Sapphire Foods India Limited (SAPPHIRE) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Conference Call of Sapphire Foods India Limited, hosted by Orient Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Kapoor from Sapphire Foods India Limited. Thank you, and over to you, sir.

Thank you, Faizan. Good evening, everyone, and a warm welcome to Sapphire Food's First Quarter FY '23 Earnings Conference Call. I'm Rahul Kapoor from Sapphire Food's Investor Relations team. Today, I'm -- on the call, I'm joined by Mr. Sanjay Purohit, who's our CEO -- Group CEO and Whole-Time Director; Mr. Vijay Jain, who is our CFO. We've already uploaded our investor presentation and earnings press release on stock exchanges and our company's website. We'll begin the call with a commentary from the management, which will be followed by a Q&A session. This call may contain some other forward-looking statements, which are only based upon our belief, opinions and expectations of the company as of today. These statements are in no way guarantee of our future performance and involve risks and uncertainties that cannot be predicted at this point in time. With that, I'll hand it over to Sanjay.

Good afternoon, everybody. Sanjay Purohit here. I'm also joined by Vijay Jain, who is our CFO, and both of us in tandem will take you through the highlights of our quarter 1 performance. Quarter 1 this year has been the first quarter since the COVID pandemic, when we've seen a full recovery in our operating hours. And that is translated into a positive impact on both KFC as well as Pizza Hut businesses, especially the dine-in businesses, and they have seen a strong recovery. Dine-in on KFC has come back to pre-COVID levels and Pizza Hut is just a shade short at 85% recovery. We've had a really, really strong quarter. We delivered our highest ever quarterly revenue at INR 544 crores and our highest-ever EBITDA of INR 111 crores. Our previous highest EBITDA was INR 108 crores just for the record, in quarter 3 of FY '22. This excluded that additional incentives that we accrued in the quarter, and we had called it out at that point in time. [ Through ] strong quarter, highest ever quarterly revenue and highest-ever EBITDA. This EBITDA, post [ India ] stood at 20.5%, up 640 basis points year-on-year. Adjusted EBITDA was INR 72 crores at 13.3%, up 1,020 basis points and PAT stood at INR 38 crores at 7%, up 1,570 basis points. I think the important part here is that this strong performance is despite the macroeconomic challenges that have impacted our Sri Lanka business, and I'll talk about it in a minute. But just at a broad level, Sri Lanka used to contribute about 25% of our overall profit in the last year in FY '21, '22, today, it contributes 10% in quarter 1. So despite Sri Lanka's performance, and that performance, I'll peel the onion in a minute or so, largely because of foreign currency translation. Therefore, the India business has really done well and has more than compensated for the flat Sri Lanka numbers. Let me now talk about the 3 businesses. So KFC had a very strong quarter, 65% SSSG and almost -- we doubled in overall revenue. We talked about the inflation in the last quarter. And to mitigate this inflation, we have taken a price increase of about 9%. So though gross margins dropped a bit, our overall cost efficiency programs enabled us to deliver amongst the best ever restaurant EBITDA at 20.3%. So KFC -- really strong quarter we have had in a -- very strong quarter we had had. What is happening is our Pizza Hut performance. And this continues to validate what we have said and [indiscernible] about continuously that are compact omni channel restaurant strategy which delivers optimal customer experience in dine-in, takeaway and delivery is the way for the brand to differentiate itself and be a strong #2. And as a result, we've delivered SSSG of 47%. Overall revenue has increased by 85%. We took lower price increase on Pizza Hut and limited it to 5%. But as dine-in sales recovered, our core portfolio also -- our legacy core portfolio also did well. Our dine-in sales recovered, delivery sales had -- held. And together with the cost efficiency programs, we delivered our healthiest 14.8% restaurant EBITDA margin. So Pizza Hut performance was very strong. And I think the other positive part on the brand is that there was a significant gap in our product price portfolio, Pizza Hut. And this is really a pizza under INR 100. And this has been plugged with the launch of the very differentiated Flavour Fun Pizzas. I'll speak about it more when we come to the Pizza Hut section. This was test marketed in Chennai and Hyderabad in quarter 1 with really good results, and those encouraging results have emboldened us to launch it nationally on the 25th of July. So that's another positive development on Pizza Hut. Let me come to Sri Lanka. I think the external environment has been challenging and continues to be so. It has not deteriorated further, and therefore, there's some amount of stability that has come back to Sri Lanka. On the back, so we delivered an overall 53% SSSG in Lankan Rupee terms and a 93% increase in overall revenue. So while we took price increases, inflation was even higher, and therefore, gross margins dropped and therefore, restaurant EBITDA also dropped to 15.5%. The absolute restaurant EBITDA grew by 65%. But once we do the currency translation impact, in Indian Rupee terms, the absolute restaurant EBITDA remains flat over last year quarter 1. So the -- we continue to do well from a local business perspective in Sri Lanka. However, the situation continues to remain challenging and much stable. And I would say, just very marginally improving perhaps over the end of July and August. We -- if you remember, we had advised that we should be able to double our restaurant count which was standing at 550 restaurants in December '21. We said we should be able to double it in 3 to 4 years. And accordingly, our total addition of 37 restaurants has kept in pace with that guidance that we had given. We opened 18 KFCs, 16 Pizza Hut in India. 2 Pizza Hut and 1 Taco Bell in Sri Lanka. So this was the broad highlights, specifically from a number perspective, our strong sales. I'm now referencing the slide presentation that you have got access to. I'm on Slide #7. Our restaurant sales was INR 544 crores. Adjusted EBITDA, so that's totally, that's up by 80%. Restaurant EBITDA, INR 72 crores, 13.3%. The same quarter last year, which was COVID impacted, was 3.1%. Our EBITDA is INR 111 crores, up 161% over INR 43 crores in quarter 1 of FY '22 or 20.5%, up 640 basis points. PAT is INR 38 crores versus negative INR 26 crores in the same quarter last year, so 7% PAT. I'll now hand it over to Vijay, who will take us through the specific consolidated financial highlights. And then I'll come back to give you indication of KFC, Pizza Hut and Sri Lanka, again.

Thanks, Sanjay. Good afternoon, everyone. I'll take on from Slide #9, consol financial highlights. As we said, restaurant revenue of INR 543 crores was highest ever for the quarter. Gross margins, as estimated, we were expecting a drop in gross margins on account of inflation and our price increase will lower than the inflation. So we dropped the gross margins by 220 basis points. And we had guided that in spite of a drop in gross margins, we were confident of not only sustaining but improving our restaurant EBITDA margins. So restaurant EBITDA margins of 18.5% up by 690 basis points over corresponding quarter. And even if you look at sequentially, it was 18.3% in quarter 4. This translated into higher adjusted EBITDA of 13.3%, up by 1,020 basis points at INR 72.2 crores. Slide 11 corporate EBITDA or consolidated EBITDA at INR 111 crores, which is highest ever. As Sanjay mentioned, the previous highest was in quarter 3 of last financial year. This was up by 640 basis points over corresponding quarter and a growth of 161%. We delivered a PAT of 7% at INR 38 crores, up by 1,570 bps. So the corresponding quarter was a loss making on account of COVID impact -- second wave of COVID impact.

Yes. Let me quickly take you through KFC's performance as you could expect in as I spoke about this when operating are started to normalize, dine-in sales recovered, so dine-in sales as a contribution. I'm talking about Slide #14 of the presentation, dine-in was 46% and delivery held, but in a contribution since, came down to 35%. When we look at comparable stores and their recovery versus -- so our recovery at a channel level, absolute ADS versus FY '20, dine-in is 102%, takeaway is 112% and delivery is still double of what it was in FY '20. From a new product launch perspective, we had the KFC Popcorn Nachos launch, and that has done quite well. It's a very differentiated product, and I -- invites everyone on the call to perhaps try it once, it's really, really tasty. I'm now going to go to some of the new restaurant launches. I wish I could show you some slides, but there was a really important gap in our mall portfolio that we plugged in quarter 1 perhaps the largest and most successful malls in the country that fall in our territory is the High Street Phoenix or the Phoenix Palladium Mall in Parel. And there, we've been knocking on the doors of the mall, while we've got great relationships with the mall, they were unable to find a space for us for 6 years. And then finally, we were able to enter the mall in what is perhaps an absolutely iconic store location. And -- to my mind, it's a one-off location. I haven't seen any such stores anywhere else in the country. So within a successful mall, you have a separate structure, many of you are Mumbai-based and therefore, you know what I'm talking about. When you go on the road, you can see the separate structure and KFC has opened there. We're very proud of that store -- is doing really well. And then you can see on the next slide, Slide #19, some of the other stores that we have opened in Chikhali, in Shalimar Bagh Delhi, in Gerugambakkam, Chennai and Vicino Mall, Mumbai. Vijay will now take us through the numbers.

Slide 20 on KFC financials, our SSSG was 65% over corresponding quarter with an ADS of 144,000, so growth of 37%. Restaurant revenue was a growth of 98% at INR 353 crores. This was highest ever revenue for KFC. The gross margin dropped by 200 basis points. And if I break this down into 2 parts, 1 was on account of mix. Our delivery mix was lower compared to the corresponding quarter. Last year same quarter, it was 62%. Now it has come down to 35%, generally, our delivery prices are 10% to 15% higher. So roughly 50% of drop is contributed by the change in mix, the balance 50% is on account of inflation. And as I said previously that our price increase was 9%, while inflation was well into double-digits into mid-teens. Still, we were able to drive restaurant EBITDA margin expansion, 20.3%, one of the highest ever margins on KFC. This was due to dine-in recovery as well as the cost efficiency, which enable us delivered a very strong EBITDA performance at restaurant level for KFC. So overall, very strong quarter for KFC. Our momentum continues in terms of store expansion, the revenue growth. And still delivering some amount of margin expansion in KFC.

Quickly, the Pizza Hut channel sales, I'm on Slide #23. Dine in had a smart recovery and now contribute 37% of the total business. Delivery contribution has dropped to 47%. But at an overall ADS level continues to hold. When we look at recovery versus FY '20, dine-in is at 85%. And when I look at, say, when I compare dine-in, 85% to say, KFC at 102%. Largely, we see this gap in -- coming out of Karnataka and perhaps a few mall stores where dine-in transactions are still not back to pre-COVID level. So that explains the slight gap between dine-in recovery on KFC and Pizza Hut. Other than that, I talked about the Flavour Fun Pizza launch. I'm on Slide #24. The starting price ranges at INR 79. There are 5 delicious sauce flavors. So there's a Classic, Italian, Tandoori, Cheezy and Schezwan sauce. It comes only in the personal pan size range, and there are 12 pizza offerings. So it goes up to, I think, about INR 149 or INR 189 for the top end non-veg range. We are really excited with this launch. It comes with a cheesy dressing and it is absolutely fantastic. And basis, the encouraging response that we've got in the test markets that we ran, Chennai and Hyderabad. We are hoping that this will also do quite well at the national level. We continue to open stores in Pizza Hut, and you can see some of the picture. We're very proud of the kind of stores that we open also, the Capital Mall, Nalasopara Mall. We are doing about a lakh ADS, and it's just a beautiful store. And I think similarly across the board the stores that we open look good, the customer experience is great. Quickly, Vijay, on the number.

Slide 28, Pizza Hut delivered SSSG of 47% with ADS of 61,000 and a growth of 24% versus corresponding quarter. Again, Pizza Hut to delivered a all-time high revenue of INR 122 crores, up by 85% over corresponding quarter. And a 16 store addition -- 16 restaurant additions in the quarter. The gross margins dropped on Pizza Hut by 110 basis points, led by inflation on cheese, packaging and a bit of oil. But again, we had an excellent margin expansion of 14.8%, which is probably the -- one of the best ever performance in case of Pizza Hut restaurant EBITDA level. I think the previous highest was quarter 3 -- the first 2 quarter where we delivered 14.9% excluding the additional incentives. So really good margin expansion. This was possible on account of dine-in recovery, which we saw, our strategy on compact omni channel format. So the new additions which have been happening is [indiscernible] onwards are on this higher profitable format and our cost efficiency program has enabled us to deliver highest ever restaurant EBITDA for Pizza Hut. Within this 14.8%, I always give a color on pre-'18 and post-'18 restaurants. So the stores which have opened post-first April '18, they are delivering now moving from mid-teens level of profitability towards high teens, and this is enabling us to drive margin expansion on Pizza Hut. So overall, very heartening performance on Pizza Hut, especially things that -- our compact omni channel strategy being played out, and we've been able to deliver a significant margin expansion on the brand.

From a Sri Lanka perspective, let me first give you quick insight into what is happening on ground in that country. So we saw the images of the of the general public uprising against the government and against the president and the Prime Minister, we saw what happened there. After that, there there's been a Prime Minister elect -- Prime Minister who has been appointed. Little more stability from a political perspective. I think people have realized -- so people are realizing that there isn't a silver bullet answer to their issues from a general consumer and general public perspective, inflation has hit them quite hard. And month-on-month, we have seen inflation -- so overall general food inflation, they have been hit. We have taken price increases, but I think we have -- to be able to still retain transactions, we have still not taken price increases in line with inflation. And I think Vijay will give you a little bit of color on that. Having said that, availability of gas, electricity that enables us to do business as slowly and steadily stabilized and perhaps improve. And that is on the upward tick. Quarter 1 typically is a low quarter for us in -- from a seasonality perspective in Sri Lanka. Quarter 2 onwards is when -- if I just look back at the trend over the last 5, 6 years, quarter 2 and then quarter 3 other very big are the best quarters. So I'm anticipating as the business stabilizes as the overall environment and economic macroeconomic conditions stabilize, our business also should do well. We continue to be the #1 QSR operator. Internally, we monitor the -- our market share and this is our estimates of market share. And we believe that we have steadily increase and gained market share in from -- in the total QSR business in Sri Lanka. So we continue to do better than anyone else in Sri Lanka. And again, that's because of our advantages. We are -- the brand is very powerful. Our innovation and product program is very strong. We are most accessible, the highest number of restaurants we got there. And we have our own delivery capability also. And when last -- or in June, July when there was serious shortage of petrols for our delivery vehicles. We hit upon quite an innovative idea of delivering on cycles. And about 10%, 12% of our total deliveries were then being handled on cycles. And now we have -- now as fuel has [ got ] more available, we are able to deliver, again, back on our bike. So Sri Lanka from an overall perspective, I think we have seen the worst of what is to happen there. We have continued to open stores in Sri Lanka because we see that as an opportunity, and we opened 2 Pizza Hut and 1 Taco Bell in Sri Lanka in the quarter. So within the numbers.

Slide 34. For ADS, grew by 53% in LKR terms, overall -- sorry, SSSG was 53% in LKR terms. Our ADS grew by 34% in LKR terms at LKR [ 333,000 ]. In India Rupees, due to translation impact and due to currency depreciation, our ADS dropped by 18%. Our revenue in LKR terms grew by 93%. And while you convert into India Rupee, it grew by 17% for the quarter. Gross margin had a big impact on account of high inflation, and we were actually estimating this. And the idea was to minimize the impact at a restaurant EBITDA level. And more specifically, the idea for this year was how do you actually try and deliver and grow the absolute EBITDA in LKR terms. So while restaurant EBITDA dropped by 250 basis points, the LKR EBITDA margin actually grew by 65%. And when you convert that into India Rupees, it was flat year-on-year. So overall, as Sanjay mentioned, external challenges continue to remain. And with cash further aggravated by the fact of depreciation of the currency, when you translate the numbers in Indian Rupees for consolidation. However, Sri Lanka used to form 25% of our company EBITDA mix in FY '22, which has come down to now close to 10% in FY -- quarter 1 of this particular financial year. And this drop -- in spite of this drop, this impact has been not just mitigated, in fact, surpassed by the India business performance, and this has allowed us to still deliver an overall very healthy quarter and our highest ever corporate EBITDA of INR 111 crores. Over to you, Faizan. We can open the session for Q&A.

[Operator Instructions] The first question is from the line of Percy Panthaki from IIFL.

I just wanted to understand, firstly, for your India business, typically, what would be the Q1 ADS as a percentage of the full year ADS in a normal year?

So Q1 is typically is on annual average. In terms of seasonality, I can just explain how the quarter-wise seasonality plays out for Sapphire Foods. Q1 is typically annual average at a restaurant EBITDA level and a corporate EBITDA level. Quarter 2, we see a slight dip on account of seasonality, especially on our KFC business because of the various festivities, the various religious festivities, the Sawans in the North, the Sawans in the West. The Navratras, which impacts the quarter 2 seasonality. This gets more than compensated by our Q3 performance, which is a festive quarter where the sales actually goes up. So quarter 3 is higher than the annual average. And quarter 4 is typically the annual average. So Q1 and Q4 is annual average, Q2 drops a bit, which gets more than compensated by the Q3 performance.

And the Q2 drop is largely North and West. I mean, if I just look at North and West are nonvegetarian. That is the -- a drop. And from a Pizza Hut perspective, I think it is reasonably stable right through the 4 quarters. Perhaps quarter 3 is slightly higher because of the festival. Does that answer your question, Percy?

Hello?

This is the operator. So one moment, please. So Percy Panthaki, please go ahead.

Am I audible?

Yes, sir.

I was just saying, so Q1 is in line with annual average, both on ADS as well as EBITDA margins.

Yes. Largely. Yes, Percy.

Okay.

You we able to get the detailed answer Percy, because I thought you got dropped off.

You were able to get our answer on the entire seasonality, Q1, Q2, Q3?

Yes. I was able to hear you, yes. Second question is on Sri Lanka. So just wanted to understand in terms of the margin trajectory, you see Q1 has done 15.5%. But was it a sliding scale across the 3 months? I mean, the exit margins for the quarter were they significantly lower and therefore, Q2 margins on that trajectory, do you expect it to be below Q1 for Sri Lanka?

Again, we don't get into quarterly guidance, but what I can tell you, so we don't anticipate overall Q2 absolute EBITDA for Sri Lanka to be any worse off than quarter 1. Largely should remain on the same trajectory as quarter 1 in terms of absolute EBITDA. And why I'm calling out absolute EBITDA again and again because this is the year where it's going to be very difficult to predict the percentage margin. The way there is a high inflation in the country. The price cost cannot be every week price cost, right? And again, at the same time, we need to hold on to the [ translation ]. So heartening part is that we've been able to hold on to the [ translations ] in quarter 1. So the way we are going to drive this year is tailoring Sri Lanka in LKR terms, can we hold on to the previous year's LKR EBITDA and drive upon that and grow upon that. So we anticipate a drop when you translate that EBITDA into Indian currency. Last quarter I had called out there would be a drop on translation. We anticipate drop could be anywhere between now, INR 10 crores to INR 20 crores rupees. This was the overall INR 50 crores rupees EBITDA last year, roughly I'm giving you at a corporate level. There could be INR 10 crores to INR 20 crores rupees drop at India Rupees level. But again, as I said, this has been more than compensated by our India performance and then overall mix of Sri Lanka business at EBITDA level has come down to 20 -- 10%.

Okay. Understood. So basically, the absolute EBITDA that you have done in rupee terms in this quarter, that kind of average quarterly run rate is sort of sustainable?

Yes, Percy, to hold on.

[Operator Instructions] The next question is from the line of Jaykumar Doshi from Kotak.

Just a follow-up on what Percy asked on Sri Lanka. Look, if I were to sort of -- from what I recall, your brand EBITDA for Sri Lanka was around INR 70 crores, INR 72 crores last year. And corporate EBITDA was INR 50 crores, INR 52 crores. So there is a corporate overhead of INR 4 crores to INR 5 crores per quarter. When I look at this quarter's, INR 10 crore brand EBITDA, I would assume that corporate EBITDA would be INR 5-odd crores. So when you're indicating the corporate EBITDA for Sri Lanka will not be more than INR 10 crores, INR 20 crores lower than last year, you are indicating INR 30 crores for full year, at least. And which means that you are assuming significantly higher or rather in absolute terms, this INR 5 crores or INR 6 crores this quarter, you're expecting improvement. So are you seeing any improvement on the ground? Or you think that the stable political stability will gradually sort of translate into recovery or allow you to take more price increases to offset inflationary pressure.

So a bit of correction in those numbers, Jay. So when you get INR 5 crores corporate overhead last year, when you translate into Indian currency, even that translation would have dropped, right? Is that INR 5 [indiscernible] to INR 3 crore -- that's why the math -- if you are estimating INR 10 crores restaurant EBITDA, the math says it has to be in the range of INR 7-odd crores. That's why should surpass INR 30-odd for the current year. I think that might...

INR 5 crores is not restaurant EBITDA, you understood. Yes.

Perfect. Second question is -- look, this quarter, we have seen very strong recovery or sequential performance or more or less full recovery in dine-in for all, dine-in centric QSR that you did -- sort of KFC. We witnessed some weakness in jubilee's results versus expectations. Today on our channel mix it clearly indicate that Pizza Hut dine-in is still 85% recovery versus FY '20 levels. You've seen similar sort of trends for Pizza Hut of [ the year end ] as well. So do you think that pizza is a category -- this is a new normal that more or less all stores will settle at a lower post-pandemic, will settle at a lower dine-in absolute sales than where it was earlier. And if that is the case, so are you sort of -- are you getting that feeling or could you give us some thoughts or insights there?

So not so at all, Jay. I mean, if I just look at some of our strong malls, I mean, if I just look at Bombay, Mumbai. And if I say Infiniti, Inorbit, Vashi, Seawoods -- sorry, Seawoods, we are not there. Some of these malls our dine-in is back -- in High Street, dine-in is also is back. I think it's just a matter of time. It's just a matter of time that we'll see full recovery on Pizza Hut also. It is [ pockets ] where it has not recovered fully. So Karnatka still today, it is not -- or in quarter 1, it's still not recovered fully. And I think when I -- when we speak to other people, Bangalore from a retail perspective was still not back to pre-COVID level. So I think Pizza Hut -- pizza as a category, we can't extrapolate it, at least for Pizza Hut run by Sapphire, not at all.

Understood. Now you mentioned that there was a specific forecast in Karnataka, Bangalore from malls that you've seen [ retail ] recovery. When you talk to other brands and at least I'm sure you would -- you don't manage KFC there, operate KFC in Bangalore. But is KFC recovery or, let's say, like the recovery in those malls, those markets also lower than pre-pandemic, have you had a time to [indiscernible]?

I don't know that, Jay, because we don't run KFC in Karnataka. So I'm not able to comment on that.

Understood. My final question is for Vijay. So Vijay, you did mention that first quarter EBITDA is typically average of full year. So it means that INR 72 crores, what if everything being normal should ideally mean you would do, INR 288 crores of EBITDA full year. Does that factor in the store addition that you've also planned? Or this is the bare minimum and store addition could add a bit more.

So Jay, again, I would not get drawn into an annual number over here, annual number guidance. I just tried to give an indication on trend, how quarter 1 is and how quarter 2, quarter 3, quarter 4. Sapphire will always -- we will always avoid giving a quarterly or annual number with guidance. So that's for you to...

That trend takes into consideration store addition. Is that right?

So Jay, what I actually meant was percentage margins, right? So percentage margins of 13-odd percent is what we said we were -- is typically an annual average. So you are driving me into a conversation where how much is absolute EBITDA considering these [ 4 ] additions, I'll not get drawn into that conversation, Jay.

Jay, plus in any case, your model is so detailed that we might have to come to you to say what will happen to us in 2 years down the line.

So I was tempted to ask this question because I know you don't guide, but he was asking the question on ADS trends, and you yourself indicated EBITDA trends, I thought I might as well push my luck.

The next question is from the line of Kapil Jagasia from Edelweiss Financial Services.

First of all, congratulations for a great set of numbers, especially because of disruption in Sri Lanka, my question pertains to Sri Lanka operations only. So if you could let us know what would be the inflation for a raw material basket in Sri Lanka. And, like, what would be the cumulative price taken by our [indiscernible] division. First, I'm not wrong, you had mentioned something like 15% price hike taken in the last quarter. So any more price hike taken this quarter, the ballpark number would be fine for both.

Yes. So roughly another 15% to 16% price hike in quarter 1 FY '23, whereas the inflation would be anywhere between 30% to 40% for the quarter.

Okay. So Sir, cumulative inflation would -- then that would be like, if we look from the last 12-month perspective?

It would be upwards of 60-odd percent.

Okay. So are we envisaging like a further price hike? Or like, are we like done for now if the situation remains the same?

Too volatile -- the initial indications of July, August sales that the things are improving, but too early to take a call either way. So it's volatile. We'll just keep a watch how quarter 2 passes by. I think from quarter 3 onwards, we should be a bit more confident about how the situation goes in which direction?

Okay. Okay. My next question is, if I look at the Pizza Hut India ADS numbers for this quarter, it at [ 61,000 ] and that's like FY '19 level. So we have kind of reached those levels. But if I look at the Domino's number at [ around 84,000, 85,000 ]. So we are a good 30% away from reaching that. So I'm sure we plan to aspire to reach those levels or even surpass it. So look, what would be the 2, 3 key initiatives that we would be taking over the near to medium term to improve this number?

So I think -- one is, so plugging this gap in our product price portfolio. This is a large -- this forms a large portion of the overall pizza market. Pizza under INR 100 rupees, and that has been one of our Lacuna. Now it was important for us to -- when we launch something here, to do it in a manner that is quite, Pizza Hut. And therefore, from a product perspective also, we are known for superior products. So it has to deliver that kind of Pizza Hut product superiority. So I think this one is -- this launch is one important factor in us improving ADS. I think apart from that, as we continue to get our execution right, improve our accessibility on the brand. So our product innovation at the top end, so both the San Francisco dough, as well as the Momo Mia Pizza, all of them have done well. We've done a couple of pasta launches. So I think the story on Pizza Hut continues to be strengthen the areas where we win, which is product and innovation and our dine-in omni channel experience on value, on our regular range, we have -- we are now competitive versus the principal competitor, and we have plugged one big gap in the portfolio. And on delivery, we continue to hold and improve and improve accessibility. So this is continuing to execute what we have called out on the brand has [ coupled ].

Just to add to that, [ coupled ], while you're seeing [indiscernible] is the #1 competitor. I don't think they are in that particular rate, because, again, the model allows us our omni channel allows us to deliver a higher profitability and lower ADS as well. So we've been -- I've been talking about our new compact omni channel model, which we have been opening since April '18, which is already moving from mid-teens to high teens. And in this model, if the ADS goes to a 70-odd thousand as well, we can deliver a 20% kind of profitability. So that's the power of that model. I'm not saying that we can deliver 70,000 tomorrow. But we don't have to reach the level of 80,000-odd to deliver that kind of profitability. This is because of our dine-in niche, which gives us higher profitability.

Okay. And sir, like you would be spending a lot on A&P also to improve this number like going forward. So just a ballpark number, just like bookkeeping number, what the A&P spend would be for us this quarter as a percentage of sales?

So 6% of our revenue is towards marketing.

Okay. And this is like significantly higher than the 4% earlier, right?

It was almost 6%. So 5% goes to a national PP, which [indiscernible] would spend nationally on the brand. And 1% happens through a local sales marketing.

Okay. So we are kind of now looking to settle at this number, 6% can be like [indiscernible]...

This was alaways 6&% and we are happy with that particular percentage. It's not either going down or going up at this level.

The next question is from the line of Krishnan Sambamoorthy from Motilal Oswal Institutional Equities.

Are you surprised by the resilience of the takeaway and then particularly for Pizza Hut, sustaining at 16% despite the recovery that's happening on dine-in? And what do you expect this proportion to be going forward?

So again, we -- so while mix are good to look at, we don't really predict mix because what happens is there is a one channel performing far superior to other channels, the mix can go up and down. What we look at is at what levels we are compared to the previous quarters or the previous years and recovery rate 110%, I think we are comfortable at this level. And from here, as the overall business growth with our Flavour Fun addition, I think the growth should come across all the 3 channels and not just 1 channel versus the other. But difficult to comment on the mix.