How Devyani’s biryani deal—likely worth Rs 420Cr—leaves investors bitter, founders smiling

On 19 April, Devyani International, the operator of international brands such as KFC, Pizza Hut, and Costa Coffee in India, informed stock exchanges that it would acquire a controlling equity stake in Sky Gate Hospitality. 

Sky Gate Hospitality operates restaurants in India under the brand Biryani by Kilo (BBK), along with other brands such as Goila Butter Chicken, The Bhojan, and Get-A-Way.

Devyani's board will meet on 24 April to consider the acquisition, which will be "subject to the approval of equity shareholders at an extra-ordinary general meeting of the company."

While the exact financial details of the acquisition have not yet been made public, a note by the founders of Sky Gate Hospitality – Kaushik Roy & Vishal Jindal,  to its investors, which BW Businessworld was able to access in the first week of April, pegged the deal at around Rs 420 crore. 

But beyond these financial details of the deal, the note also gave a sense of the financial difficulties plaguing this biryani player.

In the note, the founders go on to address Sky Gate's fundraising attempts since 2024 and how the macro situation forming since 2025, especially since President Trump's re-election and the general slowdown in consumer demand, impacted the overall fundraising activity for Indian startups.

Weakening Consumer Demand

The note goes on to say that market demand remains weak in the Indian QSR market. The founders substantiated this fact by citing that only one listed player in the India QSR space was able to deliver Same-Store Sales Growth (SSSG) in 2024. Moreover, the 3-year market returns for all QSR and restaurant players, barring Jubilant Foodworks, have been negative, per the note.

Even KFC, which Devyani operates, has its SSSG at ~ -5 per cent, per the note. KFC's H1FY25 SSSG stood at -7.1 per cent compared to -2.1 per cent in H1FY24. Despite the turndown, Devyani International's earnings have grown at an average annual rate of 15.6 per cent, reflecting steady expansion.

In Q3 FY25 alone, the company reported a 53.5 per cent year-on-year revenue growth, with consolidated revenues reaching Rs 1,294 crore for the quarter and Rs 3,762 crore for the nine months ended December 2024. The revenue for FY24 stood at Rs 3,558 crore.

The note read, "Investors are concerned with the continued increase of competition in food delivery and the lack of scaling up for biryani brands."

Facing Operational Headwinds

The founders go on to say that the current environment has made it very difficult for financial investors to invest in Sky Gate, which operates at -10 to -15 per cent EBITDA. However, they mention that despite this turbulent period, the company got some indications of interest from a strategic investor with "a view to acquire a majority stake in the company."

On 31 March 2025, Sky Gate signed a term with this strategic investor, with this being “the only offer on the table.” The note further revealed that the company only has a cash runway for the next 3-4 months, indicating weak operating financials.

"The Strategic Investor will be acquiring all shares of Sky Gate (other than Founders) at 2.0x Revenue Multiple of FY25 for approximately ~Rs 420 Crore (after adjusting liabilities) by way of allotting their shares," the founders wrote.

This means both founders will retain their stake as part of this deal. The strategic investor has insisted they “work with the acquired business for a minimum period of four years, in order to ensure continuity and facilitate exit to existing Sky Gate Investors.”

As of 11 December 2024, data from Traxcn showed that both the founders, Kaushik Kumar Roy and Vishal Jindal, own a 14.26 per cent stake in Sky Gate Hospitality, worth Rs 126 crore. Other shareholders, including the ESOP pool, maybe exiting at a haircut as the data showed their stake to be worth Rs 726 crore.

How Did The Kilo Become A Gram?

Major investors in the company are not happy with this deal and rightly so considering they are exiting at a haircut and no real value creation. But what exactly went wrong with this Biryani giant? BW Businessworld spoke to a few investors in the company on the condition of anonymity.

They told that co-founder Vishal Jindal’s growing dominance in decision-making led to increasing friction with stakeholders. “He stopped listening,” said one investor, pointing to questionable marketing spends, brand dilution through unrelated forays—such as acquisitions in the healthy low calorie ice cream segment—and missed opportunities to take BBK international at the right time.

One particular decision that drew sharp criticism from investors was the appointment of badminton star PV Sindhu as BBK’s brand ambassador—a move some insiders viewed as emblematic of misplaced priorities. “It was an expensive, ill-timed call,” said one early investor, who had explicitly advised against the endorsement.

Tensions between the founders and key investors had been simmering for over a year. According to people familiar with the matter, IvyCap Ventures—one of the major institutional investors in Sky Gate Hospitality—had at one point pushed for the removal of one of the co-founders, citing deep concerns over the way day-to-day operations were being handled.

Excerpted from BW Businessworld with permission