The Rs 810 crore maiden public offer of Burger King India has received a strong response from retail investors. So far, the issue has been subscribed 5.6 times on December 3, the second day of bidding.
This is the sixth IPO to get subscribed on the first day of bidding itself, following Happiest Minds Technologies, Route Mobile, Chemcon Speciality Chemicals, Mazagon Dock and Likhita Infrastructure.
The public issue has received bids for 41.61 crore equity shares against IPO size of 7.44 crore shares, the subscription data available on the exchanges showed.
The portion set aside for retail investors has been subscribed 27 times, while the reserved portion of non-institutional investors witnessed a subscription of 1.8 times and that of qualified institutional buyers 25 percent.
The IPO size of 7.44 crore equity shares excluded anchor book. The company already raised Rs 364.5 crore from anchor investors on Tuesday.
The public issue consists of a fresh issue of Rs 450 crore and an offer for sale of 6 crore shares by promoter QSR Asia. The price band for the IPO, which will close on December 4, has been fixed at Rs 59-60 per share.
“At the higher end of the price band, the issue is valued at 2.7x FY20 Price/sales and 8.3x FY20 P/BV which is reasonable compared to peers. Considering its strong brand positioning, robust store expansion plans and the bright growth prospects of the QSR industry in India, we expect its financials to improve going ahead. Thus, we would recommend investors to subscribe for listing gains to the IPO,” Motilal Oswal said.
Burger King’s revenue and EBITDA grew at a CAGR of 49 percent and 258 percent respectively, led by 2x the store strength in FY18-FY20. However, it continued to make losses at the PAT level.
Its same-store sales growth stood at 12.2 and 29.2 percent in FY18 and FY19 while it surprisingly became flat in FY20. In the first half of FY21, revenue declined 68 percent YoY, while it made losses at EBITDA and PAT levels due to the COVID-19 impact.
“Given its cash base business model, Burger King has a negative working capital. The net debt/equity as of September 2020 stood at 3.3x which post-IPO will reduce to zero,” Motilal Oswal said.
Company has exclusive national master franchise rights in India till December 2039, with an obligation to develop and open at least 700 restaurants by December 2026.
Burger King India is one of the fastest-growing international QSR chains in India during the first five years of its operations based on the number of restaurants. It had 261 restaurants, including eight sub-franchised restaurants, across 17 states and union territories and 57 cities across India as at September 2020.
The company plans to use roughly Rs 270 crore of the offer towards the expansion of stores with a target of opening 370 restaurants by CY22.
GEPL Capital has recommended a subscribe to the offer for the purpose of listing gains. However, “as a longer-term investment, we would wait a few quarters for signs of a sustainable recovery in the same-store sales growth and the ability to repay the pending obligations with a sustainable debt to equity,” said the brokerage.
News Source:- Moneycontrol