Sapphire Foods IPO subscribed 6.62 times on final day, check grey market premium; should you invest

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Updated: November 11, 2021 5:25 PM

KFC and Pizza Hut operator Sapphire Foods India’s IPO has been subscribed 6.62 times on the final day.

KFC, Pizza Hut, Devyani International, Sapphire Foods, IPODevyani International which has the same franchise of KFC, Pizza Hut, etc., similar to Sapphire Foods is available at Rs 18,000 crore market cap. Image: Reuters

KFC and Pizza Hut operator Sapphire Foods India’s IPO has been subscribed 6.62 times on the final day. Sapphire Foods India IPO has received bids for 6.39 crore equity shares, against an offer size of 96.63 lakh shares. The retail investor portion has been subscribed 8.70 times; the non-institutional investor portion is undersubscribed at 3.46 times; and the qualified institutional buyers’ portion has been subscribed 7.50 times. Analysts say Sapphire Foods is very similar to Devyani International in terms of business and brands.“The company did a preferential allotment at Rs 505 just 2 months back and now IPO at Rs 1,180. This doesn’t inspire confidence,” Aditya Kondawar, COO, JST Investments, told Financial Express Online.

Sapphire Foods, set up in 2015, is one of the Yum brand’s restaurant operators in the Indian subcontinent. “Devyani International which has the same franchise of KFC, Pizza Hut, etc., similar to Sapphire Foods is available at Rs 18,000 crore market cap on Rs 1,100 crore revenue. Sapphire with almost the same revenue is coming up at Rs 7,500 crore of market capitalisation. There is a good chance of listing gains as something has been left on table for the investors as compared to its listed peers,” Rajesh Singla, Founder & CEO, PreIPO consulting firm Planify Consultancy, told Financial Express Online.

Sapphire Foods’ initial public offering was entirely offer-for-sale (OFS) of 1.75 crore equity shares by promoters and existing shareholders. The company had fixed a price band of Rs 1,120-1,180 per equity share. In the primary market, Sapphire Foods India shares were quoting at a premium of Rs 55 apiece. On Thursday, shares were seen trading at Rs 1,235, a premium of nearly 5 per cent.

Sapphire Foods has seen losses in the past few periods (FY19-20) and the financials have not been great, however in the past two periods the loss has reduced, said an analyst. The QSR space is expected to have a bright future prospect in the country due to its cash-generating ability and its working capital cycle. “The IPO is valued at 60.2x FY21 EV/EBITDA and 7.3x FY21 EV/sales, which looks to be at a modest discount compared to the recently-listed Devyani International, which appears reasonable due to the better margins profile of Devyani. Fast food culture under QSR is expected to flourish in India due to an increase in the working-class population and continued urbanization. Hence, investors can subscribe to it on a long-term basis,” Likhita Chepa, Senior Research Analyst at CapitalVia Global Research, told Financial Express Online.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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