Devyani International has taken another decisive step in strengthening its presence in India’s fast-growing food services market. The Yum Brands franchisee has announced that its board has approved the acquisition of an additional 11.4% equity stake in Sky Gate Hospitality for approximately ₹57.5 crore, a move that will make Sky Gate a wholly owned subsidiary of the company.
The transaction underlines Devyani’s intent to deepen its control over high-growth homegrown food brands at a time when competition in the organised food services space is intensifying. In this article, we will delve into Devyani International’s acquisition of Sky Gate Hospitality, its strategic implications, deal structure, financial performance, and what the move signals for India’s restaurant industry.
Credits: Financial Express
Deal Structure: Cash Plus Preference Shares
According to the regulatory filing made on 4 February, the acquisition will be executed through a combination of cash and issuance of non-convertible redeemable preference shares (NCRPS).
Devyani will pay around ₹27.5 crore in cash to Sky Gate’s promoters and founders. The remaining ₹30 crore will be settled through the issuance of 3 lakh NCRPS, each with a face value of ₹1,000, on a private placement basis.
Once the transaction is completed, Sky Gate Hospitality—already a subsidiary—will become 100% owned by Devyani International, simplifying ownership and strategic decision-making.
Sky Gate’s Brand Portfolio and Growth Story
Sky Gate Hospitality operates a portfolio of well-known food brands, including Biryani by Kilo, Goila Butter Chicken, and The Bhojan. These brands have carved out a strong niche in India’s premium delivery-led and casual dining segments, benefiting from changing consumer preferences and rising demand for branded regional cuisine.
The company reported a consolidated turnover of about ₹277 crore in FY25, up from ₹268 crore in FY24 and ₹218 crore in FY23, excluding revenue from Krazy Kebab Co. and Peanutbutter and Jelly Pvt. Ltd. The steady rise in revenue highlights Sky Gate’s ability to scale despite a challenging operating environment for food service companies.
As of 31 December 2025, Sky Gate’s paid-up share capital stood at approximately ₹23.36 lakh, according to the filing.
Capital Restructuring on the Cards
Alongside the acquisition, Devyani’s board has approved a reclassification of its authorised share capital, subject to shareholder and regulatory approvals. This will involve reducing the number of equity shares in the authorised capital while increasing the value and structure of preference share capital.
The proposed changes will require an amendment to the capital clause of the company’s memorandum of association. Devyani said it will seek shareholder approval through a postal ballot, with a separate notice to be issued in due course.
Financial Performance: Mixed Signals in Q3
The acquisition announcement comes at a time when Devyani International is navigating mixed financial signals. For the third quarter, the company reported a net loss of ₹10.3 crore, wider than the ₹0.5 crore loss recorded in the same period last year.
Revenue, however, showed resilience, rising 11.3% year-on-year to ₹1,441 crore, up from ₹1,294.4 crore. Operating performance also improved, with Ebitda increasing 8.3% to ₹231 crore from ₹213.3 crore a year earlier. That said, margins edged lower to 16% from 16.5%, reflecting cost pressures and continued investments in expansion.
Credits: MarcaMoney
Transaction Details and Timeline
The acquisition has been classified as a related-party transaction, given Sky Gate’s existing subsidiary status. However, Devyani clarified that the deal is being conducted on an arm’s length basis. No government or regulatory approvals are required for the transaction.
The preference shares issued as part of the deal will carry a nominal dividend of 0.001% and will be redeemable within 10 years from the date of allotment, at a premium determined by the board and the allottee based on predefined parameters.
Devyani expects to complete the acquisition by 31 March 2026, marking a significant milestone in its strategy to consolidate ownership of fast-scaling Indian food brands while continuing to expand its core quick-service restaurant business.
