Devyani-Sapphire merger: What the 3,000 restaurant deal means for your shares
Devyani International and Sapphire Foods will merge through a near-parity share-swap to create one of India’s largest QSR players with over 3,000 outlets and revenue above Rs 7,800 crore, bringing all KFC and Pizza Hut operations under one operator, with limited arbitrage and equal synergy benefits for shareholders.
In a transformative deal that reshapes India's quick-service restaurant (QSR) landscape, Devyani International and Sapphire Foods have announced a merger that will create one of the country's largest QSR platforms with over 3,000 restaurants and consolidated revenue exceeding Rs 7,800 crore. The share-swap transaction, set at 177 Devyani shares for every 100 Sapphire shares, consolidates all KFC and Pizza Hut operations in India under a single operator for the first time.
The merger ratio offers near-perfect parity, implying approximately a 1% discount for Sapphire shareholders based on current market prices, according to multiple brokerages. The swap leaves virtually no arbitrage opportunity, a rarity in merger transactions. Devyani shares were trading 1% higher at Rs 149.55 while Sapphire shares fell 1.6% to Rs 257.15 during the day.
"The merger ratio is very close to where the stock prices closed yesterday (1 Jan-26) and hence, there is no major price arbitrage (or likely adjustment) arising out of this ratio," Jefferies noted, adding that shareholders of both companies would enjoy potential synergy benefits equally.
The real prize lies in the synergies. Management has guided for steady-state savings of ₹200 crore to ₹225 crore annually starting from the second year of integration—likely FY29. JM Financial highlighted that this translates to an estimated EBITDA benefit of ₹100 crore to ₹150 crore in the first integration year (FY28), with Pre-Ind AS EBITDA potentially reaching ₹1520 crore in FY28 and ₹1950 crore in FY29 when synergies are factored in.
"The highlighted savings are significant, at ~15% of our combined EBITDA estimate for the two companies," one brokerage noted. These savings will come primarily from lower royalty costs, reduction in corporate overheads, and multiple scale benefits.
Devyani has secured favorable terms from Yum! Brands, which has approved the consolidation. The agreement includes certain cost waivers, along with phased transition of technology and supply-chain management rights for both Pizza Hut and KFC, as well as marketing rights for Pizza Hut only.
"The transaction will transform DIL into a pan-India QSR play, comparable with JUBI," Jefferies said, referring to rival Jubilant FoodWorks. "Synergy benefits expected to add 2.5% to Ebitda margin."
Emkay echoed this view: "In our view, the combined entity will have a 50-60% higher revenue/EBITDA scale (vs current levels), and agreement negotiations with Yum! provide synergies in terms of improved decision-making, new innovations, use of tech, and better sourcing efficiencies." The firm maintained its Buy rating on Devyani with a September 2026 target price of ₹190.