Sapphire Foods IPO: Subscribe rating by Angel One - Positives, investment concerns, outlook and valuation

Sapphire Foods IPO: Yum Brands franchise partner Sapphire Foods India has come out with an IPO aiming to raise up to Rs 2,073 crore. The initial share-sale will open on November 9 and conclude on November 11.  Sapphire Foods India has said it has fixed a price band of Rs 1,120-1,180 a share for its Rs 2,073-crore initial public offering (IPO).

Sapphire Foods India, which operates KFC and Pizza Hut outlets in India, Sri Lanka and the Maldives, has already raised Rs 474 crore of primary funds through the private placement, which will fund its expansion plans.

Stockbroker firm Angel One in its IPO Note for Sapphire Foods IPO has given SUBSCRIBE rating. 

Listing out positives of Sapphire Foods IPO, Angel One said, "(a) YUM's largest franchise operator in the Indian subcontinent in terms of revenue (b) Portfolio of well recognized global brands across spectrum (c) Scalable business model (d) Experienced Board and senior management team. Sapphire Foods India is scouting for inorganic growth opportunities besides the organic one in the existing markets."

Talking about investment concerns of Sapphire Foods IPO, Angel One said, "(a) SFIL is making continuous losses on bottom-line front, hence profit concerns remain; (b) Slowdown in the economy could impact the overall revenue of the company (discretionary in nature)."

On Outlook & Valuation of Sapphire Foods IPO, Angel One, says, "In terms of valuations, the post-issue FY21 EV/Sales works out 7.4x to (at the upper end of the issue price band), which is low compared to its peers Devyani International (FY21 EV/Sales -16.3x). Further, Sapphire Foods India has a better revenue per store compared to Devyani International. On the EBITDA front, the company is continuously showing improvement. Considering all the positive factors, we believe this valuation is at reasonable levels. Thus, we recommend a subscribe rating on the issue."

Sapphire Foods IPO will be entirely an offer for sale (OFS) of 1,75,69,941 equity shares by promoters and existing shareholders.

JM Financial, BofA Securities, ICICI Securities and IIFL Securities are the lead managers to the company's public issue. The equity shares of the company will be listed on BSE and NSE.