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Sapphire Foods IPO: Sapphire Foods IPO open for subscription today: That’s what brokers recommend

New Delhi: The Rs 2.073 billion initial public offering of Sapphire Foods India, which operates and operates KFC, Pizza Hut and Taco Bell businesses in India, Sri Lanka and the Maldives, began subscription Tuesday. Investors can apply for the three-day first sale of shares until Thursday, November 11th.

The primary offering is entirely an offer for sale (OFS) in which existing shareholders and promoters submit 17,569,941 shares ranging from 1,120 to 1,180 rupees each.

A day before going public, Sapphire Foods India raised around Rs 933 billion from anchor investors, who were allotted 7,906,473 shares in the upper price range of Rs 1,180 per share.

A total of 53 anchor investors participated in the anchor allotment, including the Singapore Government, Fidelity Funds, Abu Dhabi Investment Authority, Ashoka India Opportunities Fund, Sundaram Mutual Funds, ICICI Prudential Life Insurance, Bajaj Allianz Life Insurance Company and HDFC Mutual Funds.

Although losses have been reported in recent years, analysts are suggesting investors subscribe to the issue. They stand firm on the company’s bullish outlook and competitive valuations, which leaves some value on the table for investors.

The fast food culture is expected to thrive under QSR in India due to the rise in the working class population and ongoing urbanization, Reliance Securities said in its pre-IPO note. The brokerage firm gave it a long-term “subscribe” rating.

“The QSR business model is pretty impressive as every restaurant franchise begins to generate significant restaurant-level RoE once it reaches over 90% occupancy, which bodes well for long-term investors,” he added.

However, brokerage firm Choice Broking warns investors of uncertainty about profitability as the likelihood of further losses in upcoming finances is higher. She assigned the issue a “Subscribe with caution” rating.

“Net debt to equity was 1.35x, which appears to be higher. With continued investment needs to expand and a modest path for EBITDA and margin, higher interest costs would continue to weigh on profitability in nearby financial areas,” she added.

Investors can subscribe to the IPO in a lot size of 12 shares and in multiples thereof. The company’s shares are expected to be listed on both the BSE and the NSE on November 22nd.

Canara Bank Securities, which has recommended underwriting the issue for listing profits as well as long-term investments, said the company had streamlined its stores by reducing its floor space as part of its cost-saving strategy.

“The company’s bottom line is negative, it is positive on an operational level with an operating margin of 12-14% in FY19-21 supported by a strong balance sheet,” it added.

Sapphire Foods India is the largest YUM franchisee in the Indian subcontinent with a wide range of products for all brands. The company operates under the QSR category with an omni-channel presence.

Amarjeet Maurya, AVP – Mid Caps, Angel One said EV / Sales spend is working 7.4x after issuing in FY21, which is low compared to fellow Devyani International.

“Sapphire Foods has better sales per store compared to Devyani. The company is showing continuous improvement in EBITDA, ”he added. “In view of all the positive factors, we consider this rating to be appropriate.”

“Given the post-launch adjusted EBITDA (TTM) of Rs 1,823.74, the company will trade at an EV / EBITDA of 41.38 with a market capitalization of Rs 7,498 crore compared to its competitors Jubilant Foodworks and Westlife Development, are trading at an EV / EBITDA of 49.26 and 73.55, respectively, “said Marwadi Shares and Finance analysts with a subscription rating.

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