United Foodbrands Limited (formerly known as Barbeque-Nation Hospitality Limited) has secured a significant victory in its tax appeal case. The Income Tax Appellate Tribunal (ITAT), Bengaluru Bench, has upheld the company's eligibility for depreciation on goodwill for Assessment Years 2013-14 to 2018-19, overturning earlier disallowances.

Key Highlights

• Tribunal Decision: The ITAT has ruled in favor of United Foodbrands, allowing depreciation on goodwill for six assessment years.
• Financial Impact: The company had faced disallowance of ₹11.05 crores in goodwill depreciation for the period in question.
• Pending Assessment: United Foodbrands is awaiting the final assessment order from the assessing officer to determine the exact positive financial impact.

Background of the Case

United Foodbrands had appealed to the ITAT against the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] which had disallowed depreciation on goodwill and other expenses for the Assessment Years 2013-14 to 2018-19.

Implications of the Ruling

The ITAT's decision overturns the previous disallowances made by the Assessing Officer and CIT(A). This ruling is expected to have a positive impact on the company's financial statements, although the exact figures are yet to be determined.

Financial Overview

To provide context on the company's financial position, here's a snapshot of United Foodbrands' key financial metrics:

Note: Figures are based on the standalone financial statements.

Looking Ahead

The company is now awaiting the final assessment order from the Assessing Officer, which will provide clarity on the exact financial benefit resulting from this favorable ruling. This decision may strengthen United Foodbrands' financial position and could set a precedent for similar cases in the industry.

Investors and stakeholders will be keenly watching for the final assessment order to gauge the full impact of this ruling on the company's financials and future tax liabilities.

United Foodbrands Limited (formerly known as Barbeque-Nation Hospitality Limited) has reported a 2.6% sequential revenue growth to INR 305.00 crores in Q2 FY26, despite facing margin pressures. The company achieved positive Same Store Sales Growth (SSSG) of 0.8% excluding the Navratri impact, driven by transaction growth across both dine-in and delivery segments.

Key Financial Highlights

• Revenue: INR 305.00 crores (up 2.6% quarter-on-quarter)
• SSSG: 0.8% positive (excluding Navratri impact)
• Gross Margin: 66.2% (down 150 basis points)
• Restaurant Operating Margin (Pre-Ind AS): 8.2%
• Consolidated Reported EBITDA: INR 37.70 crores (12.4% margin)
• Adjusted Operating EBITDA: INR 3.30 crores (1.1% margin)

Segment Performance

Barbeque Nation India

• Revenue: INR 230.00 crores (0.5% quarter-on-quarter increase)
• SSSG: -1.1% (excluding Navratri)

International Business

• Revenue: INR 28.00 crores (27% year-on-year growth)
• SSSG: 8.4%
• Gross Margin: 72%
• Restaurant Operating Margin (Pre-Ind AS): ~18%

Premium Casual Dining Restaurant (CDR) Segment

• Revenue: INR 47.30 crores (17% year-on-year growth)
• Gross Margin: 73%
• Restaurant Operating Margin (Pre-Ind AS): ~13%

Expansion and Strategy

United Foodbrands added 6 new restaurants during the quarter, bringing its total network to 241 outlets. The company remains on track to open 35 restaurants in FY26 and is progressing towards its FY27 target of 300+ restaurants.

The company faced margin compression with gross margins declining 150 basis points to 66.2% due to value-based group offers and food festival costs. However, management maintained strict cost control, achieving a 6% reduction in overhead costs within the Barbeque India business.

Rahul Agrawal, CEO and Whole-Time Director, stated, "We are seeing some positive momentum in the consumption growth. Our focus remains on driving sustained volume growth across formats."

Outlook

Management expressed cautious optimism about future performance, citing positive transaction growth momentum and plans to focus on enhancing guest experience through culinary innovations and engagement activities. The company aims to improve margins through tactical adjustments to offerings, pricing, and cost structures, targeting mid-teens restaurant operating margins at a consolidated level.

United Foodbrands continues to see strong performance in its international operations and Premium CDR segment, which could help offset some of the challenges faced in the domestic market.

Investors should note that while the company is showing signs of recovery, it continues to face challenges in achieving consistent positive SSSG and margin improvement in its core Indian market. The management's strategies to drive transaction growth and control costs will be crucial in determining the company's financial performance in the coming quarters.