India’s fast-food scene is about to shake things up. Two major players, Sapphire Foods and Devyani International, announced their merger in a deal worth $934 million. This move aims to create a powerful franchise network in the world’s most populous country.
With rising costs and stiff competition from giants like McDonald’s and Domino’s, fast-food franchisees in India are facing challenges. Many consumers are cutting back on non-essential spending, which impacts same-store sales.
Under the new agreement, Devyani will swap 177 of its shares for every 100 shares of Sapphire. They anticipate achieving annual synergies of around 2.1 to 2.25 billion rupees (about $23 to $25 million) starting in the second year post-merger.
Combined, these companies manage over 3,000 outlets in India and abroad, covering popular brands like KFC and Pizza Hut. However, both are currently operating at a loss. Independent consumer goods expert Akshay D’Souza notes that if they can harness even half the expected synergies, they could turn things around and become profitable.
In their financial reports for the quarter ending September, Sapphire’s costs jumped by 10% to nearly 7.68 billion rupees, while Devyani’s expenses surged by 14.4% to around 14.08 billion rupees. Devyani also reported a net loss of 219 million rupees, a stark turn from a small profit last year. Sapphire saw even larger losses, with a net loss of 127.7 million rupees compared to a smaller loss of 30.4 million rupees the previous year.
As consumer habits evolve, the food industry must adapt. Mergers like this might be one way to navigate these changes, but only time will tell how successful they will be.
For a deeper understanding of the fast-food industry’s trends in India, check out the data shared by the National Restaurant Association.
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Restaurants,Business,Food and drink,Yum! Brands Inc,Devyani International Ltd,Sapphire Foods India Ltd,business news
