Devyani International shares zoom 8% after mega merger announcement with Sapphire Foods

Shares of Devyani International Ltd (DIL) zoomed as much as 7.8% to an intraday high of Rs 159.45 on the BSE on Friday, January 2, after the company announced a merger with Sapphire Foods India Ltd (SFIL), setting the stage for the creation of a single unified entity that will become the largest Yum! Brands franchisee in India.

The deal, once completed, will consolidate the operations of both companies, key operators of global fast food giants KFC and Pizza Hut, into one powerhouse of the quick-service restaurant (QSR) space.

The boards of both DIL and SFIL have approved the scheme of arrangement, under which Sapphire Foods will be merged with and into Devyani International through a share-swap mechanism.

As per the agreed swap ratio, shareholders of SFIL will receive 177 equity shares of DIL for every 100 equity shares held. The merger will be subject to customary regulatory approvals from stock exchanges, the Competition Commission of India, the National Company Law Tribunal, and shareholders and creditors of both companies.

The completion timeline is pegged at 12 to 15 months from the effective date.

The transaction has also received a green light from Yum! Brands, the global licensor of KFC and Pizza Hut. The approval comes with enhanced commercial terms, including long-term waivers aimed at boosting sustainable growth, and the acquisition of 19 KFC stores operated by Yum! in Hyderabad.

DIL will pay a one-time charge for merger approval and territorial license expansion, positioning itself as Yum!'s largest franchisee in the Indian market.

The merger is expected to unlock significant synergies and operational benefits. These include cost efficiencies through economies of scale, stronger vendor negotiations, margin expansion through productivity gains, and enhanced cash flow flexibility. DIL anticipates an annual synergy benefit of Rs 210–225 crore beginning from the second year of integration.

Strategically, the combined entity will focus on accelerated expansion of KFC, revitalisation of the Pizza Hut brand for long-term sustainability, and scaled growth of DIL’s emerging brands. Arctic International, a group company, will also acquire an 18.5% stake in SFIL’s paid-up capital from its existing promoters as part of the transaction.

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