Sapphire Foods IPO subscribed 6.6 times on strong QIB, retail interest

The initial public offering (IPO) Sapphire Foods India saw nearly 7 times more demand than the shares on offer. The qualified institutional buyers (QIBs) portion garnered 7.5 times subscription, the high networth individual (HNI) portion was subscribed 3.5 times and the retail quota garnered nearly 9 times subscription.

Sapphire Foods is the largest YUM franchisee operator. The company has non-exclusive rights to operate restaurants under three of YUM’s leading brands—KFC, Pizza Hut and Taco Bell.

The company had set the price band for its IPO at Rs 1,120-1,180 per share. Sapphire Foods’ IPO was entirely an offer for sale worth Rs 2,073 crore. At the top-end, the company is valued at nearly Rs 7,500 crore.

For the 12-month period ending June 2021, Sapphire Foods had reported operating profit of Rs 182 crore.

The company has an EV/EBITDA of 41 times, slightly below its peers. Jubilant Foodworks and Westlife Development trade at around 50 times and 74 times EV/EBITDA, as per analyst.

At the end of June 2021 quarter, the company operated 450 stores. Westlife operates about 305 stores, Burger King 270 and Jubilant close to 1,400.

“We expect Sapphire to roll out 306 additional stores over the next 3 years taking its total tally to 788 stores by FY24. This store expansion should support a robust revenue CAGR of 39.6 per cent to Rs 2,774 crore. Due to operating leverage, EBITDA is expected to grow at a faster CAGR of 51.3 per cent to Rs 431 crore. Net earnings are expected to turn positive by FY24 and scale to Rs 46 crore (versus a Rs 98-crore loss in FY21),” said a note by broking firm Ventura, which has a target price of Rs 1,500 on the stock.