MUMBAI: Shares of Barbeque Nation Hospitality Ltd listed at Rs489.85 apiece on the National Stock Exchange on Wednesday, a marginal discount to the issue price of Rs500. This was in-line with some recent IPOs, which also listed at a discount.
But there was a surprise in store for investors, with shares rising 20% to Rs588 at 10.30 am. Note that there is tremendous selling pressure when a share lists, as most IPO investors are looking to flip their holdings. So there needs to be equally high buying demand as well for shares to list at a premium.
Sentiment in the IPO market had turned weak recently, largely due to the second wave of coronavirus infections, especially in the key state of Maharashtra.
For casual dining restaurant chain Barbeque Nation in particular, the recent restrictions imposed by the Maharashtra government on dining out, is likely to impact it’s revenues and profits. Even though the state government has allowed home delivery of food, it is unlikely to provide much relief to the company. According to the company’s management, most of its revenues come from in-house dining and the take-away business contributes around 15% to its revenues.
In this backdrop of rising regional lockdowns, it’s interesting that the company’s shares have risen post listing. It’s likely that some anchor investors are increasing their stake in the company by buying shares post listing.
Given the discretionary nature of business and with in-house dining being a key revenue generator, last year’s lockdowns had weighed heavily on the company’s financial position. In fact, the company was in a liquidity squeeze. So, in a pre-IPO funding round, it raised around Rs150 crore at Rs252 per share, which is nearly half of its IPO issue price. Analysts say, at that time, the survival of the company was more important for its management than valuations.
Meanwhile, after the funds raised through pre-IPO placement and IPO, the company is likely to be in a better liquidity position. The company aims to use IPO proceeds for expansion and repayment of debt.
News Source:- Moneycontrol