KFC, Pizza Hut Operator Sapphire Foods To Merge With Devyani International

KFC and Pizza Hut operator Sapphire Foods India Limited will be merged into Devyani International Limited, which also runs quick-service restaurant (QSR) chains in the country, the company said in a statement on Thursday, January 1.

The move comes at a time when fast-food franchisees in India are grappling with slowing same-store sales and margin pressures, as consumers rein in discretionary spending on eating out and food delivery amid elevated living costs.

Under the proposed transaction, Devyani will issue 177 shares for every 100 shares of Sapphire. The company expects annual synergies of Rs 210 crore to Rs 225 crore from the second full year of operations of the combined entity. As part of the arrangement, group company Arctic International

will acquire around 18.5 per cent of Sapphire Foods’ paid-up equity from existing promoters, with the option to transfer this stake to a mutually agreed financial investor.

The merger remains subject to customary regulatory and statutory approvals, including clearances from stock exchanges, the Competition Commission of India, the National Company Law Tribunal(s), as well as approvals from shareholders and creditors of both companies.

The approval process is expected to take around 12 to 15 months, after which the merger will come into effect.

Both companies are partners of Yum Brands and together operate more than 3,000 outlets across India and overseas, including KFC and Pizza Hut dine-in restaurants. They compete with Indian operators of McDonald’s and Domino’s Pizza chains, namely Westlife Foodworld and Jubilant Foodworks.

“Upon completion, the transaction will result in Devyani International becoming one of the largest quick-service restaurant (QSR) operators in India by combining the operations of both companies, positioning the merged entity for the next phase of accelerated growth, scale, and profitability,” the company said in its stock exchange filing.

Ravi Jaipuria, Non-Executive Chairman of Devyani International Limited, said the consolidation marks a major milestone in the group’s growth journey. “The merger results in Devyani International Limited holding franchise rights across the entire Indian market for KFC and Pizza Hut brands. It also adds a strong international presence in Sri Lanka, complementing our existing overseas operations,” he said.

In the quarter ended September, Sapphire’s consolidated total costs rose 10 per cent year-on-year to Rs 768 crore, while Devyani’s expenses increased 14.4 per cent to Rs 1,408 crore.

Devyani reported a net loss of Rs 21.9 crore for the quarter ended September 30, reversing a profit of Rs 1.7 lakh in the year-ago period. Sapphire, meanwhile, posted a wider consolidated net loss of Rs 12.77 crore, compared with a loss of Rs 3.04 crore a year earlier.