Devyani International shares surged 8 per cent to hit an intraday high of ₹159.45 on January 2, while Sapphire Foods declined 4 per cent to ₹251.70 following the announcement of their transformative merger. According to latest market data from Economic Times, Devyani was trading at ₹149.25, up ₹1.82 or 1.23% from its previous close of ₹147.43, with heavy volumes of 330.24 lakh shares traded valued at ₹508.24 crore. Sapphire Foods was down ₹11.00 or 4.19% from its previous close of ₹262.70, with 53.92 lakh shares changing hands worth ₹137.74 crore. The stock movements reflect strong investor optimism about the strategic consolidation creating India's largest quick-service restaurant platform.
The boards of both companies approved the scheme of arrangement with a share swap ratio of 177:100, meaning Sapphire Foods shareholders will receive 177 equity shares of Devyani for every 100 shares held in Sapphire Foods. According to reports from Economic Times, 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 15-18 months from the effective date, with the appointed date for the merger being April 1, 2026. As a condition precedent, Sapphire Foods' promoter will sell its 18.5 per cent stake to Arctic International, a Devyani group company, with the option to later assign this stake to a mutually agreed financial investor.
JM Financial has valued the combined entity at ₹387 billion based on 28 times December 2027 estimated pre-Ind AS EV/EBITDA, implying a 45 per cent upside over the current combined market capitalization of ₹266 billion. The firm maintains a 'Buy' rating on Devyani with a price target of ₹180. According to latest reports, Devyani anticipates annual synergy benefits of ₹210-225 crore beginning from the second year of integration, with management guiding for EBITDA benefits of ₹100-150 crore in the first integration year. These synergies will be driven by cost efficiencies through economies of scale, stronger vendor negotiations, margin expansion through productivity gains, and enhanced cash flow flexibility, with an expected EBITDA margin addition of 2.50%.
The merger will create India's largest quick-service restaurant platform with approximately 2,875 stores by FY26 and consolidated revenue exceeding ₹7,800 crore, representing a 50-60% increase over current combined levels. The combined entity will operate across multiple brands including KFC, Pizza Hut, Costa Coffee, and owned brands like Biryani By Kilo. According to Economic Times, the transaction has received approval from Yum Brands, the global licensor of KFC and Pizza Hut, with enhanced commercial terms including long-term waivers aimed at boosting sustainable growth. Devyani will acquire 19 KFC restaurants in Hyderabad from Yum India for approximately ₹90 crore and make a one-time payment of ₹320 crore towards merger approval and territorial license expansion, positioning itself as Yum's largest franchisee in the Indian market. According to Ravi Jaipuria, Non-Executive Chairman of Devyani International, "The consolidation marks a significant milestone and a decisive leap forward in our growth journey, resulting in DIL holding franchise rights across the entire Indian market for KFC and Pizza Hut brands. The merger also adds a strong international presence in Sri Lanka, which complements our existing overseas operations."
JP Morgan analysts described the merger as a 'welcome strategic move', citing benefits from simplified structure, meaningful cost savings, and quicker decision-making capabilities that will help Devyani compete more effectively with peers and food delivery platforms. SBI Securities noted the development as positive for both companies in the long term, highlighting benefits from economies of scale and operational synergies that will strengthen their market position. Jefferies analysts observed that the merger ratio aligns closely with where stock prices closed on January 1, indicating no major price adjustment arising from the deal structure, suggesting fair valuation for all stakeholders. The combined entity will focus on accelerated expansion of KFC, revitalization of the Pizza Hut brand for long-term sustainability, and scaled growth of Devyani's emerging brands.
