Devyani International Narrows Q2 Loss as CCI Clears Sapphire Foods Merger

Devyani International, which runs KFC and Pizza Hut outlets in India, reported on Monday that its second-quarter loss narrowed sharply as strong same-store sales at KFC offset higher raw material costs. The company said its consolidated net loss fell to 2.4 million rupees, equivalent to about 25,301 dollars, from a loss of 218.9 million rupees a year earlier. Its shares rose as much as 5.8 percent on the news and were trading 4.3 percent higher at 125.6 rupees by late morning in Mumbai.

The result lands in the same week that India's competition regulator cleared a separate but related transaction. The Competition Commission of India approved the proposed merger of Sapphire Foods India Limited into Devyani International, a combination registered under case number C-2026/09/1467. The approval also covers certain related transactions, and the regulator said a detailed order would follow.

What the quarter showed

Devyani, a franchisee of US-based Yum Brands, said same-store sales at its KFC outlets rose 4.4 percent, marking the third straight quarter of growth. Revenue climbed 10.4 percent to 15.19 billion rupees, while expenses rose 8.3 percent. Consolidated gross margin declined 60 basis points from the previous quarter but rose 70 basis points from a year earlier to 68.5 percent.

Quick-service chains in India have leaned on discounts and value meals to draw cost-conscious diners as competition from newer local entrants intensifies. The company also said restaurants have faced higher input costs, from raw materials to energy, since the conflict in the Middle East began. The operator said it remains on track to meet its full-year forecast of 200 to 220 net new store additions.

Chairman Ravi Jaipuria said in a statement that with food inflation firming and interest rates beginning to rise, discretionary spending is expected to stay under pressure. Those pressures matter for the quick-service restaurants sector, where margins depend on food costs, energy bills and the pace of new store openings, all of which shape hiring at outlet level.

The merger picture

Both Devyani and Sapphire Foods operate KFC and Pizza Hut restaurants in India. Sapphire's latest quarterly results, for the period ended September 30, 2026, showed restaurant sales of 885.3 crore rupees, up 20 percent from 740.1 crore rupees a year earlier. Consolidated adjusted EBITDA rose 39 percent to 62.4 crore rupees, and adjusted profit before tax excluding exceptional items was 12 crore rupees, compared with a loss of 4.3 crore rupees in the year-ago quarter.

Sapphire added 15 KFC restaurants during the quarter, along with one Pizza Hut outlet in Sri Lanka, taking its total network to 1,086 restaurants as of September 30, 2026. Net additions were 12 outlets, against 23 in the same period last year. KFC was the main growth contributor, with revenue up 26 percent and same-store sales up 14 percent, while Pizza Hut recorded 7 percent revenue growth and 5 percent same-store sales growth, its strongest in seven quarters.

What to watch next

The detailed merger order is the next marker for how the combined business will be structured and what it means for the two companies' restaurant networks, franchise agreements and staff. Analysts will also track whether value-led promotions keep drawing price-sensitive customers if food inflation continues to firm and interest rates rise.

For workers, the quarter points to steady expansion rather than retrenchment, with store additions continuing on plan and KFC staffing at new outlets tied to the rollout. Restaurant operators' ability to pass cost increases into menu prices while keeping traffic will determine whether hiring at the outlet level holds pace into the holiday season and beyond.