KFC Franchise Operators Sapphire Foods, Devyani International Announce Merger in India

In a statement released on January 1, Sapphire Foods India Limited, the operator of KFC and Pizza Hut, stated that it would merge with Devyani International Limited, which also runs the QSR franchises in the nation. As consumers cut back on eating out and ordering in due to rising living expenses, fast-food franchisees in India are facing declining same-store sales and margin challenges.

As part of the agreement, Devyani will issue 177 shares for every 100 shares of Sapphire, and starting in the second full year of the merged company's operations, it anticipates annual synergies of INR 210 crore to INR 225 crore. As part of the agreement, current promoters will sell about 18.5% of Sapphire Foods' paid-up equity to group firm Arctic International, with the option to transfer the holding to a financial investor of mutual agreement.

Merger Aligned with Acquisition of Necessary Approvals

All customary regulatory and legislative approvals, including those from the stock exchanges, the Competition Commission of India, the National Company Law Tribunal(s), and the shareholders and creditors of both companies, must be obtained before the planned merger can proceed.

The anticipated time frame for acquiring these permissions is 12 to 15 months, after which the merger will go into effect. Westlife Foodworld and Jubilant Foodworks, the Indian operators of McDonald's and Domino's Pizza brands, compete with the firms, which are partners of Yum Brands, and operate over 3,000 locations in India and abroad, including KFC and Pizza Hut dine-in restaurants.

Sapphire Foods’ Filling at the Exchange

According to Sapphire Foods' stock exchange filing, once the deal is finalised, Devyani International will become one of the biggest quick-service restaurant (QSR) operators in India by merging the operations of both businesses, setting up the combined company for the next stage of faster growth, scale, and profitability.

Furthermore, the merger of Devyani International Limited and Sapphire Foods India Limited represents a major turning point and a clear step forward in its development, according to Ravi Jaipuria, Non-Executive Chairman of Devyani International Limited. As a result, DIL now owns franchise rights for the KFC and Pizza Hut brands throughout the whole Indian market.

Sapphire Foods' current abroad operations are enhanced by the merger's addition of a significant international presence in Sri Lanka. Devyani's spending increased 14.4% to INR 1,408 crore during the September quarter, while Sapphire's consolidated total costs increased 10% year over year to INR 768 crore. While Sapphire recorded a greater overall net loss of INR 12.77 crore, compared to a loss of INR 3.04 crore a year earlier, Devyani reported a net loss of INR 21.9 crore for the quarter ended September 30, reversing a profit of INR 170,000 a year earlier.