Sapphire Foods India Limited IPO Review

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Sapphire Foods Limited India is the largest and the leading franchise operator of the worldwide famous YUM brand in the country. The company is also Sri Lanka’s largest QSR chain engaged in international business. The company is the owner and the operator of 204 KFC restaurants present in India, Maldives. It also operates another 231 restaurants in India for Pizza Hut. The company also operates these restaurants in Sri Lanka and the Maldives. The company also has a facility of 2 restaurants of Taco Bell in Sri Lanka. The company is backed by marquee investors such as Goldman Sachs, Samara Capital, Edelweiss, and CX Partners. In this article, we take a closer look at the Sapphire Foods IPO Review and its possible future prospects. 

The company works on a model of an in-house supply chain management system. It is also operational and functional in work associated with the vendor partners for logistics, food ingredients, warehousing, and packaging. The company has the facility of warehouses in 5 Indian cities. The company, in its prospectus, has claimed that it is looking forward to expanding its business operations by building technology solutions for its restaurants. Sapphire Foods employs global online and digital channel solutions of the YUM brand. It helps them enhance their customer experience and the achievement of operational efficiency with proper financial control. The company has its restaurants of all the franchises: high population density areas, high traffic, and high visibility locations.

OBJECTS OF THE IPO ISSUE:

  • Prepayment of all the loans of the company, which be availed on a consolidated basis. 
  • To meet corporate targets. 
  • To fund the working capital requirement.   

BASIS OF THE SAPPHIRE FOODS IPO OFFER:

  • The company is engaged in the business of a quick-service restaurant. It is the leading brand in the sector with a large and wide market share.
  • The company has a strong business association and relations with the YUM brand. 
  • The company is focused on providing excellent customer service.
  • The company has excelled in its business operations.
  • The company has developed a scalable and economic model for new restaurants for their growth plan.
  • The company is a value company that provides a proper working environment. 
  • The company is backed by a well-qualified and experienced management team along with a strong institutional backing.

SAPPHIRE FOODS IPO DETAILS:

Sapphire Foods India limited is a company with its headquarters in Mumbai. The company is the operator of many KFC and Pizza Hut Outlets in the country. Also, Sapphire Foods holds control of some of the food outlets of Taco Bell. Recently the company submitted their DRHP with the SEBI. The company is currently waiting to get the approval of SEBI to float its IPO in the market. The IPO of the company is a pure OFS based IPO. The company will not be issuing any new equity shares by the launch of the IPO. The IPO is of 1,75,69,941 equity shares sold by the promoters and the company’s selling stakeholders.

 On August 10, 2021.

Through the OFS, the QSR Management Trust will offload its 8.50 lakh equity shares. In addition, Sapphire Foods Mauritius Ltd will sell their 5.57 million equity shares, while WWD Ruby will sell 4.85 million equity shares. Check Day by Day IPO Subscription Details (Live Status)

IPO Opening DateNovember 09, 2021
IPO Closing DateNovember 11, 2021
Issue TypeBook Building Type
Face ValueRs.10/ Equity share
IPO PriceRs.1120 – Rs.1180
Market Lot1 lot of 12 Equity Shares
Minimum Order Quantity12
Minimum Order Quantity PriceRs.14,160
Maximum Order Quantity14 lots corresponding to 168 Equity Shares
Minimum Order Quantity PriceRs.198,240
Listing AtBSE, NSE
Issue Size1,75,69,941 equity shares
Issue SizeRs.2073 Crores
Fresh Issue0
Offer for Sale1,75,69,941 equity shares
Basis of Allotment DateNovember 16, 2021
Initiation of RefundsNovember 17, 2021
Credit of Shares to Demat AccountNovember 18, 2021
IPO Listing DateNovember 22, 2021
Basis of Allotment Type% Of the IPO Offer
Qualified Institutional Buyer75
Non-Institutional Investor15
Retail10

STRENGTHS AND GROWTH PARAMETERS OF SAPPHIRE FOODS IPO:

  • The company’s primary strength lies with its association with the YUM Brand. It has given n the company flexibility for conducting local and regional campaigns with the association of the YUM brand.  
  • The company operates the KFC, Pizza Hut, and Taco Bell restaurants. All these restaurants provide a unique product and expertise in their different food item; KFC is a leading market player in Chicken Food items while Pizza Hut is worldwide known for Pizza. Taco Bell is highly renowned for its fresh and exotic Mexican-inspired cuisine.
  • The company recorded a sale of $26.2 billion from KFC. It also reported a sale of $11.9 billion from Pizza Hut and another $11.7 billion from Taco Bell in 2020.
  • The company registered an increase in their restaurant to 437 from 376 in the last two financial years.
  • The company is the largest company engaged in business in terms of revenue and the number of restaurants been operated.
  • The company is planning to carry out a CAPEX plan in the next two financial years. The term loan and internal accruals will fund the CAPEX.
  • The company is engaged in the business where the cash conversion to their business and the product’s sale is instant.
  • The company has adequate liquidity with an unrestricted cash balance of Rs. 76.38 Crore on their books.
  • The company has a comfortable capital structure. It is engaged in low working capital business operations.
  • The company has registered a substantial investment that was made by many known and reputed capital funds. It has received investment funding from Goldman Sachs, Samara Capital, Edelweiss, and many more. These investors infused around Rs. 681.93 Crore in terms of direct equity. They also invested another Rs.224.99 Crore in CCPS, also known as compulsorily convertible preference shares.
  • The company in FY21 until September quarter reported an operating profit. It was on account of the healthy sales been reported by the company. 

WEAKNESS AND THREATS OF SAPPHIRE FOODS IPO:

  • The COVID-19 pandemic has affected the industry badly as people have opted to shift for more homemade food. COVID-19 has also changed the consumer spending pattern, resulting in the company’s business operation being primarily affected.
  • The company registered a loss in the financial years FY19, FY20, FY21.
  • Along with its directors and their subsidiary, the company is subject to trial under a legal procedure.
  • The company is also vulnerable to the failure associated with adjustment and distinguishing the client tastes, trending taste patterns, client eating patterns, and many more.
  • The company is also vulnerable to any lack of proper strategy and execution in marketing, social media, and advertisement.
  • Specific administrative arrangements of their investors’ licensee investors’ understanding might adversely affect their organization activities. 
  • The company is engaged in the business operations in a highly competitive business. It faces immense competition from various organized and challenging competition from the unorganized players in the market.
  • The company needs to focus equally on its different outlets as the company is operating outlets for Pizza Hut, KFC, and Taco Bell. The company needs to satisfy and be at the standards of the franchise to continue its business operations.
  • The company is also vulnerable to fluctuation in the cost of packaging materials, ingredients, and other expenditures. It may hurt their margins, operating parameters, and profitability.
  • The company’s operational cash flows have remained highly under stress. It is due to the losses reported by the company. 
  • The company has repayment obligations of Rs.55 Crore on a consolidated level for the next three years. 
  • The company has registered a negative Return on Capital Employment (RoCE) since it began its operation.
  • The company also reported very modestly operating margins, high tax and depreciation expenses, and additional pressure of an ongoing CAPEX to set up new food restaurants and outlets with a facility of Drive Through.

FINANCIAL TRENDS OF SAPPHIRE FOODS INDIA LIMITED IPO:

 
ParticularsIn Crore for the respective year
31-Mar-2131-Mar-2031-Mar-19
Total Assets1,348.941,380.661,567.47
Total Revenue1,081.241,351.741,206.28
Loss After Tax99.90159.2569.40

×

PARAMETERMARCH 21MARCH 20YoY %
   Core EBITDA Margin (%)12.2013.85-11.88
   EBIT Margin (%)-2.27-6.6265.76
   Pre-Tax Margin (%)-9.68-12.0119.40
   PAT Margin (%)-9.80-11.8817.53
   Cash Profit Margin (%)10.712.39347.92
   ROA (%)-7.32-10.8032.25
   ROE (%)-20.50-35.0741.54
   ROCE (%)-4.02-16.2475.26
   Asset Turnover(x)0.750.91-17.84
   Sales/Fixed Asset(x)0.610.86-29.44
   Working Capital/Sales(x)-6.12-8.2625.94
   Receivable days2.223.68-39.84
   Inventory Days16.4311.2346.31
   Payable days49.6637.0034.24
   Net Sales Growth (%)-23.9312.28-294.90
   Core EBITDA Growth (%)-5.5324.29-122.78
   EBIT Growth (%)73.95-2499.08102.96
   PAT Growth (%)37.27-129.45128.79
   EPS Growth (%)40.29-96.86141.60

PROMOTERS:

The promoters of the company are as follows:

Sapphire Foods Mauritius Limited46.53%
QSR Management Trust5.96%
WWD Ruby18.79%.

CONTACT DETAILS:

Sapphire Foods India Limited
702, Prism Tower, A Wing, Mindspace, Link Road, Goregaon (West),
Mumbai, 400 062, Maharashtra, India.
Telephone: +91 22 6752 2343
E-mail: investor@sapphirefoods.in
Websitewww.sapphirefoods.in

REGISTRAR:

Link Intime India Private Limited
C 101, 247 Park, L. B. S. Marg
Vikhroli (West) Mumbai 400 083
Tel: +91 22 4918 6200
E-mail: sapphire.ipo@linkintime.co.in
Website: www.linkintime.co.in

LEAD MANAGER(S):

  • JM Financial Limited
  • BofA Securities India Limited
  • ICICI Securities Limited
  • IIFL Securities Limited
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