 "Devyani International-Sapphire merger set to add spice to QSR competition")
The newly announced merger of Sapphire Foods India Ltd (SFIL) with Devyani International Ltd (DIL) will make the latter one of the largest players in the quick-service restaurant (QSR) space.
The move will create a unified Yum! India franchise for KFC and Pizza Hut, where SFIL was operating the restaurants in South, while DIL was running shop in North, East and West India. It will also intensify competition between DIL and Jubilant FoodWorks, which operates Domino’s and fried chicken brand Popeyes.
“Post the merger the combined entity will be amongst India’s largest QSR players; it will also be a multi-brand, multi-cuisine and multi-country QSR platform, and will potentially offer superior growth visibility, improved resilience across demand cycles and a structurally stronger business model,” JM Financial said in a note on Friday.
Back-of-the-envelope calculations, which do not bake in the merger, show that the combined equity value could be around ~387 billion, according to the report.
The proposed merger, subject to approvals, will be carried out through a swap share ratio, where DIL will issue 177 shares for every 100 shares of Sapphire Foods. Arctic International, a group company, is to acquire approximately 18.5 per cent of SFIL paid-up equity share capital from the existing promoters, with an option to assign to a mutually agreed financial investor.
According to latest figures available until September 30 (Q2FY26), Jubilant FoodWorks operates 2,450 stores in the country, including 2,321 Domino’s stores. Meanwhile, DIL operated 1,802 stores until the same time and Sapphire Foods operated 997 stores.
As part of the acquisition, DIL will also acquire 19 KFC restaurants in Hyderabad currently operated by Yum! India, effectively taking its total store count to 2,818.
DIL expects an overall synergy of Rs 210 to 225 crore on an annual basis from the second full year of operations of the integrated company.
“We view the merger positively, as it consolidates execution of Yum brands (KFC and Pizza Hut) under a single operator, eliminating overlaps and accelerating decision-making,” analysts at Antique Stock Broking said in a note.
“Pizza Hut, in particular, has underperformed in recent years, partly due to divergent strategies adopted by the two master franchisees. Post-merger, Devyani should be better positioned to execute a unified turnaround strategy, potentially driving a medium-term recovery in the brand,” it added.
The country’s QSR space, however, has been witnessing a sustained slowdown, marred by rising inflation and decreasing urban consumption for the past few quarters.
“While we remain cautious on the broader QSR space, we expect gradual operational improvements as integration progresses,” Antique said.
"Devyani has diversified its cuisine portfolio through multiple acquisitions, most notably Sky Gate Hospitality (Biryani By Kilo). This diversification has supported topline growth and strengthened confidence in management’s execution capabilities," the note further added.
In 2024, DIL had also entered into exclusive master franchise agreements with southeast Asian beverage brand Tealive, Canadian QSR New York Fries, and Singapore-based Sanook Kitchen.
“The merged entity can leverage regional strengths to accelerate expansion of Devyani’s owned brands such as Biryani By Kilo, Goila Butter Chicken and Vaango, while scaling exclusive international franchises, including Costa Coffee, Tealive, New York Fries and Sanook Kitchen in India,” JM Financial added.
DIL owners, the Japuria family, and Jubilant Bhartia group, which operates Jubilant FoodWorks, also compete in the aerated bottling sector.
In December 2024, the Jubilant Bhartia group signed an agreement to buy out 40 per cent in Coca-Cola’s local bottling unit Hindustan Coca-Cola Beverages, competing with the Jaipuria family, which is the bottler for PepsiCo, housed under Varun Beverages.