Devyani-Sapphire Merger Creates QSR Giant with 3,000 Stores

A New Powerhouse in India's QSR Sector

In a landmark move set to reshape India's quick-service restaurant (QSR) landscape, the boards of Devyani International Ltd (DIL) and Sapphire Foods India Ltd (SFIL) have approved a merger. The amalgamation, announced after market hours on January 1, 2026, will consolidate the operations of two of Yum! Brands' largest franchisees in India, creating a single, unified entity for KFC and Pizza Hut.

This strategic consolidation aims to establish one of the largest QSR platforms in the country, positioning the merged company for accelerated growth, enhanced scale, and improved profitability. The transaction will bring most of the KFC and Pizza Hut restaurants in India under a single listed company, with the exception of outlets located in captive markets like airports and railway stations.

Understanding the Merger Terms

The merger will be executed through a share-swap arrangement. Under the agreed terms, shareholders of Sapphire Foods will receive 177 equity shares of Devyani International for every 100 shares they hold. The appointed date for the merger is set for April 1, 2026, though the entire process is subject to a series of regulatory and shareholder approvals, which are expected to take approximately 12 to 15 months to complete. Upon the merger becoming effective, Sapphire Foods India will be dissolved without winding up, and all its operations will be integrated into Devyani International.

At the time of the announcement, Devyani International shares were trading around ₹147, while Sapphire Foods shares were at about ₹261, indicating that the transaction is valued close to prevailing market levels.

The Financial Blueprint of the Combined Entity

The merger is expected to create a formidable player with significant scale. Based on proforma financials for FY25, the combined entity will operate over 3,000 stores and generate substantial revenue and earnings.

This consolidation is projected to increase Devyani International's revenue by 58% and its EBITDA by 53%, significantly enhancing its market position and financial strength.

Strategic Rationale and Synergies

The primary driver for this merger is the potential for significant operational and financial synergies. The companies anticipate annual synergies of ₹210 crore to ₹225 crore, expected to be fully realized from the second full year of combined operations. These savings are anticipated to come from economies of scale in procurement, supply chain optimization, reduced overheads, and a unified marketing strategy.

Ravi Jaipuria, Non-Executive Chairman of DIL, stated that the merger will allow the company to realize meaningful economies of scale, leverage a unified technology platform, and strengthen supply-chain capabilities. The consolidation also resolves overlapping expansion rights for Pizza Hut in certain territories, enabling faster decision-making and product innovation.

Additional Components of the Transaction

The merger agreement includes several other key components. Arctic International, a Devyani group company, will acquire an 18.5% stake in Sapphire Foods from its existing promoters. This move effectively increases promoter-level consolidation ahead of the formal merger. Furthermore, Devyani International will acquire 19 KFC outlets in Hyderabad currently operated directly by Yum! India for a consideration of ₹90 crore. DIL will also pay a one-time charge of ₹320 crore to Yum! India for the merger approval and the grant of additional territory rights.

Yum! Brands has expressed its support for the merger, viewing it as a move that will unlock a new phase of accelerated growth and create a more resilient partner in the Indian market.

Market Reaction and Analyst Views

The announcement prompted a mixed reaction in the stock market. On the day following the news, shares of Devyani International jumped as much as 8.3%, while Sapphire Foods' stock declined by over 3% as investors adjusted to the merger terms. Analysts have largely viewed the merger as a positive strategic step for Devyani International.

JP Morgan described the move as strategically welcome, highlighting benefits such as a simplified structure and potential for meaningful cost savings. Similarly, Emkay Global noted that the combined entity would have a revenue scale and growth profile comparable to market leader Jubilant FoodWorks, reiterating a 'Buy' rating on Devyani International. Analysts believe the scale benefits and streamlined execution will help the merged entity compete more effectively in a challenging QSR environment marked by slowing sales and margin pressures.

The Road Ahead

The path to completion involves securing approvals from various regulatory bodies, including the Competition Commission of India (CCI), stock exchanges (BSE and NSE), and the National Company Law Tribunal (NCLT). Shareholder and creditor approvals from both companies are also required. The full integration of the two businesses is expected to be completed within 15 to 18 months from the merger's effective date.

Once completed, the transaction will position Devyani International as one of India's largest QSR operators, ready to leverage its expanded scale and operational efficiencies to drive long-term growth and create value for its stakeholders.