scorecardSapphire Foods will capture the wave of change in eating habits, say analysts
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Sapphire Foods will capture the wave of change in eating habits, say analysts

Sapphire Foods will capture the wave of change in eating habits, say analysts
Stock Market4 min read
  • Sapphire Foods India IPO opens today and will close on November 11.
  • The IPO consists of a pure offer for sale of 1.75 crore shares by existing shareholders and promoters.
  • Analysts believe riding on strong brands, fine dine experience and focus on delivery strength the company is well positioned to capture the new age wave of change in eating habits
  • Moreover, shares of the company are demanding a premium of ₹125 in the grey market.
Sapphire Foods India, the operator of KFC and Pizza Hut outlets, has opened its initial public offering (IPO) for investors to subscribe today, November 9.

The company is the largest franchisee of Yum! Brands in the Indian subcontinent. Besides, the company is backed by marquee investors such as Samara Capital, Goldman Sachs, CX Partners and Edelweiss.

As of June 2021, the company 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.

Here is what brokerages recommend for the IPO:
Brokerages

Rating

Canara Bank Securities

Subscribe

KR Choksey

Subscribe

Choice Broking

Subscribe with caution

Analysts believe the company is well positioned to capture the new age wave of change in eating habits.

“Riding on strong brands, fine dine experience and focus on delivery strength the company is well positioned to capture the new age wave of change in eating habits. The quick service restaurant (QSR) segment is expected to witness a significant rebound in the coming years driven by the economic recovery of the country and improvement in the purchasing power of consumers,” said brokerage firm KR choksey while recommending a ‘subscribe’ rating to the IPO.

IPO may attract more number of investors as the shares of the company are demanding a premium of ₹125 in the grey market, according to IPO Watch.

Analysts at Canara Bank Securities has also recommended a subscribe rating to the IPO as it says, “The company has been optimising its stores by reducing its space as a part of its cost saving strategy. Although the bottom line of the company is negative, it is positive at the operating level with an operating margin of 12-14% in FY19-21 backed by a strong balance sheet.”

Meanwhile, analysts at Choice Broking recommend to subscribe with caution as it is concerned about the company’s profitability as it has been incurring continuous losses.

“While valuation seems reasonable compared to peers, we are concerned about business profitability due to higher likelihood of continuing incurring losses in the coming fiscals. Additionally, the company has a short operating history as it started franchise operations with YUM brands in 2015,” said the brokerage firm.
Particulars

January-March

April-June

Revenue

₹313 crore

₹108 crore

Profit

-₹26 crore

-₹99 crore


Meanwhile, most of Sapphire Foods’ peers have performed well in the 2021 so far.

Peer company

Market cap

% returns in 2021

Devyani International

₹17,797 crore

20%

Jubilant Foodworks

₹50,905 crore

38%

Westlife Development

₹9,196 crore

32%

Burger King India

₹6,217 crore

-6%

Sapphire Foods

₹7,498 crore

-


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