Sapphire–Devyani Share Swap: How Your Capital Gains Will Be Calculated

Sapphire Foods is merging with Devyani International through a tax-neutral share swap. Shareholders will receive 177 Devyani shares for every 100 Sapphire shares. No capital gains tax is due at the time of this exchange.

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When news broke that Sapphire Foods India will merge with Devyani International, thousands of small investors had the same worry: "Will the taxman knock on my door now?" The short answer is not immediately. But the way your capital gains will be calculated later is something you must clearly understand today.

What Exactly Is Happening in This Merger?

Under the proposed scheme:

• For every 100 shares of Sapphire Foods, you will get
• 177 shares of Devyani International.

After the merger, Sapphire Foods shares will disappear from your demat account and be replaced by Devyani shares.

This merger will combine major Yum! Brands franchises like KFC and Pizza Hut under one listed company.

Relief for Investors: No Tax at the Time of Merger

Here's the biggest relief.

This merger qualifies as a tax-neutral transaction under the Income Tax Act.

That means:

• You do not pay capital gains tax when your Sapphire shares are swapped for Devyani shares.
• Tax is payable only when you sell the Devyani shares in the future.

So the exchange itself won't trigger any tax bill.

How Your Cost Price Will Be Recalculated

Your investment value stays the same, only the number of shares changes.

Let's take a simple example

• You bought 100 Sapphire Foods shares at Rs 300 each
• Total investment = Rs 30,000

After the merger, you receive 177 Devyani shares.

So your new cost per Devyani share becomes:

Rs 30,000 ÷ 177 = Rs 169.49 per share

Whenever you sell Devyani shares, capital gains will be calculated using Rs 169.49 as your cost price.

Good News: Your Holding Period Carries Forward

Your time holding Sapphire Foods shares will not reset.

• If you held Sapphire shares for over 12 months, your Devyani shares will automatically qualify as long-term assets.

Current tax rules:

• LTCG: 12.5% on gains above Rs 1.25 lakh per year
• STCG: 20%

What You Must Keep Safe

Even though no tax is due now, one mistake can cost you later.

Make sure you preserve:

• Your original Sapphire Foods purchase price
• Your purchase date
• Your 177:100 conversion details

These records will decide how much tax you pay when you eventually sell.