The initial public offering (IPO) of quick service restaurant (QSR) Burger King India, which closed on Friday, saw 157 times more demand than the shares on offer. The issue led to offers for 11.7 billion shares, worth Rs 70 billion, compared to just Rs 75 million on offer, making it one of the most subscribed IPOs in history. This despite the company that operates in the restaurant business, one of the hardest hit by the Covid-19 pandemic. Demand in three categories of the robust IPO. The Qualified Institutional Buyer (QIB) obtained 87 times the underwriting, excluding demand in the anchor segment. The High Net Worth Individual (HNI) and the Retail Party subscribed 354 times and 68 times, respectively. The retail share for this IPO was 10 percent as the company did not meet profitability criteria, compared to 35 percent for regular IPOs.
Analysts said Burger King India is a game in the organized QSR space, which is set to grow at an annualized rate of 19 percent to 82.5 billion rupees over the next five years. The growth rate is considered by some to be even higher for organized actors, as the unorganized sector has been severely affected by the pandemic.
“By benefiting from reduced competition from smaller unorganized local restaurants due to Covid-related disruptions and expansion of food delivery businesses, the company is well positioned to expand its presence in India.
We believe Burger King India could capture growth with the help to a large extent of changing eating out / ordering out habits, ”said a note from ICICI Direct.
Burger King India had its offering document in November 2019. It had almost given up on IPO plans as the company was badly hit by the shutdowns to slow the spread of the virus.
“At the end of March 2020, 201 of our restaurants had temporarily closed their operations due to the closure of Covid-19 in India, which means that only 59 of our restaurants remained operational as of March 31, 2020. As of April 1 From 2020 to June 30, 2020, 130 restaurants had reopened during the period for dinner or food delivery, and another 37 restaurants reopened between July 1, 2020 and September 30, 2020, which means that we had a total of 226 restaurants operating as of September 30, 2020 ”, the company said in its offer document.
Analysts say that, in addition to reduced competition, the drop in rents is another headwind for the QSR industry.
Given the huge demand, Burger King’s IPO is likely to be priced at Rs 60 per share, the upper end of the price band, giving the company a market capitalization of Rs 2,290 crore on a basis. post-diluted.
Through the IPO, Burger King has raised 450 million rupees, which will be used to roll out new outlets and pay off debt. The IPO also included the sale of secondary shares worth Rs 360 million.
Burger King currently operates around 270 outlets. Its goal is to scale it to 700 outlets by 2026. Proceeds from the IPO will help open about 190 new stores by 2023.
The company competes with international QSR chains such as McDonalds, KFC, Domino’s Pizza, Subway and Pizza Hut.
In the 2019-20 fiscal year, Burger King had reported operating income of Rs 841 crore and a loss of Rs 77.6 crore. Losses had widened for the first six months of 2020-21 to Rs 119 crore from Rs 17.4 crore during the same period last year. Income from operations was reduced to Rs 135 crore from Rs 422 crore.
Dear reader,
Business Standard has always strived to provide up-to-date information and commentary on events that interest you and that have broader political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only strengthened our determination and commitment to these ideals. Even during these difficult times arising from Covid-19, we remain committed to keeping you informed and up-to-date with credible news, authoritative opinions, and incisive commentary on relevant current affairs.
However, we have a request.
As we fight the economic impact of the pandemic, we need your support even more so that we can continue to bring you more quality content. Our subscription model has received an encouraging response from many of you, who have subscribed to our content online. Increased subscription to our online content can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital editor
.
