FSI expected to grow by 9% CAGR over FY20-25E: MOFSL

New Delhi, Dec 11: The Indian food service industry (FSI) is expected to grow by nine per cent CAGR over FY20-25E.

As per Motilal Oswal Financial Services (MOFSL), the growth of FSI is being driven by rising income levels, urbanisation, and nuclearisation apart from innovative offerings that appeal to the youth and the changing dynamics of the space, with the growth of online food delivery and food tech.

"Within FSI, organised players are growing faster than the industry, with the companies covered in this report growing even faster."

"Over FY20-25E, the organised industry is expected to deliver 15.4 per cent CAGR, while the companies in this report are expected to deliver an aggregate sales CAGR of 18.5 per cent."

According to MOFSL, the contribution of organised FSI players has increased to 38 per cent in FY20 from 29 per cent in FY15 and is expected see its share increased to 50 per cent by FY25E.

"The organised Indian FSI is witnessing enhanced growth prospects post-Covid, led by sustained high delivery levels compared to the past aided by increased technology adoption by consumers; incrementally strong gains from unorganised peers, led by closures of 30-40 per cent the restaurants."

"An evident move towards more trusted brands, with better hygiene standards; accelerated store expansion by organized players; favourable cost outlook by variablising them; and increased supply of real estate, due to closures of restaurants and other retail players, making it attractive for the survivors to expand their store networks."

Besides, MOFSL said that once the impact of the lockdown on the dine-in channel recedes, increased focus on the value segment by the leading Quick Service Restaurants (QSRs) and Casual Dining Restaurants (CDRs) would precipitate faster conversion from smaller and unorganised peers.

"While dine-in was affected by the restrictions on operations, branded players, with a strong delivery presence and supported by their investments in technology, were far more resilient compared to smaller and unorganised players as the delivery channel continues to drive sales."

"With enhanced prospects and recovery in momentum, organised FSI players are likely to witness robust earnings growth prospects going forward."