Devyani International and Sapphire Foods Merger: Key Details Explained
- 2nd January 2026
- 12:00 AM
- 3 min read
Summary
Devyani International and Sapphire Foods have approved a merger through a share-swap deal to consolidate KFC and Pizza Hut operations in India, creating the country’s largest Yum! Brands franchisee. Shares of Devyani International surged over 7% following the announcement, reflecting positive market response to the deal.Mumbai| January 2, 2026
The boards of Devyani International Limited and Sapphire Foods India Limited have approved an amalgamation that will combine the two largest franchise operators of Yum! Brands in India into a single listed entity.
Once completed, the merged company will operate over 3,000 restaurants across five countries, consolidating KFC and Pizza Hut operations under one management and balance sheet.
The transaction is subject to customary approvals from stock exchanges, the Competition Commission of India (CCI), the National Company Law Tribunal (NCLT), and shareholders and creditors.
The approval process is expected to take 12–15 months, with April 1,2026 as the appointed date.
Share swap structure
Under the approved scheme of arrangement, Devyani International will issue 177 shares for every 100 equity shares of Sapphire Foods.
At current market prices, the swap ratio reflects full parity with current market prices, leaving no meaningful arbitrage opportunity. This indicates a negotiated consolidation rather than a forced or distressed merger.
As part of the transaction, Arctic International, a Devyani group company, will acquire ~18.5% of Sapphire Foods’ equity from existing promoters, with an option to assign this stake to a mutually agreed financial investor.
Yum! Brands has granted its approval for the consolidation.
Rationale for the merger
Over the past few years, the QSR sector has faced:
- Rising food, packaging and logistics costs
- Higher rentals and wage inflation
- Slower same-store sales growth
- Increased reliance on discounting
Despite aggressive store expansion, profitability has remained under pressure. Both Devyani and Sapphire have reported losses in recent quarters, underscoring the limits of scale without operating leverage.
The merger aims to improve efficiency, cost discipline and long-term sustainability.
What changes operationally after the merger
By bringing both franchisees under one roof, the merged entity stands to benefit from:
- Centralised procurement and stronger purchasing power
- A unified supply chain and technology platform
- Better bargaining power with landlords and vendors
- Streamlined expansion and capital allocation decisions
Management expects annual synergies of ₹210–225 crore, beginning from the second full year after integration.
In addition, Devyani will acquire 19 KFC restaurants in Hyderabad currently operated by Yum! India, expanding its footprint further. A one-time charge will be paid to Yum! India towards merger approval and licence fees for the additional territory.
Why the deal is positive for Devyani International
From an investor perspective, the merger is seen favourable for Devyani International.
Post-merger, Devyani will emerge as the sole listed franchisee of Yum! Brands in India, with nationwide rights for KFC and Pizza Hut. This simplifies the business structure and improves strategic and operational control.
Brokerages note that the combined scale could help unlock synergies and support profitability improvement over the medium term, subject to execution.
Stock Price Reaction
Shares of Devyani International jumped as much as 8.2% intraday after the merger announcement, while shares of Sapphire Foods declined up to 6% in today’s trade.
What investors should track next
- Regulatory approvals and integration milestones
- Delivery of cost synergies over FY27–FY28
- Same-store sales growth trends
- Margin trajectory and return on capital
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