The proposed merger between Devyani International and Sapphire Foods has received positive analyst coverage, with leading brokerages highlighting the strategic benefits and Pizza Hut's turnaround potential. The merger will create India's largest food and beverage company with an expected turnover of approximately ₹8,000 crore, combining major international quick service restaurant brands under unified operations.

Brokerage Ratings and Target Prices

Macquarie has reiterated an Outperform rating on Devyani with an unchanged target price of ₹200, while Goldman Sachs maintains a Buy rating with a 12-month target price of ₹170. The broader analyst community shows strong support, with 17 out of 26 analysts tracked by Bloomberg maintaining 'buy' recommendations, indicating a potential upside of 26.25%.

Pizza Hut Turnaround Strategy

A central element of the investment thesis focuses on Pizza Hut's margin improvement trajectory. Management guidance indicates low double-digit margins in the near term, with longer-term ambitions to converge towards KFC's mid-teen margin profile of 16-19%. Goldman Sachs expects Pizza Hut to turn contribution-margin positive in the first year post-merger, supported by royalty waivers and the ability to shut unprofitable outlets.

Synergy Benefits and Timeline

Macquarie estimates synergy benefits of ₹2.10-2.25 billion, net of capability-building costs. The brokerage projects approximately 60% of these benefits will accrue in the first year after merger completion, with full benefits realized by the second year. Key strategic shifts include moving supply chain, technology, innovation, and marketing functions in-house from Yum, with capabilities expected to be fully developed by mid-2026.

Merger Structure and Financial Terms

The merger will be executed through a share swap arrangement with a ratio of 177 Devyani shares for every 100 Sapphire shares. The deal includes a floor price of ₹280 per share and a one-time payment of ₹320 crore to Yum. Additionally, the structure features a 10-year reduction in Pizza Hut royalty and a planned sale of 18.5% of Sapphire promoter stake to meet Yum's promoter holding requirements.

Technology Integration and Market Position

The companies will operate on a unified technology stack post-merger, with KFC systems transitioning to Devyani's existing platform. Goldman Sachs highlighted potential upside at KFC, where technology and supply chain control transition could support same-store sales growth, particularly in the delivery channel that accounts for 40-45% of sales. The merger completion is projected within 13-18 months of signing the agreement.

While both brokerages remain optimistic about execution and synergy visibility, they emphasize that sustained consumer demand recovery will be critical for store expansion and earnings momentum in the competitive quick service restaurant sector.

Devyani International Limited has received a demand order of ₹5.42 million from tax authorities in Karnataka, the company disclosed in a regulatory filing on January 1, 2026. The demand order was issued under Section 74 of the Central Goods and Services Tax Act, 2017, covering a period spanning from FY 2018-19 to FY 2022-23.

GST Demand Details

The Assistant Commissioner of Central Tax, Karnataka issued the demand order on December 31, 2025, which the company received and disclosed pursuant to Regulation 30 of the SEBI Listing Regulations. The demand relates to alleged violations concerning Input Tax Credit management.

Nature of Alleged Violations

The tax authorities have raised concerns regarding two specific areas of GST compliance during the assessment period. The demand order alleges short reversal of Input Tax Credit on exempt supplies and incorrect availment of ITC on inward supply. These allegations cover a five-year period from FY 2018-19 through FY 2022-23.

Company's Response and Impact Assessment

Devyani International has stated that there is no material impact on the company's financial, operational, or other activities due to this demand order. The company is currently in the process of evaluating the demand order and plans to take necessary steps to respond appropriately.

The company has indicated it will explore available legal remedies, including filing an appeal before relevant forums and the Appellate Authority as permitted under applicable law. This approach suggests the company intends to contest the demand through proper legal channels.

Regulatory Compliance

The disclosure was made in compliance with SEBI regulations, specifically under Regulation 30 of the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015. The company provided detailed information as required under the SEBI Master Circular dated November 11, 2024, ensuring transparency with stakeholders regarding this regulatory development.