UBS has maintained its buy rating on Devyani International with a target price of ₹190 per share, following the announcement of the Devyani–Sapphire Foods merger, which the brokerage believes will deliver meaningful scale benefits and execution efficiencies over time.
Under the proposed merger terms, Devyani will issue 177 shares for every 100 shares of Sapphire Foods, creating a significantly larger and more streamlined quick service restaurant (QSR) platform. UBS noted that the merger is strategically compelling, as it brings together complementary store networks, brand portfolios and operating capabilities under a single structure.
UBS estimates that the combined entity could generate annual synergies of around ₹210–225 crore from the second year of operations, driven by procurement efficiencies, better leverage of fixed costs, streamlined supply chains and improved store-level execution. The brokerage believes that these synergies could materially enhance margins and cash flow generation over the medium term.
The merger is also expected to simplify organisational structures and decision-making, enabling faster rollout of new stores and more consistent execution across regions. UBS highlighted that Devyani, with its existing scale and operational expertise, is likely to emerge as the primary beneficiary of the consolidation, strengthening its competitive positioning in the Indian QSR market.
While integration risks and near-term execution challenges cannot be ruled out, UBS believes the long-term benefits outweigh the risks. The brokerage sees the merger as a positive structural development that enhances Devyani’s growth runway, improves operating efficiency and supports sustained earnings growth.
UBS continues to view Devyani as well placed to capitalise on India’s expanding organised food services market, supported by favourable demographics, rising urban consumption and increasing preference for branded QSR offerings.
Disclaimer: The views and recommendations above are those of UBS. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
