SAPPHIRE FOODS IPO

IPO Details:

Price Band: 1120-1180

Cutoff Price: 1180

About Company:

Sapphire Foods is one of YUM’s franchisee operators in the Indian subcontinent. They are also Sri Lanka’s largest international QSR chain, in terms of revenue for the financial year 2021 and number of restaurants operated (with 68 restaurants representing 39% of the total number of outlets in the market). Sapphire has also established a presence in the Maldives. Company owned and operated 209 KFC restaurants in India and the Maldives, 239 Pizza Hut restaurants in India, Sri Lanka and the Maldives, and two Taco Bell restaurants in Sri Lanka.

Competitive Strengths:

1. Leading QSR brands with a substantial market presence and scale.

2. Strong relationship with YUM.

3. Continuous focus on delivering great customer experience.

4. Operational excellence.

5. Scalable new restaurant economic model for expansion.

6. Great place to work led by an experienced management team and backed by institutional capital.

Strategies:

1. Accelerate conversion from unorganized food services to the brands.

2. Pursue inorganic growth.

Financial Performance:

Revenue in FY21 had reduced and this might be because of pandemic and lockdown. Still if we see, company is not profitable. Checking Price to Earning Ratio would be meaningless here. Company's Price to Book value is 14.

Objects of the Issue:

The Net Proceeds from the Issue are proposed to be utilised in the following manner:

1. Offer for Sale

Competitors Comparison:

Sapphire Foods seems to be undervalued after comparing it with the Devyani International.

Grey Market Premium:

Our view: GMP of the IPO is good but the company is not profitable and also valuation seems to be high. I won't subscribe to this IPO.

Disclaimer: Views are shared for an educational purpose. Please consult your financial advisor or planner before taking any action based on the views or facts shared on this blog.

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