Devyani International Limited (DIL) and Sapphire Foods India Limited (SFIL) on January 1 announced a definitive merger agreement to create India’s largest franchisee of Yum! Brands, consolidating operations of KFC-Pizza Hut across India and Sri Lanka. The all-stock transaction values the deal at approximately $934 million (around ₹7,800 crore).
KFC-Pizza Hut Merger Structure and Valuation
Under the approved share-swap arrangement, Sapphire Foods shareholders will receive 177 equity shares of Devyani International for every 100 equity shares held. Analysts noted that the swap ratio implies near-perfect parity, leaving limited arbitrage opportunity between the two stocks based on closing prices prior to the announcement.
The merger has been structured as tax-neutral under the Income Tax Act, implying that shareholders will not incur capital gains tax at the time of the share exchange.
Strategic Rationale
The combined entity will operate over 3,000 restaurants globally, significantly enhancing scale and positioning the group to compete more effectively with major quick-service restaurant (QSR) players such as Jubilant FoodWorks and Westlife Foodworld.
Management expects annual synergy benefits of ₹210–225 crore, beginning from the second full year after integration. These gains are projected to arise from consolidated procurement, shared technology platforms, operational efficiencies, and reduced corporate overheads.
As part of the transaction, Devyani International will also acquire 19 KFC outlets in Hyderabad, currently operated directly by Yum! India, further strengthening its domestic footprint.
Promoter and Ownership Changes
Ahead of the merger, Arctic International, a Devyani group company, will acquire approximately 18.5% stake in Sapphire Foods from existing promoter Samara Capital, resulting in a realignment of ownership prior to the final amalgamation.
Timeline and Regulatory Approvals
The merger is proposed to take effect from April 1, 2026, subject to customary approvals from the Securities and Exchange Board of India (SEBI), the Competition Commission of India (CCI), and the National Company Law Tribunal (NCLT). The companies expect the approval and integration process to take 12–15 months.
Market Reaction on Merger
On January 2, the first trading session after the announcement, Devyani International shares surged up to 8%, touching an intraday high of ₹159.66, reflecting investor optimism around scale and synergy benefits of the KFC-Pizza Hut merger.
In contrast, Sapphire Foods shares declined between 3% and 6%, trading in the ₹247–₹255 range, as markets adjusted for the swap ratio and factored in near-term integration risks.
Industry Context
The consolidation comes at a time when India’s QSR sector is grappling with rising input costs, slowing same-store sales growth, and cautious consumer spending. By combining operations, Devyani and Sapphire aim to improve unit economics, operating leverage, and bargaining power with suppliers, strengthening resilience in a challenging consumption environment.
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