Devyani International Ltd Management Discussions

ECONOMIC OVERVIEW

The global economy continued to demonstrate resilience amid persistent geopolitical tensions, trade fragmentation and financial market volatility. According to the International Monetary Fund (IMF), global growth is projected at approximately 3.1% in 2026, supported by stable financial conditions, easing inflationary pressures and a gradual recovery in real incomes. While elevated interest rates in several economies and cautious consumer sentiment continue to moderate demand, resilient labor markets have sustained household consumption. Consumer spending patterns are also evolving, with a sustained shift towards services, digital channels and experience- led consumption, while demand for goods continues to normalize following the post-pandemic surge.

Against this backdrop, India remains one of the fastest-growing major economies. The Reserve Bank of India (RBI) projects GDP growth of 6.6% for FY 2026-27, underpinned by robust domestic demand and sound macroeconomic fundamentals. Private consumption continues to be the primary engine of growth, supported by rising disposable incomes, moderating inflation, healthy employment levels and improving consumer confidence across both urban and rural markets.

The year witnessed several structural developments that further strengthened Indias medium- to long-term growth outlook. Measures such as direct tax relief and continued GST rationalization are expected to stimulate consumption, deepen formalization and improve overall economic efficiency. At the same time, an accommodative monetary policy environment has supported effective liquidity transmission, facilitating credit availability across the economy.

Rural demand continued to improve, aided by healthy agricultural output and sustained government support, while urban consumption remained resilient, driven by rising incomes and stable employment across the services and manufacturing sectors. Healthy household balance sheets, expanding retail credit penetration and continued public investment in infrastructure have further reinforced the consumption-led growth cycle.

Looking ahead, Indias sustained policy emphasis on infrastructure development, manufacturing competitiveness, digitalization and ease of doing business is expected to strengthen economic resilience and expand long-term growth opportunities. Supported by favorable demographics, rising aspirations and increasing formalization of the economy, India remains well positioned to be one of the principal drivers of global economic growth in the years ahead.

Source: IMF World Economic Outlook - April 2026

INDUSTRY OVERVIEW & OUTLOOK

Indias foodservice industry continues to exhibit strong structural growth, supported by favorable macroeconomic conditions, demographic advantages and evolving consumer lifestyles. The market is projected to expand from approximately USD 94 billion in 2026 to USD 153 billion by 2031, representing a healthy CAGR of ~10.3%. This growth is underpinned by rising disposable incomes, rapid urbanization, and a young, aspirational population with an increasing propensity to spend on dining experiences and convenience-led consumption. Changing household structures, particularly the rise of nuclear families and dual-income households, along with time-constrained lifestyles, are accelerating the shift toward eating out and ordering in. Additionally, increasing digital adoption, seamless payment infrastructure, and deeper penetration of aggregator platforms have significantly enhanced accessibility and frequency of consumption across both metro and non-metro markets.

The industry is also witnessing a structural transition from an unorganized market to a more organized, branded ecosystem. While Full-Service Restaurants (FSRs) continue to remain popular due to their experiential appeal and social dining relevance, there is a preference towards convenience-oriented formats. Delivery- led channels, cloud kitchens, and takeaway models are witnessing accelerated adoption, driven by asset-light expansion strategies and improved unit economics. The growing influence of technology, ranging from aggregator platforms and loyalty ecosystems to data-driven menu optimization, is enabling operators to enhance customer engagement and operational efficiency. Furthermore, expansion beyond metro and tier-1 cities, supported by rising income levels and improving infrastructure, is unlocking new demand pockets and widening the industrys addressable market.

Within this evolving landscape, the Quick Service Restaurant (QSR) segment remains one of the fastest-growing and most resilient categories. The segment is expected to grow from approximately USD 30 billion in 2026 to USD 47 billion by 2031, at a CAGR of ~9.3%. Growth is being driven by increasing consumer preference for affordable, standardized, and quick meal solutions, particularly among younger demographics and working professionals. QSR operators are leveraging a multi-channel approach - encompassing dine-in, takeaway, drive-through, and delivery - to maximize reach and throughput. Menu localization, value offerings, and product innovation tailored to regional tastes continue to play a critical role in driving volumes. At the same time, strategic partnerships with delivery aggregators, investments in digital ordering platforms, and the scaling of franchise-led expansion models are supporting rapid network growth and brand penetration.

Looking ahead, the long-term outlook for Indias food services sector remains highly favorable. Continued urbanization, rising discretionary incomes, increasing formalization of the industry and accelerating adoption of technology-enabled operating models are expected to sustain growth over the coming years. Innovations such as AI-powered customer engagement, cloud kitchens, hybrid dining formats and intelligent supply chains are reshaping the industrys competitive landscape. While operators continue to navigate cost inflation, evolving regulatory standards and heightened competition, businesses with strong brands, diversified portfolios, technology- led operations and efficient supply chains will be best positioned to deliver sustainable, long-term value.

Source: Mordor Intelligence - Indian Foodservice Market and India QSR Market, Kearney & Swiggy - How India Eats 2026

KEY DRIVERS FOR GROWTH & OPPORTUNITY

The Indian foodservice and quick service restaurant (QSR) industry continues to demonstrate strong structural growth, supported by favorable demographics, rising disposable incomes, increasing urbanization, and rapid digital adoption. The sector is witnessing accelerated formalization, with organized players gaining share through technology-led models, evolving consumer preferences, and deeper penetration into emerging markets.

Rising Incomes Driving Affordability: Increasing disposable incomes and a growing aspirational class are leading to higher discretionary spending on food consumption, with consumers showing a clear preference for quality, hygiene, and branded experiences. Globally, discretionary consumption accelerates once per capita income crosses the USD 7,500 threshold. Indian Food Service market is <2% of its GDP - reflecting a lower per capita income of ~USD 2,800, thus allowing a significant headroom for expansion.

Favorable Demographics and Evolving Preferences:

Indias young and increasingly experimental consumer base is driving demand for diverse cuisines, new formats, and frequent innovation. At the same time, growing awareness around health and nutrition is influencing food choices. This creates opportunities for continuous menu innovation, introduction of healthier and customized offerings, and alignment of product strategies with evolving consumer preferences.

Urbanization and Convenience-led Consumption: Rapid urbanization, coupled with nuclear households and dual-income families, is accelerating demand for convenient food solutions. Time-constrained consumers are increasingly relying on takeaway, delivery, and quick-service formats, leading to higher frequency for out-of-home food consumption and creating opportunities for companies to expand store throughput and drive higher consumption across multiple dayparts.

Digital Ecosystem Enabling Delivery-led Growth: The widespread adoption of smartphones, digital payments, and food delivery platforms such as Zomato and Swiggy has significantly expanded market access and order frequency. This digital ecosystem enables companies to build omnichannel capabilities, leverage customer data for targeted engagement, and improve unit economics through direct ordering platforms and loyalty programs.

Shift Toward Organized and Branded Players: The industry continues to transition from unorganized operators to organized, branded chains, supported by increasing consumer focus on hygiene, consistency, and trust, along with regulatory oversight by Food Safety and Standards Authority of India. This shift provides organized players with a structural advantage to gain market share, scale operations through standardized processes, and build longterm customer loyalty.

Technology-led Operational Efficiency: The integration of technology across ordering, supply chain, and store operations is improving efficiency, consistency, and scalability. Advanced analytics is enabling better demand forecasting, pricing optimization, and inventory management, thereby creating opportunities for margin expansion, cost optimization, and enhanced customer retention through data-driven insights.

The Indian foodservice and QSR industry remains well-positioned for sustained long-term growth, supported by strong macroeconomic fundamentals, favorable demographics, and increasing adoption of organized and technology-enabled formats. As the market continues to evolve, companies that effectively leverage digital capabilities, scalable expansion models, and localized innovation are expected to capitalize on emerging opportunities and drive sustainable value creation.

BUSINESS OVERVIEW Company Snapshot

Devyani International Limited ("DIL" or "the Company"), a key growth engine of the RJ Corp Group, is one of Indias largest Quick Service Restaurant (QSR) operators and among the countrys leading organized foodservice companies. Since opening its first Pizza Hut restaurant in Jaipur in 1997, the Company has evolved into a multi-brand, omni-channel food services platform through disciplined expansion, operational excellence and a consumercentric growth strategy.

Today, DIL is the largest franchisee of Yum! Brands in India, operating globally recognized brands including KFC and Pizza Hut, while also managing Costa Coffee stores across the country. Complementing its international portfolio are fast-growing home-grown brands such as Vaango and Food Street, enabling the Company to cater to diverse consumer preferences across cuisines, formats and consumption occasions. During the year, DIL further strengthened its presence in the Indian cuisine segment through the acquisition of Sky Gate Hospitality Private Limited, bringing high-growth brands such as "Biryani By Kilo" and "Goila Butter Chicken" into its portfolio and reinforcing its "House of Brands" strategy.

As of March 31, 2026, the Company operated 2,256 stores across India, Nepal, Nigeria and Thailand, compared with 2,039 stores a year earlier. This comprised 783 KFC restaurants, 639 Pizza Hut outlets and 193 Costa Coffee cafes in India, alongside a growing portfolio of emerging brands. Spanning dine-in, takeaway, delivery, travel hubs and other convenience-led formats, DILs extensive footprint is supported by strong capabilities in site selection, supply chain management, procurement and store-level operational excellence. These capabilities provide significant scale advantages, enabling faster market expansion, improved cost efficiencies and greater agility in responding to changing consumer preferences.

A defining milestone in the Companys growth journey was the announcement of its proposed merger with Sapphire Foods India Limited on January 01,2026. Upon completion, the combined entity is expected to operate more than 3,000 stores globally and generate approximately USD 1 billion in annual revenues, creating one of the largest food service platforms in India. The merger is expected to unlock meaningful synergies across procurement, supply chain, technology, capital allocation and network expansion, further strengthening the Companys competitive position.

Beyond scale, DIL is undergoing a strategic transformation to become a technology-enabled, multi-brand food platform. It is embedding Artificial Intelligence, automation, advanced analytics and digital technologies across its operations to enhance customer engagement, improve productivity, optimize supply chains and enable faster, data-driven decision-making. Simultaneously, the Company is also testing new growth categories through franchise partnerships with international brands such as New York Fries and Sanook Kitchen.

This transformation is supported by disciplined execution across the business. Continued store expansion, stable performance from the international division and the successful integration and turnaround of acquired businesses have strengthened the Companys operating performance. DIL remains focused on improving store economics, driving same-store sales growth, expanding margins through operational efficiencies and delivering sustainable value creation.

With favorable structural trends supporting Indias food services industry, DIL is well positioned for its next phase of growth. Its diversified portfolio of global and Indian brands, technology-led operating model, robust execution capabilities and clear vision of building Indias leading integrated Food & Beverage platform provide a strong foundation for sustained, long-term growth. As the Company continues to transform for the future, it remains committed to creating superior value for its customers, partners, employees and shareholders.

TRANSFORMATIONAL MERGER - A DEFINING STEP TOWARD MARKET LEADERSHIP:

The proposed merger between Devyani International Limited (DIL) and Sapphire Foods India Limited (SFIL) marks a transformational milestone in the Companys journey towards building Indias largest and most diversified Quick Service Restaurant (QSR) platform. By bringing together two complementary franchise operators with strong operational capabilities and shared strategic vision, the combined entity will create a scaled, future-ready business with enhanced market leadership and long-term growth potential.

Upon completion, the merged entity is expected to operate over 3,000 restaurants across multiple geographies and generate approximately USD 1 billion in annual revenues, creating one of the largest franchise platforms for global QSR brands in India. The increased scale will strengthen the Companys ability to compete in a rapidly expanding food services market while enhancing its capacity to invest in technology, innovation, customer experience and network expansion.

Structured as a share-swap transaction, the merger aligns the interests of shareholders of both companies while facilitating a seamless integration of operations. Subject to the necessary regulatory and shareholder approvals, the transaction is expected to be completed by March 2027, subject to regulatory and statutory approvals. Resulting in a stronger, well-capitalized organization with greater financial flexibility and enhanced execution capabilities.

Strategically, the combination creates a well-diversified, multi-brand portfolio anchored by globally recognized brands such as KFC and Pizza Hut, while strengthening the Companys presence across high-growth categories through Costa Coffee, Vaango, Biryani By Kilo, Goila Butter Chicken and other emerging brands. Supported by a robust omnichannel presence spanning dine-in, takeaway, delivery and digital commerce, the combined platform will be well positioned to serve evolving consumer preferences across multiple cuisines, occasions and price points.

The merger is also expected to unlock significant operational synergies across the value chain, with an estimated 2-2.25 Billion in savings every year once integration is completed. These benefits will be driven by procurement efficiencies through an integrated supply chain, optimized corporate overheads, unified technology platforms, enhanced data analytics and the adoption of best practices across operations. Together, these initiatives are expected to improve productivity, enhance overall operating margins and allow the merged entity to drive growth.

Beyond financial synergies, the combined organization will benefit from greater organizational capabilities, deeper management expertise and an expanded innovation pipeline. The enlarged platform will provide increased agility to enter newer territories, accelerate the rollout of emerging brands, strengthen digital and AI-enabled capabilities, and respond more effectively to changing consumer trends.

The proposed merger represents far more than a combination of two businesses - it is a defining step in DILs strategic transformation into a diversified, technology-enabled and consumer-centric food services platform. By combining scale with operational excellence and innovation, the merged entity will be uniquely positioned to deliver sustainable growth, strengthen market leadership and create enduring value for its customers, employees, partners and shareholders.

Key developments in FY 2026

Strategic Merger: FY 2026 marked a pivotal strategic milestone with the announcement of the proposed merger between Devyani International and Sapphire Foods. The combined entity is expected to operate over 3,000 stores with an annual revenue scale of approximately USD 1 billion, positioning it as one of Indias largest and most diversified QSR platforms. The merger is likely to unlock significant synergies across procurement, supply chain, operations, and brand management, while also strengthening bargaining power and enhancing long-term growth visibility.

Store Expansion: DIL expanded its network to 2,256 outlets by March 2026, supported by the addition of 217 new stores, across India and international markets. The company continued to deepen its presence in Tier II and III cities in India while advancing its footprint in Thailand and Nepal. KFC remained the primary growth engine, complemented by steady scaling of owned brands such as Biryani by Kilo and Vaango. Notably, FY 2026 reflected a more disciplined and selective approach to expansion. While KFC sustained strong store additions, Pizza Hut operations was largely directed toward optimizing the portfolio through replacement and rationalization of underperforming outlets. This shift highlights improved capital allocation and a sharper focus on driving store-level profitability and returns.

Portfolio Expansion & Brand Diversification: In

FY 2026, DIL advanced its portfolio diversification strategy through a mix of acquisitions, partnerships, and new brand launches. The acquisition of Sky Gate Hospitality, home to fast-growing brands such as Biryani by Kilo and Goila Butter Chicken, marked its entry into the sizable and underpenetrated Indian cuisine segment, helping reduce dependence on global QSR formats. At the same time, the company strengthened its international franchise portfolio by adding brands like New York Fries, and Sanook Kitchen. During the year, we also tested the bubble-tea brand Tealive. However, the performance and customer response was below our expectations and hence we decided not to scale or further continue the business. These initiatives expand DILs play across multiple consumption occasions while enhancing its long-term growth visibility.

Digital Investments & Consumer Engagement: The company continued to strengthen its digital ecosystem and consumer engagement capabilities in FY 2026. Devyani focused on driving traffic and improving conversion through targeted promotions, value-led offerings, combo meals, and localized menu innovation. Additionally, increased use of data analytics enabled more effective marketing spend, better demand forecasting, and enhanced customer experience across both online and offline touchpoints, aligning well with evolving consumer preferences around convenience, value, and speed.

BUSINESS STRENGTHS

Visionary Leadership & Strong Strategic Partnerships

Led by Mr. Ravi Jaipuria, bringing 30+ years of experience in building and scaling consumer businesses across geographies. Unflinching focus on disciplined capital allocation and a longterm strategic vision.

Supported by a seasoned Board and a new management team led by Mr. Manish Dawar, with strong expertise across operations, finance and strategy.

Well-defined leadership transition and succession planning ensure continuity and long-term strategic stability.

Enduring partnerships with leading global franchisors provide access to world-class operating practices, product innovation and strong brand equity.

• Exclusive franchise rights across key markets reinforce DILs competitive advantage.

Market Leadership with a Scaled Multi-Brand Platform

Among the largest QSR operators in India, with a growing international presence.

Operates 2,256 stores globally as of March 2026, reflecting strong scale and execution capabilities.

Diversified portfolio of globally renowned brands - including KFC, Pizza Hut and Costa Coffee - alongside high-growth Indian brands such as Vaango, Biryani By Kilo and Goila Butter Chicken.

Successfully participate across multiple cuisines, consumer segments, formats and price points.

Well-positioned to benefit from structural tailwinds in the QSR sector, including urbanization and rising consumption.

Technology-Driven, Consumer-centric Business Model

Continued investments in digital platforms, Artificial Intelligence, automation and advanced analytics across its value chain to enhance productivity, improve customer engagement and enable faster, data-driven decision-making.

Continuous menu innovation and omni-channel presence to capture evolving consumer expectations.

Operational Excellence and Disciplined Execution

Strong capabilities across site selection, supply chain management, procurement and store operations.

Relentless focus on improving store economics, cost optimization, capital efficiency and portfolio consolidation.

Rationalization of underperforming stores and disciplined expansion improve overall portfolio quality.

Consistent network expansion across India and international markets.

Diversified Growth Drivers and Financial Resilience

Multiple growth engines - new store expansion, international operations, emerging brands and acquisitions.

Diversified revenue streams across Metros and high- growth, emerging cities; multiple cuisines and formats and a geographical footprint across multiple countries.

Builds financial resilience and support sustainable long-term profitability.

Positioned to Capture Indias Structural Growth Opportunity

Indias favorable demographics, rising disposable incomes, rapid urbanization and increasing preference for organized food services continue to create significant long-term opportunities for the QSR sector.

DIL brings scale, diversified portfolio, technology-enabled operations and disciplined execution.

Well positioned to capitalize on these structural tailwinds and execute its vision of becoming Indias leading integrated Food & Beverage platform.

Scalable Growth

Consistent expansion through disciplined store additions across brands and geographies.

Added 217 net new stores in FY 2026, demonstrating strong growth momentum.

Focus on Tier II & III cities and international markets supports long-term growth and diversification.

FINANCIAL OVERVIEW

Revenue: On a consolidated basis, Revenue grew by 13.3% YoY to 56,115 Million, driven by strong performance across core brands, continued store expansion, and increasing contribution from international markets. Growth was further supported by menu innovation and higher traction from digital and delivery channels.

Profitability: Gross profit stood at 38,396 Million with margins of 68.4%, supported by favorable product mix, pricing actions, and supply chain efficiencies. Brand Contribution stood at 7,411 Million representing a margin of 13.2%. Investments in growth and dilution from acquired and newly franchised brands led to a transient dilution in the margin.

DIL delivered EBITDA of 8,554 Million and an EBITDA margin of 15.2%, reflecting front-loaded investments in new brands and building in-house capabilities, with scope for improvement due to operating leverage on expected sales growth in future.

Network Expansion: The Company operated 2,256 outlets as of March 31, 2026, up from 2,039 in the previous year. 217 net new stores were added during the year, led primarily by KFC, with growing contributions from other brands and international markets.

Particulars	FY26	FY25	YoY Change
Revenue	56,155	49,511	13.34%
Gross Profit	38,396	34,123	12.52%
EBITDA	8,554	8,422	1.57%
Depreciation	6,540	5,699	14.76%
Finance Cost	2,757	2,648	4.12%
PAT	(425)	(69)	(516.45%)

 

Particulars	FY26	FY25	YoY Change (%)	Explanation for variance > 25%
1 Interest Coverage Ratio (in times)	0.83	1.12	(25.46)	Interest expenses increased due to the availing of a term loan
2 Net Profit Margin (%)	(0.76)	(0.14)	(443.90)	Decline in PAT
3 Return on net worth (%)	(2.26)	(0.49)	(358.53)	Decline in PAT

FY 2026 marked a phase of measured growth and strategic consolidation for Devyani International Limited. While near-term demand softness in certain markets weighed on growth, the companys strong brand partnerships, expanding footprint, and disciplined execution provide a solid foundation for sustained long-term growth and margin expansion.

CORPORATE SOCIAL RESPONSIBILITY AND SPECIAL INITIATIVES

DIL the largest franchisee of Yum! Brands in India, integrates Corporate Social Responsibility (CSR) into its broader Environmental, Social, and Governance (ESG) framework, ensuring that business growth is aligned with social impact, inclusivity, and sustainability. In FY 2026, the Company adopted a comprehensive and well- structured CSR approach that combines its expanding operational footprint with meaningful community-driven initiatives.

In FY 2025-26, DIL reinforced its commitment to creating a positive social impact through focused CSR initiatives aligned with its core values. DIL participated in the National Apprenticeship Promotion Scheme (NAPS) introduced by the Government, and spent 17.71 Million towards the scheme, which supported a total of 528 apprentices. The aim of implementing the NAPS within the Company was to foster skill development among youth/ freshers PAN India and enhance their employability. By participating in the NAPS, the Company aimed to provide structured training opportunities that bridge the gap between theoretical knowledge and practical skills required in the workforce. Through NAPS, the Company contributed to the national agenda of creating a skilled workforce that meets the demand of Industries.

A central pillar of DILs CSR strategy is employment generation and skill development. With continuous expansion across urban and semi-urban regions, the Company has created significant job opportunities, particularly for youth entering the workforce. This is complemented by structured training programs that enhance practical skills, improve employability, and support long-term career development within the food services and retail sector.

DIL has also taken notable steps in promoting diversity, equity, and inclusion, making it a key part of its special initiatives. The Company actively employs hearing-impaired individuals, ensuring equal compensation, career progression opportunities, and a supportive work environment. Managers are trained in sign language, and employees receive specialized training to integrate seamlessly into operations. Additionally, DIL promotes womens empowerment through women-led stores and targeted programs such as "Women Squad," which focus on self-defence, health awareness, and workplace well-being, fostering a safe and inclusive environment.

The Companys CSR efforts extend to community development and social welfare. DIL undertakes initiatives such as food distribution drives, festive donations, and partnerships with NGOs and institutions to support underprivileged communities. It also runs programs focused on nutrition, healthcare awareness, hygiene, and vocational training, particularly in areas surrounding its outlets, thereby contributing to overall community upliftment and improved quality of life.

From an economic perspective, DIL contributes to strengthening local ecosystems by engaging with local suppliers, vendors, and service providers. This not only supports small and medium enterprises but also ensures stable demand and promotes economic resilience within its value chain. At the same time, the Company enhances food accessibility and affordability through value-based pricing strategies and localized menu offerings, making quality QSR food accessible to a broader and more diverse consumer base.

On the environmental front, DIL has made consistent progress toward sustainable and responsible operations. The Company is accelerating the adoption of renewable energy through rooftop solar installations, investing in sustainable and circular packaging solutions, and implementing effective waste management practices, including recycling of used cooking oil. It is also focused on reducing water and energy consumption across its outlets and prioritizing responsible sourcing practices, thereby minimizing its environmental footprint.

These initiatives are supported by strong governance frameworks and oversight mechanisms, including dedicated CSR and ESG committees that ensure transparency, accountability, and alignment with regulatory requirements and long-term sustainability goals. Policies related to stakeholder engagement and responsible business conduct further reinforce the companys commitment to ethical practices.

Overall, Devyani Internationals CSR and special initiatives in FY 2026 reflect a holistic and forward-looking approach. By integrating social responsibility, environmental stewardship, and inclusive growth into its core business strategy, the company continues to create sustainable value for its stakeholders while contributing positively to society and the environment.

HUMAN RESOURCES

At DIL, our people are the driving force behind our transformation and long-term success. As we continue to scale our business, we remain committed to fostering a safe, inclusive, healthy, and engaging workplace that enables employees to grow professionally while maintaining their physical, mental, and financial well-being. We are focused on building a future-ready workforce equipped with the skills, capabilities and mindset required to thrive in an increasingly digital and technology-enabled operating environment.

As of March 31, 2026, DIL, on a standalone basis, employed 15,955 partners across its operations, including 255 specially abled partners. Our workforce reflects our commitment to diversity, equal opportunity, and creating an inclusive work environment where every employee is respected and empowered.

DIL commitment to fostering a diverse, equitable and inclusive workplace is reflected in its workforce mix. As of March 31, 2026, 30.5% of our employee base consisted of female partners. The Company also operated 229 women-managed restaurants and

2 outlets managed by especially abled partners, reflecting our continued commitment to inclusive growth. We continue to expand opportunities for women across operational and leadership roles. We are also creating meaningful employment opportunities for differently abled individuals, reinforcing our belief that diversity strengthens organizational performance and enriches customer experiences.

Our talent strategy spans the entire employee lifecycle - from attracting and onboarding high-quality talent to developing future leaders and creating meaningful career opportunities. In addition to our permanent workforce, we engage specialized third-party service providers for select functions, including security services, and deploy part-time employees to efficiently manage seasonal and peak demand. The Company does not have labor union representation or collective bargaining arrangements.

Developing talent remains central to our operating philosophy. We have established structured learning and capability-building programs aligned with Yum! Brands global operating and certification standards, delivered through a blended learning approach combining classroom instruction, digital learning platforms and on-the-job training. Employees undergo mandatory programs covering food safety, fire safety, operational excellence and brand standards, while specialized development pathways prepare supervisors and restaurant managers for leadership responsibilities. Regular assessments and operational audits help ensure consistent execution across our restaurant network.

As our business becomes increasingly technology-enabled, we continue to strengthen digital capabilities across the organization. Technology-driven learning platforms, digital performance management systems and data-enabled HR processes are improving workforce productivity, enhancing employee experience and enabling faster, more informed talent decisions. These initiatives support the Companys broader transformation agenda by building an agile, digitally-enabled workforce capable of adapting to changing consumer expectations and evolving business needs.

We are focused on promoting the health, safety, and overall wellbeing of our employees through comprehensive welfare initiatives. During FY 2025-26, the Company invested 6.20 crore towards employee well-being. These initiatives reflect the Companys commitment to providing financial security, quality healthcare support, and family-friendly benefits, while fostering a healthy, inclusive, and supportive workplace for all employees. During the year, we also organized various employee engagement activities to foster a positive workplace culture. Celebrations of International Womens Day, Mothers Day, Holi, Diwali, and Christmas & New Year provided employees with opportunities to connect beyond work, recognize individual contributions, and celebrate cultural diversity. These initiatives strengthened team bonding, enhanced employee morale, and reinforced the Companys commitment to creating an engaging and people-centric work environment.

As we transform into a technology-driven, consumer-centric food services platform, our investment in people remains a strategic priority. By nurturing talent, embracing digital innovation and fostering an inclusive, high-performance culture, we are building a resilient organization capable of sustaining long-term growth and delivering exceptional experiences for our customers and stakeholders.

OUTLOOK & STRATEGY

DIL is entering the next phase of its growth journey on a strong foundation. Supported by favorable industry fundamentals, a diversified portfolio of leading brands and a technology-led operating model, the Company remains well positioned to capitalize on the significant opportunities emerging in Indias organized food services market.

A defining catalyst for DILs next phase of expansion is the proposed merger with Sapphire Foods India Limited - creating one of Indias largest and most diversified food service platforms. The merger is expected to unlock significant synergies across procurement, supply chain, technology, digital platforms, corporate functions and capital allocation, while strengthening the Companys ability to accelerate expansion, improve operating efficiencies and enhance long-term profitability.

Alongside scale, DIL continues to execute its strategic transformation into a diversified, technology-enabled platform. The Company remains focused on expanding its presence across established brands such as KFC and Costa Coffee, while accelerating the growth of high-potential businesses including Biryani By Kilo and Vaango. The successful turnaround of recently acquired brands - including the achievement of Brand Contribution break-even by Biryani By Kilo ahead of schedule - demonstrates the Companys disciplined execution capabilities and reinforces confidence in its ability to scale emerging businesses profitably.

For Pizza Hut, the strategic focus remains on portfolio consolidation and brand revitalization. The proposed merger with Sapphire Foods India Limited is expected to provide DIL with greater operational control and pan-India access for the Pizza Hut business, creating opportunities to strengthen brand positioning, improve the pace of product innovation, improve operating performance and drive more effective consumer outreach. Ongoing investments in menu innovation, customer engagement, digital capabilities and targeted marketing initiatives are expected to support improvements in same- store sales growth and long-term profitability.

Technology will remain a key enabler of DILs transformation. The Company is accelerating the deployment of advanced analytics, automation and digital platforms across its operations to enhance productivity, optimize supply chains, improve customer engagement and enable faster, data-driven decision-making. These investments are expected to strengthen operational resilience while creating a scalable platform capable of supporting sustained growth across brands and geographies.

Looking ahead, DIL remains focused on balancing growth with disciplined capital allocation and margin expansion. Backed by trusted global franchise partnerships, a diversified portfolio of international and homegrown brands, a robust execution engine and a clear longterm strategy, the Company is well positioned to strengthen its market leadership and create sustainable value for all stakeholders. While near-term uncertainties relating to consumer demand and input costs will require close monitoring, the Companys strong fundamentals, strategic transformation and technology-led capabilities provide confidence in its long-term growth trajectory.

RISK MANAGEMENT, AUDIT AND INTERNAL CONTROL

DIL has implemented a comprehensive internal control system designed to address the complexity of its operations and the rapidly evolving business landscape. The framework is focused on optimizing resource utilization, safeguarding organizational assets, and ensuring the accuracy, consistency, and reliability of financial reporting.

All financial transactions are governed by well-defined authorization protocols and are recorded through standardized processes, reinforcing transparency, traceability, and accountability. A robust system of internal checks and controls underpins the integrity of financial information and supports ongoing compliance with applicable regulatory requirements and accounting standards.

To strengthen governance oversight, the Company has established an Audit, Risk Management, and Ethics Committee at the Board level. This Committee provides strategic direction and supervision over internal audit activities, evaluates the effectiveness of risk management practices, and promotes adherence to high standards of ethical conduct and corporate governance.

As part of its commitment to independent oversight and financial discipline, the Company has appointed Walker Chandiok & Co LLP O P Bagla & Co LLP as joint statutory auditors. They are responsible for independently reviewing the adequacy of internal financial controls and evaluating the overall financial reporting framework.

The Company operates under a well-defined Risk Management Policy that enables the proactive identification, evaluation, and mitigation of key business and operational risks. This policy is closely aligned with strategic objectives, ensuring that risk considerations are embedded into decision-making processes and that appropriate corrective actions are implemented in a timely manner.

Key risk areas and mitigation framework are summarized below:

Risk Area	Nature of Risk & Potential Impact	Mitigation Framework & Strategic Actions
Macroeconomic & Market Risk	Exposure to economic slowdowns, inflationary pressures, and shifts in consumer sentiment that may adversely affect discretionary spending and overall demand.	Adoption of a multi-tier pricing architecture to cater to diverse customer segments and protect volumes.
		Continuous menu innovation and value engineering to sustain competitiveness and offset input cost inflation.
		Ongoing monitoring of macro indicators to enable timely recalibration of pricing and promotional strategies.
Demand Variability & Seasonality	Revenue volatility arising from festive cycles, regional demand patterns, and evolving consumer preferences, potentially impacting store-level performance and capacity utilization.	Deployment of advanced analytics and predictive modeling for accurate demand forecasting.
		Agile workforce and inventory planning to align with demand cycles.
		Targeted marketing campaigns and product bundling to drive traffic during lean periods.
Operational & Organizational Risk	Risks stemming from process inefficiencies, execution gaps, or dependency on key personnel, which may disrupt operations or impact service quality.	Clearly-defined operating procedures and standardized processes across locations.
		Strengthened governance structure with defined roles, accountability, and escalation mechanisms.
		Leadership pipeline development and structured succession planning to ensure continuity.
Supply Chain & Procurement Risk	Potential disruptions due to supplier concentration, logistics constraints, geopolitical factors, or commodity price volatility, affecting availability and cost structures.	Diversified and geographically distributed supplier network aligned with quality and compliance standards.
		Long-term strategic sourcing agreements to enhance cost predictability.
		Technology-enabled supply chain visibility, including real-time inventory tracking and demand-supply synchronization
		Periodic supplier audits and risk assessments to ensure resilience.
Human Capital Risk	Challenges in attracting, retaining, and upskilling talent in a high-attrition industry, potentially impacting service delivery and growth plans.	Structured recruitment, onboarding, and performance management systems.
		Continuous investment in training, capability building, and leadership development programs.
		Employee engagement initiatives, wellness programs, and performance-linked incentives to enhance retention and productivity.
		Focus on diversity, equity, and inclusion to build a sustainable workforce.
Technology & Information Security Risk	Risks related to system downtime, scalability limitations, data breaches, and cyber threats, which could disrupt operations and compromise sensitive information.	Regular system audits, performance testing, and timely infrastructure upgrades.
		Implementation of robust cybersecurity architecture, including access controls, encryption protocols, endpoint protection, and network monitoring.
		Business continuity and disaster recovery planning to minimize operational disruptions.
		Periodic employee awareness programs on data security and cyber hygiene.