New Delhi | Mumbai: Yum! Brands Inc, the American owner of fast-food restaurant chains KFC and Pizza Hut, is in talks to facilitate a merger of Devyani International Ltd (DIL) and Sapphire Foods India Ltd—its publicly-traded franchisee partners in the country, people aware of the developments said.
The negotiations could result in Sapphire Foods getting merged into DIL through a share swap deal. This would entail the latter either acquiring the franchisee rights of KFC and Pizza Hut from Sapphire Foods, or all of KFC’s franchisee stores in India getting consolidated under DIL, the people said.
One of the persons cited above said a 1:3 share swap ratio is being prepared with Sapphire shareholders getting one share of DIL for every three owned. This could not be independently verified.
Turn: Synergies Amid Slowing Growth
DIL, owned by billionaire entrepreneur Ravi Jaipuria’s RJ Corp, currently has a market capitalisation of Rs 19,935.61 crore, compared to Sapphire Foods’ Rs 10,313 crore.
"There are direct synergies for DIL, since it is owned by PepsiCo’s bottling partner Varun Beverages Ltd (VBL),” a second person said.
Mumbai-based listed VBL and DIL are the flagship companies of RJ Corp.
“The negotiations are being led by DIL. RJ Corp is looking to reduce dependence on soft drinks which has a limited portfolio compared to fast foods,” the person said. “The restaurant and café businesses have tremendous growth opportunities to scale through multiple formats such as dine-in, deliveries, take-aways, and food courts, despite the ongoing slowdown in discretionary spending,” he added.
RJ Corp, Sapphire Foods, and Yum! Brands did not respond to email queries.
DIL, the larger of the two, runs more than 2,030 stores across India, Thailand, Nigeria and Nepal. Sapphire operates 963 KFC, Pizza Hut and Taco Bell restaurants across India and Sri Lanka, as of March 31, 2025, according to the websites of both companies.
Both the Indian companies are facing slowing growth as inflation-hit consumers cut back on discretionary spending, mirroring the larger trend in the food services sector.
Apart from KFC and Pizza Hut, DIL is the exclusive franchisee for British coffee chain Costa Coffee in India. Its own brands include South Indian cuisine chain Vaango, The Food Street food courts, and Cream Bell ice-cream.
Set up in September 2015, Sapphire Foods was led by a group of private equity firms Samara Capital, Goldman Sachs, CX Partners and IDI Emerging Markets. Over the years, most of the earlier PE investors have exited, selling their stakes in the public market. As of March 31, 2025, shareholders in Sapphire Foods include Sagista Realty Advisors, Mirae Asset Great Consumer Fund and Franklin India Smaller Companies Fund among other investors, according to disclosures by the company.
A Bernstein Research report noted that India’s quick service restaurant (QSR) sector could see a turnaround this fiscal year, led by gradual demand recovery, after a tough FY25, marked by declining margins as urban consumers cut discretionary spending, and proliferation of regional and hyperlocal boutique-style rivals.
Bernstein said that “it expects consumer demand to pick up gradually in the first half and materially in the second half of the year, with overall return to positive mid-high single digit same-store sales growth across players.”
For the March quarter, DIL sharply widened its net loss to Rs 14.74 crore, from Rs 7.47 crore a year earlier. Revenue from operations grew 16% to Rs 1,212.59 crore.
Sapphire’s KFC division reported a 12% on-year growth in revenue in the March quarter, with same-store sales or retail sales at stores that have been open for at least one year at less than 1%. For Pizza Hut, Sapphire posted 5% on-year growth during the quarter, and same-store sales growth of 1%.
On a standalone basis, Sapphire Foods plunged to a net loss of Rs 3.66 crore for the quarter, compared to a year-earlier net profit of Rs 2.14 crore. The company reported overall revenue of Rs 711 crore in Q4FY25, growing 13% year-on-year.
While DIL has rights to operate KFC and Pizza Hut brands mainly in North and East India, Sapphire’s footprint is largely focused on South and West India. Both also have common franchisee zones such as airport stores in select states like Maharashtra, Andhra Pradesh, and Karnataka in formats such as delivery-only, takeaways, and airports.
Sanjay Purohit, group chief executive of Sapphire Foods, said in a recent analyst call to discuss March quarter earnings that starting from that quarter, the chain “has not been able to invest in mass media advertising (for Pizza Hut)…That’s resulted in an impact on our transactions. That’s arising because of a difference of view between us and our sister franchisee (Devyani) on marketing strategy and investments on advertising.”
He said “while Yum is aligned with investing (on Pizza Hut ads) similar to us, the difference in opinion has meant that we’ve not been able to advertise in common markets.”
Responding to an analyst query on when Sapphire Foods expected a resolution to the differences, Purohit said it may take one to two quarters.
Louisville-based Yum! Brands reported over $65 billion in total system sales in 2024, operating 61,000 restaurants in 155 countries with 1,500 franchise partners, according to its website. Earlier in February, its shares saw their biggest gain in nearly five years after December 2024 sales surpassed expectations, buoyed by growth at the Taco Bell fast-food chain.
The negotiations could result in Sapphire Foods getting merged into DIL through a share swap deal. This would entail the latter either acquiring the franchisee rights of KFC and Pizza Hut from Sapphire Foods, or all of KFC’s franchisee stores in India getting consolidated under DIL, the people said.
One of the persons cited above said a 1:3 share swap ratio is being prepared with Sapphire shareholders getting one share of DIL for every three owned. This could not be independently verified.
Turn: Synergies Amid Slowing Growth
DIL, owned by billionaire entrepreneur Ravi Jaipuria’s RJ Corp, currently has a market capitalisation of Rs 19,935.61 crore, compared to Sapphire Foods’ Rs 10,313 crore.
"There are direct synergies for DIL, since it is owned by PepsiCo’s bottling partner Varun Beverages Ltd (VBL),” a second person said.
Mumbai-based listed VBL and DIL are the flagship companies of RJ Corp.
“The negotiations are being led by DIL. RJ Corp is looking to reduce dependence on soft drinks which has a limited portfolio compared to fast foods,” the person said. “The restaurant and café businesses have tremendous growth opportunities to scale through multiple formats such as dine-in, deliveries, take-aways, and food courts, despite the ongoing slowdown in discretionary spending,” he added.
RJ Corp, Sapphire Foods, and Yum! Brands did not respond to email queries.
DIL, the larger of the two, runs more than 2,030 stores across India, Thailand, Nigeria and Nepal. Sapphire operates 963 KFC, Pizza Hut and Taco Bell restaurants across India and Sri Lanka, as of March 31, 2025, according to the websites of both companies.
Both the Indian companies are facing slowing growth as inflation-hit consumers cut back on discretionary spending, mirroring the larger trend in the food services sector.
Apart from KFC and Pizza Hut, DIL is the exclusive franchisee for British coffee chain Costa Coffee in India. Its own brands include South Indian cuisine chain Vaango, The Food Street food courts, and Cream Bell ice-cream.
Set up in September 2015, Sapphire Foods was led by a group of private equity firms Samara Capital, Goldman Sachs, CX Partners and IDI Emerging Markets. Over the years, most of the earlier PE investors have exited, selling their stakes in the public market. As of March 31, 2025, shareholders in Sapphire Foods include Sagista Realty Advisors, Mirae Asset Great Consumer Fund and Franklin India Smaller Companies Fund among other investors, according to disclosures by the company.
A Bernstein Research report noted that India’s quick service restaurant (QSR) sector could see a turnaround this fiscal year, led by gradual demand recovery, after a tough FY25, marked by declining margins as urban consumers cut discretionary spending, and proliferation of regional and hyperlocal boutique-style rivals.
Bernstein said that “it expects consumer demand to pick up gradually in the first half and materially in the second half of the year, with overall return to positive mid-high single digit same-store sales growth across players.”
For the March quarter, DIL sharply widened its net loss to Rs 14.74 crore, from Rs 7.47 crore a year earlier. Revenue from operations grew 16% to Rs 1,212.59 crore.
Sapphire’s KFC division reported a 12% on-year growth in revenue in the March quarter, with same-store sales or retail sales at stores that have been open for at least one year at less than 1%. For Pizza Hut, Sapphire posted 5% on-year growth during the quarter, and same-store sales growth of 1%.
On a standalone basis, Sapphire Foods plunged to a net loss of Rs 3.66 crore for the quarter, compared to a year-earlier net profit of Rs 2.14 crore. The company reported overall revenue of Rs 711 crore in Q4FY25, growing 13% year-on-year.
While DIL has rights to operate KFC and Pizza Hut brands mainly in North and East India, Sapphire’s footprint is largely focused on South and West India. Both also have common franchisee zones such as airport stores in select states like Maharashtra, Andhra Pradesh, and Karnataka in formats such as delivery-only, takeaways, and airports.
Sanjay Purohit, group chief executive of Sapphire Foods, said in a recent analyst call to discuss March quarter earnings that starting from that quarter, the chain “has not been able to invest in mass media advertising (for Pizza Hut)…That’s resulted in an impact on our transactions. That’s arising because of a difference of view between us and our sister franchisee (Devyani) on marketing strategy and investments on advertising.”
He said “while Yum is aligned with investing (on Pizza Hut ads) similar to us, the difference in opinion has meant that we’ve not been able to advertise in common markets.”
Responding to an analyst query on when Sapphire Foods expected a resolution to the differences, Purohit said it may take one to two quarters.
Louisville-based Yum! Brands reported over $65 billion in total system sales in 2024, operating 61,000 restaurants in 155 countries with 1,500 franchise partners, according to its website. Earlier in February, its shares saw their biggest gain in nearly five years after December 2024 sales surpassed expectations, buoyed by growth at the Taco Bell fast-food chain.
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