According to a report from credit rating agency ICRA, India’s homegrown quick-service restaurant (QSR) industry is expected to grow by 20–25% in FY2024 on account of the demand uptick and increasing penetration driven by a rapid expansion of stores.
It expected this kind of growth on the back of a strong industry revenue expansion of about 30–35% in year-on-year (YoY) terms estimated for FY2023, and with time, revenue growth shall be supported by factors like rising QSR penetration levels, shift from the unorganised to the organised segment, and a preference for branded QSR players, given the hygiene and convenience factors that include delivery over dine-in.
ICRA considered the aggregate of five major domestic QSR players in the organised segment, including Jubilant Foodworks, Devyani International, Sapphire Foods India, Restaurant Brands Asia, and Westlife Food World.
As per the report, there will be an addition of about 2,300 stores between FY23 and FY25, with an estimated capex of around Rs. 5,800 crores for this period, twice that of the levels seen during the pre-Covid era. The domestic QSR industry is looking at forceful store capex over the medium term. The majority of the capex is expected to be funded through internal accruals and cash on the books, having raised money through the pre-IPO or IPO route in the last two fiscal years to support the planned capex in the near to medium term.
Suprio Banerjee, vice president and sector head of corporate ratings at the company, said, “The capex spree in the QSR industry is likely to be driven by favourable demographics, steady urbanization in India, growing per-capita GDP, and significant headroom available in terms of QSR penetration, compared to a developed economy like the US.”
Increasing the formalisation of the sector is expected to improve penetration levels considerably. Also, higher technological absorption amidst the changing consumer behaviour post-Covid, wherein delivery as a medium is much more accepted, shall support the increasing penetration, as per a statement.
The domestic QSR industry witnessed a sharp recovery in ADS and revenues during FY2023, supported by demand drivers like changing food consumption habits, favourable demographics, improving purchasing power, steady urbanization, and new store additions. Also, other factors like better value propositions from QSR players with enhanced product and service offerings, wide adoption of user-friendly and convenient delivery applications, and tech-enabled delivery networks also fuelled growth.