Shares of Devyani International Ltd. and Sapphire Foods India Ltd. are trading significantly higher on Tuesday, with Sapphire Foods shares rising as much as 6.91% to an intraday high before trimming gains, while Devyani International climbed as much as 8.61% shortly after the open. According to reports from Moneycontrol, the stock prices rose up to 9% as investors responded positively to the exchange's approval for the proposed merger between the two restaurant operators. The stock climbed as much as ₹179.51, up 3.49%, and ₹114.90, up 3.14%, respectively, in early trade. As per Business Standard, Devyani International shares opened with a gain of 2.3% at ₹113.99 and touched a high of ₹121.38, up 9%, while Sapphire Foods shares opened higher at ₹177.70 and touched a intraday high of ₹185.58. The primary trigger behind the rally is the company receiving 'No Objection' letters from both the NSE and BSE for its proposed merger with Sapphire Foods, removing a key regulatory hurdle and paving the way for the next major milestone — approval from the National Company Law Tribunal (NCLT).
The BSE has issued its observation letter for the proposed merger between the two companies, allowing them to move ahead with the next stage of the transaction. As reported by Moneycontrol, BSE stated it has no adverse observations on the proposed scheme from the perspective of listing regulations, enabling the companies to file the merger proposal before the National Company Law Tribunal (NCLT). The NSE has also provided its approval through 'No Objection' letters, providing comprehensive regulatory clearance for the transaction. However, the exchange directed the companies to make additional disclosures to shareholders before seeking approval for the scheme. According to Business Standard, Devyani International has announced via a filing that it has received 'observation letters from the NSE and BSE in relation to the proposed Scheme of Arrangement' between the two companies and their respective shareholders. Both NSE's no-objection letter and BSE's no-adverse-observation letter are valid for six months from June 12, within which the scheme must be submitted to the tribunal. The exchanges have clarified that their observations should not be construed as approval of the merger and do not amount to certification of the financial soundness of the scheme or the accuracy of statements made by the companies.
The merger will take place through a share-swap mechanism with a ratio of 177 equity shares of Devyani International for every 100 equity shares of Sapphire Foods. As reported by Business Standard, Arctic International, an entity associated with the promoter group of DIL, will acquire approximately 18.5% of Sapphire Foods' paid up equity share capital from the existing promoters, with an option to assign to a mutually agreed financial investor. The strategic focus areas of the merged entity will be to accelerate expansion of KFC; strengthen and revitalise Pizza Hut for long-term sustainable growth, and scale growth of Devyani's emerging brands portfolio. Both companies are engaged in the development, management, and operation of Quick Service Restaurants (QSRs) — Devyani is the largest franchisee for Yum! Brands (KFC and Pizza Hut) in India, while Sapphire Foods' portfolio includes KFC, Pizza Hut, and Taco Bell. Upon completion, the transaction will result in Devyani International becoming one of the largest 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 BSE has specified several key areas where additional disclosures are mandatory before seeking NCLT approval. According to the exchange's communication reported by Moneycontrol, these include details of pre- and post-merger shareholding patterns, assets and liabilities proposed to be transferred, pending litigation or regulatory proceedings, promoter reclassification plans, and Sapphire Foods Mauritius' proposed stake sale to Arctic International. The exchange clarified that its observations should not be interpreted as an approval of the merger. As per Moneycontrol, the companies need to disclose details of any ongoing adjudication, recovery proceedings, prosecutions, or enforcement actions involving the companies, their promoters and directors while seeking shareholder approval. The exchanges have emphasized that their observations do not amount to certification of the financial soundness of the scheme or the accuracy of statements made by the companies.
For the March quarter, on a consolidated basis, Devyani International had reported a net loss of ₹100.43 million on revenues of ₹14.37 billion, while Sapphire Foods India had reported a net loss of ₹126.05 million on revenues of ₹7.92 billion. According to Informist Media, the proposed scheme remains subject to other statutory and regulatory approvals, including approvals from shareholders and creditors, as required. The boards of both companies had approved the scheme of merger through a share-swap mechanism in January, marking a significant step toward creating India's largest QSR operator. As of 11:45 AM, Devyani International shares were trading 4.1% higher at ₹115.95, while Sapphire Foods shares gained 3.6% to trade at ₹179.85. The scheme requires approval from the Competition Commission of India before filing the scheme with the National Company Law Tribunal.
