Shares of Devyani International, the operator of KFC and Pizza Hut outlets in India, rose sharply on Friday after the company announced a long-awaited $934 million merger with smaller rival Sapphire Foods.
The deal brings together two major franchisees of Yum Brands under a single listed entity and creates a fast-food operator with the scale to challenge market leader Jubilant Foodworks.
Devyani International’s stock jumped as much as 8.3% during the session and was last trading 2.03% higher at ₹150.43.
Sapphire Foods shares slipped about 2.6% to ₹255.8, while Jubilant Foodworks, which operates Domino’s Pizza in India, was trading marginally higher.
Scale boost through consolidation
The merged entity will operate more than 3,000 KFC and Pizza Hut outlets in India and overseas.
This compares with Jubilant Foodworks’ 3,480 Domino’s outlets in India, positioning the combined Devyani–Sapphire business as a direct competitor to the country’s largest fast-food chain operator.
Analysts at JP Morgan described the merger as a “welcome strategic move,” noting that it simplifies the corporate structure and could enable meaningful cost savings and faster decision-making.
These factors, they said, should help Devyani compete more effectively not only with listed peers but also with food delivery platforms.
The consolidation comes at a difficult time for India’s fast-food franchise operators.
The sector is grappling with higher operating costs, slowing same-store sales growth, and margin pressures as consumers cut back on discretionary spending amid rising living costs.
Both Devyani and Sapphire reported losses in the September 2025 quarter, underscoring the challenging operating environment.
Financial impact and synergies
According to Emkay Global, the combined business could deliver revenue and operating profit that are 50% to 60% higher than current levels, supported by increased scale and a stronger growth trajectory.
However, the brokerage cautioned that margins are likely to remain weaker than those of Jubilant Foodworks, at least in the near term.
UBS maintained a “buy” rating on Devyani International with a target price of ₹190.
UBS highlighted expected annual synergies of ₹210–225 crore from the second year of operations, along with scale benefits and more streamlined execution following the merger.
The brokerage also said Devyani is likely to be a major beneficiary of the consolidation.
Share swap details and integration timeline
Under the proposed scheme of arrangement, Devyani International will issue 177 shares for every 100 shares held in Sapphire Foods.
Once the merger takes effect, Sapphire shareholders will no longer hold Sapphire Foods shares and will instead receive Devyani shares based on this swap ratio.
Jefferies analysts noted that the merger ratio is close to where the two stocks closed on January 1, suggesting there is limited scope for major price adjustments arising from the deal.
They added that the terms appear broadly balanced for shareholders of both companies.
The integration of the two businesses and the realisation of expected synergies is projected to take 15 to 18 months from the effective date of the merger.
Ahead of the consolidation, Arctic International, a group company, will acquire around 18.5% of Sapphire Foods’ paid-up equity capital from existing promoters, with the option to later assign this stake to a financial investor.
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