KFC, Pizza Hut franchisees to consolidate as Sapphire Foods merges with Devyani International

KFC Outlet

• Sapphire Foods to merge with Devyani International, consolidating Yum Brands.
• Devyani to issue 177 shares for every 100 Sapphire shares in proposed merger
• Merger to boost efficiency, expand QSR presence, and strengthen growth prospects

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Sapphire Foods India on Thursday announced plans to merge with Devyani International, a move that is expected to consolidate the Indian franchisee operations of Yum Brands-owned quick-service chains such as KFC and Pizza Hut.

The deal comes at a time when fast-food operators in India are grappling with slowing same-store sales and pressure on margins, as consumers cut back on eating out and ordering food amid rising living costs.

Sapphire Foods India Limited (SFIL) and Devyani International Limited (DIL) have outlined key details of their proposed merger, a move that will bring together two of India’s largest franchise partners of Yum! Brands under a single, scaled quick-service restaurant (QSR) platform.

Under the proposed merger, Devyani International will issue 177 shares for every 100 shares held in Sapphire Foods, the company said. The full integration of the two entities, along with the realization of the identified synergy benefits, is expected to be completed within 15 to 18 months from the effective date of the merger.

Ahead of the merger, Arctic International, a group company, will acquire around 18.5% of Sapphire Foods’ paid-up equity capital from the existing promoters, with the option to later assign this stake to a mutually agreed financial investor.

The merged entity will focus on three key strategic priorities: accelerating the expansion of KFC, revitalising Pizza Hut to drive sustainable long-term growth, and scaling up Devyani’s emerging brands portfolio.

The transaction has received approval from Yum! Brands, the global owner of KFC and Pizza Hut. As part of the approval, Devyani International has agreed to several important commercial terms with Yum! Brands. These include long-term enhancements of certain waivers for KFC and Pizza Hut, aimed at supporting store expansion and ensuring sustainable growth for both brands.

In addition, Devyani will acquire 19 KFC restaurants currently operated by Yum! India in Hyderabad, further strengthening its footprint in a key market. The company will also pay a one-time charge to Yum! India towards merger approval and the licence fee for the additional territory.

The consolidation is expected to create a larger, more efficient QSR platform at a time when fast-food operators are navigating slower demand and rising cost pressures, while also positioning the combined entity for faster expansion and stronger alignment with Yum! Brands’ long-term strategy in India and overseas.

Sapphire said the merger aims to create a larger, scaled quick-service restaurant (QSR) platform by bringing together KFC and Pizza Hut operations under one umbrella. The consolidation is expected to improve efficiencies, expand both domestic and international presence, and strengthen growth prospects as well as access to capital.

Ravi Jaipuria, Non-Executive Chairman of Devyani International Limited, said, “The consolidation of Devyani International Limited and Sapphire Foods India Limited marks a significant milestone and a decisive leap forward in our growth journey, resulting in DIL holding franchise rights across the entire Indian market for KFC and Pizza Hut brands. The merger also adds a strong international presence in Sri Lanka, which complements our existing overseas operations.

This combination will allow us to realize meaningful economies of scale, leverage a unified technology platform, and strengthen our supply-chain capabilities. Together, these advantages will help unlock sustained value creation and long-term growth for our shareholders, customers, employees, and partners. We are grateful to Yum! Brands and its management team for placing their confidence in DIL as the sole, long-term partner for the future growth of KFC and Pizza Hut in India and for their support of this transformative merger.”

Sumeet Narang, SFML nominee director of SFIL and Founder of Samara Capital, said, “Sapphire Foods was conceptualized in 2015 through the consolidation of multiple Yum! Brands franchisees, with a clear vision of building a scaled, institutionally strong QSR platform over time. We are extremely excited about this development, which brings together a single, unified franchisee for KFC and Pizza Hut in India through the merger with Devyani International Limited. This transaction reflects the shared long-term vision and strong partnership between Samara Capital Group and RJ Corp. We are confident that, under RJ Corp’s leadership, these iconic brands

will continue to grow from strength to strength in the years ahead. India has the potential to become a true crown jewel within Yum!’s global markets, and this announcement represents a significant step in that journey.”

Ranjith Roy, Yum! Brands CFO said, “Devyani International Limited and Sapphire Foods India Limited have been outstanding partners to Yum! for many years. India is a high-priority market for us with an abundance of white space for further growth and strong consumer reception for our brands. We are pleased to support this proposed merger to unlock a new phase of accelerated growth in the region and to advance supply chain operations, leading to a stronger, more resilient partner in India and greater value for both shareholder bases. We look forward to our continued partnership.

Devyani International Limited (DIL) is among India’s largest quick service restaurant (QSR) operators, running a network of over 2,000 outlets across more than 280 cities in India, Thailand, Nigeria and Nepal. The company operates a mix of well-known global brands alongside successful homegrown food concepts.

DIL is the largest franchisee of Yum! Brands in India and Nepal and is also the sole Indian franchisee for several international brands, including Costa Coffee, Tea Live, New York Fries and Sanook Kitchen. Alongside these, it has built strong indigenous brands such as Vaango, a South Indian vegetarian restaurant chain, and The Food Street, a food court format that brings multiple brands under one roof. Its Indian cuisine portfolio was further strengthened through the acquisition of Sky Gate Hospitality, which owns popular brands like Biryani By Kilo and Goila Butter Chicken.

Sapphire Foods India Limited (SFIL) was established in 2015 after acquiring KFC and Pizza Hut restaurants in India and Sri Lanka. Since then, it has grown into a major franchisee of these global fast-food brands.

The company operates restaurants across dine-in, takeaway and online delivery formats. In India, Sapphire Foods holds franchise rights to run KFC outlets in 10 states and Pizza Hut outlets in 11 states. Internationally, through its Sri Lankan subsidiaries, it operates KFC, Pizza Hut and Taco Bell restaurants.

Across India and Sri Lanka, Sapphire Foods runs more than 1,000 restaurants, making it one of the most significant Yum! Brands franchise partners in the region.