KFC operator Sapphire Foods to merge with Devyani International for scale, as the two major restaurant franchisees aim to build efficiencies and strengthen operations amid a slowdown in consumer spending. The companies recently announced the proposed merger in a joint statement.
Sapphire Foods operates KFC and Pizza Hut outlets in India, while Devyani International is also a major franchise partner of Yum Brands. Both companies have been affected by softer demand as rising living costs have reduced discretionary spending on eating out and food delivery.
Industry-wide pressure has been visible through weaker same-store sales growth and higher operating expenses. The proposed consolidation is positioned as a response to these challenges, allowing the combined entity to optimise costs and strengthen its market presence.
Devyani Sapphire Merger
Under the proposed merger terms, Devyani International will issue 177 equity shares for every 100 equity shares held by shareholders of Sapphire Foods. Once completed, Sapphire Foods will cease to exist as a separate listed entity.
Devyani International has estimated that the combined business could generate annual synergies of about Rs 210 crore to Rs 225 crore from the second full year after the merger becomes effective. These synergies are expected to come from procurement efficiencies, shared infrastructure, and operational optimisation.
As part of the transaction, Arctic International, a group company, will acquire around 18.5 percent of Sapphire Foods’ paid-up equity from existing promoters. This stake may later be assigned to a mutually agreed investor, subject to conditions outlined in the transaction documents.
Approval Process
The merger will be subject to multiple regulatory and corporate approvals. These include clearances from stock exchanges, the Competition Commission of India, and the National Company Law Tribunal, along with approval from shareholders and creditors of both companies.
The companies have indicated that the approval process is expected to take around 12 to 15 months. During this period, both Devyani and Sapphire will continue to operate independently.
Following completion, Devyani International is expected to emerge as one of the largest quick service restaurant operators in the country, with a significantly expanded footprint across brands and geographies.
Business Footprint
Devyani International and Sapphire Foods together operate more than 3,000 outlets across India and select international markets. Their brand portfolio includes KFC and Pizza Hut, and the combined entity will compete with other large listed players such as Westlife Foodworld and Jubilant FoodWorks.
After the merger, Devyani International will hold franchise rights for KFC and Pizza Hut across the entire Indian market. The transaction will also add Sapphire’s international presence in Sri Lanka to Devyani’s existing overseas operations.
The consolidation is expected to improve bargaining power with suppliers and landlords, while also allowing for more efficient capital allocation across markets.
Financial Context
Both companies have reported financial pressure in recent quarters. In the quarter ended September, Sapphire Foods’ consolidated total costs rose 10 percent year on year to Rs 768 crore, reflecting higher input and operating expenses.
During the same period, Devyani International’s expenses increased 14.4 percent to Rs 1,408 crore. Profitability remained under strain for both operators.
Devyani International reported a net loss of Rs 21.9 crore for the quarter, while Sapphire Foods posted a net loss of Rs 12.77 crore. The proposed merger is seen as an attempt to improve margins and resilience in a challenging consumption environment.
