Summary of this article
Devyani International and Sapphire Foods announced an all-stock merger to consolidate Yum! Brands’ KFC and Pizza Hut operations under one entity by April 1, 2026.
Sapphire Foods shareholders will receive 177 equity shares of Devyani International for every 100 shares held, accounting for differences in face value and market valuations.
The unified entity aims to capture significant economies of scale, targeting a global store count of 3,002 and projected gross margins of 68.5 per cent.
The shares of Devyani International surged over 8 per cent to trade at an early high of Rs 159.66 per share on the NSE on January 2, 2026. The stock gained after the parent company of Devyani International and Sapphire Foods, Yum! Brands in India announced a definitive merger agreement on January 1. On the other hand, shares of Sapphire Foods slipped nearly 6 per cent to an early low of Rs 247.10 apiece on the NSE.
On January 1, Sapphire Foods informed the exchanges that its Board of Directors has approved the merger of Sapphire Foods India and Devyani International. Notably the two companies operate popular quick service restaurants (QSR) Pizza Hut and KFC in India.
Pizza Hut-KFC Merger
The deal between the two companies has been structured as an all-stock merger which seeks to bring the two iconic brands under a single operational umbrella. The merger is expected to create a single operational entity with outlets across India, Sri Lanka, and other international markets. The proposed merger will take place on April 1, 2026 according to an investor presentation released to the exchanges.
As part of the merger, the companies have also proposed a share-swap agreement. According to the filing, the share-swap will take place in the 177:100 ratio. A share swap agreement is an arrangement between two entities in which shares are exchanged instead of using cash to pay for a merger or acquisition.
“In consideration of the amalgamation of the Transferor Company with the Transferee Company, the Transferee Company shall issue and allot to shareholders of the Transferor Company, whose name is recorded in the register of members and/or records of the depository on the Record Date (as defined in the Scheme) as follows: “177 (One Hundred and Seventy Seven) equity shares of the Transferee Company of INR 1/- each fully paid up for every 100 (One Hundred) equity shares of Rs 2/- each fully paid up, held by the shareholders of the Transferor Company,” the company said in its filing with the exchange.
The 177:100 Share Swap
The share swap is expected to affect the shareholders of the two companies. As part of the share swap arrangement, investors who hold 100 equity shares of Sapphire Foods India will receive 177 equity shares of Devyani International.
Notably, the face value of Devyani International’s shares is Re 1 each, while Sapphire Foods shares have a face value of Rs 2 each. The ratio accounts for the difference in the face value and the relative market valuations of both entities. However, if a shareholder’s holding results in a fractional share, the fractions are typically pooled and sold by a trustee, with the cash proceeds distributed to the respective shareholders.
Shareholders who hold shares of Devyani International (DIL) in their demat account will continue to hold them. However their proportional stake in the company will be “diluted” following the merger, as the company is issuing new shares to Sapphire’s investors. However, the shareholder will get a stake in a relatively larger entity post the merger.
Once the merger is finalised within the 12-15 month timeline specified by the company, Sapphire Foods will be delisted from the stock exchanges and the new Devyani shares will be automatically credited to the demat accounts of eligible shareholders based on the 177:100 ratio, while the shares of Sapphire will be cancelled.
Why is a Merger Taking Place
The focus areas for the merger include expanding KFC, strengthening Pizza Hut, and growing the non-Yum Brands portfolio. The company plans to create one of the largest QSR companies in India with pan-India operations across multiple cuisine options. The company also mentioned in the investor presentation that it seeks to benefit from economies of scale and operational synergies, a stronger balance sheet to support accelerated expansion along with a wider investor base and enhanced liquidity.
The company expects its global store count to increase to 3,002. The merged entity’s projected revenue from operations and gross profit are expected to grow to Rs 78,265 million and Rs 53,872 million, respectively. The gross margin of the company is expected to improve to 68.5 per cent.
The company added that the merger is subject to approvals from several regulatory authorities, such as the stock exchanges, the Securities and Exchange Board of India (Sebi), Competition Commission of India (CCI), the National Company Law Tribunal (NCLT), creditors of the company, shareholders of the company, along with any other regulatory approvals.
At the time of writing, shares of Sapphire Foods India were trading at Rs 253.25 apiece, down by 3.60 per cent, while shares of Devyani International were trading at Rs 149.32 apiece, up by 1.28 per cent.
