Sapphire Foods India IPO | Swastika Blog - Share Market Updates, Latest News and Expert's Tips | Swastika Investmart Ltd (Swastika Investmart) Swastika

Sapphire Foods India IPO

Sapphire Foods India limited one of YUM’s franchisee operators in the Indian subcontinent. They are also Sri Lanka’s largest international QSR chain, in terms of revenue. Company 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. They operate their restaurants in high traffic and high visibility locations in key metropolitan areas and cities across India and develop new restaurants in new cities as part of their brand and food category expansion. 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 employs YUM brand’s global online and digital channel solutions to enhance customer experience and achieve operational efficiency and financial control.

  • Food services is a key segment in the Indian economy, with a market size of US$26.8 billion in the financial year 2021 growth of the food services sector in India is expected to grow more.
  • Company’s franchisee Arrangement also provides 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 or regional promotions, while meeting YUM’s global
    quality assurance standards.
  • The organized market, consisting of chain and organized standalone outlets, is expected to increase its share in the food services market in India from 37.8% in financial year 2020 to 51.3% in financial year 2025,

Outlook & Valuation:

The Company recorded a loss of Rs (99.89) cr. in the financial year FY21 against a loss of Rs (159.25) cr. in the previous year FY20. Revenue from operations in the same period declined to Rs 1,019.62 cr. in FY21 from Rs 1,340.41 cr. in FY20 due to the Covid-19 crisis. The issue is priced at a P/BV of 14.63 based on its NAV of Rs. 80.67 as of June 30. Sapphire Foods is a Leading quick-service restaurant brand with a large market presence and size. Their initial public offer will be a pure offer for the sale of its equity shares; also the company is loss-making in the last three financial years. The company aims to break even in the near future. We are in a bull run of IPO’s where new edge businesses are on the front seat. IPO euphoria might lead to listing gain as the IPO is arriving at a P/S of 7x which is half to its
peers however we expect the peers to outperform Sapphire Food over the long run. Thus we assign a “SUBSCRIBE” rating with a cautious
view.

KEY MANAGERIAL PERSONNEL

  • Sanjay Purohitis the Whole Time Director and Group CEO of the Company. He has over 30 years of work experience across consumer product categories including food and apparel retail, packaged food, and paints.
  • Sunil Rewachand Chandiramani is the Chairman and Independent Director of the Company. He has experience of over 29 years and has worked in the field of accounting and advisory services.
  • Sumeet Subhash Narang is a Non-Executive Director of the Company as a nominee of Sapphire Foods Mauritius Limited.
  • Manish Mehta is a Non-Executive Director of the Company as a nominee of Sapphire Foods Mauritius Limited. He has experience of over 17 years.
  • Vikram Ranjan Agarwal is a Non-Executive Director of the Company as a nominee of QSR Management Trust for the past 13 years and has worked in the field of private equity.
  • Kabir Kishin Thakur is a Non-Executive Director of the Company. He has experience of over 14 years
  • Deepa Gopalan Wadhwa is an Independent Director of the Company.
  • Anu Ram Aggarwal is an Independent Director of the Company.

COMPETITIVE STRENGTHS

  • Leading QSR brands with a substantial market presence and scale
  • Strong relationship with YUM
  • Continuous focus on delivering great customer experience
  • Operational excellence
  • Scalable new restaurant economic model for expansion
  • Great place to work led by experienced management team and backed by institutional capital

KEY CONCERNS

  • Company reported loss for the last three financial years and may incur additional losses in the future.
  • The Coronavirus disease (COVID19) pandemic has substantially affected and may continue to affect the business
  • Company will not receive any proceeds from the Offer for Sale. The Selling Shareholders will receive the net proceeds from the Offer for Sale.
  • Company incurred indebtedness and may incur additional indebtedness in the future which could affect their ability to obtain future financing or pursue any growth strategy.
  • There are material outstanding legal proceedings involving the Company, Subsidiaries, and Directors…

DISCLAIMER:
The information contained herein are strictly confidential and are meant solely for the information of the recipient and shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written permission of Swastika Investmart Ltd. (‚SIL‛). The contents of this document are for information purpose only. This document is not an investment advice and must not alone be taken as the basis for an investment decision. Before taking any decision to invest, the recipient of this document must read carefully the Red Herring Prospectus (‚RHP‛) issued to know the details of IPO and various risks and uncertainties associated with the investment in the IPO of the Company. All recipients of this document must before acting on the given information/details, make their own investigation and apply independent judgment based on their specific investment objectives and financial position. They can also seek appropriate professional advice from their own legal and tax consultants, advisors, etc. to understand the risks and investment considerations arising from such investment. The investor should possess appropriate resources to analyze such investment and the suitability of such investment to such investor’s particular circumstances before making any decisions on the investment. The Investor shall be solely responsible for any action taken based on this document. SIL shall not be liable for any direct or indirect losses arising from the use of the information contained in this document and accept no responsibility for statements made otherwise issued or any other source of information received by the investor and the investor would be doing so at his/her/its own risk. The information contained in this document should not be construed as forecast or promise or guarantee or
assurance of any kind. The investors are not being offered any assurance or guaranteed or fixed returns on their investments. The users of this document must bear in mind that past performances if any, are not indicative of future results. The actual returns on investment may be materially different than the past. Investments in Securities market products and instruments including in the IPO of the Company are highly risky and they are generally not an appropriate avenue for someone with limited resources/ limited investment and low risk tolerance. Such Investments are subject to market risks including, without limitation, price, volatility and liquidity and capital risks. Therefore, the users of this document must carefully consider all the information given in the RHP including the risks factors before making any investment in the Equity Shares of the Company.

Swastika Investmart Ltd or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither Swastika Investmart Ltd nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Swastika Investment Ltd may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the Subject Company or third party in connection with the Research Report.

CORPORATE & ADMINISTRATIVE OFFICE – 48, Jaora Compound, M.Y.H. Road, Indore – 452 001 | Phone 0731 – 6644000
Compliance Officer: Ms. Sheetal Duraphe Email: compliance@swastika.co.inPhone: (0731) 6644 241
Swastika Investmart Limited, SEBI Reg. No. : NSE/BSE/MSEI: INZ000192732 Merchant Banking: INM000012102 Investment Adviser: INA000009843 MCX/NCDEX: INZ000072532
CDSL/NSDL: IN-DP-115-2015 RBI Reg. No.: B-03-00174 IRDA Reg. No.: 713.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *