Deep Dive into the Numbers
Karan Taurani, EVP, Elara Securities in an interview to ET Now highlighted the scale of India’s food service industry. “We have got almost four million F&B outlets. Out of this, 15% is the organised outlets and 85% is the unorganised outlets. It is all over India basically. The unorganised part covers all your dhabas and the roadside food and so on and so forth. Now, within this four million outlets, 80% of the outlets are LPG dependent and 20% are dependent on electric and hybrid and all those kinds of things.”
He elaborated on demand specifics: “For other companies, they would need about 5 to 10 cylinders per month. Then, you go to standalone restaurants, they would need three to four cylinders per month based on the cuisine and the category that they cater to. Generally, on a thumb rule, these 32 million outlets require five cylinders of 19 kg per month. So, the demand for the cylinders for the F&B industry is about 1.7 crore.”
The supply side, however, is constrained. “If we include weddings, parties, and corporate canteens, the demand actually is closer to two odd crores per month for the cylinders, and the supply is almost about 1.6-1.7 crore. So, there is a deficit of 15-20% as of now,” Taurani said.
Impact on Restaurants and Food Tech
Despite the shortfall, Taurani said the immediate closures are limited. “Very clearly, less than 5% of restaurants are shut today as per NRAI. QSR chains are operating, business as usual, because most of them are dependent on electric and not on LPG. Some are trying to go hybrid, some are rationalising menu, some are reducing work hours. But QSRs are not seeing any big negative impact.”
Smaller standalone players, however, are bearing the brunt. “Assuming a worst-case scenario that 10-15% of restaurants eventually shut down in the next one month, you could see a 7% to 8% EBITDA downgrade for the food business for Zomato,” Taurani added.
He also clarified the potential effect on annual performance: “So, this 7% to 8% EBITDA downgrade is quarterly EBITDA. Annualised basis, this impact is around two odd percent. Assuming that the food business is 55% of SOTP, you tend to get a number of almost about 1.5% to 2%. So, as of now, this impact is very small. But if the number of restaurants shutting down moves ahead from 15% to 25%, these numbers can swing miserably. And if the situation prolongs for two or three months, these numbers could change massively in a negative manner.”QSRs and Electric Advantage
Taurani emphasised that QSRs are better positioned to adapt. “For QSR perspective, they are more dynamic in nature. The first thing is rationalise the menu, try and have menus with lower dependence on LPG. Second is reduce the number of work hours. Third, most QSR companies are trying to get electrical equipment inside the stores. For example, in the case of fried chicken, they have got 60% dependence on electric equipment, 40% LPG. So somewhere they are trying to increase the dependence on electric equipment going ahead.”
He also noted a potential shift in consumer orders: “For someone who was ordering a dosa or a pav bhaji which is LPG dependent, they could now opt for a burger if it is not available in that area. So, QSR could see a positive bias in terms of order traffic.”
On pricing, Taurani said: “I do not think so. There has been no change on pricing as of now.” He further explained that QSRs represent only 10-12% of order volumes, with 80% dependence on standalone restaurants.
Food Tech and Quick Commerce Concerns
While the food business impact is modest, Taurani highlighted concerns in quick commerce (Qcom). “Obviously, there are worries on the food side, but as I mentioned, it does not translate to numbers in a big manner. The bigger worry is Qcom valuations have come off sharply. One reason is fear about management change—Albinder coming in, Deepinder going away—which investors fear could bring strategic changes, which we do not believe. A second fear is competitive intensity from Zepto and Ecom players. Amazon and Flipkart are entering Qcom, scaling up dark stores and assortment. But Ecom and Qcom will coexist; Ecom is top-down, Qcom is bottom-up. We do not believe Ecom will scale up in a very big manner.”
Taurani concluded on a reassuring note for Blinkit: “If Flipkart, Amazon, and others together account for less than 10% of Qcom market share, there is enough for Blinkit. They may not lose market share in a big manner. So Blinkit is quite safeguarded here as the Qcom business is concerned.”
While LPG supply challenges may temporarily affect smaller F&B players, large QSRs and well-positioned food tech companies are likely to weather the storm. Adaptability, menu rationalisation, and the shift towards electric equipment are helping them navigate the crisis, keeping overall impact limited.
