Devyani International Ltd is Rated Strong Sell

Understanding the Current Rating

The Strong Sell rating assigned to Devyani International Ltd indicates a cautious stance for investors, suggesting that the stock is expected to underperform relative to the broader market and its peers. This recommendation is based on a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. Each of these factors contributes to the overall assessment of the company’s investment potential as of today.

Quality Assessment

As of 29 December 2025, Devyani International Ltd’s quality grade is below average. The company demonstrates weak long-term fundamental strength, with an average Return on Capital Employed (ROCE) of just 9.15%. This modest ROCE reflects limited efficiency in generating profits from its capital base. Furthermore, operating profit growth has been sluggish, expanding at an annual rate of only 1.02% over the past five years. Such minimal growth signals challenges in scaling operations or improving profitability sustainably.

Additionally, the company’s ability to service its debt is concerning. The Debt to EBITDA ratio stands at 3.27 times, indicating a relatively high leverage level that could strain financial flexibility. The debt-equity ratio, reported at 5.08 times in the half-year period, further underscores the elevated financial risk. These factors collectively weigh down the quality score and contribute to the cautious rating.

Valuation Considerations

The valuation grade for Devyani International Ltd is classified as expensive. Despite the company’s modest ROCE of 4.1% in recent periods, the stock trades at an enterprise value to capital employed ratio of 4.5 times. This suggests that investors are paying a premium relative to the capital employed in the business. Although the stock currently trades at a discount compared to its peers’ historical valuations, the premium relative to its own capital efficiency raises concerns about value for money.

Over the past year, the stock has delivered a negative return of 20.77%, reflecting investor scepticism and market challenges. Meanwhile, profits have declined sharply by 195.7%, signalling deteriorating earnings quality. Such a combination of high valuation and declining profitability is a key driver behind the Strong Sell rating.

Financial Trend and Recent Performance

The financial trend for Devyani International Ltd is negative. The latest quarterly results for September 2025 reveal significant setbacks, with Profit Before Tax (excluding other income) falling to a loss of ₹29.54 crores, a decline of 114.1% compared to the previous four-quarter average. Net profit after tax also plunged, registering a loss of ₹19.52 crores, down 587.1% from the prior four-quarter average. These figures highlight a sharp deterioration in profitability and operational performance.

Long-term growth remains subdued, with operating profit growth barely above 1% annually over five years. The company’s elevated debt levels further exacerbate financial strain, limiting its capacity to invest in growth or weather market volatility. This negative financial trajectory is a critical factor in the current rating.

Technical Analysis

From a technical perspective, the stock is rated bearish. Recent price action shows a 1-day decline of 1.45%, with mixed short-term returns: a 1-week gain of 2.58% and a 1-month increase of 5.42%, but more extended periods reveal weakness. Over three months, the stock has fallen 15.89%, and over six months, it declined 16.97%. The year-to-date return stands at -21.33%, while the one-year return is down 25.96%. This consistent underperformance against the BSE500 benchmark over the last three years reinforces the bearish technical outlook.

Such price trends suggest limited investor confidence and a lack of upward momentum, supporting the Strong Sell recommendation from a market timing perspective.

What the Strong Sell Rating Means for Investors

For investors, the Strong Sell rating on Devyani International Ltd signals a recommendation to avoid or exit the stock due to its unfavourable risk-return profile. The combination of weak fundamentals, expensive valuation, deteriorating financial trends, and bearish technical signals suggests that the stock is likely to underperform in the near to medium term.

Investors should be cautious about allocating capital to this stock, especially given its high leverage and recent losses. The rating advises prioritising capital preservation and seeking alternative opportunities with stronger financial health and growth prospects.

That said, investors who already hold the stock may consider closely monitoring quarterly results and market developments for any signs of turnaround or improvement in fundamentals before reassessing their position.

Company Profile and Market Context

Devyani International Ltd operates within the Leisure Services sector and is classified as a small-cap company. Its market capitalisation and sector dynamics influence its risk profile and investor interest. The company’s recent performance and financial metrics place it at a disadvantage relative to peers and broader market indices, as reflected in its persistent underperformance against the BSE500 benchmark over the last three years.

Given these factors, the Strong Sell rating aligns with the current market sentiment and financial realities facing the company.

Summary of Key Metrics as of 29 December 2025

• Mojo Score: 9.0 (Strong Sell grade)


• Return on Capital Employed (ROCE): 9.15% (long-term average)


• Operating Profit Growth (5 years): 1.02% annualised


• Debt to EBITDA Ratio: 3.27 times


• Debt-Equity Ratio (Half Year): 5.08 times


• Enterprise Value to Capital Employed: 4.5 times


• Profit Before Tax (Sep 2025 quarter): -₹29.54 crores


• Profit After Tax (Sep 2025 quarter): -₹19.52 crores


• 1-Year Stock Return: -25.96%


• Year-to-Date Return: -21.33%

These figures illustrate the challenges currently faced by Devyani International Ltd and underpin the Strong Sell rating assigned by MarketsMOJO.

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