Please refer to important disclosures at the end of this report
1
Sapphire Foods India Limited (SFIL) was incorporated on November 10, 2009.
Sapphire Foods is YUM’s largest franchisee operator in the Indian subcontinent
with revenue from operations of ₹1,340 crore and ₹1,020 crore for the financial
years 2020 and 2021, respectively. Company’s association with Yum started in
2015 and they presently have the non-exclusive rights to operate restaurants
under 3 of YUM’s leading brands, namely, the KFC, Pizza Hut and Taco Bell
brands in the Territories. As of June 30, 2021, they owned and operated 209
KFC restaurants in India and the Maldives, 239 Pizza Hut restaurants in India,
Sri Lanka and the Maldives, and 2 Taco Bell restaurants in Sri Lanka. Total
number of restaurants are 450 as of June 30, 2021.
Positives: (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.
Investment concerns: (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).
Outlook & Valuation:
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.
Key Financials
Y/E March (Rs cr)
FY2020
FY2021
1QFY21
1QFY22
Net Sales
1,340
1,020
111
303
% chg
12.3
(23.9)
-
173.0
Net Profit
(158)
(98)
(75)
(26)
% chg
431.7
309.9
-
-
OPM (%)
6.8
12.2
(7.9)
11.2
EPS (Rs)
(29.8)
(18.7)
-
-
P/E (x)
-
-
-
P/BV (x)
11.9
13.0
-
RoE (%)
-
-
-
RoCE (%)
-
-
-
EV/Sales (x)
5.1
6.7
-
EV/EBITDA (x)
74.8
54.6
-
Angel Research; Note: Valuation ratios based on pre-issue outstanding shares and at upper end
of the price band
SUBSCRIBE
Issue Open: Nov 09, 2021
Issue Close: Nov 011, 2021
Offer for Sale: `2,073cr
QIBs 75%
Non-Institutional 15%
Retail 10%
Promoters 50.0%
Public 50.0%
Fresh issue: Nil
Issue Details
Face Value: `10
Present Eq. Paid up Capital: `52.8cr
Post Issue Sha reholding Pattern
Post Eq. Paid up Capital: `63.5cr
Issue size (amount): `2,073cr
Price Band: `1,120-1,180
Lot Size: 12 shares
Post-issue mkt.cap: `7,117*– 7,498cr**
Promoter holding Pre-Issue: 60.1%
Promoter holding Post-Issue: 50.0%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Amarjeet S Maurya
+022 39357600, Extn: 6831
[email protected]
Sapphire Foods India Limited
f
IPO Note | Food & Beverage
November, 08, 2021
Sapphire Foods India Ltd | IPO Note
November 8, 2021
2
Company background
Sapphire Foods India Limited was incorporated on November 10, 2009. Sapphire
Foods is YUM’s largest franchisee operator in the Indian subcontinent with revenue
from operations of ₹1,340 crore and ₹1,020 crore for the financial years 2020 and
2021, respectively.
Company’s association with Yum started in 2015 and they presently have the non-
exclusive rights to operate restaurants under 3 of YUM’s leading brands, namely,
the KFC, Pizza Hut and Taco Bell brands in the Territories.
They are also Sri Lanka’s largest international QSR chain in terms of revenue for
the financial year 2021 (with revenue of ₹190 crore representing 35% of the total
market revenue) and number of restaurants operated as of March 31, 2021 (with
68 restaurants representing 39% of the total number of outlets in the market). They
have also established a presence in the Maldives.
As of June 30, 2021, they owned and operated 209 KFC restaurants in India and
the Maldives, 239 Pizza Hut restaurants in India, Sri Lanka and the Maldives, and 2
Taco Bell restaurants in Sri Lanka. Total number of restaurants are 450 as of June
30, 2021.
Issue details
Sapphire Foods India is raising ₹2,073cr through offer for sale by the company’s
shareholder.
Exhibit 1: Pre and post IPO shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
38,173,680
60.1%
31,752,208
50.0%
Public
25,368,861
39.9%
31,790,333
50.0%
Total
63,542,541
100.0%
63,542,541
100.0%
Source: Source: RHP, Note: Calculated on upper price band
Objectives of the Offer
Carry out the offer for sale of up to 1.75cr equity shares by the selling
shareholders,
Achieve the benefits of listing the equity shares on the stock
exchanges, and
Enhancement of company’ s brand name amongst existing and
potential customers and creation of a public market for equity shares
in India.
Sapphire Foods India Ltd | IPO Note
November 8, 2021
3
Exhibit 2: Consolidated Income Statement
Y/E March (` cr)
FY2019
FY2020
FY2021
Net Sales
1,194
1,340
1,020
% chg
12.3
(23.9)
Total Expenditure
1,155
1,249
895
Raw Material
395
432
310
Personnel
208
229
196
Others Expenses
553
589
390
EBITDA
39
91
124
% chg
136.5
36.4
(% of Net Sales)
3.2
6.8
12.2
Depreciation& Amortisation
74
191
209
EBIT
(36)
(100)
(85)
% chg
179.7
(15.3)
(% of Net Sales)
(3.0)
(7.5)
(8.3)
Interest & other Charges
18
72
76
Other Income
10
11
62
(% of PBT)
(22.4)
(7.0)
(62.4)
Share in profit of Associates
-
-
-
Recurring PBT
(44)
(161)
(99)
% chg
269.6
(38.7)
Tax
1
(2)
1
(% of PBT)
(2.5)
1.1
(1.2)
PAT (reported)
(45)
(159)
(100)
Basic EPS (`)
(8.5)
(29.8)
(18.7)
% chg
252.7
(37.5)
Source: Company, Angel Research
Sapphire Foods India Ltd | IPO Note
November 8, 2021
4
Consolidated Balance Sheet
Y/E March (` cr)
FY2019
FY2020
FY2021
SOURCES OF FUNDS
Equity Share Capital
43
50
53
Reserves& Surplus
429
474
427
Shareholders Funds
472
524
480
Total Loans
96
646
645
Deferred Tax Liability
17
12
11
Total Liabilities
587
1,182
1,134
APPLICATION OF FUNDS
Net Block
719
1,161
1,084
Capital Work-in-Progress
21
21
30
Investments
-
16
27
Current Assets
355
186
208
Inventories
38
47
48
Sundry Debtors
22
5
8
Cash
186
39
50
Loans & Advances
16
74
75
Other Assets
92
20
28
Current liabilities
508
202
215
Net Current Assets
(153)
(16)
(7)
Deferred Tax Asset
-
-
-
Total Assets
587
1,182
1,134
Source: Company, Angel Research
Sapphire Foods India Ltd | IPO Note
November 8, 2021
5
Consolidated Cash Flow Statement
Y/E March (` cr)
FY2019
FY2020
FY2021
Profit before tax
(44)
(161)
(99)
Depreciation
74
191
209
Change in Working Capital
(1)
18
15
Interest / Dividend (Net)
8
62
70
Direct taxes paid
(4)
(3)
(3)
Others
12
105
(38)
Cash Flow from Operations
47
213
154
(Inc.)/ Dec. in Fixed Assets
(174)
(142)
(73)
(Inc.)/ Dec. in Investments
(161)
140
(5)
Cash Flow from Investing
(335)
(2)
(78)
Issue of Equity
0
0
44
Inc./(Dec.) in loans
66
(82)
(18)
Dividend Paid (Incl. Tax)
0
0
0
Interest / Dividend (Net)
216
(126)
(78)
Cash Flow from Financing
281
(208)
(52)
Inc./(Dec.) in Cash
(7)
3
25
Opening Cash balances
30
15
17
Closing Cash balances
22
17
42
Source: Company, Angel Research
Sapphire Foods India Ltd | IPO Note
November 8, 2021
6
Key Ratios
Y/E March
FY2019
FY2020
FY2021
Valuation Ratio (x)
P/E (on FDEPS)
-
-
-
P/CEPS
209.8
194.3
57.0
P/BV
13.2
11.9
13.0
EV/Sales
5.1
5.1
6.7
EV/EBITDA
159.2
74.8
54.6
EV / Total Assets
10.5
5.8
6.0
Per Share Data (Rs)
EPS (Basic)
(8.5)
(29.8)
(18.7)
EPS (fully diluted)
(8.5)
(29.8)
(18.7)
Cash EPS
5.6
6.1
20.7
Book Value
89.4
99.3
90.9
Returns (%)
ROCE
-
-
-
Angel ROIC (Pre-tax)
-
-
-
ROE
-
-
-
Turnover ratios (x)
Asset Turnover (Net Block)
1.7
1.2
0.9
Inventory / Sales (days)
12
13
17
Receivables (days)
7
1
3
Payables (days)
39
40
57
Working capital cycle (ex-cash) (days)
(20)
(26)
(37)
Source: Company, Angel Research
Sapphire Foods India Ltd | IPO Note
November 8, 2021
7
Research Team Tel: 022 - 39357800
E-mail: research@angelbroking.com
Website: ww.angelone.in
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Disclosure of Interest Statement
1.Financial interest of research analyst or Angel or his Associate or his relative No
2.Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives No
3.Served as an officer, director or employee of the company covered under Research No
4.Broking relationship with company covered under Research No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15%)
Hold (Fresh purchase not recommended)