Devyani International and Sapphire Foods India have announced a strategic merger to create India's largest quick-service restaurant entity, with the new entity projected to achieve annual turnover exceeding one billion US dollars. The merger will combine operations through a near-parity share-swap, creating one of India's largest QSR players with over 3,000 outlets and revenue above ₹7,800 crore. The combined company will bring all KFC and Pizza Hut operations under one operator, with limited arbitrage and equal synergy benefits for shareholders. The merger is set to become effective from April 1, 2026, subject to approvals from regulators, stock exchanges, the Competition Commission of India, the National Company Law Tribunal, and shareholders and creditors.
According to latest reports, Devyani International Ltd. reported mixed financial results for Q3 FY26, with the company posting a wider consolidated net loss of ₹109.78 million compared to ₹76.46 million in the same period last year. Despite the higher loss, the company demonstrated strong revenue growth with consolidated revenue increasing 11.3% year-on-year to ₹14,408.97 million, up from ₹12,944 crore in Q3 FY25. The basic and diluted Earnings Per Share (EPS) stood at a negative ₹(0.08) for the quarter. As per the latest earnings report, the company achieved EBITDA of ₹2,267 million with an EBITDA margin of 15.7%, showing improvement in profitability metrics.
The 11.3% year-on-year revenue growth to ₹14,408.97 million was driven by the company's continued expansion and operational improvements across its brand portfolio. According to the latest earnings report, KFC India revenue grew 5.9% to ₹6,032 million, while Pizza Hut India revenue declined 6.3% to ₹1,781 million. Own brands revenue rose 3.3% on a like-for-like basis to ₹938 million, and international business revenue increased 10.1% to ₹4,734 million. For the nine-month period ending December 31, 2025, consolidated revenue increased by 11.7% YoY to ₹41,746.17 million, though the company swung from a profit of ₹98.63 million last year to a net loss of ₹326.96 million.
During the quarter, Devyani International added 95 net new stores, including 13 stores under Biryani by Kilo and Vaango and 20 international stores across Thailand and Nepal. The total store count reached 2,279 outlets by the end of Q3 FY26. Importantly, Biryani by Kilo achieved brand-level EBITDA breakeven earlier than expected, marking a key milestone in the company's turnaround strategy. The company has begun closing loss-making Pizza Hut stores and will open new outlets mainly to replace unprofitable ones, aiming to improve efficiency and reduce capital spending. The merger with Sapphire Foods will accelerate KFC's expansion and focus on revitalizing the Pizza Hut brand.
The company recognized exceptional items amounting to ₹215.03 million on a consolidated basis, primarily related to the impact of new Labour Codes on employee benefits and a payment made under protest for a lease dispute. These items contributed significantly to the widened losses. According to the earnings announcement, EBITDA rose 8.3% year-on-year to ₹231 crore from ₹213.3 crore in the previous year, though the company experienced marginal compression in EBITDA margins, with margins coming in at 16% compared to 16.5% a year ago. The latest results show EBITDA of ₹2,267 million with an EBITDA margin of 15.7%, indicating improved operational efficiency and margin expansion.
The most significant corporate development announced is the Board's approval for the amalgamation of Sapphire Foods India Limited with Devyani International Limited, set to be effective April 1, 2026. Under the proposed scheme, DIL will issue 177 equity shares for every 100 shares of Sapphire Foods, signaling a major consolidation within the Quick Service Restaurant space in India. Additionally, the Board has approved the acquisition of the remaining equity stake in Sky Gate Hospitality Private Limited for approximately ₹575 million. The immediate concern for investors is the company's deteriorating profitability despite topline growth, compounded by unprovided forward-looking guidance. The successful integration of Sapphire Foods, execution of cost-saving measures, and management of exceptional items will be critical for future performance.
