Competition:
There is cut-throat competition in the QSR sector of India. The QSRs are expanding
their menu and giving combos, offers, and high discounts to lure the customers. The
company can face stiff competition in their core offering from other QSRs as well in
the future, which can restrict the growth of the company.

 Quality Manpower:
The food services market is labor-intensive but has a shortage of manpower. It
requires human intervention at each step right from the purchase of ingredients to
cooking to service delivery to customers. The QSR sector requires trained and
professional chefs and waiters. Every year, the market requires a high number of
skilled workers for restaurant employment but the availability of such workers in the
market is limited. This creates a void for talented manpower which is likely to be
filled with unskilled workers, leading to a decrease in the quality of service provided
to the customers. The attrition rate in the segment is around 35% to 40%. During the
lockdown, the skilled and unskilled workers moved from urban to rural areas due to
the loss of jobs, which caused the supply of manpower.

 Food Safety:
Because of the pandemic, hygiene and food safety have become the primary concern
for most of the consumers and industries. The customers will be shifting towards the
organized sector from the unorganized sector. Food Safety and Standards Authority of
India (FSSAI) has to play an active role in addressing food safety issues by educating
companies in the food sector. International brands such as McDonald’s, Burger King,
KFC, and others have strict rules regarding food safety and hygiene. The awareness

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 from FSSAI will drive consumers to choose formats that follow the food safety
norms.

 High real estate prices:

Rentals being the second highest cost component after raw materials for most food
services companies, (~12%-15% of revenue generally and occasionally 20%). Driven
by higher demand and availability of easy credit, real estate prices in India have been
increasing for over a decade. Hence, any disproportionate increase in real estate prices
will exert pressure on the profitability of companies in the food services industry and
will hinder the growth of their outlets.

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 Future Outlook

The organized QSR market in India has more than 100 brands with 7000+ outlets
spread across India. Five years ago, the numbers were less than 50% as compared to
these numbers. International companies are looking to scale their operations
throughout the country with best global best practices, advanced supply chains, and
established standard operating procedures. The QSR sector is expected to rebound in
the coming years with the improvement in the purchasing power of consumers. The
one thing we can take away from the COVID-19 pandemic is increasing focus on
food safety, health, and sanitation. The QSRs have to make sure that they follow the
best hygiene practices. This gives an extra opportunity to the sector to explore new
ideas and bring innovation to their menu to fulfill the needs of customers. Moreover,
businesses have to change their entire model and incorporate the latest technological
trends. QSRs will be focusing more on health & hygiene, contactless delivery, and
special take-out menus in the future. According to the Morgan Stanley report, QSRs
will be among the first beneficiaries of the recovery in discretionary consumption
once the pandemic is over. Contactless dining and deliveries will be priorities for
consumers as the pandemic is still not over. The pandemic has had a harsher impact
on the unorganized segment as compared to the organized players; this is expected to
lead to faster consolidation of the industry towards the organized segment.
Convenience channels such as home delivery will be growing at a faster pace due to
the varying consumer eating patterns. These factors will enhance the investments in
QSRs. In the upcoming years, QSRs will be looking to expand their presence in
multiple non-metro towns across India.

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 Conclusion

The outlook for the QSR sector and entire value chain in India remains positive going
forward. the existing listed players can grow their revenue and profitability further
while creating wealth for investors. Further, many companies are looking to tap the
equity markets for fundraising, driven by the promising potential in the sector. I
expect more such companies in the food services value chain to do the same as
investor’s appetite for the sector grows. Based on the financial analysis it can be
concluded that Jubilant FoodWorks outperform the other players of the industry by
maintaining the profit-making tag and increasing their sales too. They are leading the
Indian QSR industry when it comes to organise food chain sector. The outlook for
Jubilant Foodworks remains Positive.

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 Bibliography

https://www.jubilantfoodworks.com/investors-financial-information

https://www.westlife.co.in/investors-annual-report.php

http://burgerking.riweb.com.br/default.aspx?linguagem=en

https://www.technopak.com/food-services/

https://www.moneycontrol.com/

https://www.morningstar.in/default.aspx

https://www.nseindia.com/

https://www.bseindia.com/

NISM-Series-XV-Research-Analyst-Workbook

Nirmal Bang Institutional Equities Research

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