Devyani International Shares in Focus After Mega Merger with Sapphire Foods
Devyani International and Sapphire Foods have announced a merger creating India's largest Yum! Brands franchisee with over 3,000 stores. The deal features a 177:100 share swap ratio, enhanced commercial terms from Yum! Brands, and acquisition of 19 KFC outlets in Hyderabad. Expected to complete in 12-15 months, the merger will generate annual synergies of ₹210-225 crore and position the combined entity for accelerated expansion.
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Devyani International shares will be in focus following the announcement of a mega merger with Sapphire Foods India, creating India's largest Yum! Brands franchisee. The boards of both companies have approved the scheme of arrangement that will consolidate operations of key KFC and Pizza Hut operators into a single powerhouse in the quick-service restaurant space.
Merger Structure and Enhanced Terms
The merger involves Sapphire Foods India Limited as the transferor company and Devyani International Limited as the transferee company. Under the approved share-swap mechanism, shareholders of Sapphire Foods will receive 177 equity shares of Devyani International for every 100 equity shares held. The transaction has received approval from Yum! Brands with enhanced commercial terms including long-term waivers and the acquisition of 19 KFC stores operated by Yum! in Hyderabad.
| Merger Parameters: | Details |
|---|---|
| Share Exchange Ratio: | 177:100 |
| Completion Timeline: | 12-15 months |
| Transferor Company: | Sapphire Foods India Limited |
| Transferee Company: | Devyani International Limited |
| Arctic International Stake: | 18.50% acquisition |
| Expected Annual Synergies: | ₹210.00-225.00 crore |
| KFC Stores Acquisition: | 19 outlets in Hyderabad |
Combined Entity Scale and Financial Impact
The merger creates significant scale benefits with the combined entity operating over 3,000 stores across India. Devyani International will pay a one-time charge for merger approval and territorial license expansion, positioning itself as Yum!'s largest franchisee in the Indian market.
| FY25 Proforma Financials: | Devyani | Sapphire | Combined |
|---|---|---|---|
| Stores: | 2,039 | 963 | 3,002 |
| Revenue (₹ crore): | 4,951.00 | 2,875.00 | 7,826.00 |
| Operating EBITDA (₹ crore): | 494.00 | 262.00 | 756.00 |
| EBITDA Margins: | 10.00% | 9.10% | 9.70% |
Strategic Benefits and Synergies
The merger is expected to unlock significant operational benefits including cost efficiencies through economies of scale, stronger vendor negotiations, and margin expansion through productivity gains. The combined entity anticipates annual synergy benefits of ₹210.00-225.00 crore beginning from the second year of integration.
| Post-Merger Strategic Focus: | Objectives |
|---|---|
| KFC Expansion: | Accelerated store rollout |
| Pizza Hut Revival: | Brand revitalization for sustainability |
| Emerging Brands: | Scaled growth initiatives |
| Cash Flow: | Enhanced flexibility and optimization |
Regulatory Approvals and Timeline
The merger remains subject to customary regulatory approvals from stock exchanges, the Competition Commission of India, the National Company Law Tribunal, and shareholders and creditors of both companies. The completion timeline is set at 12-15 months from the effective date, with Arctic International acquiring an 18.50% stake in Sapphire Foods' paid-up capital from existing promoters as part of the transaction.
Historical Stock Returns for Sapphire Foods
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -1.90% | -11.21% | -12.74% | -41.17% | -35.96% | -16.95% |
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