The quarter-on-quarter performance showed marginal improvement, with losses widening by 39.72% from ₹41.94 crores in Q1 FY26 to ₹58.60 crores in Q2 FY26. Despite achieving revenue growth of 11.23% year-on-year, the company continues to grapple with profitability challenges stemming from high depreciation costs of ₹96.93 crores and interest expenses of ₹45.61 crores during the quarter.
The stock has been on a consistent downward trajectory, losing 40.56% over the past three years compared to the Sensex's 40.77% gain, resulting in a staggering negative alpha of 81.33 percentage points. Trading below all major moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—the technical outlook remains decidedly bearish.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Net Profit (₹ Cr) | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 703.43 | +0.82% | +11.23% | -58.60 | 10.09% |
| Jun'25 | 697.72 | +10.30% | +7.89% | -41.94 | 10.43% |
| Mar'25 | 632.55 | -1.02% | +5.93% | -56.28 | 11.57% |
| Dec'24 | 639.06 | +1.05% | — | -50.40 | 10.88% |
| Sep'24 | 632.43 | -2.21% | — | -60.17 | 10.00% |
| Jun'24 | 646.69 | +8.30% | — | -49.36 | 9.77% |
| Mar'24 | 597.14 | — | — | -85.26 | 11.59% |
Financial Performance: Revenue Growth Masks Persistent Losses
In Q2 FY26, Restaurant Brands Asia recorded net sales of ₹703.43 crores, representing a modest 0.82% quarter-on-quarter increase from ₹697.72 crores in Q1 FY26. The year-on-year comparison proved more favourable, with revenue climbing 11.23% from ₹632.43 crores in Q2 FY25. This marks the highest quarterly revenue in the company's recent history, suggesting sustained expansion of its restaurant network and improved same-store sales.
However, the top-line growth failed to translate into bottom-line improvement. The consolidated net loss of ₹58.60 crores in Q2 FY26 deteriorated significantly on a sequential basis, widening by 39.72% from the ₹41.94 crores loss in Q1 FY26. The year-on-year comparison showed marginal improvement, with losses narrowing by 2.61% from ₹60.17 crores in Q2 FY25.
Revenue (Q2 FY26)
QoQ: +0.82%
YoY: +11.23%
Net Loss (Q2 FY26)
QoQ: +39.72%
YoY: -2.61%
Operating Margin
Down from 10.43% in Q1
PAT Margin
Vs -6.51% in Q1 FY26
Operating margins excluding other income stood at 10.09% in Q2 FY26, down from 10.43% in Q1 FY26 and marginally higher than the 10.00% recorded in Q2 FY25. The company's operating profit before depreciation, interest, and tax (excluding other income) reached ₹70.97 crores, representing a 12.23% year-on-year increase but a 2.47% sequential decline.
Employee costs rose to ₹123.16 crores in Q2 FY26 from ₹116.61 crores in Q1 FY26, reflecting a 5.62% quarter-on-quarter increase. This uptick in personnel expenses, coupled with the expansion drive, has continued to pressure margins. The profit after tax margin deteriorated to -9.00% in Q2 FY26 from -6.51% in Q1 FY26, highlighting the persistent challenge of achieving operational profitability.
The Profitability Challenge: High Fixed Costs Erode Gains
The fundamental issue plaguing Restaurant Brands Asia is the disproportionate burden of fixed costs relative to its revenue base. Depreciation expenses of ₹96.93 crores in Q2 FY26 consumed 13.78% of net sales, whilst interest costs of ₹45.61 crores accounted for an additional 6.48%. Combined, these two line items totalled ₹142.54 crores—more than double the operating profit of ₹70.97 crores generated during the quarter.
Critical Concern: Unsustainable Cost Structure
The company's depreciation and interest expenses of ₹142.54 crores in Q2 FY26 exceeded operating profit by ₹71.57 crores, creating a structural impediment to profitability. With an average debt-to-EBITDA ratio of 7.60 and net debt-to-equity of 1.40, the balance sheet remains highly leveraged, limiting financial flexibility.
The company's return on equity stands at a concerning 0.00%, whilst return on capital employed registers at -7.83% on average, indicating that the business is destroying shareholder value rather than creating it. This weak return profile reflects the capital-intensive nature of the quick-service restaurant business combined with insufficient operational scale to achieve profitability.
On an annual basis, FY25 saw net sales of ₹2,550 crores, up 4.60% from ₹2,437 crores in FY24. However, the company recorded a net loss of ₹232 crores for FY25, marginally better than the ₹236 crores loss in FY24. The operating margin excluding other income improved to 10.50% in FY25 from 9.90% in FY24, demonstrating gradual operational efficiency gains that have yet to overcome the fixed cost burden.
The balance sheet reveals shareholder funds of ₹908.57 crores as of March 2025, up from ₹626.57 crores in March 2024, primarily due to a ₹85.70 crore increase in share capital. Long-term debt stood at ₹181.46 crores, whilst current liabilities totalled ₹779.07 crores. The company's fixed assets of ₹1,202.92 crores represent the bulk of its asset base, underscoring the capital-intensive nature of restaurant operations.
Cash Flow Analysis: Operations Generate Positive Cash Despite Losses
One bright spot in an otherwise challenging financial picture is the company's ability to generate positive operating cash flow. For FY25, cash flow from operations reached ₹350 crores, the highest in recent years and up from ₹346 crores in FY24. This demonstrates that despite reporting accounting losses driven by high depreciation charges, the underlying business generates cash at the operational level.
The company's closing cash position stood at ₹534 crores as of March 2025, a substantial improvement from ₹31 crores in March 2024. This liquidity cushion provides some breathing room as the company navigates its expansion phase. However, investing activities consumed ₹232 crores in FY25, primarily for capital expenditure related to new restaurant openings, whilst financing activities contributed ₹384 crores, largely from equity infusion.
| Cash Flow (₹ Cr) | FY25 | FY24 | FY23 | FY22 |
|---|---|---|---|---|
| Operating Cash Flow | 350 | 346 | 124 | 77 |
| Investing Cash Flow | -232 | -218 | 15 | -1,090 |
| Financing Cash Flow | 384 | -251 | -170 | 1,112 |
| Net Cash Inflow | 502 | -123 | -30 | 98 |
| Closing Cash | 534 | 31 | 155 | 185 |
Industry Context: Competitive Quick-Service Restaurant Landscape
The Indian quick-service restaurant sector has witnessed intense competition, with multiple players vying for market share in a price-sensitive market. Restaurant Brands Asia operates Burger King outlets, competing against established players such as Jubilant FoodWorks (Domino's Pizza, Dunkin'), Westlife Development (McDonald's), Devyani International (KFC, Pizza Hut), and Sapphire Foods (KFC, Pizza Hut franchisee).
The sector's dynamics have been challenging, with rising real estate costs, labour expenses, and commodity inflation squeezing margins. Whilst branded quick-service restaurants have gained market share from unorganised players, achieving profitability at scale has proven difficult for newer entrants. The capital-intensive nature of the business—requiring significant upfront investment in store fit-outs, equipment, and working capital—creates a high barrier to profitability until critical mass is achieved.
"Despite generating positive operating cash flow of ₹350 crores annually, Restaurant Brands Asia's path to profitability remains obscured by the twin burdens of high depreciation and interest costs."
Peer Comparison: Valuation Discount Reflects Profitability Struggles
Restaurant Brands Asia's financial metrics compare unfavourably with industry peers. The company's return on equity of 0.00% lags significantly behind competitors such as Travel Food Services (34.47%), Devyani International (15.42%), and Jubilant FoodWorks (15.46%). This weak return profile reflects the company's inability to generate profits despite growing revenues.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Restaurant Brands | NA (Loss Making) | 4.59 | 0.00 | 1.40 | NA |
| Jubilant FoodWorks | 155.55 | 19.30 | 15.46 | 1.98 | 0.20% |
| Devyani International | NA (Loss Making) | 18.76 | 15.42 | 2.75 | NA |
| Travel Food Services | 47.25 | 16.29 | 34.47 | -0.60 | NA |
| Sapphire Foods | 3138.70 | 0.69 | 7.85 | 0.09 | NA |
| Westlife Development | 921.83 | 15.46 | 6.70 | 2.59 | 0.12% |
The price-to-book value ratio of 4.59x for Restaurant Brands Asia appears relatively modest compared to peers such as Jubilant FoodWorks (19.30x) and Devyani International (18.76x). However, this apparent valuation discount is justified given the company's zero return on equity and persistent losses. Profitable peers command premium valuations due to their demonstrated ability to generate returns on invested capital.
Restaurant Brands Asia's debt-to-equity ratio of 1.40 sits in the middle of the peer range, though the company's inability to service this debt through operating profits remains a significant concern. With a market capitalisation of ₹4,181 crores, the company ranks amongst the smaller players in the sector, limiting its ability to achieve economies of scale.
Valuation Analysis: Loss-Making Status Precludes Traditional Metrics
Traditional valuation metrics such as price-to-earnings ratio cannot be applied to Restaurant Brands Asia given its loss-making status. The company's P/E ratio is classified as "NA (Loss Making)", reflecting the absence of positive earnings. This fundamentally limits the stock's appeal to value-oriented investors who rely on earnings-based valuation frameworks.
The price-to-book value of 4.59x suggests the market is pricing in expectations of future profitability, though this multiple has compressed from higher levels as the path to profitability has remained elusive. The EV-to-EBITDA ratio of 19.53x appears elevated, particularly given the company's inability to convert EBITDA into net profits due to high depreciation and interest charges.
P/E Ratio (TTM)
Price to Book
EV/EBITDA
Mojo Score
The company's overall valuation grade is classified as "Risky", reflecting the uncertain path to profitability and the challenges inherent in forecasting future earnings. With no dividend yield and negative free cash flow to equity, the stock offers no income component and relies entirely on capital appreciation driven by eventual profitability—a scenario that remains uncertain.
Shareholding Pattern: Institutional Confidence Remains Mixed
The shareholding pattern reveals interesting dynamics in investor sentiment. Promoter holding stands at 11.27% as of September 2025, unchanged from June 2025 but down from 13.16% in December 2024. The reduction in promoter stake earlier in FY25 was likely part of a planned dilution to raise capital.
| Quarter | Promoter | FII | Mutual Funds | Insurance | Other DII |
|---|---|---|---|---|---|
| Sep'25 | 11.27% | 20.65% | 29.97% | 9.30% | 0.80% |
| Jun'25 | 11.27% | 20.52% | 29.54% | 9.46% | 0.97% |
| Mar'25 | 11.27% | 20.36% | 29.62% | 9.79% | 1.04% |
| Dec'24 | 13.16% | 15.34% | 27.62% | 10.59% | 0.63% |
| Sep'24 | 13.17% | 17.52% | 26.48% | 10.57% | 0.70% |
Foreign institutional investors have steadily increased their stake, rising from 17.52% in September 2024 to 20.65% in September 2025. This 3.13 percentage point increase suggests some international investors see value in the company's long-term growth story. Similarly, mutual fund holdings have climbed from 26.48% to 29.97% over the same period, with a sequential increase of 0.43 percentage points in Q2 FY26.
Insurance company holdings have declined from 10.57% in September 2024 to 9.30% in September 2025, indicating some institutional caution. Overall institutional holdings stand at 60.72%, reflecting significant professional investor interest despite the company's profitability challenges. The high institutional ownership suggests that sophisticated investors are betting on the company's ability to eventually achieve operational scale and profitability.
Stock Performance: Severe Underperformance Across All Timeframes
Restaurant Brands Asia's stock performance has been dismal across virtually all time horizons. The stock has declined 21.40% over the past year, whilst the Sensex has gained 5.58%, resulting in a negative alpha of 26.98 percentage points. The underperformance becomes even more pronounced over longer periods, with the stock losing 40.56% over three years compared to the Sensex's 40.77% gain—a negative alpha of 81.33 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +1.43% | -0.18% | +1.61% |
| 1 Month | -6.93% | +5.15% | -12.08% |
| 3 Months | -13.41% | +3.59% | -17.00% |
| 6 Months | -11.50% | +5.19% | -16.69% |
| YTD | -15.53% | +8.02% | -23.55% |
| 1 Year | -21.40% | +5.58% | -26.98% |
| 2 Years | -35.34% | +31.65% | -66.99% |
| 3 Years | -40.56% | +40.77% | -81.33% |
The stock currently trades at ₹71.68, down 24.35% from its 52-week high of ₹94.75 but up 20.47% from its 52-week low of ₹59.50. Technical indicators paint a uniformly bearish picture, with the stock trading below all key moving averages. The MACD, KST, and Dow Theory indicators all signal bearish trends on both weekly and monthly timeframes.
The stock's beta of 1.35 indicates higher volatility than the broader market, with annualised volatility of 34.89% compared to the Sensex's 12.49%. This high-beta, high-volatility profile combined with negative returns places the stock firmly in the "high risk, low return" category—an unattractive combination for most investors.
Investment Thesis: Turnaround Story with Significant Execution Risk
The investment case for Restaurant Brands Asia rests primarily on the potential for eventual profitability as the company achieves greater operational scale. The quick-service restaurant business is characterised by high fixed costs but also significant operating leverage—once a critical mass of stores is reached, incremental revenues should flow more readily to the bottom line.
Valuation
Quality Grade
Financial Trend
Technical Trend
The company's ability to generate positive operating cash flow of ₹350 crores annually despite reporting accounting losses provides some comfort. This suggests the underlying business model is viable, with losses driven primarily by non-cash depreciation charges. However, the high interest burden of approximately ₹160 crores annually remains a cash expense that must be addressed through either debt reduction or revenue growth.
The bull case hinges on Restaurant Brands Asia achieving same-store sales growth whilst simultaneously improving operational efficiency to expand margins. With 60.72% institutional ownership, the company has backing from sophisticated investors who presumably see a path to profitability. The 5-year sales CAGR of 15.65% demonstrates the company's ability to grow its top line, though this has yet to translate into bottom-line performance.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Strong revenue growth trajectory with 11.23% YoY increase in Q2 FY26
- Positive operating cash flow generation of ₹350 crores in FY25
- High institutional ownership at 60.72% indicates professional investor confidence
- Improving operating margins, reaching 10.09% in Q2 FY26
- Strong liquidity position with ₹534 crores closing cash as of March 2025
- No promoter pledging, indicating clean governance
- Growing store network expanding market presence
KEY CONCERNS ⚠️
- Persistent losses with net loss of ₹58.60 crores in Q2 FY26
- Zero return on equity and negative return on capital employed of -7.83%
- High depreciation burden of ₹96.93 crores quarterly eroding profitability
- Elevated debt levels with debt-to-EBITDA ratio of 7.60
- Stock down 21.40% over past year with negative alpha of 26.98 percentage points
- High volatility of 34.89% combined with negative returns
- Bearish technical indicators across all timeframes
Outlook: What to Watch Going Forward
POSITIVE CATALYSTS
- Achievement of EBITDA-to-net-profit conversion through reduced depreciation as older stores stabilise
- Acceleration in same-store sales growth driving operating leverage
- Margin expansion beyond 11-12% through operational efficiencies
- Successful debt reduction lowering interest burden below ₹40 crores quarterly
- Reaching breakeven profitability within next 4-6 quarters
RED FLAGS TO MONITOR
- Further deterioration in quarterly losses beyond ₹60 crores
- Operating margin compression below 9-10% levels
- Decline in operating cash flow generation
- Increase in debt levels requiring additional equity dilution
- Reduction in institutional holdings signalling lost confidence
The path forward for Restaurant Brands Asia requires disciplined execution on multiple fronts. The company must demonstrate consistent same-store sales growth whilst maintaining or expanding operating margins. Simultaneously, it needs to manage its capital expenditure carefully to avoid further balance sheet strain whilst still investing in growth opportunities.
Investors should closely monitor quarterly results for signs of inflection towards profitability. Key metrics to watch include operating margin trends, absolute EBITDA generation, interest coverage ratios, and most importantly, the trajectory of net losses. A sustained reduction in quarterly losses moving towards breakeven would be the most important catalyst for stock price recovery.
The Verdict: High-Risk Turnaround Bet Not Suitable for Most Investors
Score: 17/100
For Fresh Investors: Avoid initiation at current levels. The company's persistent losses, weak return metrics, and bearish technical setup create an unfavourable risk-reward profile. Wait for concrete evidence of a path to profitability before considering entry.
For Existing Holders: Consider exiting positions or reducing exposure significantly. The stock's 21.40% decline over the past year and consistent underperformance versus the broader market suggest fundamental challenges that may take considerable time to resolve. The lack of near-term profitability visibility warrants a defensive stance.
Fair Value Estimate: Given loss-making status, traditional valuation is not applicable. Current price of ₹71.68 appears fully valued relative to book value of ₹15.61 per share, offering limited downside protection.
Rationale: Whilst Restaurant Brands Asia demonstrates revenue growth and generates positive operating cash flow, the persistent inability to achieve net profitability after years of operations raises serious questions about the business model's viability at current scale. The combination of zero return on equity, negative return on capital employed, high leverage, and bearish technical trends creates a challenging investment proposition suitable only for highly risk-tolerant investors with long time horizons.
