A big shakeup is about to come in the Indian fast-food industry. KFC and Pizza Hut, which increase the appetite of Indian customers, now the companies behind them are going to unite. This mega merger will not only change the equation of the Quick Service Restaurant (QSR) sector, but may also increase the problems of giants like McDonald’s and Domino’s. The announcement of merger of Sapphire Foods India Limited with Devyani International Limited has created a stir in both the market and the industry.
Big decision of parent companies of KFC-Pizza Hut
According to the information given by the company, Sapphire Foods, the operator of KFC and Pizza Hut, will now merge with Devyani International. This is the same Devyani, which already operates many big QSR brands in India. Under this deal, Devyani will issue 177 shares for every 100 shares of Sapphire. The combined company formed after the merger is expected to get an annual synergy of Rs 210-225 crore from the second full year.
Why did this merger become necessary?
Actually, the fast-food sector in India is under pressure these days. Due to inflation and rising cost of living, people are cutting back on eating out and ordering food online. This has had a direct impact on the sales and profits of restaurants. Both Sapphire and Devyani companies have reported rising expenses and losses in the September quarter. In such a situation, this merger is considered important to reduce costs, increase scale and improve profits.
Why will tension increase between McDonald’s and Domino’s?
After completion of the merger, Devyani International will become one of the largest QSR operator companies in India. The entire Indian franchise rights of KFC and Pizza Hut will be with the same company. Apart from this, the company’s presence in international markets like Sri Lanka will also be strengthened. This is sure to increase competition pressure on McDonald’s (Westlife Foodworld) and Domino’s (Jubilant FoodWorks).
Approval will take time
However, this deal will not be completed immediately. For this, approval from stock exchange, CCI, NCLT, shareholders and lenders is required. This process may take about 12 to 15 months. The merger will become effective only after approval is received.
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