Sapphire Foods IPO : Subscribe or NOT?

The data has been compiled from various sources and might have small difference but overall theme is to subscribe or not — we will focus on that

Sapphire foods IPO-Sapphire Foods India is YUM brand’s largest franchise operator in the Indian subcontinent in terms of revenue as of FY’20. It is also Sri Lanka’s largest international QSR chain in terms of revenue for FY’ 2021 and the number of restaurants operated as of March 31, 2021. .

Business — Company owned and operated 204 KFC restaurants in India and the Maldives, 231 Pizza Hut restaurants in India, Sri Lanka and the Maldives, and 2 Taco Bell restaurants in Sri Lanka.The company has an in-house supply chain function and works with vendor partners for food ingredients, packaging, warehousing, and logistics. The company operates warehouses across 5 Indian cities and has invested in building technology solutions in their restaurants. The company operates its restaurants at high traffic and high visibility locations in key metropolitan areas and cities across India and develop new restaurants in new cities as part of its expansion strategy.

Region of Operation -It serves clients in India and Srilanka with KFC, Pizza hut and Taco bell outlets

Offer purpose — The IPO comprises a complete offer for sale of 2000 cr. Proceeds will not go company

Risks —

Decreasing revenues from same stores

Operating losses continuing

High competition

Strength

One of India’s largest restaurant franchisee operators and Sri Lanka’s largest international QSR chain
YUM’s largest franchise operator in the Indian subcontinent in terms of revenue
Focus on delivering excellent customer experience
Quality control and operational excellence
Scalable business model
Experienced management team with robust corporate governance practices.

Future

Company has been working to reduce costs on multiple fronts like store size etc which is yet to show up in financials. Similarly Increasing delivery revenues and opening new stores, driving same store sales growth is a work in progress. Model is scalable and with demographic advantage, it should be able to sustain and turnaround over a long period

Valuations

Valuations are comparable to peers and lower wrt some peers in this bull marlet. Looking in isolation, valuations are not attractive though

Should we apply?

Long term investors need to wait and watch company progress before investing.

Risk takers can apply for IPO and exit on listing gains if any

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