Devyani International and Sapphire Foods have agreed to combine their quick‑service restaurant businesses, forming one of India’s biggest QSR groups.
Deal Overview
The merger will bring together all KFC and Pizza Hut outlets in the country under a single operator. After the deal, the combined entity will run more than 3,000 restaurants and generate over ₹7,800 crore in revenue.
Share‑Swap Details
Shareholders will exchange stocks at a ratio of 177 Devyani shares for every 100 Sapphire shares. This ratio is almost a 1% discount for Sapphire investors, leaving little room for price arbitrage.
- Devyani shares were up about 1% at ₹149.55.
- Sapphire shares fell roughly 1.6% to ₹257.15.
Expected Synergies
Management expects annual cost savings of ₹200‑₹225 crore from the second year of integration, roughly 15% of the combined EBITDA. The first‑year EBITDA boost could be ₹100‑₹150 crore, pushing pre‑Ind AS EBITDA to about ₹1,520 crore in FY28 and ₹1,950 crore in FY29.
Key sources of savings include lower royalty payments, reduced corporate overhead, and scale efficiencies in sourcing and technology.
Financial Outlook & Analyst Views
Analysts compare the new entity to Jubilant FoodWorks, noting a potential 2.5% lift in EBITDA margin. One broker kept a Buy rating on Devyani with a target price of ₹190 for September 2026.
Valuations: Devyani trades at ~34× FY2027 EBITDA, Sapphire at ~27×. Fair‑value estimates are ₹170 for Devyani and ₹325 for Sapphire.
Transaction Structure & Timeline
Devyani will buy 19 KFC stores from Yum! India for about ₹90 crore and pay a one‑time ₹320 crore for merger approval and extra territory rights. Sapphire’s promoter will sell its 18.5% stake to Devyani’s group company before the merger becomes effective.
The merger still needs regulatory clearance, which could take 12‑15 months. Full integration and synergy capture are expected within 15‑18 months after the effective date of April 1, 2026.
What This Means for Investors
The combined firm will have a pan‑India presence, multiple brands and cuisines, and a stronger balance sheet to weather demand cycles. Investors should be ready for a 12‑month waiting period, but the deal aims to create a QSR powerhouse that can compete with the market leader.
Disclaimer
Remember, this is my perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.