Devyani International witnessed a 7% surge in share price in two days, a day after the KFC and Pizza Hut operator in India announced a significant partnership to enter Thailand’s Quick Service Restaurant (QSR) market.
Devyani International, Dubai, a subsidiary of Devyani International, disclosed its entry into Thailand through the signing of a share-purchase agreement. This agreement aims to acquire a controlling interest in Restaurants Development Co Ltd (RD) Thailand, marking Devyani’s entry into the QSR/Limited Service Restaurants (LSR) market in the country.
This strategic foray into Thailand is a collaboration between Devyani International Limited and Temasek Holdings (Private) Limited, a global investment company headquartered in Singapore, boasting over SGD 380 billion in assets under management.
An extraordinary general meeting is scheduled for January 11, where shareholders will be sought for approval regarding the investment in Devyani International DMCC and “providing corporate guarantee(s) up to an aggregate amount of THB 2.5 billion (equivalent to Rs 5.83 billion) to secure the credit facility(ies) to be availed by Restaurants Development Co .
For a 50% stake in Restaurant Development Co, the company will pay Rs 341.4 crore. Temasek Holdings will secure a 48% stake, and a local Thai partner will acquire the remaining portion. The total acquisition cost of Rs 1,066 crore includes local bank debt of Rs 385 crore.
Jefferies, maintaining its “hold” rating on the stock with a target at Rs 190 per share, commented on the acquisition. Jefferies noted that the forward growth multiple could be 5-6x EBITDA, even with modest growth assumptions. However, they expressed a preference for an India growth effort instead.
JM Financials has maintained its ‘buy’ recommendation with a target of Rs 210 for Devyani International (DIL). JM Financials says, the move follows Devyani International’s strategic entry into the Thailand market, as the company announced its intention to acquire a controlling interest in Restaurants Development Thailand. The acquisition is set to be executed through its Dubai-based subsidiary, Devyani International DMCC.
According to Devyani International’s management, Thailand’s demographic profile is highly favorable, providing significant growth opportunities. The company envisions the potential to double the KFC store count in the country over the next 10 years, implying a Compound Annual Growth Rate (CAGR) of 8%.
