Devany International’s shares jumped about 8% while Sapphire Foods fell nearly 6% after the companies announced a long‑awaited merger that will combine KFC and Pizza Hut outlets across India.
Merger Overview
The boards of Devany International Limited (DIL) and Sapphire Foods India Limited have approved a merger that will make DIL one of the largest quick‑service restaurant (QSR) operators in the country. The combined entity will own the franchise rights for KFC and Pizza Hut across India, except for captive outlets at airports and railway stations.
Share‑Swap Details
- Share‑swap ratio: Sapphire Foods shareholders will receive 177 DIL shares for every 100 Sapphire shares they own.
- Current market prices (approx.): DIL ₹147 per share, Sapphire ₹261 per share, making the deal roughly fair‑value.
- As part of the deal, Sapphire Foods Mauritius will sell about 5.95 crore shares (18.5% stake) to Arctic International, a Devyani Group entity, increasing promoter ownership before the merger.
Regulatory Approvals and Timeline
The merger still needs clearances from stock exchanges, the Competition Commission of India, the National Company Law Tribunal, and the shareholders and creditors of both firms. The approval process is expected to take 12‑15 months, after which the merger will be effective.
Operational Impact
- Devany International will take over 19 KFC outlets in Hyderabad that are currently run by Yum Brands.
- Sapphire Foods will be dissolved without a liquidation process, with all its operations absorbed into Devany International.
- The combined company will have a stronger presence not only in India but also internationally, including a foothold in Sri Lanka.
Analyst Opinions
- JM Financial estimates the merged entity could have an equity value of around ₹38,700 crore, implying about a 45% upside over the current combined market cap of roughly ₹26,600 crore. It keeps a “Buy” rating on Devany with a target price of ₹180.
- UBS also maintains a “Buy” rating, citing scale benefits and smoother execution, and sets a target price of ₹190.
Share‑Price Reaction
On the day of the announcement, Devany International’s stock rose to an intraday high of ₹157.37, while Sapphire Foods fell to an intraday low of ₹252.90. Over the past six months, Devany’s share price has slipped about 10% and is down 20.5% over the last year. Sapphire’s stock is more volatile, up 4.5% in the past month but down 19% over six months.
Key Takeaways for Investors
- The merger creates a dominant QSR player, potentially delivering operational synergies and higher profitability.
- The share‑swap ratio appears fair based on current market prices.
- Regulatory approvals could take up to a year, meaning the benefits may be realized in the medium term.
- Analyst targets suggest significant upside, but investors should consider the pending approvals and integration risks.
Remember, this is perspective, not prediction. Do your own research and consider consulting a financial advisor before making any investment decisions.