Sapphire Foods India Limited (SFIL) and Devyani International Limited (DIL), the two dominant franchisees of Yum! Brands in India, have received board approval to merge into a single entity, according to an exchange filing by Sapphire Foods. This move is expected to consolidate the operations of KFC and Pizza Hut, creating one of India's largest quick-service restaurant (QSR) operators with a combined footprint of over 3,000 stores across five countries.

According to the deal announced late Thursday evening, Devyani International will issue 177 equity shares for every 100 equity shares held in Sapphire Foods. While the "appointed date" for the merger is set for April 1, 2026, the full integration process is expected to take 12-15 months subject to regulatory clearances.

As part of the transaction, Arctic International, a group company, is set to acquire approximately 18.5% of SFIL’s paid-up equity share capital from existing promoters, with an option to assign this stake to a mutually agreed financial investor.

Expansion and synergies

In addition to the merger, DIL will acquire 19 KFC restaurants currently operated directly by Yum! India in Hyderabad. DIL will pay a one-time charge to Yum! India for the merger approval and the license fee for this additional territory.

The companies expect the merger to generate annual cost synergies of ₹210–₹225 crore, primarily driven by operational efficiencies and improved purchasing power.

Ravi Jaipuria, Non-Executive Chairman of DIL, stated, “The consolidation of Devyani International Limited and Sapphire Foods India Limited marks a significant milestone... 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."

He added, "This combination will allow us to realize meaningful economies of scale... 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.”

Sumeet Narang, SFML nominee director of SFIL and Founder of Samara Capital, commented, “Sapphire Foods was conceptualized in 2015... with a clear vision of building a scaled, institutionally strong QSR platform. We are extremely excited about this development, which brings together a single, unified franchisee for KFC and Pizza Hut in India."

Ranjith Roy, Yum! Brands CFO, added, “India is a high-priority market for us with an abundance of white space for further growth... We are pleased to support this proposed merger to unlock a new phase of accelerated growth in the region.”

Regulatory headwind

In a separate exchange filing on January 1, 2026, Sapphire Foods disclosed that it has received a GST demand order of ₹20.32 crore from tax authorities in Haryana. The demand, received on December 31, 2025, pertains to alleged excess Input Tax Credit (ITC) availed between 2018 and 2022. The company has stated it intends to challenge the order and does not expect a material impact on operations.

The shares of Devyani International ended 1.52% lower at ₹145.70 apiece on the national stock exchange on Thursday, while shares of Sapphire Foods ended 2.70% higher at ₹264 apiece.