'Sapphire Foods India Limited' is YUM's franchisee operator in the Indian subcontinent. It is also Sri Lanka's largest international QSR chain in terms of revenue for FInancial Year 2021 and the number of restaurants operated as of March 31, 2021 (with 68 restaurants representing 39% of the total number of outlets in the market). They have also established a presence in Maldives. As of June 30, 2021, company owned and operated 209 KFC restaurants in India and Maldives, 239 Pizza Hut restaurants in India, Sri Lanka and Maldives, and two Taco Bell restaurants in Sri Lanka. The total number of restaurants in the Territories grew from 376 restaurants as of March 31, 2019 to 450 restaurants as of June 30, 2021. Company's franchisee arrangement with YUM allows them to operate, on a non-exclusive basis, under the KFC brand in several states in India and across Maldives, the Pizza Hut brand in several states in India and across Sri Lanka and Maldives, and the Taco Bell brand across Sri Lanka, while leveraging YUM’s system and system property. The Franchisee Arrangement also provides them with a right to use YUM's system and system property covering all aspects of business operations, as well as the flexibility to undertake, with YUM's approval, local or regional promotions, while meeting YUM's global quality assurance standards. Company has an in-house supply chain function, and they work with the vendor partners for food ingredients, packaging, warehousing and logistics with the goal of providing the restaurants with the optimum level of inventory at the highest level of quality in a standardised and cost efficient manner. They operate warehouses across five cities in India to service the restaurants in India, and have invested in building technology solutions including a restaurant-level SAP enterprise resource planning ('ERP') system and POS software solutions in the restaurants. They have also adopted YUM's global online and digital channel solutions to enhance customer experience in both the physical and digital restaurants and achieve operating efficiency and financial controls within the organization. Company has a wide variety of vegetarian and non-vegetarian value offerings at entry and premium price points, both enabling them to drive new customer acquisition across different income classes and, at the same time, upsell products through the use of meal combos and add-ons. As per financial performance, Sapphire has posted total income/net profits of Rs. 1206.28 Cr / Rs. (69.40) Cr (FY19), Rs.1351.74 Cr / Rs. (159.25) Cr (FY20), Rs 1081.24 Cr / Rs. (99.89) Cr (FY21) and Rs 313.93 Cr/ Rs (26.40) Cr (Q1 F22). So company has shown good growth, but FY21 remain muted due to pandemic situation. They have posted an average EPS of Rs. (22.46) and average RoNW of (24.92)% for last 3 fiscals. Issue is priced at a P/BV of 14.63 as per NAV of 80.67 on 30.06.21. As Company is making losses, so there is no measure to check, if it's fairly priced or not. On market cap to sales ratio, it looks cheaper compared to other listed players. As per RHP, Comparison between listed peers are shown in above table. On BRLM's front, four lead manager is associated with this IPO, and have handled around 77 IPO in last three fiscals. From last 10 IPOs, two are opened below issue price and remaining are opened above issue on the day of listing. As of now, one is trading below issue price and other are trading above issue price. ( As on 26.10.21) As per financials, Sapphire has shown good growth, RoNW is (22.16)% and posting consist losses. But on operational bases company is making profit and company is going ahead with aggressive expansion plan. The QSR sector is expected to grow at good and Sapphire has association with good QSR brands expected to outperform market. As company has non-exclusive franchise agreement, and also for some states, So they may face competition from other franchisee, we are giving SUBSCRIBE rating to this IPO for listing gains as well as long term.
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