Written by EduInvesting Team | August 01, 2025
At a Glance
Sapphire Foods India Ltd is the proud operator of KFC, Pizza Hut, and Taco Bell in India, Sri Lanka, and Maldives – basically, they own your midnight cravings. But here’s the spicy twist: despite selling buckets of fried chicken and pizzas, they barely make any profit. With a P/E ratio of 590, investors are paying Rolex prices for a Swatch performance. Net profit for Q1 FY26? A juicy loss of ₹1.74 Cr. Yet, the stock clings to ₹320 like it’s hanging from a cliff. The promoters have been quietly reducing their stake from 51% to just 26% over 3 years. Red flag? Oh, it’s practically a billboard.
Introduction
Sapphire Foods, the Yum! Brands franchisee, is like that popular student who peaked in high school – used to be cool, still looks cool, but grades? Yikes. They operate 900+ outlets across India and the subcontinent, serving everything from buckets to burritos. Yet, financials tell a less appetizing story. Revenue is growing, yes, but profits are sinking faster than your diet plan at a KFC.
Why is everyone still obsessed? The market loves a good “growth” fairy tale. Sapphire Foods has scale, brand power, and locations that make Swiggy blush. However, with rising costs, falling margins, and an EPS that can barely buy a piece of garlic bread, investors are left wondering: is this a growth play or just a very expensive meal?
Business Model (WTF Do They Even Do?)
Sapphire Foods is basically Yum! Brands’ regional puppet. They pay royalties to Yum for the right to sell fried happiness under the KFC, Pizza Hut, and Taco Bell banners. Their revenue comes from dine-in, delivery, and occasional upselling of extra cheese nobody asked for.
But here’s the roast: they don’t own the brands, and their margins are fried by rising input costs (hello chicken prices) and rent. Unlike a traditional restaurant chain, they are a franchisee – meaning expansion = more capex = more debt. Also, menu innovation is limited by what the mothership Yum! dictates. So while you may enjoy the 7-cheese-overload pizza, Sapphire just enjoys the bill.
Financials Overview
Q1 FY26:
- Revenue: ₹776.8 Cr (+8% YoY)
- EBITDA: ₹112.8 Cr (-13% YoY)
- Net Profit: ₹-1.74 Cr (yes, negative)
- EPS: ₹-0.06
Annual (FY25):
- Revenue: ₹2,940 Cr (+3%)
- PAT: ₹17 Cr (-67%)
- OPM: 16%
- ROE: 1.85% (a joke)
Colourful commentary? This is like selling thousands of buckets but losing money because the buckets cost more than the chicken.
Valuation
Let’s try not to cry while calculating:
- P/E Method
- EPS (annualized from Q1 FY26) ≈ ₹-0.24 → P/E not meaningful (you can’t divide by sadness).
- EV/EBITDA
- EV ≈ ₹11,500 Cr
- EBITDA FY25 ≈ ₹465 Cr
- EV/EBITDA ≈ 24.7x (expensive for a company with flat growth).
- DCF
- Even with heroic assumptions of 15% growth and margin expansion, fair value lands around ₹200-230.
Fair Value Range: ₹200 – ₹250 (Current price is basically a loaded pizza with gold flakes).
What’s Cooking – News, Triggers, Drama
- Q1 FY26 loss due to flat KFC SSSG and negative Pizza Hut SSSG (-8%).
- GST Show Cause Notice of ₹51 million – company denies material impact.
- Promoter exit continues, now only 26% holding.
- No dividends ever – because all cash is busy paying rent and royalty.
- Menu innovation (new chicken sandwich) – may boost footfalls but unlikely to save margins.
Balance Sheet
| (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Assets | 2,591 | 2,837 | 3,040 |
| Liabilities | 1,399 | 1,562 | 1,706 |
| Net Worth | 1,256 | 1,339 | 1,398 |
| Borrowings | 963 | 1,164 | 1,292 |
Auditor Roast: Debt is growing like yeast, and net worth moves like a snail. Solid? Meh.
Cash Flow – Sab Number Game Hai
| (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Ops | 382 | 449 | 508 |
| Investing | -204 | -187 | -337 |
| Financing | -195 | -213 | -211 |
Auditor Punchline: Operations generate cash, but it vanishes into capex and debt repayments faster than fries disappear at a party.
Ratios – Sexy or Stressy?
| Metric | Value |
|---|---|
| ROE | 1.85% |
| ROCE | 5.76% |
| P/E | 590 (LOL) |
| PAT Margin | 0.6% |
| D/E | 0.92 |
Remark: These ratios scream “stress” louder than a customer waiting 40 minutes for a cold pizza.
P&L Breakdown – Show Me the Money
| (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 2,266 | 2,594 | 2,940 |
| EBITDA | 430 | 462 | 465 |
| PAT | 233 | 52 | 17 |
Remark: Revenue grows, profits nosedive. Classic growth trap.
Peer Comparison
| Company | Rev (₹ Cr) | PAT (₹ Cr) | P/E |
|---|---|---|---|
| Jubilant Food | 8,142 | 228 | 186 |
| Devyani Intl | 4,951 | -10 | NA |
| Westlife Food | 2,533 | 10 | 1,107 |
| Sapphire Foods | 2,940 | 17 | 590 |
Remark: The entire QSR sector is priced like caviar but earns like street food.
Miscellaneous – Shareholding, Promoters
- Promoters: 26.06% (down from 51%).
- FIIs: 31.55% (clearly love overpriced chicken).
- DIIs: 37.86%
- Public: 4.52% (smart? or scared?).
Promoters are slowly exiting while funds keep nibbling. Not a good mix.
EduInvesting Verdict™
Sapphire Foods is a paradox: massive scale, popular brands, and growing sales – yet profits keep shrinking. The high P/E is not a badge of honour; it’s a red siren. Operating margins are under pressure, debt keeps rising, and promoters are cashing out.
SWOT Snapshot
- Strengths: Strong brand, extensive network, QSR demand tailwind.
- Weaknesses: Low profitability, high debt, royalty payments.
- Opportunities: Delivery boom, menu innovation, digital ordering.
- Threats: Rising input costs, competition, and promoter exit.
Conclusion: Sapphire Foods is like that overpriced combo meal – looks fancy but leaves you hungry. Unless margins recover and profits actually show up, this stock is more hype than bite.
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