Westlife FoodWorld Stocks Near 52-Week Lows Amid India's LPG Crisis

Global Energy Supply Chain Disruptions Impact QSR Stocks

India, a major consumer of Liquefied Petroleum Gas (LPG), is facing disruptions in its energy supply chain due to escalating geopolitical tensions in the Middle East. The country sources over 80% of its LPG from the region, where the US-Israeli war against Iran has caused fuel and oil shipments to be stuck at the Strait of Hormuz.

Commercial LPG supplies have been disrupted across several major cities in India, including Mumbai and Bengaluru, affecting restaurants, hotels, and food courts that rely heavily on cylinder-based cooking fuel. This highlights a hidden operational risk in India's food service ecosystem, with independent restaurants facing the most immediate risk of closures.

Quick Service Restaurant (QSR) stocks have been impacted, with most trading near their 52-week low levels. Sapphire Foods shares have lost over 2% to hit ₹169.45, while Devyani International's share price is down 12% this month. Restaurant Brands Asia (RBA) and Westlife FoodWorld have also lost 2-3% this month, with the latter hitting a 52-week low of ₹456.90.

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JM Financial's channel checks indicate that major QSR chains use LPG cylinders for 60-65% of their overall cooking, with a buffer for one-two weeks. If the LPG supply chain issue persists beyond that, their operations are likely to be hampered. A closure for five days amid LPG supply disruption can result in a revenue decline of ~6% per store for the quarter and a higher decline of 14-20% on restaurant-level EBITDA versus the normalised level of operations.

QSR companies face both supply disruption and cost pressures, with the price of one commercial LPG cylinder increasing by 8% MoM this month. This can increase kitchen operating costs, compress restaurant-level EBITDA margins, and raise delivery pricing or menu prices.