KFC growth and Sri Lanka momentum offset by Pizza Hut weakness and cost pressures
Sapphire Foods India, which operates KFC and Pizza Hut restaurants across India and Sri Lanka, reported a net loss in the third quarter of FY26 even as revenue growth remained steady and profitability improved sequentially, led by its KFC business.
The company posted a net loss of Rs 4.7 crore for the quarter, compared with a profit of Rs 11.9 crore in the same period last year. Revenue from operations rose about 7 per cent year on year to around Rs 814 crore, up from Rs 756 crore a year earlier.
Earnings before interest, tax, depreciation and amortisation (Ebitda) stood at Rs 134 crore, largely flat on a year-on-year basis. However, operating margin narrowed to 16.4 per cent from 17.8 per cent, reflecting higher input and operating costs. Consolidated Ebitda margin was reported at 16.8 per cent, down 170 basis points year on year, while restaurant-level Ebitda margin stood at 15.0 per cent, down 40 basis points. Adjusted Ebitda declined 5 per cent year on year to Rs 77.4 crore, with an adjusted margin of 9.5 per cent.
KFC Drives Operational Improvement
The company said overall profitability improved compared with earlier quarters, driven mainly by KFC. The chicken nugget franchy revenue grew 11 per cent year on year, while same-store sales growth (SSSG) came in at 1 per cent, aided partly by festive demand. Restaurant-level Ebitda margin for KFC improved 60 basis points year on year to 18.8 per cent, supported by better gross margins and cost efficiencies.
Pizza Hut India Continues To Lag
Pizza Hut India continued to face demand pressures during the quarter. Revenue declined 11 per cent year on year, while same-store sales fell 12 per cent.
Restaurant-level Ebitda margin for the brand was negative at 3.1 per cent, down 780 basis points from a year earlier. The Tamil Nadu market remained a relative bright spot, delivering a double-digit positive gap in same-store sales and restaurant profitability compared with the rest of the country.
Sri Lanka And Store Expansion Support Growth
Sapphire Foods’ Sri Lanka operations maintained strong momentum, posting double-digit same-store sales growth of 11 per cent in local currency terms and revenue growth of 15 per cent year on year in Sri Lankan rupee terms. Restaurant-level Ebitda margin in Sri Lanka stood at 16.7 per cent, though margins were impacted by higher minimum wages and cyclone-related costs.
During the quarter, the company added 27 KFC restaurants, one Pizza Hut outlet in India and three Pizza Hut outlets in Sri Lanka, taking its total restaurant count to 1,028 as of 31 December 2025.
Consolidated profit before tax before exceptional items stood at Rs 7.8 crore, but after accounting for exceptional items, the company reported a consolidated loss before tax of Rs 3.4 crore, mainly due to one-time impacts related to changes in labour codes and merger-related expenses.
