Devyani International Limited — Q2 FY26 earnings call

Call held 6 Jan 2026

Management summary

The call focused exclusively on the landmark merger between Devyani International and Sapphire Foods, aimed at creating a unified franchise partner for Yum! Brands in India. Management highlighted significant scale advantages, including a 3,000+ store footprint and ₹8,000 crore revenue base. The strategy centers on turning around the Pizza Hut brand through unified marketing, technology, and supply chain control, supported by a 10-year incentive package from Yum! Brands.

Highlights

  • Announced merger of Devyani International (DIL) and Sapphire Foods India (SFIL) to create a QSR giant with 3,000+ stores globally.

  • Merged entity expected to generate approximately ₹8,000 crore in annualized turnover.

  • Net cost synergies estimated between ₹210 crore and ₹225 crore annually.

  • Share swap ratio fixed at 177 shares of Devyani for every 100 shares of Sapphire.

  • One-time merger fee of ₹320 crore to be paid to Yum! Brands, which will be capitalized.

  • RJ Corp (Promoter) to acquire 18.5% stake in SFIL from Sapphire Foods Mauritius at a floor price of ₹280 per share.

  • Targeting low double-digit brand contribution margins for Pizza Hut in the first year post-merger.

  • Synergy realization timeline: 60% in Year 1 post-merger and 100% by Year 2.

Concerns

  • Negative Same-Store Sales Growth (SSSG) at Pizza Hut

Key financials

  1. Annualized Merged Revenue ₹8,000 Cr
  2. Net Synergies ₹210 Cr
  3. One-time Merger Fee ₹320 Cr
  4. Promoter Stake Floor Price ₹280

What they filed

Q1 FY27: revenue up 8.9%, net profit up 36.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue836 873 801 917 871 +4%906 +4%879 +10%999 +9%
EBITDA146 146 137 151 131 −10%158 +8%144 +5%169 +12%
Net profit1 4 -13 6 -14 −1505%-12 −385%-13 +4%9 +37%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Merged Entity (Pro-forma)
    3,000 units Store Count₹8,000 Cr Annualized Turnover

Guidance & targets

Margin

  • Pizza Hut Brand Contribution Margin Margin · Year 1 post-merger · Medium confidence Low double-digit
    Our endeavor will be to be at a low double digit given what we have as part of the deal and negotiation with Yum!

    — Manish Dawar, CFO

Other

  • Synergy Realization (Year 1) Other · Year 1 post-merger · High confidence 60%
    Our estimate is that number will be close to 60%. And in the second year, we will be able to realize the balance amount of synergies.

    — Manish Dawar, CFO

  • Merger Completion Timeline Other · FY27 · Medium confidence 9-15 months
    As you know that the entire merger approval process is going to take about 12 months' time, so it could be anywhere from 9 months to 15 months.

    — Manish Dawar, CFO

  • Yum! Incentives Duration Other · Next 10 years · High confidence 10 years
    So, Gaurav, we have incentives for a period of 10 years.

    — Manish Dawar, CFO

Risks & concerns

  • Negative Same-Store Sales Growth (SSSG) at Pizza Hut

    high

    Pizza Hut has faced negative SSSG for several quarters, leading to margin erosion; turnaround depends on successful restructuring and new marketing.

    Both acknowledged

  • Regulatory Approval Delays

    medium

    The merger requires CCI and NCLT approvals, with a projected timeline of 9-15 months.

    Management acknowledged

  • Integration of Technology and Supply Chain

    medium

    DIL must build internal capabilities to manage tech stacks and SCM that were previously handled by the franchisor.

    Analyst acknowledged

Areas of evasion (3)

  • Specific quarterly business performance (due to silent period)
  • Exact gross synergy numbers vs net
  • Specific store-level data for Sapphire

Q&A highlights

2 direct
Organizational Capabilities in Tech and Marketing Direct
For Pizza Hut, we will be taking over marketing and innovation, and we will be taking over technology and supply chain function as well.

Confirms DIL is shifting from a pure operator to managing core brand functions, which requires significant new capability building.

Asked by Devanshu Bansal, Emkay Global

Promoter-to-Promoter Transaction Details Direct
RJ Corp can maintain a significant shareholding in the combined entity... and that number will be 18.5% out of the remaining 25% [of SFIL Mauritius stake].

Explains the bilateral deal needed to satisfy Yum! Brands' promoter shareholding criteria while avoiding a cash-out from the listed entity.

Asked by Jignanshu Gor, Bernstein

Synergy Breakdown and Gross vs Net Partial
We feel confident that we will be able to deliver these synergies by way of G&A, by way of additional Yum! incentives, by way of additional negotiations on the procurement costs.

Reveals that the ₹210-225cr synergy figure is net of the new costs DIL will incur by taking over functions previously managed by Yum!.

Asked by Percy Panthaki, IIFL Securities

2 min read 5 chapters

Detailed narrative

Strategic Consolidation of Yum! Brands in India

The merger of Devyani International and Sapphire Foods creates a unified powerhouse for Yum! Brands (KFC, Pizza Hut) in India. By combining, the entity eliminates the '3-way approach' between the franchisor and two separate franchisees, allowing for a single, well-capitalized partner with national rights. The merged entity will operate over 3,000 stores globally with an annualized turnover of ₹8,000 crore, positioning it to capture the projected $25 billion QSR market in India.

Synergy Roadmap and Cost Management

Management has identified net synergies of ₹210 crore to ₹225 crore, primarily driven by G&A optimization, procurement negotiations, and additional incentives from Yum!. These synergies are expected to be realized progressively, with 60% achieved in the first year post-merger and 100% by the second year. Notably, these figures are net of the additional costs DIL will bear as it takes over marketing, innovation, and technology functions for Pizza Hut.

Pizza Hut Revival Strategy

A core focus of the merger is turning around the Pizza Hut brand, which has struggled with negative SSSG and low margins. DIL has negotiated full flexibility with Yum! to shut underperforming stores and relocate units, provided the net store count does not decrease. The company is targeting a move from current low margins to low double-digit brand contribution margins in the first year, eventually aiming for margins closer to KFC's performance.

Promoter Shareholding and Transaction Structure

The transaction involves a share swap of 177 DIL shares for every 100 SFIL shares. To satisfy Yum! Brands' requirement for a strong promoter presence, RJ Corp will bilaterally acquire an 18.5% stake in SFIL from Sapphire Foods Mauritius at a floor price of ₹280 per share. This ensures RJ Corp remains the controlling shareholder of the merged entity while Sapphire Foods Mauritius ceases to be a promoter.

Technology and Supply Chain Integration

DIL is aggressively building internal capabilities to manage technology and supply chain functions previously handled by Yum!. The company has already shortlisted a global technology vendor to create a common tech stack across all brands, including a new web and app interface. This transition is expected to be completed by June 2026, well before the merger's final approval, to demonstrate operational readiness to the franchisor.

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