Sapphire Foods delivered a consolidated net profit of ₹140.22 million for the quarter ended June 30, 2026 (Q1FY27), marking a decisive turnaround from the net loss of ₹17.38 million recorded in the corresponding period of the previous year. The profitability swing was fueled by robust top-line growth, with revenue from operations rising 15% year-on-year to ₹8,909.60 million, and improved operational efficiency that expanded the EBITDA margin to 15.8% from 14.6%. This performance underscores the effectiveness of the company’s cost management strategies and consumer recruitment initiatives ahead of its proposed merger with Devyani International.

The Board of Directors approved the unaudited standalone and consolidated financial results on July 24, 2026. The results were reviewed by the Audit Committee and subjected to a limited review by M/s. Deloitte Haskins & Sells, Chartered Accountants, the statutory auditors. The financial statements comply with Indian Accounting Standard 34 (Ind AS 34) "Interim Financial Reporting" and Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Financial Performance Overview

On a consolidated basis, total income stood at ₹8,966.31 million, comprising revenue from operations of ₹8,909.60 million and other income of ₹56.71 million. Total expenses amounted to ₹8,804.64 million, including cost of materials consumed (₹2,780.57 million), employee benefits expense (₹1,153.45 million), finance costs (₹319.31 million), depreciation and amortisation (₹973.62 million), and other expenses (₹3,577.69 million). Profit before tax was ₹161.67 million, against which tax expense of ₹21.45 million was charged, resulting in the net profit after tax of ₹140.22 million.

Standalone results also showed a turnaround, with net profit after tax reaching ₹128.67 million compared to a loss of ₹34.04 million in Q1FY26. Standalone revenue from operations increased to ₹7,560.72 million from ₹6,603.95 million in the prior-year quarter. Earnings per equity share on a consolidated basis were ₹0.44, up from (₹0.06) in the previous year.

Operational Highlights and Brand Performance

Q1FY27 marked the second consecutive quarter of strong performance, with restaurant sales reaching ₹8,882 million, up 15% year-on-year — the best growth in the last 11 quarters. Adjusted EBITDA grew by 37% to ₹749 million, the highest growth in 15 quarters, with margins expanding by 130 basis points to 8.4%. Consolidated EBITDA stood at ₹1,406 million (15.8% margin), up 24% year-on-year.

Sapphire Foods added 16 KFC restaurants, 5 Pizza Hut outlets in India, and 1 Pizza Hut in Sri Lanka during the quarter, bringing the total restaurant count to 1,074 as on June 30, 2026. Same-store sales growth (SSSG) was positive across all verticals:

• KFC India: Revenue grew by 17% with SSSG at 5%. Restaurant EBITDA margin improved by 120 basis points to 16.9%, despite high energy cost inflation. Growth was driven by a two-pronged consumer recruitment strategy including the ₹99 Chicken Krisper Burger Meal and Buy-One-Get-One-Free offers on Chicken Buckets. Gross margin improved by 160 basis points over the last quarter due to lower discounts and a 2% price increase.
• Pizza Hut India: Delivered positive SSSG of 1% after five quarters, with Dine-In SSSG also positive. Revenue grew by 3%, though Restaurant EBITDA remained negative at -3.6% due to higher gas costs. Tamil Nadu territory continued to perform well due to targeted marketing investments. Dine-in and takeaway mix remained stable at 50%.
• Sri Lanka Business: Revenue grew by 14% in LKR terms with SSSG of 9%. Restaurant EBITDA margin was 12.0%, impacted by minimum wage revisions and geopolitical conflict-related inflation. Management expects profitability normalization in a few quarters as transaction growth continues.

Strategic Insights from Earnings Call

During the earnings call held on July 24, 2026, Whole Time Director and Group CEO Sanjay Purohit and CFO Vijay Jain provided deeper context on the results. They emphasized that the demand environment has remained similar, with the upside at KFC being a direct outcome of improved sales strategies rather than macroeconomic shifts. Vijay Jain noted that operating leverage typically kicks in at a 3% to 5% SSSG threshold, which covers inflation in wage and other costs. The company has been able to create leverage even at this level through gross margin improvements from reduced discounts and selective price hikes.

Regarding pricing, the company implemented price increases in two installments: 1% in April and 0.5% to 1% in June for KFC, and 1% each in two installments for Pizza Hut. Jain stated that these hikes were carefully managed to avoid impacting consumer sentiment or SSSG, with the aim of managing gross margins rather than increasing average per customer (APC) bills significantly. The company restricts price hikes to 50% to 60% of inflation, managing the rest through supply chain efficiencies.

Merger Progress and Regulatory Approvals

A key development noted by the Board is the progress of the scheme of arrangement between Sapphire Foods India Limited (Transferor Company) and Devyani International Limited (Transferee Company). Approved under Sections 230 to 232 of the Companies Act, 2013, the scheme envisages the amalgamation of Sapphire Foods into Devyani International with effect from April 01, 2026. Under the terms, shareholders will receive 177 equity shares of Devyani International for every 100 shares of Sapphire Foods held.

The company received a 'no objection' observation letter from the National Stock Exchange (NSE) and 'no adverse observations' from the Bombay Stock Exchange (BSE) on June 12, 2026. The scheme remains subject to further regulatory and statutory approvals.

Operational and Structural Updates

Additionally, the Board noted the completion of the shifting of the company's registered office from Maharashtra to Haryana. The Regional Director (Western Region Directorate I) approved the shift on April 21, 2026, and the Registrar of Companies, Haryana, issued the Certificate of Registration on May 18, 2026, recording the new address at SCO 328, Sector - 9, Panchkula. The group continues to operate in a single reportable segment: restaurant operations.

What the Numbers Show

The swing to profitability in Q1FY27 is primarily operational, driven by robust revenue growth of approximately 14.7% year-on-year on a consolidated basis. Notably, there were no exceptional items in the current quarter, unlike the previous year where merger-related charges and labour code impacts had weighed on results. The absence of such one-time costs, combined with margin expansion, indicates a stabilisation of the core business model ahead of the proposed merger. The divergence between consolidated EBITDA margin (15.8%) and adjusted EBITDA margin (8.4%) highlights the significant impact of Ind-AS 116 lease adjustments on reported profitability metrics. Furthermore, the management's focus on driving dine-in and takeaway transactions over delivery suggests a strategic shift towards higher-margin channels, which is beginning to yield results as seen in the improved SSSG across all brands.

Source: https://lodr-files.dhan.co/lodr-inputs/Company/INE806T01020/16d4fe22d790427a.pdf

Sapphire Foods has laid out a comprehensive expansion roadmap across its key brand portfolio, anchoring its long-term growth strategy on KFC in India while adopting a more measured approach for Pizza Hut and navigating near-term headwinds in its Sri Lanka operations. The company's multi-brand strategy reflects a differentiated outlook for each market and format, balancing aggressive growth ambitions with operational prudence.

KFC India: A Long-Term Doubling Ambition

Sapphire Foods considers KFC a long-term opportunity in India and has set its sights on doubling KFC outlets over the next five years. This underscores the company's confidence in the brand's growth potential within the Indian quick-service restaurant landscape. To support this trajectory, the company has established a near-term KFC store expansion target of 60 to 80 new locations, with no changes planned to this guidance.

Sri Lanka: Expansion Continues Despite Profit Challenges

Despite recent profitability challenges in Sri Lanka, Sapphire Foods has maintained its store expansion target for the market at high-single-digit additions for the current year. The company, however, acknowledges that a return to profitability in Sri Lanka is expected to take a few quarters, signalling that the near-term financial performance in the region remains under pressure even as the physical footprint continues to grow.

Pizza Hut: Cautious Growth Approach for 2026

For its Pizza Hut brand, Sapphire Foods intends to maintain a careful approach to store growth in 2026, consistent with the strategy it adopted in 2025. This deliberate pacing reflects the company's focus on sustainable expansion for the Pizza Hut format rather than aggressive network scaling.

Key Expansion Highlights

• KFC India identified as a long-term growth opportunity with plans to double the outlet count over five years
• KFC store addition target set at 60 to 80 new locations, unchanged
• Sri Lanka store expansion target held at high-single-digit for the year despite profitability headwinds
• Sri Lanka profitability recovery expected to take a few quarters
• Pizza Hut store growth to remain cautious in 2026, in line with the 2025 approach

Overall, Sapphire Foods' strategy reflects a clear prioritisation of KFC-led growth in India over the long term, while managing near-term challenges in Sri Lanka and maintaining disciplined expansion for Pizza Hut.