India's KFC and Pizza Hut operators merge in $934 million deal

New Delhi: Sapphire Foods India and Devyani International, the key operators of KFC and Pizza Hut in India, have announced a merger valued at $934 million.

The all-stock deal is aimed at consolidating operations amid rising costs and intensifying competition. The combined entity will have more than 3,000 outlets across India and overseas.

Under the terms of the agreement, Devyani International will issue 177 shares for every 100 shares of Sapphire Foods, effectively absorbing the latter.

The companies expect annual synergies of Rs 2.1 billion to Rs 2.25 billion (Rs 210–225 crore) from the second full year of operations. They said the gains will come largely from cost efficiencies and supply chain optimisation.

Both companies are franchise partners of US-based Yum Brands, which owns KFC and Pizza Hut among other chains. Sapphire Foods, listed in India since 2021, operates around 700 KFC and Pizza Hut stores across India, Sri Lanka and the Maldives.

Devyani International, which traces its roots to 1991, runs over 1,700 outlets, including KFC, Pizza Hut and Costa Coffee franchises in India, Nepal and Nigeria.

The merger comes as the sector faces pressure from higher ingredient prices, rent and labour costs, along with slowing same-store sales growth. Consumers have also cut back on non-essential spending amid inflation, adding to margin stress.

Both firms reported net losses for the quarter ended September 2025. Sapphire’s loss widened to Rs 127.7 million (Rs 12.77 crore) from Rs 30.4 million (Rs 3.04 crore) a year earlier, while Devyani posted a Rs 219 million (Rs 21.9 crore) loss, reversing a profit of Rs 170,000 (Rs 1.7 lakh).

Total costs rose for both companies. Sapphire’s costs were up 10% to Rs 7.68 billion (Rs 768 crore), while Devyani’s costs increased 14.4% to Rs 14.08 billion (Rs 1,408 crore).

India’s fast-food market is projected to grow at a compound annual rate of 11% through 2030, driven by urbanisation and a young consumer base. The deal is subject to regulatory approvals and shareholder votes, and is expected to close by mid-2026.