Sapphire Foods IPO Review – Is it good or bad for investment?
Sapphire Foods IPO (Sapphire Foods India Limited IPO) Details
Mumbai based Sapphire Foods is coming up with IPO that would open for subscription on 9th November 2021. Sapphire Foods India is one of the YUM brand’s largest franchise operator in the Indian subcontinent in terms of revenue as of FY2020. It is in similar business like Devyani International which came up with IPO few months back. Should you invest in Sapphire Foods IPO? What are the risk factors in this IPO? Let me do IPO review and indicate whether investors should buy this IPO or not.
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About Sapphire Foods India Limited
Company is one of the YUM’s franchisee operators in the Indian subcontinent. Company is also Sri Lanka’s largest international QSR chain based on revenue for FY21.
Company have also established a presence in the Maldives. Company owns and operates 209 KFC restaurants in India and Maldives, 239 Pizza Hut restaurants in India, Sri Lanka and Maldives and Two Taco Bell restaurants in Sri Lanka as of end of June, 2021.
Company has franchisee arrangement with YUM allows them to operate, on a non-exclusive basis, under the KFC brand and several states in India and across the Maldives, the Pizza Hut brand in several states in India and across Sri Lanka and Maldives.
Company franchisee arrangement also provides them with a right to use YUM’s system and system property covering all aspects of business operations, as well as the flexibility to undertake, with YUM’s approval, local and regional promotions, while meeting YUM’s global quality assurance standards.
Sapphire Foods IPO details
|IPO Opening Date||09-Nov-21|
|IPO Closing Date||11-Nov-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 10 per equity share|
|IPO Price band||Rs 1120 to Rs 1180 per equity share|
|Lot Size||12 Shares|
|Min Order Quantity||12 Shares|
|Listing at||BSE and NSE|
|Issue Size||Rs 2,073.25 Crores|
|Book Running Lead Managers||ICICI Securities, IIFL Securities, BoFA Securities India and JM Financial Consultants|
Sapphire Foods IPO RHP Prospectus
What are Sapphire Foods strengths?
1) Company is one of India’s largest restaurant franchisee operators and Sri Lanka’s largest international QSR chain
2) It is YUM’s largest franchise operator in the Indian subcontinent in terms of revenue
3) Its focus on delivering excellent customer experience
4) Good Quality control and operational excellence
5) It has scalable business model
6) Company with experienced management team with robust corporate governance practices
What are the Objects of the Offer?
Sapphire Foods IPO Size is Rs 2,073.25 Crores and entire proceeds are offered through Offer for Sale (OFS) by selling shares holders. Company would not get any money from this IPO proceeds.
Who is the promoter of Sapphire Foods India Limited?
QSR Management Trust and Sapphire Foods Mauritius Limited are the company promoters.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years.
|Financial Year ending / Period ending (Amt in Mns)|
|Particulars||FY19||FY20||FY21||Qtr ending 30-Jun-21|
|Profit After Tax||-694.0||-1,592.5||-999.0||-264.0|
Why to invest in Sapphire Foods IPO?
Here are the positive factors in this company.
1) Company is one of India’s largest restaurant franchisee operators and Sri Lanka’s largest international QSR chain. Company is YUM’s largest franchise operator in India subcontinent and owns 209 KFC restaurants in India and Maldives, 231 Pizza House restaurants in India, Sri Lanka and Maldives and 2 Taco Bell Restaurants in Sri Lanka.
2) Company has stable revenue growth. It generated revenue of Rs 1,206.2 Crores, Rs 1,351.7 Crores and 1,081.2 Crores for FY19, FY20 and FY21. Its FY21 revenues are low and can be attributed due to covid.
Risk Factors in Sapphire Foods IPO
1) Company has been incurring losses in the last 3 financial years and for quarter ending June, 2021. As per RHP company indicated that “it may continue to incur additional losses in future” too.
2) Covid-19 pandemic has substantially affected and may continue to affect its business in future too.
3) Company may suffer uninsured losses or experience losses exceeding its limits and they may have to make payments to cover its uninsured losses.
4) Company have had negative cash flows for quarter end June, 2021 and in FY21, FY20 and FY19. Company may have negative cash flows in the future too.
5) The IPO issue is only for offer for sale and proceeds would go to selling shareholders only. Company would NOT get single rupee from this issue.
6) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Sapphire Foods IPO dates for subscription, Allotment and Listing
|Finalization of Allotment||16-Nov-21|
|Initiation of Refunds||17-Nov-21|
|Credit to Demat Account||18-Nov-21|
|IPO Shares Listing Date||22-Nov-21|
Is Sapphire Foods IPO Price is underpriced or overpriced?
Sapphire Foods share price band is Rs 1,120 to Rs 1,180 per share.
Company has been incurring losses in the last 3 years and for Q1 FY22. Hence, we cannot compute P/E ratio and would not be able to indicate whether the issue price is underpriced or overpriced.
What is Sapphire Foods IPO Grey Market Premium?
GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about IPO price as it is unorganized market.
Currently Sapphire Foods IPO GMP is not available as there are no trading’s happening as of the day of writing the article.
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Sapphire Foods India Limited IPO – Review and Conclusion
You might be wondering, should I buy Sapphire Foods IPO or not?
Sapphire Foods India is one of India’s largest restaurant franchisee operators and Sri Lanka’s largest international QSR chain.
Company is generating stable revenues in the last few years. FY21 revenues are lower and we can attribute it to due to covid-19 pandemic.
Company has been incurring losses in the last 3 years and for Q1 FY22.
Since it is incurring losses, we cannot ascertain whether the IPO price is underpriced or overpriced.
Currently there is IPO craze and I am sure even this company would get oversubscribed.
Considering all these parameters, investors should stay away from such IPOs as of now.
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Thank you for the analysis
(To buy or not to buy)
This decision would probably rest &/or be solely determined by the price at which Devyani International & Burger King stock’s shall be traded during the IPO period/dates of Sapphire Foods India.