The merger between Devyani International Ltd. (DIL) and Sapphire Foods will create India’s largest food and beverage (F&B) company with an expected turnover of more than $ 1 billion, Ravi Jaipuria, non-executive chairman of Devyani International, said in an analyst call on January 6.
“By this time, the merger gets consummated, the merged entity is likely to cross a billion dollars USD in annual revenues,” Jaipuria said while addressing the merger of KFC and Pizza Hut operator Sapphire Foods India into Devyani International, which was announced on January 1.
What did Jaipuria say?
Jaipuria stated that India’s food and beverage market is large, becoming formalized, and expanding rapidly, with independent estimates placing the broader food services market at over $100 billion and the Quick Service Restaurant (QSR) segment alone at more than $25 billion.
He added that the merged entity of Devyani-Sapphire will operate marquee brands such as KFC, Pizza Hut, Costa Coffee, Vango, and Biryani by Kilo under a single platform with pan‑India reach across multiple formats.
Following the merger, Devyani International will take over the marketing, innovation, technology, and supply chain functions of Pizza Hut from Yum! Brands, while for KFC, Divyani International will only take over the technology and supply chain, while marketing and innovation will continue to be run by Yum under the current agreement, Manish Dawar, Executive Director & CFO at Devyani International said.
What did management say?
The management of both Devyani International added that a large global technology vendor has been shortlisted to create new technology assets (web and app), with a unified tech stack planned across all brands of DIL, while maintaining brand‑specific UI/UX layers.
Both management also expect synergy benefits of about Rs 210–225 crore, explicitly described as net of the additional costs of new functions and integration. The companies added that the turnaround in same-store sales growth will be the focus way forward.
The management of companies also highlighted that both companies expanded Pizza Hut aggressively over the last three years, leading to negative same‑store sales and margin pressure; the new priority is turnaround rather than rapid net unit additions.
The merged entity has also negotiated flexibility with Yum to keep net new units non‑negative but to freely close, relocate, and reopen stores to improve performance, with an internal goal of returning Pizza Hut to positive brand contribution in year one and targeting low double‑digit brand contribution margins.
For KFC, management targets calibrated expansion based on market demand rather than just development agreements (DAs), and expects a unified strategy and tech stack to help recover and improve same‑store sales growth.
The technology for the entire merged entity will be common, but for KFC, it will be different. A faster delivery and product innovation will be the key focus for the merged entity.
Around 45% of KFC business is said to be home‑consumed/home‑delivered, and technology is highlighted as critical to improving top line and delivery speed in that channel.
As part of the proposed arrangement, Devyani International will complete a one‑time payment of about Rs 320 crore to Yum, which management contrasts with recurring annual synergies and indicates will be capitalized.
The proposed merger also involves a swap ratio wherein Sapphire shareholders will receive 177 Devyani shares for every 100 Sapphire shares held, as per the approved swap ratio.
Both companies also highlighted that due to Yum’s requirements, Sapphire Foods India has a Mauritius promoter entity required to maintain at least 25% stake; this structure is being unwound in favor of a single promoter, RJ Corp, for the merged entity.
Of this 25%, around 18.5% will be sold bilaterally to an RJ Corp–affiliated entity over 3–15 months at a floor price of Rs 280, while the remaining stake will be share‑swapped into DIL; Sapphire Food Mauritius will cease to be a promoter after this.