Devyani, Saphhire merger: A recipe for growth?
The merger of two leading brands -- Sapphire Foods India Ltd (SFIL) and Devyani International Ltd (DIL) - is all set to create a fast-food giant with more than 3,000 stores, a consolidated turnover of more than Rs 7,800 crore and operations in markets such as India, Nigeria, Nepal, Thailand and Sri Lanka.
Besides retailing the American multinational fast-food corporation Yum! Brands’ offerings such as KFC, Pizza Hut and Taco Bell, the merged entity will also hold licenses for other global QSR brands, including Costa Coffee, Tea Live, New York Fries, and Sanook Kitchen, in their respective markets.
Sapphire will merge with Devyani, consolidating the Indian franchise operations of Yum! Brands- owned chains under one listed entity. As part of the deal, DIL will issue 177 shares for every 100 shares held in SFIL. Once the merger is complete, Sapphire shareholders will cease to hold SFIL shares and will instead receive Devyani International shares in the specified swap ratio.
Rationale for merger
The merger between two large players is happening at a time when QSR chains in India are witnessing sluggish growth, lower margins, and almost flat demand growth as consumers are holding on to discretionary spending. QSR sales are down also due to intense competition (cloud kitchens, food delivery apps like Zomato/Swiggy) and evolving consumer tastes. This has led to softer demand and fragmented market share, with companies resorting to discounts to maintain volumes which in turn is impacting profitability.
From McDonald’s, Burger King, Pizza Hut to KFC, same-store sales are declining and footfalls are falling. Sapphire Foods and Devyani International's recent quarterly earnings numbers also indicate a growing concern. DIL slipped into the red in the September quarter (Q2FY26), posting a net loss of Rs 21.8 crore, compared with a marginal profit of Rs 0.02 crore in the same period last year. The company’s expansion also slowed as it added only 39 net new stores during the quarter, taking the total store count to 2,184 at the end of September 2025. The Average Daily Sales (ADS) for Devyani stood at Rs 94,000 per store in March 2025, down from Rs 105,000 per store a year ago, translating into a 6.4% drop in Same Store Sales Growth.
Sapphire Foods also reported a net loss of Rs 12.7 crore for the quarter ended September 2025, widening from a loss of Rs 3 crore in the same period last year. Revenue rose by just 7% year-on-year to Rs 742.7 crore. In FY25, average daily sales from KFC stores for Sapphire Foods came down to Rs 114,000 from Rs 125,000 a year ago. For Pizza Hut stores, the average daily sales remained stagnant at Rs 46,000. In FY23, the average sales were Rs 58,000
Devyani management has guided for steady-state synergies to start accruing from the 2nd year of integration, leading to EBITDA benefit for the combined entity to the tune of Rs 200-250 crore, driven primarily by lower royalty costs, reduction in corporate overheads, and multiple scale and synergy benefits.
JM Financial highlighted that this translates to an estimated EBITDA benefit of Rs 100 crore to Rs 150 crore in the first integration year (FY28). “Post-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,” stated the brokerage.
Emkay Global Financial Services said that the highlighted savings by the management are significant, at around 15% of the combined Ebitda estimate for the two companies. It stated that 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.
Competition
Jubilant FoodWorks, promoted by the Bhartia family, is the largest QSR chain operator in India, with a network comprising 3,480 stores across six markets -- India, Turkey, Bangladesh, Sri Lanka, Azerbaijan and Georgia as on September 30, 2025. It has a portfolio of three global brands -- Domino’s, Popeyes and Dunkin’ – and two of its own brands. In the September quarter (Q2FY26), Domino’s, under Jubilant, opened 81 new stores, taking the total count to 2,321 outlets.
Unlike other QSR chains, Jubilant continues to report healthy growth in revenue and profit. The company’s net profit rose to Rs 186 crore in the September quarter from Rs 64 crore in the year-ago period. Revenue rose 20% to Rs 2,340 crore from Rs 1,955 crore in the same quarter last fiscal.
With Sapphire merging with Devyani, competition in the QSR space is expected to heat up as the two groups operate rival brands such as Domino’s vs Pizza Hut and KFC vs Popeyes. “India’s QSR industry is growing at a steady pace, driven by urbanisation, rising disposable incomes, and changing consumption habits. However, competition is intense, with both global and domestic players fighting for market share,” said Swastika Investmart.
The brokerage added that by combining operations, Sapphire Foods and Devyani International can leverage procurement efficiencies, better bargaining power with suppliers, and shared technology platforms. Scale also helps in faster expansion into Tier 2 and Tier 3 cities, where organised QSR penetration is still low.
Moreover, DIL promoters, the Japuria family, and the Jubilant Bhartia group also compete in the aerated bottling business. The Jubilant Bhartia group in December 2024 signed an agreement to buy out 40% in Coca-Cola’s local bottling unit Hindustan Coca-Cola Beverages. The Jaipuria family, on the other hand, runs Varun Beverages, one of world’s largest bottling partners for PepsiCo outside the US.