This project presents a comprehensive financial, credit, and valuation analysis of Westlife Foodworld Ltd., the master franchisee of McDonald’s in West and South India.
The analysis was conducted as part of the Financial Statement Analysis course during the PGDM (Finance & Analytics) program at IMT Hyderabad.
Westlife Foodworld operates McDonald’s restaurants in India through its subsidiary Hardcastle Restaurants Pvt. Ltd. The company operates over 430 outlets across West and South India.
Revenue is recognised when control of goods is transferred to customers and performance obligations are satisfied. Revenue is measured at transaction price, net of discounts, rebates, and indirect taxes such as GST.
No significant changes were observed in revenue recognition policies over the last four financial years. The company acts as the principal in all transactions, retaining pricing discretion and inventory risk.
Property, Plant & Equipment are recorded at historical cost less accumulated depreciation and impairment. Borrowing costs directly attributable to qualifying assets are capitalised. Depreciation is charged using the straight-line method.
Intangible assets are recorded at cost and amortised over their useful lives. Software is amortised over five years, while franchise-related costs are amortised based on franchise agreement tenure.
The company follows the cost model and does not revalue assets.
Deferred tax assets and liabilities are recognised for temporary differences between accounting and tax bases. Deferred tax assets are recognised only when future taxable profits are probable.
ICRA has reaffirmed the company’s long-term rating at [ICRA]AA– (Stable) and short-term rating at [ICRA]A1+, reflecting strong brand backing and operational experience.
However, profitability pressures, declining margins, and increased lease obligations remain key monitoring factors.
- Weak demand and negative Same Store Sales Growth in FY24
- Margin compression due to higher operating and promotional costs
- Rising depreciation due to aggressive store expansion
- Inventory buildup in FY25 (management clarified as seasonal)
FY25 showed early signs of recovery with improved sales growth and operational stabilization.
- Profitability weakened sharply in FY24 and remained under pressure in FY25.
- Demand conditions improved in FY25 with positive SSSG.
- Financial risk reduced due to lower net debt and strong liquidity.
- Aggressive store expansion continues despite margin pressure.
- Input cost inflation remains the primary risk to margin recovery.
- Strengthen cost efficiency and supply chain optimisation
- Increase contribution from premium and digital channels
- Adopt selective, ROI-driven store expansion strategy
Compared to peers like Jubilant FoodWorks and Sapphire Foods, Westlife Foodworld exhibits:
- Higher leverage
- Weaker liquidity
- Lower asset efficiency
This places pressure on future return metrics.
A hypothetical 30% increase in debt significantly worsens leverage and interest coverage. Under this scenario, the company presents elevated credit risk and requires strict covenants for any additional borrowing.
At current valuations (>200x PE), achieving a 15% CAGR over five years appears unlikely under realistic assumptions. Base-case valuation suggests ~7% CAGR, indicating limited upside at current prices.
Westlife Foodworld remains a strong brand-backed operator, but high valuation, margin pressure, and rising costs limit near-term investment attractiveness. Operational execution and margin recovery will be key to future value creation.