LPG shortage triggered by Strait of Hormuz disruption is forcing QSR kitchens to shut or cut menus. Analysts say earnings may take a hit in Q4FY26 but advise investors not to panic
QSR stocks slide on LPG shortage
India quick service restaurants (QSRs) are in a soup as choked supply chains, due to the closure of the Strait of Hormuz amid the Iran-US war, has sent LPG (liquefied petroleum gas) cylinders stocks dwindling, forcing restaurant chains to shut operations or curtail menus.
Analysts are closely monitoring the situation but caution against panic selling. Although this development has clouded the near-term outlook for operators like Jubilant FoodsWorks, Devyani International, and Westlife Foodworld, they expect the government’s proactive steps to limit the downside.
“A prolonged delay in restoring LPG supply may affect the March quarter (Q4FY26) earnings to some extent. However, looking at the proactive measures of the government to secure supplies, LPG availability may be restored shortly,” said Vinod Nair, head of research at Geojit Investments.
Investors should not panic sell and should hold their positions in QSR stocks, he added.
On Wednesday, the government announced that India will soon receive two cargoes each of crude oil and liquefied natural gas (LNG) that have bypassed the now-blocked Strait of Hormuz. Additionally, Indian oil companies have increased LPG production by 25 per cent at their refineries following the government’s order to maximise production.
LPG shortage forces kitchen shutdowns
Since Monday, restaurants across several Indian cities, including Mumbai and Bengaluru, have reported LPG supply shortage, forcing them to shut operations or limit working hours, reports suggest, adding that the dispatch of non-domestic cylinders has been temporarily halted in some regions to protect household supply.
Investors fear that cylinder supply disruption could reduce operating hours; limit menu availability; and force temporary outlet shutdowns as QSR kitchens depend on consistent, high-volume LPG usage for ovens and fryers; grills; and high-speed cooking lines.
Analysts at JM Financial Institutional Securities believe the impact on large QSR chains such as Domino’s, McDonald’s, Burger King and KFC is lower than independent restaurants; though they are not entirely immune to the disruption.
“With prices of commercial LPG cylinder already up 8 per cent month-on-month in March, we foresee increased kitchen operating costs, compressed restaurant-level Ebitda margins, and higher delivery pricing or menu prices for QSR companies,” the brokerage said.
Notably, large QSR operators, typically, maintain centralised procurement multi-vendor cylinder supply contracts and back-up fuel arrangements. Analysts, however, warn that if system-wide cylinder availability drops, even large chains may face challenges due to the scale of daily cylinder consumption across hundreds or thousands of stores.
LPG shortage: Assessing the financial impact
According to JM Financial’s channel checks, around 60-65 per cent of major QSR players’ overall cooking happens through LPG with the brokerage estimating a buffer for one to two weeks.
For the entire organised industry of 0.5 million players, including unlisted operators, nearly 90 per cent rely on commercial LPG cylinders.
“If the LPG supply chain issue persists beyond that, their operations are likely to be hampered. Assuming restaurants dependent on LPG cylinders shut down for five days amid LPG supply disruption, we estimate that the revenue of listed players to decline by nearly 6 per cent per store for the quarter and restaurant-level Ebitda would see a higher decline of 14–20 percent versus normalised operating levels,” it said.
Individually, JM Financial expects McDonald’s operator Westlife Foodworld to suffer the highest sales loss (₹8 lacs), followed by Burger King-owner RBA and KFC-operator Sapphire Foods with sales losses of ₹5 lacs each.
KFC chains owned by Devyani International, it said, may face sales loss of ₹4 lacs, while Pizza Hut chains operated by Sapphire Foods may incur loss of ₹2 lacs.
Investment strategy
Amid a lack of clarity on how long the shortage may last, analysts suggested investors may stay invested in their holdings as QSR stocks may see limited downside.
The decline in QSR stocks, said G Chokkalingam, founder and chief investment officer at Equinomics Research, suggests that markets have factored-in the impact of the shortage.
So far this week, shares of Sapphire Foods have tumbled 11.56 per cent, United Foodbrands (formerly Barbeque Nation Hospitality) have declined 5.8 per cent, Devyani International 4.15 per cent, and Jubilant Foodworks 3.8 per cent.
By comparison, the Nifty50 index has slipped 2.39 per cent in three sessions.
Kranthi Bathini, director of equities at WealthMills Securities, also said that although the companies may suffer some dent in their Q4 earnings, it is difficult to assess the impact at this juncture.
“No listed operator has informed the exchanges regarding any operational challenge. Long-term investors, thus, may continue to hold their stocks,” he said.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not sharechart. We advise investors to consult with certified experts before making any investment decisions.
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