December 16, 2020: Burger King India Ltd saw a share jump of 100 per cent after its debut on Monday stock exchange listing. The initial offering of Rs 810 crore is known to be subscribed more than 157 times after they put it up last week. The franchise operates 268 stores in India currently. They fixed the price band of their IPO at Rs 59-60 per share, for subscription open during December 2-4.
The company plans to open around 700 restaurants in India, including company outlets and sub-franchise entities by end of 2026.
The recent stock opened at Rs 115.35 on the BSE and touched a high of Rs 119.50 apiece.
At 10.05 am on Monday, the scrip was at Rs 110 which is 86.7 per cent more than its issue price of Rs 60 per share. The benchmark Sensex was up 0.24 per cent at 46,210 points.
Burger King vs peers
The IPO for Burger King is valued at a price to sales ratio of 2.7 times, at Rs 60 as upper brand price, based on sales of fiscal 2020. In comparison, Analysts say that Jubilant FoodWorks Ltd has a price to sales ratio of 8.4 times and West Life Development has 4.4 times.
Anand Rathi Research recently reported: “The valuation seems reasonable when compared to peers. While the COVID-19 crisis has impacted short term growth, we believe the company remains well placed for long term growth, given its strong brand position, diverse food offerings, well-established supply chain, aggressive expansion plans, cost management efforts and benefit from the gradual recovery in the quick-service restaurant industry post-COVID.”
Where will the IPO proceeds be invested?
It is speculated that Rs 450 crores from the proceeds will be used to repay debt and for expansions. The existing shareholders private equity firm Everstone and its co-investors will garner Rs 360 crore from Burger King. Burger King India had previously raised Rs 364.5 crore from anchor investors. From the portion reserved for retail investors subscription was done 68.79 times while the portion set aside for qualified institutional investors was subscribed 86.48 times and the portion of high-net-worth investors was subscribed 357.45 times.
Financial advice and growth
Investment banks Kotak Mahindra Capital, Edelweiss, CLSA and JM Financial advised Burger King India on the IPO. Prior to this, in September, the company reported revenue of Rs 135.20 crores and fiscal year 2020, they reported revenue of Rs 841.20 crores. The company is yet to report a net profit margin for the year. It is said that Burger King India Ltd. has been able to maintain decent gross margin, earnings before interest, taxes, depreciation and amortization and a positive operating cash flow prior to the Covid-19 pandemic.