Devyani acquires Sky Gate getting access to it’s 3 brands

Devyani has acquired 80.72% stake in Sky Gate Hospitality (SGH).

• Founded in 2015, SGH is the owner of popular brands including Biryani by Kilo, Goila Butter Chicken and The Bhojan
  • Its two other brands – Get-A-Way and Krazy Kebab Co – will get disinvested over the next nine months.
• SGH operates 100 outlets in 40 cities.
• Financial track
  • Revenues
    • FY 25: Rs 277 cr
    • FY 24: Rs 268 cr
    • FY 23: 218 cr
  • Profits track has not been provided
• The total value of the transaction is Rs 419.6 cr valuing the business at Rs 520 cr
• Devyani has approved a preferential issue of 2.37 crore shares at Rs 176.78 each to fund the transaction
  • The price is similar to the current stock price.

Valuation prima facie appears attractive @ <2x revenues. Market norms for this kind of business are around 3-4x.

Personally I believe these are much tougher businesses than what market perceives and hence find the valuations ok.