KFC, Pizza Hut franchises to unite as Sapphire Foods merges with Devyani International in a $934 million deal

Sapphire Foods India said on Thursday that it would merge with Devyani International, a deal that would unite two of Yum Brands’ largest franchise partners in India at a time when the country’s fast-food industry is confronting slower growth and tighter margins.

The transaction would consolidate the operations of global quick-service chains such as KFC and Pizza Hut under a single operator, creating a scaled platform with nationwide reach just as consumers pull back on discretionary spending amid rising living costs.

Under the proposed share-swap arrangement, Devyani International will issue 177 shares for every 100 shares held in Sapphire Foods. The companies said the integration, including the realization of anticipated synergies, is expected to take 15 to 18 months from the effective date of the merger.

Ahead of the merger, Arctic International, a group company, will acquire about 18.5 percent of Sapphire Foods’ equity from its existing promoters, with the option to later transfer the stake to a financial investor. Once combined, the group plans to focus on accelerating KFC’s expansion, reviving Pizza Hut’s performance and scaling Devyani’s portfolio of newer brands.

The $934 million deal has received approval from Yum Brands, the U.S.-based owner of KFC and Pizza Hut, which has also agreed to revised commercial terms intended to support long-term growth. These include extended waivers linked to store expansion. Devyani will additionally acquire 19 KFC outlets in Hyderabad that are currently operated by Yum India and will pay a one-time fee related to merger approval and additional licensing rights.

The consolidation comes as India’s fast-food operators face slowing same-store sales and rising costs, squeezing profitability across the sector. Industry executives have pointed to more cautious consumer behaviour, with households cutting back on dining out and online food orders.

The combined entity is expected to benefit from greater operating leverage, a unified technology platform and a strengthened supply chain, executives said, positioning it for faster expansion in India and overseas while aligning more closely with Yum Brands’ long-term strategy.

Ravi Jaipuria, the non-executive chairman of Devyani International, said the merger would result in a single franchisee holding rights to operate KFC and Pizza Hut across the Indian market, while also adding a stronger international presence through Sapphire’s operations in Sri Lanka.

Sumeet Narang, a nominee director at Sapphire Foods and founder of Samara Capital, said the transaction fulfilled Sapphire’s original ambition of building a scaled, institutionally backed restaurant platform and reflected a shared long-term vision between its promoters and RJ Corp, Devyani’s parent group.

Ranjith Roy, Yum Brands’ chief financial officer, described India as a priority growth market with significant room for expansion, saying the merger would create a “more resilient partner” with the ability to invest in supply chains and store growth.

Devyani International operates more than 2,000 outlets across India, Thailand, Nigeria and Nepal, spanning global brands such as KFC, Pizza Hut and Costa Coffee, alongside homegrown concepts including Vaango and The Food Street. It has also expanded into Indian cuisine through its acquisition of Sky Gate Hospitality, owner of brands like Biryani By Kilo and Goila Butter Chicken.

Sapphire Foods, founded in 2015, operates more than 1,000 restaurants across India and Sri Lanka. In India, it holds franchise rights for KFC in 10 states and Pizza Hut in 11 states, while its Sri Lankan subsidiaries run KFC, Pizza Hut and Taco Bell outlets.

Together, the companies would form one of the largest quick-service restaurant operators in the region, betting that scale and operational efficiency can help counter a more challenging consumer environment.