Editor’s Note
Sapphire Foods India, a major franchise operator for KFC, Pizza Hut, and Taco Bell, is contesting a GST-related show cause notice from Delhi authorities for the 2021-22 financial year. The company states the notice, which includes interest and penalties of approximately INR 51 million, is not maintainable and expects no material operational or financial impact.
Sapphire Foods India Limited, a YUM franchisee operator, has received a show cause notice from Delhi’s Sales Tax Officer for alleged GST return discrepancies in FY 2021-22. The notice, totaling INR 51 million, includes interest and penalties. Sapphire Foods claims the notice is not maintainable and expects no material impact. The company is evaluating the notice and will respond accordingly. Sapphire Foods operates KFC, Pizza Hut, and Taco Bell restaurants across India and Sri Lanka.
Sapphire Foods India Limited, a leading YUM franchisee operator in the Indian subcontinent, has received a show cause notice from the Sales Tax Officer in Delhi regarding alleged discrepancies in its GST returns for the financial year 2021-22. The notice, amounting to INR 51.00 million, includes interest of INR 19.53 million and a penalty of INR 2.88 million.
The authorities issued the notice under Section 73 of the Central Goods and Services Tax Act, 2017, highlighting differences observed in the company’s filed returns. The show cause notice (SCN) was received by Sapphire Foods on July 23, 2023, as per the company’s disclosure to the stock exchanges.
In its filing, Sapphire Foods mentioned that it is in the process of evaluating the notice and will respond appropriately.
Sapphire Foods India Limited is a significant player in the Quick Service Restaurant (QSR) sector, operating 510 KFC and 336 Pizza Hut restaurants in India, along with 118 Pizza Hut and 10 Taco Bell restaurants in Sri Lanka as of June 30, 2023. The company has been expanding its presence, with recent additions including 8 KFC restaurants, 2 Pizza Hut outlets in India, and 1 Pizza Hut restaurant in Sri Lanka during the first quarter of FY2024.
In its Q1 FY2024 results, Sapphire Foods reported:
– Revenue growth (year-on-year): 8%
– Revenue: INR 7,748.00 million
– Restaurant EBITDA margin: 12.20%
– Restaurant EBITDA margin decrease: 290 basis points
– Adjusted EBITDA: INR 548.00 million
– Adjusted EBITDA decline (year-on-year): 22%
The company’s KFC business in India saw flat same-store sales growth, while Pizza Hut experienced a decline of 8% in same-store sales. However, the Sri Lanka business continued to show strong double-digit same-store sales growth of 12% in local currency terms.
As Sapphire Foods navigates this regulatory challenge, investors and industry observers will be watching closely to see how it may impact the company’s operations and financial performance in the coming quarters.
