Speciality Restaurants Limited (534425) Earnings Call Transcript

So as of now, since the past couple of years, we have made sure that we will only be expanding into the Asian segment as our primary goal. Hence, you must have seen that we have been expanding our brand Asia Kitchen by Mainland China to various high streets and malls. So yes, your question is very pertinent and right saying that we have understood that which -- as a strategy, what brand should be expanded the most. So as of now, it would be in the Asian segment. Why? Because this also allows our back-end operations to be neutralized and reutilized. For example, from every Asia Kitchen, we do also deliver Mainland China cuisine, Haka, which is our cloud brand as well. And so this rationalizes our core star strength, and we can reutilize them for similar operations via having different additives of brands. So Asia Kitchen by Mainland China continues to be our primary growth brand, and you would soon see many other locations that would be up and running in the following quarters. Apart from Asia Kitchen by Mainland China, we have seen that Italian has been a brand or as a concept or a cuisine that's not been very expanded or has a chain operation in our country. Hence, we have come up with our brand Siciliana, which is a pure Italian and Mediterranean cuisine format, which we have done in 2 malls, and we are soon to open another mall in Mumbai City in this OND. So these look like to be the primary growth engines in the casual dining space for us. Apart from this is Sweet Bengal, which falls under our QSR strategy. And apart from Sweet Bengal in the QSR space, we have Walters Burger, which will soon have many more outlets coming up in the next 1 year. This continues to be our primary growth strategy. And no, like you mentioned, barbecue brands, we are not expanding it, but the stores that are profitable, we continue to run them.

Okay. So the way I understood the key drivers -- growth drivers that we see as of today is the Asian cuisine, the Haka, which is the cloud kitchen, Sweet Bengal, which is more of a confectionery kind of thing and the Italian or the Siciliana format and Walters. These are more of 5 drivers that we feel more confident and seeing some traction over there. Is that a correct way to look at it?

Absolutely. Apart from this, we also have our brand called Gong, which is a modination format, which is for our expansion into the high streets and neighborhood locations, premium neighborhood locations, for which we are opening one Gong restaurant in January in Mumbai, Bandra very soon.

Okay. And the second question is that what are current headwinds in the restaurant sector, specifically if you look at the QSR and other thing that the SSG numbers are not that looking promising? Or is that the correct way to look at it? So what has really been a headwind for the industry? Because even if we look other players might be they are not exactly comparable, say, like [indiscernible] or any other players, they are putting 300 numbers in the playbook they have year-on-year. Yet market is evaluating the base evaluating. So any thoughts on the industry level or the sector level on the restaurant side that you like analysts like us to have more clarity on it. Or what is the correct way to look at this industry? Because is SSG only the way to look at it because even if the players are putting in more numbers, what's the way to look at it? What would you -- we as a company would like to track as a key metric or what's our [ compels ] that we are looking at?

Yes, sir. In our view, let's say, for instance, when you look at various restaurants, in any which way, same-store sales growth comes in form of 2 numbers. One is the increase in covers in a restaurant and the price increases, which do happen to neutralize the cost push in a restaurant. So in any which way, there would be a growth on same-store sales basis on existing restaurants because delivery also has coupled the increase in revenues despite lower covers. But the focus because of aggregators dine-in platforms, the dine-in covers has started increasing, and we are witnessing a growth in that number, which has resulted into a same-store sales growth in this particular quarter compared to previous quarters. So we are foreseeing, let's say, if you look at from a longer-term perspective, yes, SSG is the number which should be growing for which the efforts are on both from a marketing because dine-in during weekdays has been a challenge and which has been the focus area for the company to improve that revenue.

And one last question or I will come in the queue. Since we are very well capitalized and we have a lot of cash on our books. So any thoughts on seeing better MMUs, more number of stores coming in a particular thing? That's one thing. And the second thing -- second is the only suggestion that if we have more analysts call the disclosure in what way we are looking because the number of brands we have under our belt, that makes slightly difficult to understand the growth strategy and how we go everything looks promising on our company side?

Your point is well taken. Like Mr. Avik clarified, the focus being on Oriental and Italian at this point of time. And restaurants which are profitable with single premises, et cetera, would continue till the time they are profitable. But the focus of the organization is on Oriental cuisine and the new Siciliana, which has got opened, a couple of restaurants have Kolkata, Mumbai and now in Palladium Mall, which is going to open in another fortnight. So the focus would remain constant for this kind of numbers and the brands, which you have rightly pointed out with so many brands because of a history of 30 years, number of brands got opened, but the focus is not to expand on those individual restaurants.

[Operator Instructions] The next question is from the line of Parth Dalal, an investor.

Yes. So my question is on strategic point of view. So I don't know a year back, I think the management was very gung ho on the episode brand. And now it seems that Walters has taken over and the excitement is there. As per presentation, I think even one episode brand was converted into something else. So just trying to understand what are the -- I mean, growth areas that the company is looking for? Because what my understanding was episode being the Walters led had higher margins, and we were looking to go aggressive on that. Is it not the same now?

Mr. Avik. May I just to respond, please?

Yes. Thank you for your question. The episode has been a brand that was tactically done at the time, and we were supposed to expand it, but the company has taken a strategy to focus on Oriental cuisines. And in my previous question, I had also explained how we're going to be battling into the Oriental cuisine in different avatars. So when we say we have an Asia kitchen by Mainland China, this is purely a mall and a retail segment format, which is a quick dining, quick table turnover times and so on. Apart from this expansion, it would also be into cloud kitchen brands from the same kitchen like Haka and Mainland China. We've taken a diversion to understand how we can take over the Oriental cuisine in different formats without creating brand fatigue. Hence, we are going to be expanding Gong, which would primarily be Asian, but also have a major component of wet-led. This to us makes it a little stronger. Why? Because when it's food, the brand sustains for way longer. When it's only a liquor-driven format, the brand fatigue comes in a little faster. So hence, we've clubbed our aspirations of expanding episode as a brand into Gong, which also has Oriental as well as wet-led. So we'll be seeing 2 new Gongs in Maharashtra in the next 4 to 6 months.

Okay. And the next one is about cloud kitchen. Do we have any -- if no, are there any plans?

So on the -- sorry, Mr. Avik, please carry on.

We have currently operational 11 cloud kitchens and cloud kitchens would only be tactically placed where required, whereas we've understood that kitchen within kitchen format for us works way better because of reutilizing assets of the same space. So we would be having dark or cloud or kitchen within kitchens from every single restaurant that we open in the future. And the focus of opening pure cloud kitchen has taken a backseat as of now, but we will be having different variations of cloud kitchens through our new expansions.

[Operator Instructions] The next question is from the line of Balaji from NAFA Asset Management.

There have been some 4 to 5 new restaurants that have been planned, which includes Siciliana in Bangalore and Gong in Vasant Kunj, et cetera. I know these are all different formats, but if you could just roughly kind of take me through what kind of square feet that we are looking at these kind of restaurants. For example, Siciliana, Bangalore would be what kind of square feet that we are talking about here?

Mr. Balaji, this is -- basically, we are looking forward for premises within the range of 2,500 to 3,000 square feet of carpet area.

Okay. And this includes across -- even for Walters, is it or...

No, for the brands like -- which have already been envisaged like yourself said about Gong, et cetera, in Siciliana. These are the brands. Walters would be a smaller format.

Okay. No, but broadly 5 quarters back, we were actually talking about reducing the square feet on an overall basis. Is that still on? Or has the strategy kind of taken a back seat at this point in time?

No, no, no. Mr. Balaji, we have -- earlier, we had formats which were 3,500 to 4,000 square feet. Even some of the restaurants are 5,000 square feet. But now we contemplate to have only areas which are around 2,500 and 2,700 depending upon the location in the mall primarily.

Okay. So these new restaurants, they would be expected to have a greater fixed asset turnover compared to the older ones. Is that right? Meaning -- I mean, I don't know, your CapEx for Siciliana, Bangalore could be maybe INR 3 crores, INR 4 crores. I'm just hazarding a guess. So we are looking at INR 8 crores to INR 10 crores kind of a turnover from this kind of a restaurant. Would I be right in my assumption?

No, you're right in setting the kind of CapEx number. But yes, it would be not INR 8 crores. Let's say, for instance, it could be between INR 6 crores to INR 7 crores of revenues.

So CapEx is INR 4 crores and INR 6 crores to INR 7 crores the turnover, correct.

Yes, please. correct.

So INR 1.5 crores to INR 1.7 crores?

Correct. Correct.

Okay. Isn't that a little suboptimal for the restaurant industry in terms of I mean, from profitability point of view, shouldn't we be aiming for a greater fixed asset turnover?

Because as you heard, as we have been indicating, dine-in business is more focused towards weekend and weekdays, the pressure on dine-in is there because the guest cover turnaround is not happening during the weekdays. The company effort is already there to improve upon weekday dine-in business. So in any which way, this is the number which is happening currently. And if it is more because the targets are in any which way is more, then the operating leverage triggers and the profitability improves.

[Operator Instructions] The next question is from the line of Sanjay from Wealth Wise Capital.

Sir, I just had one quick question to be asked another way. So is it -- would it be correct to assume that now for a couple of foreseeable 1 or 2 years, we won't be indulging or experimenting with new formats or new themes or new things? Because we -- the way we look at it, we already have a lot on our plate where we can consolidate and show some growth. And that's part A. And part B, how do we calibrate our growth targets in number of units or sales or is there any math to that, that let's try to have a target of, say, about opening 10 of confectioneries or 5 of Asian cuisine and 2 in Italian. Is there any math like that goes behind for the growth strategy? Two questions. So I hope I'm clear on that.

So if I may, Mr. Avik had explained the strategy to answer your question number one, focusing on not many brands, but on Oriental cuisine. Number one. Number two, opening of restaurants is a challenge with respect to availability of skilled manpower. So that is one which has to be addressed with the simultaneous opening of the restaurants because trained manpower because we need to have trained manpower, the training has to be carried out in the existing units, et cetera. So this is a balance between the trained manpower and the availability vis-a-vis the project opening. So the number which you yourself indicated about 8 to 10 restaurants, we are envisaging that going forward, we should be opening between 8 to 10 restaurants in a 12 months period.

Is it correct to look at that we won't be indulging in more experimental formats because we have already have a track record of 13 years and we have multiple things. So the question is from the other way. So we are not going to try anything new as of now and increase more of brand or category or anything. Would that be a correct way to look at it?

Yes, absolutely right. This is what the focus is going forward.

[Operator Instructions] The next question is from the line of Srikanth Reddy from IOB.

So definitely despite service charges in [indiscernible], we have shown very good results. Congratulations for the management. Still I think when we go through the IP, there is [indiscernible]. So in future, are we expecting more kind of any QSR formats?

Reddy. As of now, as we have been explaining, sir, the focus is concentration on QZ. We would not be experimenting more brands in time to come, sir.

But in IP, we have several names I just wanted to curious [indiscernible]?

No, not really, sir. It is more cuisine specific now.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for the closing comments. Over to you, sir.

Thank you, madam. On behalf of the management, we are extremely thankful to all the participants who participated in the investors call of Speciality Restaurants today for Q2 FY '26 and spared your valuable time and questions. We look forward to your participations and support going forward. Thank you so very much.

Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.