Devyani International Ltd. announces an acquisition

The proposed combination would create a 3,308-store network across five countries, versus 2,256 stores for Devyani and 1,052 for Sapphire individually. On a comparable 31 March 2026 basis, this is approximately 1.47x Devyani’s current network and 3.14x Sapphire’s. Devyani had 1,857 Indian and 399 international stores ^[1], while Sapphire had 916 Indian and 136 Sri Lankan stores ^[2].

Yum! portfolio concentration

• Devyani’s Yum! footprint: 1,821 stores, derived from 783 KFC and 639 Pizza Hut outlets in India plus 399 overseas KFC/Pizza Hut restaurants ^[1].
• Sapphire’s Yum! footprint: 1,052 stores, comprising 575 KFC and 341 Pizza Hut restaurants in India, plus 125 Pizza Hut and 11 Taco Bell restaurants in Sri Lanka ^[2].
• Combined Yum! footprint: 2,873 stores, derived from the two reported portfolios ^{[1] [2]}.
• India alone: the combined entity would operate 2,338 Yum! stores—1,422 from Devyani and 916 from Sapphire—against a combined Indian network of 2,773 stores. Thus, approximately 84.31% of the combined Indian footprint would be Yum!-branded, derived from the reported brand and store counts ^{[1] [2]}.
• Across the entire 3,308-store pro-forma network, Yum! brands would represent approximately 86.85%, with the balance largely coming from Devyani’s non-Yum international, homegrown and other restaurant businesses, derived from the reported counts ^{[1] [2]}.

The strategic change is therefore less about simply adding stores and more about consolidating the Yum! franchise base of two listed operators into one corporate vehicle: 2,873 Yum! restaurants that are currently split between Devyani and Sapphire would sit under a single entity. This is concentration across these two franchisees—not a calculated share of Yum!’s entire Indian system, for which no total-system denominator is provided. The figures remain pro-forma because the merger is reported as proposed rather than completed ^[1].

On the comparable FY26 annual basis, Sapphire Foods was marginally better on EBITDA margin but weaker on ROCE than Devyani International. Sapphire’s consolidated EBITDA margin was 16.1%, versus 15.9% for Devyani, while its ROCE was 3.2%, versus 4.7% for Devyani. ^{[3] [4] [5] [6]}

The comparison with Devyani’s Q1 FY27 should be treated as annual versus quarterly, not like-for-like. Devyani’s latest quarterly EBITDA margin improved to 17.3%, but its ROCE declined to 2.0%; Sapphire’s Q1 FY27 metrics were 16.3% EBITDA margin and 1.8% ROCE. ^{[3] [5]}

Implied leverage effect

On a simple FY26 pro forma combination:

• Devyani reported consolidated net debt of Rs 869.14 Crores and EBITDA of Rs 894.86 Crores. ^{[7] [8]}
• Sapphire reported net cash of Rs 62.50 Crores, represented by net debt of negative Rs 62.50 Crores, and EBITDA of Rs 501.65 Crores. ^{[9] [10]}
• Combined net debt is therefore approximately Rs 806.64 Crores, while combined EBITDA is approximately Rs 1,396.51 Crores. This implies derived net debt/EBITDA of approximately 0.58x, versus Devyani’s reported 0.97x. ^{[7] [8] [9] [10]}

Implication: Sapphire’s net cash position materially improves the combined entity’s headline leverage profile, reducing FY26 net debt/EBITDA by roughly 0.39x. However, the benefit is primarily a balance-sheet and scale effect; Sapphire’s lower ROCE indicates that the merged entity would not automatically achieve better capital efficiency. The 0.58x figure is a mechanical FY26 combination and excludes any merger-related funding, transaction costs, purchase-accounting effects, or future synergies.

The CCI filing is an intermediate approval step, not completion of the merger. The disclosed sequence is: CCI approval → NCLT filing → NCLT and shareholder approvals → effectiveness of the scheme → issue of Devyani shares to Sapphire shareholders.

Regulatory and NCLT milestones

• Board approval of the amended scheme: The revised Scheme of Arrangement was approved by the boards on 26 August 2026 under Sections 230–232 of the Companies Act, 2013. ^[11]
• CCI application: Devyani and Sapphire jointly filed the application with the Competition Commission of India under the Competition Act, 2002. This is part of the regulatory approval process. ^[11]
• Stock-exchange observations: NSE issued a “no objection” and BSE issued “no adverse observations” for the scheme under Regulation 37 of the SEBI Listing Regulations. ^[12]
• CCI approval before NCLT filing: The scheme must be expressly subject to CCI approval, and the companies cannot file it with the NCLT until CCI approval is received. ^[13]
• NCLT filing window: The exchange observation letters were valid for six months from 12 June 2026. The scheme was required to be submitted to the NCLT within that window, subject to the CCI condition. ^[13]
• NCLT and shareholder process: The scheme remains subject to the NCLT process and shareholder confirmation. The companies must incorporate the SEBI and exchange observations in the NCLT petition and place those observations before the tribunal. ^[12]
• Other regulatory disclosures: Before the NCLT and shareholders, the companies must disclose relevant adjudication, recovery, prosecution and enforcement proceedings involving the companies, promoters and directors, together with the required financial, shareholding and scheme-impact disclosures. ^[13]

Share-swap mechanics and timeline

The initial disclosures specified an appointed date of 1 April 2026 and a share-swap ratio of 177 Devyani equity shares of Re 1 each for every 100 Sapphire equity shares of Rs 2 each. ^[14]

However, the cited initial disclosures do not state a separate fixed duration—such as 30, 60 or 90 days—for completing the share swap. The ratio establishes the exchange mechanics; the actual issuance would follow the scheme becoming effective after the CCI, NCLT and shareholder-related conditions are satisfied. The six-month period disclosed in the exchange observations relates to filing the scheme with the NCLT, not to completion of the share swap. ^[13]