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IPO-Note Sapphire Foods India Limited
Rs 1120 – Rs 1180 per Equity share Recommendation: Listing Gain

Company Profile: –

Sapphire Foods is YUM’s largest franchisee operator in the Indian subcontinent. The company’s association with Yum started in 2015 and they presently have the non-exclusive rights to operate restaurants under 3 of YUM’s leading brands, namely, the KFC, Pizza Hut and Taco Bell brands in the Territories.

As of June 30, 2021, they owned and operated 209 KFC restaurants in India and the Maldives, 239 Pizza Hut restaurants in India, Sri Lanka and the Maldives, and 2 Taco Bell restaurants in Sri Lanka. Total number of restaurants are 450 as of June 30, 2021.

Sapphire Foods India Limited IPO- Details

Issue Details
Objects of the issue · Carry out the offer for sale of up to 17,569,941 equity shares by the selling shareholders;

·Achieve the benefits of listing the equity shares on the stock exchanges, and

·Enhancement of company’s brand name amongst existing and potential customers and creation of a public market for equity shares in India.

Issue Size Total issue Size -Rs. 1968 Cr-Rs. 2073 Cr.

No. of shares- 17,569,941 share.

Face value Rs.10.00 Per Equity Share
Issue Price Rs. 1120 – Rs. 1180
Bid Lot 12 shares
Listing at  BSE, NSE
Issue Opens: 9th Nov, 2021 – 11th Nov, 2021
QIB 75% of Net Issue Offer
Retail 10% of Net Issue Offer
NIB 15% of Net Issue Offer

Sapphire Foods India Limited IPO

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Sapphire Foods India Limited IPO

Application Form

Sapphire Foods India Limited IPO Financial Performance:

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Sapphire Foods India Limited IPO Shareholding Pattern:

Shareholding Pattern Pre- Issue Post Issue
Promoters 51.36% 41.25%
Promoters Group  8.72% 8.72%
Public (Other) 39.92% 50.03%
Source: RHP, EWL Research

Sapphire Foods India Limited IPO Strengths:

  • YUM’s largest franchise operator in the Indian subcontinent in terms of revenue.

  • One of India’s largest restaurant franchisee operators and Sri Lanka’s largest international QSR chain.

  • Continuously working on improving their new restaurant economic model

  • Focus on delivering excellent customer experience

  • Experienced management team with robust corporate governance practices.

Sapphire Foods India Limited IPO Key Highlights:

  • Revenue from operations declined at a CAGR of -7.6% between FY19-FY21.

  • Differentiated product offerings with KFC, Pizza Hut and Taco Bell as a market leader in chicken, pizza and Mexican-inspired food, respectively;

  • Company able to report free cash flow of Rs 70.08/80.09cr during FY20/FY21 respectively.

  • Company has negative Return on Equity of 22.16% as on 31st March, 2021.

  • CFO/EBITDA stands at 0.75 as on 30th June, 2021.

  • Sapphire Foods has a lower debt to equity ratio of 1.82 as of FY21 as compared to 6.5 times of Devyani (another operator of KFC & Pizza Hut outlets as a non-exclusive franchisee of the Yum! Brand).

Sapphire Foods India Limited IPO Risk Factors:

  • It may not be able to achieve profitability in the near term.

  • Extremely competitive markets.

  • 3rd wave of COVID-19 pandemic may adversely affected their ability to open new restaurants and expand their restaurant network temporarily.

Outlook:

Sapphire Foods is a well-established QSR player in India with operating rights for KFC & Pizza Hut. Company aspire to be India’s best restaurant operator by serving customers great food with great experience at great value. Company would be able to capture the growth owing to metro lifestyle and outside food habits. The Indian QSR industry has grown at a CAGR of 3% in the last five years to US$40 bn in 2020. Further, it is likely to grow at a higher rate of 10% to become ~US$65 bn industry by 2025. At the higher price band of Rs 1180, the offer is priced at a market cap to FY21 sales of around 7 times. Devyani is valued at 15.5 times currently.  We recommend Listing Gain to the IPO considering the growth drivers and risk factors.

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