Wow! Momo dishes out plans for expansion ahead of going public

With about 680 stores across its three main brands – momos, chicken and Chinese quick service restaurants – the Tiger Global-backed company expects to post ebitda of ₹50-80 crore by FY27, co-founder and CEO Sagar Daryani told Mint.

The company expects growth from its core momo brand as well as newer verticals such as its kulfi brand and the FMCG segment, which includes frozen momos and cup noodles. The two-year-old FMCG business is expected to become a major contributor to the company’s overall earnings, Daryani said.

“We realised that we needed to be available across categories as people are consuming our momos not just in stores but in homes too,” he said, adding that the FMCG business has the potential to equal the quick service restaurant segment within the next decade.

Daryani did not specify when Wow! Momo will come out with an initial public offering. He said the company expects to close this fiscal year with ₹625 crore in revenue. The FMCG division is already contributing ₹60 crore in its second year. Daryani expects its FMCG segment to account for about one-sixth of the company’s revenue by the time the company is listed.

The company is expanding some of its newer verticals like the chicken brand, which competes with QSR chain KFC. At present, it operates 50 stores across south and east India. Daryani said this business will become profitable once it hits about 100 stores.

“The chicken business has a slightly lower gross margin of 60% as compared to momos where the margins are 70%,” he said.

The company has raised about ₹625 crore in funding since its inception, including ₹40 crore from Lighthouse Funds in 2017 and ₹120 crore from Tiger Global Management in 2019. The company was valued at about ₹2,500 crore when it last raised funds.

Kulfi, chicken brands

The Wow! Kulfi vertical, launched last year in a shop-in-shop model within momo outlets, is still in its early growth stages.

“That now has 260 points of sale and gives the company a revenue of ₹1.5 crore per month,” Daryani said.

The pandemic-induced surge in delivery orders has become a mixed blessing, with deliveries now accounting for 40% of the business, up from 10% before the pandemic. While deliveries have brought in more customers, they come with higher costs due to logistics and discounting, leading to lower margins.

“Deliveries give you more business, but they are more expensive than serving dining-in customers as margins are lower and discounting is high,” said Daryani.

The quick-commerce segment is driving almost two-thirds of the FMCG segment’s revenue. The company has also ventured into exports.

“We started exports as well of these products which are now getting exported to the Middle East markets like Qatar, Dubai, Sharjah, Abu Dhabi in Lulu Mall-owned stores. All these products are being made in our facilities in Delhi and Kolkata, and we are also setting up a new factory in Maharashtra’s Taloja district before the end of FY25 to add to the production line,” Daryani said.

Wow! Momo is expanding its frozen food offerings, including new ready-to-fry products, for which it has acquired the rights to produce in the non-vegetarian space.

“We’re very bullish about our entire FMCG division. We will also expand the kulfi business into quick commerce and will look at growing it to ₹5 crore a month by this summer,” Daryani said.

India’s food services industry is expected to reach ₹7.76 trillion by FY28 from the current ₹5.69 trillion, growing at a CAGR of 8.1% according to the National Restaurant Association of India. Quick service restaurants like these are expected to grow by 27% by FY28.