Samara Capital, CX Partners backed Sapphire Foods lists at 11% premium
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Samara Capital and CX Partners-promoted Sapphire Foods India Ltd debuted 11% premium on Thursday, after its initial public offering (IPO) subscribed over 6.6 times last week. 

The stock opened at Rs 1,311 hit a high of Rs 1,383 on BSE and gained as much as 17% in intraday. At 10.05am, the scrip was trading at Rs 1,371 on BSE, up 16% from its issue price of Rs 1,180. 

Around noon, the shares were trading at Rs 1,244.50 per share, up 5.5% from the listing price. 

The IPO of Sapphire Foods India, the operator of KFC and Pizza Hut outlets, closed on 11 November. The OFS comprised subscription from existing investors including QSR Management Trust, Sapphire Foods Mauritius Ltd, WWD Ruby Ltd, Amethyst Pvt Ltd, AAJV Investment Trust and Edelweiss. 

In August, VCCircle had exclusively reported that Sapphire Foods would file for an IPO in September. 

The company garnered Rs 2,073 crore through the IPO that was entirely an offer for sale (OFS) by selling shareholders including promoters, a key reason for lower subscription to the issue. 

Ahead of the public issue, Sapphire Foods India had raised Rs 933 crore from 53 anchor investors including Government of Singapore (GIC), Monetary Authority of Singapore, Fidelity Funds, Abu Dhabi Investment Authority (ADIA), Morgan Stanley Asia (Singapore) Pte, ICICI Prudential Life Insurance Company, Bajaj Allianz Life Insurance Company and Sundaram Mutual Fund (MF).

Sapphire Foods, an omni-channel restaurant operator and one of largest franchisee operators of Yum Brands in the Indian subcontinent, got approval for the IPO in October. It is backed by marquee investors such as Samara Capital, Goldman Sachs, CX Partners and Edelweiss. 

"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. 

The firm had posted losses in all three previous financial years, according to the draft prospectus.  

In FY21, the consolidated loss was at Rs 99.89 crore, against loss of Rs 159.24 crore in FY20. Consolidated revenue during FY21 declined to Rs 1,019.62 crore from Rs 1,340.41 crore a year ago due to Covid-led lockdown pressure. 

As of first quarter of FY22, they 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 International’s 692 stores generated 1135 cr in FY21, while Sapphire’s 437 stores generated 1081 cr 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 Rs 1019.62 crore versus Rs 1340.41 crore a year ago. Net loss for the period stood at Rs 99.89 crore against Rs 159.25 crore last year. Total borrowings were at Rs 75.66 crore from Rs 71.20 crore last year. 

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