About Sapphire Foods IPO

Strengths

• Experienced promoters: The company’s promoters have years of experience in the industry and boast of a proficient team. Collectively, they help the company draw effective strategies and operational plans.
• Brand presence: As discussed, Sapphire Foods enjoys a robust brand presence in the food and restaurant business. It hosts brand names such as KFC, Taco Bell, and Pizza Hut under its banner. This helps the company generate returns by leveraging the success and popularity of the restaurant chains under its name.
• Geographically diversified presence: Sapphire Foods enjoys a global presence. Its operations are mostly active in regions of Sri Lanka, Maldives, and India. So, even when business is slower in one part of the world, the company continues to generate earnings from the other regions. The same logic is also applicable to its variety of restaurant chain outlets under its name.
• Robust financial standing: Sapphire Foods has a robust financial standing. The company’s financial profile is characterised by substantial revenue growth, low working capital requirements, and convenient capitalisation.
• Scalable business model: The company follows a scalable, pro-expansion business model.

Weaknesses 

• Success depends on brands’ popularity: KFC, Pizza Hut, and Taco Bell are some of the most popular global food chains that come under the umbrella of this company. While the popular brands draw in the most revenue, it also makes this company over-dependent on the success of the brands under its banner.
• Exposure to project execution risk: Sapphire Foods intends to grow its geographical presence. However, to increase its store count, the company needs to have access to a suitable location. Additionally, it needs timely access to capital to execute the same. Often gaining access to these makes it challenging for Sapphire Foods to undertake a new project and execute it as per plan.

Opportunities 

• Growth and expansion: With enhanced earnings and better financial standing, Sapphire Foods could help executive expansion plans effectively. The company could emerge successful in adding restaurant chains in newer locations down the road.
• Inclusion of new brand: By adding more international restaurant brands under its umbrella, Sapphire Foods can expand its brand value and channels of earnings. Also, by initiating ventures in other countries, it could increase its market presence and customer base.

Threats 

• Increased competition: This company is exposed to intense competition from organised and unorganised players such as Burger King, Dominos, and McDonald’s. In such a set up maintaining sustainable growth and increasing profit margin is immensely challenging.
• Inherent industry risk: A large share of the company's revenue comes from KFC. However, its sales are often influenced by external factors such as the supply of chicken or outbreaks of diseases like bird flu. Also, recently with the outbreak of a pandemic, the food and dining sector suffered heavily. As a result, the revenue-generating capability of Sapphire Foods also suffered. This indicates that inherent industry risks and uncontrollable situations make this company susceptible to staggering returns.