Devyani Intl-Sapphire Foods merger, which runs brands like KFC and Pizza Hut

News Topical, Digital Desk : A major and long-awaited deal related to the QSR (Quick Service Restaurant) sector has finally been revealed on the stock market. Two major companies operating brands like KFC, Pizza Hut, and Costa Coffee are now merging. The merger of Devyani International and Sapphire Foods has been approved at the board level. The question is how beneficial this deal is for investors and what impact it could have on the stock market going forward. A long-anticipated merger in the QSR sector has now been officially approved. The board of Sapphire Foods has approved the amalgamation with Devyani International. Both companies operate franchises of Yum Brands and together will become one of India's largest QSR companies. A share swap ratio has been set as part of this merger: for every 100 shares of Sapphire, 177 shares of Devyani will be received. Based on current market prices, this deal is considered fair value. Devyani's CMP (current share price (this is the closing price on January 1)) is around ₹147, while Sapphire's CMP is around ₹261. This means the deal was not done at a premium or discount, but based on the current market price. Not just a merger, Devyani is taking another major step with this deal. The company will also take over 19 KFC outlets operated by Yum in Hyderabad. This will further strengthen Devyani's presence in South India. Now, the most important question for the average investor is first, revenue and cost synergies. There was overlap in many operations of both companies. After the merger, duplication will be eliminated, costs will decrease, and margins are expected to improve. Second, scale and operating leverage. By becoming a larger company, expenses such as supply chain, rent, staffing, and marketing can be better managed. Third, from a valuation perspective, this deal is considered accretive, meaning long-term value for shareholders. The picture becomes clearer when looking at the pro forma numbers for FY25 . The total number of stores after the merger will be around 3,002, including Devyani's 2,039 stores and Sapphire's 963. Total revenue could reach approximately ₹7,826 crore. Operating EBITDA is estimated to be around ₹756 crore. Gross margins will be around 9.7 percent, which is considered reasonable by industry standards.

Devyani's post-deal numbers also appear strong: revenue will jump by approximately 58 percent, EBITDA by approximately 53 percent, and the equity base will expand by approximately 46 percent.

What should investors be watching for next? Most importantly, improvements in per-store revenue and costs. Will each store show higher earnings and better margins after the merger? Second, store and format expansion plans. Third, changes in revenue mix – dine-in, A balance of delivery, brand, and geography. In terms of valuation, Devyani trades at around 17X FY27 estimated EV/EBITDA. In comparison, Jubilant Foodworks is trading at around 23X, Westlife at 18.5X, and Sapphire at around 14X. This means Devyani's valuation isn't overly expensive right now. Future triggers for the sector are also interesting. Demand recovery after GST 2.0, potential transactions at Restaurant Brands, and the potential listing of names like Curefoods, Subway, and Wow Momo could further accelerate the QSR space.