The intial public offering (IPO) of quick service restaurant (QSR) chain Burger King India Ltd will open on December 2, for three days. The price band for the IPO has been set at Rs 59-60 per share.
Burger King aims to raise Rs 810 crore through the issue which comprises a fresh issue of shares worth Rs 450 crore, and an offer for sale of up to 60 million shares by promoter entity QSR Asia Pte Ltd worth Rs 360 crore, at the upper end of the price band.
The company intends to utilise the fresh proceeds to finance the roll-out of new company-owned Burger King Restaurants and to meet the general corporate purposes.
The company has reserved up to 10 per cent portion of the IPO for retail investors, up to 15 per cent for non-institutional investors and up to 75 per cent for qualified institutional investors. Bids can be made for a minimum of 250 equity shares and in multiples of 250 equity shares thereafter.
The initial share-sale is being managed by Kotak Mahindra Capital Company, CLSA India, Edelweiss Financial Services and JM Financial. The company’s shares are proposed to be listed on the BSE and the NSE.
About the company
Burger King was the fastest growing international QSR chain in India during the first five years of their operations, based on the number of restaurants. Their master franchisee arrangement provides them with the ability to use Burger King’s globally recognised brand name to grow their business in India. The Burger King brand is the second largest fast food burger brand globally as measured by the total number of restaurants, with a global network of over 18,000 restaurants in more than 100 countries and US territories, as of June 30, 2019.
As of September 2020, the company has 261 restaurants, including eight sub-franchised Burger King Restaurants across 17 states and union territories and 57 cities across India, as per the addendum.
Valuation and recommendation
Burger King is growing rapidly in India. The company’s revenue increased from Rs 230 crore in FY17 to Rs 633 crore in FY19. On the other hand, the company has reduced its losses from Rs. 72 crore to Rs 38 crore from FY17 to FY19.
According to Angel Broking’s Associate Equity Analyst, Keshav Lahoti, “Burger King peer Jubilant Foodworks is currently trading at 8.7 EV/sales on FY20 basis. We believe Burger King won’t get such a premium valuation as Jubilant Foodworks as it does not have a profitability track record like Jubilant, its outlets are young and we believe majority of the Indian people prefers Jubilant – Pizza over burger sold by Burger King.”