

The Rs 2,073-crore initial public offering (IPO) by KFC and Pizza Hut operator Sapphire Foods is set to hit the primary market on Tuesday. The company has fixed a price band of Rs 1,120-1,180 for the IPO. The issue will close on Thursday.
Retail investors can bid for a minimum of one lot of 12 shares and up to a maximum of 14 lots. At the upper price band, one lot of shares of Sapphire Foods will cost Rs 14,160. Here are the top five things you should know about the issue before subscribing:
About the company: Sapphire Foods India was incorporated on November 10, 2009. The company is YUM's largest franchisee operator in the Indian subcontinent with revenue from operations of Rs 1,340 crore and Rs 1,020 crore for financial years 2020 and 2021, respectively.
It is also Sri Lanka's largest international QSR chain in terms of revenue and number of restaurants operated as of March 31, 2021. It also has presence in the Maldives. The company has differentiated product offerings with KFC, Pizza Hut and Taco Bell as a market leader in chicken, pizza and Mexican-inspired food, respectively.
As of June 30, 2021, Sapphire Foods 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. The total number of restaurants stood at 450 as of June 30, 2021.
Objective of the issue: The company aims to carry out the offer for sale of up to 1,75,69,941 equity shares. Its objective is to achieve the benefits of listing the equity shares on the stock exchanges.
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Valuations: Brokerages have given a 'Subscribe' rating to the issue, considering its reasonable valuation. Marwadi Shares and Finance said, "We assign "Subscribe" rating to the IPO as the company is a leading QSR brand with a substantial market presence and has scalable new restaurant economic model for expansion. Also, it is available at reasonable valuation as compared to its peers."
It further added that the company is going to list at an EV/EBITDA of 41.38 with a market capitalisation of Rs 7,498 crore, while its peers, namely Jubilant FoodWorks and Westlife Development, are trading at an EV/EBITDA of 49.26 and 73.55, respectively.
Angel Broking also has a 'Subscribe' rating on the issue. "In terms of valuations, the post-issue FY21 EV/Sales works out 7.4 times (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 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," the brokerage said.
Grey market premium: Abhay Doshi, founder of UnlistedArena.com, told BusinessToday.in that shares of Sapphire Foods India are available at a premium of Rs 145 in the unlisted market.
Investment concerns and key financials: According to Angel Broking, Sapphire Foods is making continuous losses, hence profit concerns remain. It further added that a slowdown in the economy could impact the overall revenue of the company (discretionary in nature).
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