Shares of Sapphire Foods India declined over 2% in early trade on Thursday, January 2, even as its proposed merger with Devyani International continued to dominate headlines. The stock was trading lower despite the broader market stability, indicating deal-specific concerns rather than sector-wide weakness.
Merger-driven selling pressure weighs on Sapphire Foods
The immediate trigger behind the decline appears to be investor reassessment of the merger economics. Under the proposed scheme, Sapphire Foods shareholders will receive 177 shares of Devyani International for every 100 Sapphire shares held. While the transaction is tax-neutral, some investors seem to be locking in gains or exiting positions ahead of the long approval timeline, which is estimated at 12–15 months.
Uncertainty around value realisation timeline
Market participants are also factoring in the time lag before synergies are realised. While brokerages expect annual synergies of Rs 210–225 crore, these benefits are projected only from the second full year after integration, not immediately post-merger. Until then, Sapphire shareholders effectively remain exposed to execution and integration risks without near-term earnings upside.
Shift in focus towards Devyani International
Brokerage commentary has largely highlighted Devyani International as the primary beneficiary of the merger, given its scale, operating leverage and continuing control as the surviving listed entity. This has led to relative preference for Devyani shares, while Sapphire Foods stock faces selling pressure as investors rotate into the merged platform rather than the outgoing entity.
Deal arbitrage and short-term profit booking
Another factor impacting Sapphire Foods is deal arbitrage activity. With the swap ratio now known, arbitrage-focused investors tend to trade Sapphire shares based on Devyani’s price movement, leading to short-term volatility. Profit booking by investors who bought Sapphire at lower levels ahead of the merger announcement has also contributed to today’s decline.
What the market is signalling
The decline in Sapphire Foods shares does not reflect a breakdown of the deal but rather market caution around valuation, timing and execution. Investors appear to be discounting the uncertainty period before merger completion and re-pricing Sapphire accordingly.
