­Extensive industry experience of the management
FPPL is the subsidiary company of Reliance Capital LLC. FPPL is managed by the directors of the company - Mr. Vijay Raman, representing Reliance Capital LLC and Mrs. Punitha Senthil Kumar and a strong management team comprising Mr. Thanga K and Mr. Ajmal Hussain. Mr. Vijay Raman, has 30 plus years of industry experience across India, West Africa and UAE/Oman with industry exposure in various segments like Manufacturing - Energy Meters/Magnets /Automobile and Defense Ancillary, Timber/ Logging Operations, Travel and Tourism, Construction, Software Development and Consulting. Few company names related to his work experience are India meters ltd, Chennai, India; MSG Liberia Shipping & Stevedoring, Liberia, West Africa; Administration Sharjah National Travel & Tourist Agency, Dubai, UAE; KCPC Construction (Kuwait), Dubai, UAE; 1001 Events Tourism LLC, UAE & Oman; Succevo GMBH, DUBAI, UAE and C2C Innovations / RTTS / Quadrant 4 Software Solutions Pvt Ltd in Chennai / Bangalore, India. He has been a vital part in establishing FPPL since 2019. Mr. Thanga Kannaiah, Business Unit Head of FPPL, is a food service expert with over 30 plus years of working with industry leaders in hospitality and food production houses such as Le Meridien, Trident, Westin and Taj Coromandel in Chennai; Intercontinental Grand Resort in Goa; Westin Casuarina Resort and Spa in Cayman Islands. He has worked in an array of food service areas in New product development, Enhancing existing product and production lines, New equipment development, Facility planning, Turnkey food service facilities, Recipe development and Conceptualizing new food service businesses. Chef Ajmal Hussain from Chennai, has 21 years of experience in culinary. He has extensive experience in kitchen operations in Mediterranean, Arabic, Indian, Continental, Caribbean cuisine. He has worked across geographies of North America, Caribbean, Middle East, Bermuda and India and has been associated with Taj Connemara, Le Royal Meridian, Carnival Cruise lines, Copper Falls steak House, Fairmont Hotel, Gulf Hotel, Amara Hotel, SAF Hotel, Bundl Technologies amongst others. Mrs. Punitha Senthil Kumar, has 10 plus years’ experience in Trade Finance and Banking. Acuité believes that extensive industry experience of the management will aid in smooth implementation of the undergoing capex over the medium to long term.

Progressively and conservatively planned capex with a need-based infusion of capit al v is-à-vis a one-time incurrence
FPPL has plans to have a total of 82 Automated Pizza Production and Commissary Facilities, 1,140 Company Owned Pizza Outlets, 640 Company Owned Pizza Container Outlets, 665 franchisees along with supplying to 8,825 Retail Super Markets and Restaurants (Frozen Pizzas, pizza bases and pizza ovens) covering all major states in India over a period of 10 years as per the envisaged plan. The distribution channels are expected to be the Company Owned Pizza Outlets, Company Owned Pizza Container Outlets, Retail Super Markets and Restaurants and franchisee model. For Company Owned Pizza Outlets, FPPL plans fully equipped outlets with an investment plan approx. USD 67,000/- (INR 43 lakhs) per outlet. The Company plans to have outlets in Malls, Commercial areas and other prime locations in Tier 1, Tier 2 and Tier 3 cities in the various states / regions of India on leased basis with average ease assumed at Rs.60k-100k per month. Each of these outlets will be equipped with its own transport truck and 5 delivery staffs. For company owned pizza container outlets, FPPL plans to have outlets housed in 20 feet containers, specially branded, in National Highway's to capture the business of the mobile population. These outlets will essentially use the Frozen Pizza's delivered from the Production Line to effect a quick turnaround for travelling customers. Each of these containerized outlets will be equipped with the necessary machinery to make pizzas and accompaniments and will also use the partly frozen pizzas supplied from the commissaries. FPPL is expected to set-up the production facilities and outlets in a systematic, selective and progressive way. At present, FPPL has set-up a small-scale pizza production unit in Chennai by incurring an amount of around Rs.2.5 Cr on pilot basis to test the mass feedback. Moreover, to initiate the project, FPPL has identified a land in Siruseri, Chennai, to set-up its first state of art facility. FPPL plans to first start in Chennai, Tamil Nadu and thereafter expand into newer territories across India by replicating its proven model. Acuité believes that a progressive way of undertaking capex will expose the company to lower risk in terms of investment cost incurred vis-à-vis its return on investments.

Self-funded by its existing Investor group out lining assured financial support
FPPL has plans to incur a capex of Rs. 7,534 Cr (USD 1.032 billion; assuming Rs.73/USD) to be funded by debt-to-equity ratio of 66:34 (Rs. 4,972 Cr of NCDs and Rs. 2,562 Cr of promoter’s equity capital). The entire capex of Rs. 7,534 Cr is self-funded by the investor group with no reliance any external debt per se. The project would be funded either by equity infusion or
funds raised through NCDs either by its parent RCL or FPPL. RCL will consecutively do needbased infusion by way of investing in the equity shares of FPPL. Around 23 percent i.e. ~Rs. 1715.5 Cr (USD 235 million) of the total project cost has already been infused by the investor group into RCL through NCDs and in-turn some portion amounting to Rs.3.44 Cr has been invested in the equity shares of FPPL till date as per need basis. Additionally, infusion of ~Rs. 2920 Cr (USD 400 Million) by the investor group is underway. This will result in aggregate amount of Rs. 4,635.5 Cr (USD 635 million) i.e. 61.5 percent of total contribution to be infused in the project. The balance portion of the equity portion is expected to be coming in as and when required from the investor group. The residual portion of the project would be funded through the NCDs being raised by the parent company or/and FPPL at an annual coupon rate of 5 percent and these are proposed to be privately placed with the existing investors, who have shown strong support to fund this project. Thus, FPPL is insulated from the risks arising from delayed financial closure for the proposed project. The NCDs are being issued on prorata basis and would be would be aligned to the progress of the expansion. These NCDs will be redeemable at the end 9th and 10th year in 2 equal portions i.e. in FY2029 and FY2030. Furthermore, Acuité derives comfort from the board resolution submitted by the investor group stating a commitment of assured investment by way of subscribing/investing/infusing an amount of not exceeding USD 600 million in form of equity share capital or/and NCD into RCL or/and FPPL to undertake the project. Acuité believes that FPPL carries low funding risk as 23 percent of the equity been infused upright in its holding company – RCL and project being self-funded by the investor group with no involvement of any lender for external debt.

Growth prospects related to the Indian Pizza Industry
India Pizza Market was worth USD546.2 Million in 2019 and the market is expected to record strong growth of CAGR 16-17 percent throughout next 10 years of time. The growth in the near future is expected to be driven by multiple factors like huge surge in consumerism, changing lifestyles, steady growth of incomes among the middle class, large share of young population i.e. >45% of population <25 years age, growing demand of serving the food through food delivery apps, quick service restaurants (QSR’s), takeaway outlets, increasing investments in the pizza industry amongst others. Pizza Industry can be categorized by way of crust type (Thick and thin), toppings (Veg and non-veg) and distribution channels (retail and online). Thick crust remained the leading submarket, and in 2019 held 58.8 percent of the India Pizza market, followed by the Thin Crust submarket with a share of 41.2 percent. Veg toppings pizzas remained the leading submarket, and in 2019 held 59.9 percent of the India Pizza market, followed by the non-veg submarket with a share of 40.1 percent. Distributionwise, retail contributed 61 percent followed by 39 percent of online sales. With respect to the frozen pizza market, the India frozen pizza market accounted to USD 550.0 thousand in 2018. FPPL will be present in both thick and thin crust type; but restricted to only veg toppings. Acuité believes that the aforesaid growth prospects will aid FPPL in penetrating deeper in the Indian Pizza market over the long term.

­High demand and implementation risk with foray into an unexplored segment of Pizza Industry (specially Frozen Pizzas)
FPPL has already in place, the latest International Organization for Standardization (ISO) and Food Safety and Standards Authority of India (FSSAI) certificate in place. FPPL has identified a land in Siruseri, Chennai, TN to set-up its first state of art facility. Further, Implementation risk is moderate due to phased manner of capex to be undertaken; majorly being land. Demand risk is moderate as FPPL is exposed to the competition from existing established pizza makers like Dominos, Pizzahut, Smokin Joe’s amongst others who have long standing presence in the fresh pizza segment. Moreover, FPPL plans to foray into the relatively unexplored frozen pizza segment in India which exposes the company to risk of slow-moving demand in the initial phase. To build on, would be FPPL’s strategy of targeting only the pizzas with Veg toppings. It is perceived that the Indian Pizza market (USD 546.2 Million in 2019) was predominantly led by the Veg toppings with a share of 59.9 percent in 2019 followed by 40.1 percent of Non-Veg toppings. The variety of veg toppings and the dominant population of vegetarian is expected to dominate the veg toppings segment in the India pizza market over the medium to long term though; yet FPPL’s growth will be restricted to veg toppings only, limiting the scope to capture the growth in the non-veg toppings segment. Acuité believes that FPPL would remain susceptible to the implementation and demand risks during the project execution cycle.

Susceptibility of profitability to competitive intensity and cost pressures
The Indian Food and beverage market is highly competitive with players in both the organized segment and in the huge un-organized market, which may result in loss of market share and reduced profitability. Fixed costs (mainly lease rentals for outlets, employee cost, and electricity charges) form a significant portion of the operating cost, resulting in high operating leverage. Hence, timely execution of the growth plan without any cost overrun, and improvement in the operating margin with sustained focus on cost optimization, technology, low leverage, and economies of scale, remain key monitorables. Acuité believes that FPPL will remain exposed to susceptibility of profitability to competitive intensity and cost pressures.