Devyani International Set For 30% Upside On Sapphire Merger Says Motilal Oswal — Check Rating, Target Price

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Motilal Oswal Report

Motilal Oswal expects Devyani International Ltd. to unlock significant scale and synergy benefits through its proposed merger with Sapphire Foods India Ltd., consolidating Yum! Brands’ India operations under a single listed entity.

The merger will be executed via a share swap, with 177 Devyani International shares issued for every 100 Sapphire shares and is expected to be completed by FY27.

Before the scheme becomes effective, Sapphire’s promoter, Sapphire Foods Mauritius, will divest its ~18.5% equity stake in Sapphire to Devyani International’s group company, Arctic International

The combined entity will operate ~3,000 stores and generate annualized revenue of ~Rs 7,800 crore, positioning it among India’s largest QSR players alongside Jubilant FoodWorks.

Motilal Oswal highlights that the merger will deliver recurring annual synergies of ~Rs 220 crore, driven by lower operating costs for Pizza Hut, rationalization of corporate overheads, and procurement efficiencies. About 60% of these synergies (~Rs 110 crore) are expected to be realized in the first year post-merger, with full benefits accruing from the second year onward.

Valuing the merged entity at 25x EV/Ebitda (pre-Ind AS) on FY28E, Motilal Oswal reiterates its Buy rating on Devyani International with a target price of Rs 180, implying a 30% upside.

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