The initial public offering of Sapphire Foods, the largest franchise operator of YUM in the Indian subcontinent is all set to hit the markets tomorrow and will be open for subscription till 11th November 2021.
The 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 as of 31st March 2021.
The proceeds from the Sapphire Foods IPO would be used for expansion of the company’s restaurant chains and food outlets.
Some quick facts about the Sapphire Foods:
Price band of Sapphire Foods IPO
The price band for the Sapphire Foods is between Rs. 1,120-1,180 per share.
Lot size
The minimum lot size is of 12 shares.
Issue size
The issue size for Sapphire Foods is Rs. 2,073 crores.
Listing date
Shares of Sapphire Foods are expected to be listed around 22nd November 2021.
Key strengths and opportunities
- Sapphire Foods ranks as the largest franchise operators of YUM brand in India and operates the largest QSR chain in Sri Lanka.
- In terms of revenue the company ranked number one as franchise operator in the Indian subcontinent.
- The company has a strong focus on delivering a delightful customer experience.
- The company has exceptional quality control measures in place which has helped it to achieve operational excellence.
- The QSR chain density in the country at mere 18 outlets per million of urban population is very low as compared to 765, 270 and 318 in USA, UK and Malaysia respectively.
- Rising incomes among India’s middle class and young population, offers huge potential for scalability of the business.
- The QSR chain sub-segment is the fastest growing sub-segment within the organized food services market in India, with its value estimated to increase at approximately 23% CAGR from Rs. 188.00 billion in FY2020 to Rs. 534.00 billion in FY2025.
- Change in consumer shift among Indians towards healthy and branded options in food in post-pandemic world is likely to benefit companies operating in the QSR segment.
- Sapphire foods is a well-managed company with an experienced management team.
Key factors to keep in mind while investing in Sapphire Foods IPO:
In its Red Herring Prospectus, the company has listed some factors which may impact the future performance of the company, such as:
The outbreak of the COVID-19 pandemic in the year 2020 and the measures taken by governments to reduce the spread of the pandemic had affected the company’s restaurant operations across India, Sri Lanka and Maldives resulting in temporary shutdowns, reduced restaurant-level operations and dining room closures. In case the COVID-19 crisis continues or worsens the company’s cash flows may be affected.
The company reported restated loss for the year after tax of Rs. 998.97 million, Rs. 1,592.47 million and ₹Rs. 694.04 million for the financials years 2021, 2020 and 2019. The company plans to grow its business by opening a number of new stores every year and expect to report losses until such time as these new restaurants mature and the company is able to apportion corporate-level expenses across a larger number of restaurants.
The QSR industry where the company operates is highly competitive. Besides competition with international QSR chains operating in India, Sri Lanka and Maldives, such as McDonalds, Burger King, Domino’s Pizza and Subway, there is also intense competition from local restaurants and restaurant chains.
To invest in the Sapphire Foods here.
– Written and contributed by Pradeep Sukumaran.
