VSapphire Foods IPO plans to raise Rs. 1,895 crores from its public offer which opens on 1st Sept. and closes on 3rd Sept. 2021. The price band is Rs. 522 – 531 per share. Vijaya Diagnostics IPO is entirely an offer for sale by promoters Karakoram Ltd., Kedaara Capital Alternative Investment Fund and S Surendranath Reddy. The OFS will dilute promoters and shareholders’ stake in this company by 35%.

Sapphire Foods IPO Details:

Issue Opens9th November, 2021
Issue Closes11th November, 2021
Issue DetailsOfs 17,569,941 Equity Shares
Issue Size (₹ Cr)₹ 1,968 – 2,073 Cr
Bid Lot12 Shares
Price Band₹ 1,120 – 1,180
Issue Structure : 
QIB75% of the offer 
NIB15% of the offer (  311 Cr)
Retail10% of the offer ( 1,756,994 Shares, ₹ 207 Cr)
Applications for 1x Retail ~ 1.5 Lacs

Sapphire Foods IPO Review: Presentation Video

Updates :

  • ANCHOR ISSUE: A

•Sapphire Foods allocated 79,06,473 equity shares to 53 anchor investors at Rs 1,180 a piece, aggregating to Rs 933 crore.

•Anchor investors include names like Government of Singapore, Monetary Authority of Singapore, Fidelity Funds, Abu Dhabi Investment Authority, Morgan Stanley Asia (Singapore) Pte, ICICI Prudential Life Insurance Company, Bajaj Allianz Life Insurance Company and Sundaram Mutual Fund (MF), and HDFC Mutual Funds among others participated in the anchor allotment.

About Sapphire Foods IPO

  • Sapphire foods is one of the largest YUM franchisee operators in the Indian subcontinent.
  • Company is also Sri Lanka’s largest international QSR chain in terms of revenue for the financial year 2021 as also number of restaurants operated as of March 31, 2021.
  • As of June 30, 2021, company owned and operated 209 KFC restaurants in India and the Maldives, 239 Pizza Hut restaurants in India, Sri Lanka, and the Maldives, nd two Taco Bell restaurants in Sri Lanka.
  • The issue constitutes 27.65% of the post issue paid-up capital of the company.
  • •The holding company, Sapphire Foods Mauritius, an entity promoted by Samara Capital is participating In OFS.
  • Other Sellers in OFS include various PE Funds and Edelweiss.

Financials:

Particulars / (₹ In Cr)Jun 21 (3m)Jun 20 (3m)2021(12)2020(12)2019(12)
Revenue from Operations303.051111,019.621,340.411,193.82
Revenue Growth (%)173.02%-23.93%12.28%
EBITDA42.72-0.44178.74185.6148.68
Adj. EBITDA9.35-34.3338.1866.1943.46
Net Loss for the period-26.4-75.17-99.9-159.25-69.4
NAV (₹ )80.6782.7484.1697.384.9
Debt Equity Ratio0.210.150.160.140.24
Post issue Equity Shr Capital63.54    
FV10
IPO Price1180
Market Cap in cr.7498
Market cap / Sales7.4

Salient Points

  • Operates mainly in West and South India.
  • PizzaHut in 11 states and KFC in 10 states.
  • Company has been optimizing its stores by reducing its space as part of its cost saving strategy.
  • The bottom line of the company is negative, but its it is positive at the operating level with an operating margin of 12-14% in FY19-21
  • Company claims to be among top 3 QSR vendors in country in terms of performance

Cons

  • The company had negative cash flows & is not in profit.
  • Company say 5-6% royally for Yum Brands
  • Franchisee agreement has been renewed but could face issues in future.
  • There may be increased competition in the QSR chain sub-segment
  • The company made a preferential allotment few months back at almost half the price to some PE Investors (mainly promoters).

Comparison with Peers

Company / Rs. In CrSales FY21Sales TTMOPM %PriceP/BVMcap Cr.Mcap/SalesFV
Westlife Develop9861313.8210.3658920.791927.02
Jubilant Food.3312411725.03387329.95111812.410
Devyani Intl.11351173.5416.6915033.81802615.41
Burger King4946066.851629.23621710.310
Sapphire Foods 1020 12.211808.3874987.410

Sapphire Foods IPO: Assessment

  • Sapphire Foods, an omni-channel restaurant operator and the largest franchisee of Yum Brands in the  Indian sub-continent.
  • It is backed by marquee investors such as Samara Capital, Goldman Sachs, CX  Partners and Edelweiss.
  • KFC is no1. chicken brand globally, PizzaHut is No. 2 brand in the country.
  • Devyani’s 692 stores generated 1135 cr in FY21, while Sapphire’s 437 stores generated 1081 cr in sales.
  • Sapphire’s stores are generating more revenue per store..
  • OPM of Devyani International is better but Sapphire is picking up.
  • Professional management with strong backing of PE funds and professional Board. •Young company started in 2014-16 and has grown fast and demonstrated ability to scale up.
  • If we compare with existing players and their valuations, the IPO pricing is not totally out of line. However a market meltdown due to excess number of IPOs poses a risk.
  • There is not much excitement in the market like the one witnessed in Devyani International IPO.  Thus tread with care.
  • Current  reported GMP at about Rs. 100-120 is a sign of shakiness in market.
  • Iam neutral or slightly positive on the company and there is fair chance that I may put in some application in this IPO.
  • This view will be negated if there is poor response to the IPO from QIB investors.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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