Sapphire Foods lists at 11% premium to issue price

The stock opened at ₹1311 and hit a high of ₹1383 on the BSE and gained as much as 17% intraday. 

Sapphire Foods is One of YUM’s franchisee operators in the Indian subcontinent. In the first quarter of FY22, it owned/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.

Devyani’s 692 stores generated ₹1135 crore in FY21, while Sapphire’s 437 stores generated ₹1081 crore in sales. Operationally, Sapphire’s stores are generating more revenue per store. But Sapphire’s operating profit margin was 18% versus 26% by Devyani in FY21.

For FY21, the firm reported a revenue from operations at ₹1019.62 crore versus ₹1340.41 crore a year ago. Net loss for the period stood at ₹99.89 crore against ₹159.25 crore last year. Total borrowings were at ₹75.66 crore from ₹71.20 crore last year.

“The issue is a complete OFS. The company is a replica of Devyani in terms of business and brands. The company seems relatively cheap (Sapphire’s 6.9x Price to sales looks cheaper when compared to Devyani’s 15.5x P/S which is in the exact same business) but as a whole as in the whole QSR segment, there is no margin of safety in the valuations. Also, one must note that Sapphire hasn’t shown any meaningful growth in its financials and the company is loss-making,” said Aditya Kondawar, chief operating officer, JST Investments.