Devyani International shares jump 8% on merger; Sapphire Foods falls

Shares of Devyani International opened with gains of as much as 8% on Friday, January 2, while Sapphire Foods slipped as much as 6%, after the long-expected merger of Yum Brands' India franchisees was finally announced. The board of Sapphire Foods has approved its amalgamation with Devyani International.

Brokerage firm UBS has maintained a 'Buy' rating on Devyani International, with a price target of ₹190 per share.

The brokerage said the Devyani-Sapphire merger should deliver scale benefits and help streamline execution. UBS expects annual synergies of ₹210-225 crore from the second year of operations.

UBS added that Devyani International is likely to be a major beneficiary of the merger, which will be effective from April 1, 2026, subject to regulatory and shareholder approvals.

Under the agreed swap ratio, Sapphire Foods shareholders will receive 177 shares of Devyani International for every 100 shares held. At current market prices, Devyani shares trade around ₹147, while Sapphire shares are at about ₹261, implying the transaction is valued at prevailing market levels.

As part of the transaction, Devyani International will also acquire 19 KFC outlets in Hyderabad that are currently operated by Yum Brands.

Post-merger, Sapphire Foods will be dissolved without winding up, and all operations will be consolidated under Devyani International.

The merger aims to bring KFC and Pizza Hut operations under a single listed entity, enabling operational efficiencies and scale benefits. However, captive outlets at airports and railway locations are excluded from the amalgamation.

Separately, Sapphire Foods Mauritius will sell around 5.95 crore shares, representing an 18.5% stake, to Arctic International.

Arctic International is a Devyani Group entity, effectively increasing promoter-level consolidation ahead of the merger.

The transaction is seen as positive for Devyani International, driven by expected revenue and cost synergies from the removal of overlaps, improved operating leverage due to scale, and valuation accretion over the medium term.

FY25 proforma financials (combined entity)

Particulars	Devyani	Sapphire	Combined
Stores	2,039	963	3,002
Revenue (₹ crore)	4,951	2,875	7,826
Operating EBITDA (₹ crore)	494	262	756
EBITDA margins	10%	9.1%	9.7%

Devyani Int post-merger impact

Metric	Change
Revenue	+58%
EBITDA	+53%
Equity base	+46%

Key factors to track post amalgamation

Key areas to monitor include improvement in per-store revenue and cost metrics following the merger, execution of store and format expansion plans, and shifts in the revenue mix across dine-in, delivery, brands, and geographies.

QSR valuations comparison

Company	FY27E EV/EBITDA
Jubilant FoodWorks	23x
Devyani International	17x
Restaurant Brands Asia	8x
Sapphire Foods	14x
Westlife Foodworld	18.5x

Triggers for the QSR sector

Sector sentiment could be influenced by a recovery following GST 2.0 implementation, potential corporate transactions in Restaurant Brands Asia, and expected listings in the space, including Curefoods, Subway, Wow Momo and others.

Shares of Sapphire Foods India closed 2.70% higher at ₹264 on Thursday, while Devyani International settled 1.52% lower at ₹145.70.