After massive Covid impact, restaurants expect record growth in FY22 surpassing pre-Covid levels

Ease of Doing Business for MSMEs: The government in March this year had extended its credit guarantee scheme Emergency Credit Line Guarantee Scheme (ECLGS) in scope to cover businesses in hospitality including hotels, restaurants, marriage halls, canteens, etc.,

It was becoming nearly impossible to shell out a significant Rs 8 lakh in rental payments per month amid dwindling sales.
The average share of food delivery in the revenue of food business operators was 10 per cent before Covid which increased to 29 per cent after the first lockdown and to 33 per cent after the second lockdown. (Image for representation)

Ease of Doing Business for MSMEs: The food services industry, which encompasses any establishment, including a vast number of micro and small eateries, serving food to customers outside their homes, is on course to post-Covid recovery faster than one would have likely imagined. The sector, which took a massive hit in financial year (FY) 2020-21 due to the lockdown restrictions and Covid-appropriate consumer behaviour, is not just looking to end the current FY with the size more than double from last FY but also surpassing FY20 levels.

“One reason for the growth is the overall aspect of revenge shopping among customers while as offices are opening up, people have started eating out. Even those who are working from home are moving out during weekdays and weekends. However, families with children have taken a much longer time to start going out in the recent past. The growth also includes home deliveries to an extent. It helped us survive as well during the Covid period and we hope to continue with it ahead. Luckily, we didn’t have to shut any of our outlets or lay off employees,” Aseem Grover, Director, Big Chill Cafe, and Secretary, National Restaurant Association of India (NRAI) told Financial Express Online.

The food services market size declined 53 per cent from Rs 4,23,600 crore in FY20 to Rs 2,00,800 crore in FY21, however, it is expected to grow by 135 per cent in the current FY to Rs 4,72,300 crore from FY21, as per a report by the National Restaurant Association of India (NRAI) launched on October 25, 2021, analysing the Covid impact on the industry. FY22 growth would also be 11 per cent higher than FY20 levels. Interestingly, the projected FY22 size of the sector will be the highest in the past seven years.

The average share of food delivery in the revenue of food business operators was 10 per cent before Covid which increased to 29 per cent after the first lockdown last year and further to 33 per cent after the second lockdown this year. According to NRAI, the impact of Covid shifted the needle of the food services industry towards the organized market that is expected to have a 54 per cent share in the overall market from the current 40 per cent.

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“The recovery is because India’s vaccination rate has been incredible. This has been a great booster for people to get back their confidence for going out again. Also, home delivery is here to stay. It makes people addicted to discounting. There are some customers who are still not comfortable stepping out of their homes and hence are depending on home deliveries. However, a number of restaurants had to shut themselves as well due to Covid,” Varun Puri, Co-founder, Viva Hospitality told Financial Express Online.

The food services sector comprises organised and unorganised segments. Dhabas, roadside eateries, street stalls, etc., that operate without any quality control or sourcing norms fall under the unorganised bucket. The organised segment includes organised standalone set-ups and chained markets or formats with over three outlets in a country and scattered across different sub-segments such as casual dining, fine dining, quick service restaurants, cafes, and more with average spend per customer spanning from as low as Rs 50 or 100 to around Rs 2,000. Restaurants in hotels is another category in the organised segment though with a minuscule share of Rs 11,643 crore in the overall Rs 4.23 lakh crore size of the sector during FY20.

Importantly, the government in March this year had extended its credit guarantee scheme Emergency Credit Line Guarantee Scheme (ECLGS) in scope and size as ECLGS 3.0 to cover businesses in hospitality including hotels, restaurants, marriage halls, canteens, etc., apart from enterprises in travel & tourism, leisure & sporting and civil aviation sectors. However, according to credit rating agency ICRA, while moratorium and ECLGS provided support to the hospitality sector but the sustenance of the demand pickup in the recent months remains to be seen as the impact of a potential third wave cannot be ruled out.

Around 70 per cent of the businesses in the agency’s hospitality portfolio had availed moratorium during the first wave of the pandemic last year, though it was only 39 per cent of rated debt, ICRA had said in a recent statement. Moreover, the revenue per available room (RevPAR) was significantly lower than pre-Covid levels. About 63 per cent of ICRA’s ratings were also on negative outlook currently,” the agency had said.

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