Quick service restaurant (QSR) Burger King India’s initial public offering (IPO), which closed on Friday, saw 157 times more demand than the shares on offer. The issue generated bids for 11.7 billion shares, worth Rs 70,000 crore, as against only 75 million on offer—making it one of the most-subscribed IPOs ever. This despite the company operating in the restaurant business—one of the most battered by the Covid-19 pandemic. Demand in three categories of the IPO robust. The qualified institutional buyer (QIB) garnered 87 times subscription, excluding the demand in the anchor segment. The high networth individual (HNI) and the retail portion were subscribed 354 times and 68 times, respectively. The retail quota for this IPO was 10 per cent, as the company failed to meet the profitability criteria, compared to 35 per cent in regular IPOs. Analysts said Burger King India is a play on organised QSR space, which is pegged to grow at annualized rate 19 per cent to Rs 82,500 crore over the next five years. Some peg the growth rate to be even higher for organised players as the unorganized sector has been badly hit by the pandemic.
“Benefiting from reduced competition from unorganised smaller local restaurants due to Covid related disruptions and expansion of food delivery businesses, the company is well positioned to expand its footprint in India. We believe Burger King India would be able to capture the growth largely aided by changing habits of eating out/ordering outside food,” said a note by ICICI Direct. Burger King India had its offer document in November 2019. It had almost given up on the IPO plans as the company was badly hit by the lockdowns to curb the spread of the virus. “By the end of March 2020,201 of our restaurants had closed their operations temporarily due to the Covid-19 lockdown in India, meaning only 59 of our restaurants remained operational as of March 31, 2020. From April 1, 2020 to June 30, 2020, 130 restaurants had reopened for operations over the course of the period for either dine-in or food delivery, with a further 37 restaurants reopening between July 1, 2020 and September 30, 2020, meaning we had a total of 226 operational restaurants as of September 30, 2020,” the company has said in its offer document. Analysts say besides reduced competition, fall in rentals is another tailwind for the QSR industry. Given the huge demand, Burger King IPO is likely to be priced at Rs 60 per share—the top end of the price band—which will give the company market capitalisation of Rs 2,290 crore on a post-diluted basis. Through the IPO, Burger King has raised Rs 450 crore, which will be used to rollout new outlets and retire debt. The IPO also comprised of secondary share sale worth Rs 360 crore. Burger King currently operates about 270 outlets. It aims to scale it up to 700 outlets by 2026. The IPO proceeds 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 financial year 2019-20, Burger King had reported revenues from operations of Rs 841 crore and a loss of Rs 77.6 crore. It losses had widened during the first six months of 2020-21 to Rs 119 crore from Rs 17.4 crore during the same period last year. Revenues from operations shrunk to Rs 135 crore from Rs 422 crore.
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