The Competition Commission of India (CCI) has approved the proposed merger of Sapphire Foods India with Devyani International, clearing a major regulatory hurdle for combining two of India’s largest KFC and Pizza Hut franchise operators.
The transaction will bring their Indian KFC and Pizza Hut operations under a single corporate structure, with Devyani International as the surviving company. However, CCI approval does not mean the merger is completed. Other statutory and procedural approvals, including the National Company Law Tribunal process, remain necessary.
CCI Approves Devyani-Sapphire Merger
The CCI approved the proposed combination at its October 30, 2026 meeting. The decision was announced through a government release on October 31.
The transaction involves the merger of Sapphire Foods India Limited into Devyani International Limited, along with certain related arrangements.
Both companies operate restaurants under the KFC and Pizza Hut brands in India. Their consolidation is expected to create a larger quick-service restaurant (QSR) platform with a unified operating structure.
Devyani International is part of the RJ Corp group and also operates Costa Coffee, New York Fries and Sanook Kitchen in India, alongside its homegrown restaurant brands.
Sapphire Foods operates KFC and Pizza Hut restaurants in India and also has operations in Sri Lanka, where it runs Pizza Hut and Taco Bell outlets.
The merger is intended to combine their restaurant operations, improve coordination and strengthen their ability to compete in India’s organised food services market.
How the Share-Swap Deal Works
The companies announced the merger agreement on January 1, 2026.
Under the proposed scheme of arrangement, Devyani International will issue 177 equity shares for every 100 shares held in Sapphire Foods.
This means Sapphire shareholders will receive shares in Devyani International in exchange for their existing holdings, subject to the approved scheme and its completion.
The transaction also includes a separate arrangement involving Arctic International, a Devyani group company, which will acquire approximately 18.5% of Sapphire Foods’ paid-up equity share capital from its existing promoters. The agreement provides an option to assign this stake to a mutually agreed financial investor.
The merger is designed to consolidate the two companies rather than operate them as separate listed restaurant businesses.
Combined Entity Could Generate ₹8,000 Crore in Annualised Revenue
The merger is expected to create one of India’s largest organised restaurant operators.
According to the companies’ earlier announcement, the combined business is expected to operate more than 3,000 restaurants globally and generate annualised revenue of approximately ₹8,000 crore.
The combined scale could help the company improve efficiency across several business functions.
| Business area | Expected benefit |
|---|---|
| Procurement | Greater purchasing scale and improved supplier negotiations |
| Supply chain | More coordinated distribution and inventory management |
| Marketing | Unified campaigns and improved brand execution |
| Technology | Shared platforms and operational systems |
| Restaurant operations | Better coordination and standardised processes |
| Product innovation | Faster development and introduction of new offerings |
These are expected operational benefits rather than savings already achieved.
The companies have also projected annual synergies of approximately ₹210 crore to ₹225 crore from the second full year of combined operations. The savings are expected to come primarily from improved scale, cost management and operational efficiencies.
KFC Expansion and Pizza Hut Revival Are Key Priorities
The merger is expected to support different strategic priorities for the two restaurant brands.
For KFC, the focus will be on accelerating expansion and strengthening its position in India’s competitive chicken-based QSR market.
For Pizza Hut, the priority is to improve business performance through stronger marketing, product innovation, technology and supply chain management.
The combined platform could help the operator coordinate promotions, pricing strategies and product launches across a wider restaurant network.
This is particularly relevant for Pizza Hut, which has faced pressure from changing consumer preferences and competition from established pizza chains and delivery-focused brands.
The companies believe a unified operating structure can improve decision-making and create a more consistent customer experience across outlets.
Why the Merger Matters for India’s QSR Industry
India’s quick-service restaurant market has attracted investment from domestic and international brands as urbanisation, food delivery and organised dining expand.
However, restaurant operators also face several challenges:
- Rising food and ingredient costs.
- Higher employee and rental expenses.
- Competition from online food delivery platforms.
- Discounting and promotional pressure.
- Changing consumer spending patterns.
- The need to maintain profitability while expanding store networks.
Combining two large franchise operators could give Devyani greater bargaining power with suppliers and improve the economics of managing a large restaurant network.
It could also help the company deploy technology and marketing investments across a larger number of outlets.
The transaction is taking place as India’s restaurant industry experiences consolidation and companies look for ways to improve profitability rather than relying only on store expansion.
What Happens to Sapphire Foods’ Sri Lanka Business?
Sapphire Foods also operates restaurants outside India, including Pizza Hut and Taco Bell outlets in Sri Lanka.
The merger’s main strategic objective is to consolidate the companies’ KFC and Pizza Hut operations in India.
The treatment of Sapphire’s overseas business and related corporate arrangements will depend on the final scheme and associated transaction documents.
This distinction is important because the merger does not simply combine every restaurant operated by the two companies into one undifferentiated business. The corporate structure and franchise rights across different territories remain subject to their respective agreements.
CCI Approval Is Not the Final Step
Although the competition regulator has cleared the proposed combination, the merger must still complete other applicable regulatory and statutory procedures.
These include the relevant National Company Law Tribunal process and other required approvals under the scheme of arrangement.
The companies had earlier indicated that the full approval process could take approximately 12 to 15 months from the announcement of the transaction.
The CCI’s approval means the competition review has progressed, but the merger cannot be treated as legally completed until the remaining requirements are satisfied.
The detailed CCI order was also awaited following the regulator’s announcement.
The Bigger Picture
The Devyani-Sapphire merger represents a major consolidation in India’s organised food services industry. Bringing two large KFC and Pizza Hut franchise operators under one corporate structure could create a stronger platform for expansion, procurement, technology investment and marketing.
The deal also reflects a wider shift in the QSR industry, where scale and operating efficiency are becoming increasingly important as restaurant companies face rising costs and intense competition.
However, the expected benefits will depend on how effectively the combined business integrates operations, manages its restaurant network and improves the performance of individual brands. A larger footprint alone does not guarantee higher profitability.
Looking Ahead
The immediate focus will be on completing the remaining statutory and regulatory procedures, including the NCLT process. Investors will also watch for the detailed CCI order, updates on the share-swap arrangement and the timeline for completing the merger. Until these steps are finished, Devyani International and Sapphire Foods will continue to operate as separate listed companies.
Once completed, the combined business could have greater bargaining power, a wider restaurant network and more resources to support KFC expansion and Pizza Hut’s turnaround in India. The key test will be whether the projected annual synergies of ₹210 crore to ₹225 crore translate into measurable improvements in operating margins and profitability.
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