Burger King India IPO Details

29 Nov 2020  Read 4643 Views

When entering the investment world, the first investment option that comes to mind is investing in stocks as it often comes as a rewarding long term investment. Investors can start investing in the stock market in two ways, through the primary market or secondary market.  

The primary market is where the shares of the company are put for sale for the first time through Initial Public Offering (IPO). And the secondary market is where the already sold shares of the company are traded between investors who are ready to buy and sell. 

Some Helpful Terms

Before moving forward, it is better to clear some concepts regarding some terms:

  • IPO - It stands for Initial Public Offering, which means that now the firm is listed with the stock exchange. IPO can be offered by a new company or an old company that decides to go public after years of private investments. Usually, an IPO can be a sign that the company is large enough to raise public funds.
  • Offer for Sale - It is when promoters dilute their shares of a listed company and put it to sale through stock exchanges.

In the long list of IPOs that were launched this year, another popular brand is ready to bring its name to the list. The popular food chain brand Burger King India is opening up for public investment and will be launching its IPO from 2-4 December 2020.

Let's get into the company details and analyze the investment prospects.

About Burger King India

Ever since Burger King started in India, it has been growing at quite a fast pace. The growth is such that it is now claimed to be one of the best Quick Service Restaurant (QSR) franchises in India. It first came to India in 2014, intending to quickly build its place in the QSR sector. And all this time it was able to remain at that path, showing consistent growth, capturing the QSR chain, and giving tough competition to its peers. 

Since 2014, it has 261 restaurants with plans to further increase the number to 325 by December 2020. It is spread across 17 states (including UTs) and 57 cities. This quick market penetration is because of the strategy it uses, starts at a famous location with maximum customers, and spreads from there to other places.

The QSR chain also knows how to bend its products based on the preferences of the Indian traffic. They add extra flavours and ingredients that will suit the Indian palette. All these strategies have paid off as Burger King is now approaching its Initial Public Offering.

Particulars

For the year ended (in millions)

 

31-March-2018

31-March-2019

31-March-2020

30-September-2020

Total Assets

7,303.55

9,204.72

11,977.07

11,771.18

Total Revenues

3,887.37

6,441.30

8,468.29

1,516.54

Profit After Tax

-822.32

-382.79

-765.70

-1,189.46

Profit/Loss

-21.20%

-5.90%

-9.00%

-4.10%

The company showed a significant rise in the revenues in FY2020, almost 2 times the revenue in FY2018. After that its sales were a bit impacted due to the global pandemic, but reports show that it was quickly able to regain its customers back after following the regulations.

Comparison with Competitors

In the growth parameter, Burger King was above its peers with 56.3% sales from FY2016 - FY2020 compared to Domino's and McDonald's with 12% and 17% respectively.

Valuation of Burger King India for FY2020

Valuation

FY2020

Price/Earnings Ratio (PE)

NA

Earnings Per Share (EPS)

-2.87

Net Asset Value (NAV)

7.62 per share 

The reason why the Earning per Share is negative here is the consecutive losses for the past 3.5 years.

SWOT Analysis

Strengths

  • Have exclusive rights to develop the Burger King franchise in India.
  • A highly popular brand with customer loyalty.
  • Many burger varieties at affordable prices.
  • A vertical supply chain that helps with cost reduction.
  • Team of professional management.

Weakness

  • The highly competitive market so the market share of Burger King is limited and has a limited impact on the market.

Opportunities

  • Have plans for growing the Indian franchise.
  • Developing menus based on Indian flavours.
  • Now it also avails home delivery, which can help in increasing sales.

Threats

  • Customers are reducing due to COVID 19.
  • Economic fluctuation is raising the costs of operations.

                                  

Promoter details

QSR Asia Pte. Ltd. is the promoter of the company, who are dilutiing their shares.

Burger King IPO Promoter Holding

Pre-issue shareholding

99.4%

Post-issue shareholding

52.9%

Burger King IPO details

IPO Date

2 December 2020 to 4 December 2020

Issue Type

Book Built Issue IPO

Issue Size

135,000,000 equity shares of Rs. 10 (approx. 810 crore)

Fresh Issue

75,000,000 equity shares of Rs. 10 (approx. 450 crore)

Offer For Sale

60,00,000 equity shares of Rs.10(approx. Rs.360 crore)

Face Value

Rs.10 per share

IPO Price

Rs.59 - Rs.60 per share

Min. Order Quantity

250 Shares

Market Lot

250 Shares

Listing At

NSE, BSE

Lead managers

CLSA India, JM Financials, Kotak Mahindra Capital, Edelweiss Fin Services

Burger King IPO Lot Size and Price (Retail)

Application

Lots

Shares

Amount (Cut-Off)

Maximum

13

3250

Rs.195,000

Minimum

1

250

Rs.15,000

Burger King IPO Tentative Dates

Bid/Offer Opens On

2 Dec 2020

Bid/Offer Closes On

4 Dec 2020

Finalization Basis Of Allotment

9 Dec 2020

Initiation Of Refunds

10 Dec 2020

Credit Of Shares To Demat A/C

11 Dec 2020

IPO Shares Listing Date

14 Dec 2020

Objectives of the Initial Public Offering

The funds generated from the IPO will be used for the below-mentioned agendas:

  • Offer for sale - the proceeds generated from OFS will be received by promoters and not the firm.
  • To provide funds for all the expenses related to the rollout of all the new restaurants opened under the Burger King franchise in India.
  • To provide funds to meet the other financial and corporate needs of the company.

Company Strategies

With a thorough knowledge of the company's strategies, investors will get an idea about what the company plans to do in the future and how the strategies will help with generating revenue. If the information feels suitable, then the investor can decide to invest in the firm. 

Company strategies of Burger King are as follows:

  • Catching up with the expansion plans regarding restaurants.
  • Increase brand loyalty
  • Achieving economies of scale

Impact of COVID-19

Studies are pointing out that the QSR chains like Burger King have quickly adapted themselves to the COVID situation. As they already have the infrastructure and management to support delivery services, the sales were not affected too critically. 

Moreover, with this crisis, customers are more inclined towards home delivery than dining at a restaurant. As soon as the QSR chain was able to abide by the government regulations, the sales began to rise.

So in a way with the pandemic, the home delivery sales have increased compared to past sales. 

Future Growth Plans

Currently, due to the global pandemic, the expansion plans are at a halt, but it is only temporary. With the help of their penetration strategies, Burger King intends to increase the franchise by opening new restaurants under the Burger King India franchise. 

Even during the COVID crisis, most of their restaurants are operational, together trying to raise the sales.

Risk Related to IPO Investment

  • For the past 3.5 years, the company has been reporting losses, so there is a chance that such losses may repeat in future fiscal years also.
  • Sales may get less due to pandemic, as people are resorting to healthier food.
  • The development of Burger King Restaurants relies on the Master Franchise and Development Agreement. So termination of the agreement may hurt future plans.

Conclusion - Is it a good investment?

In the midst of a global pandemic, where the company is facing losses, it may be risky to invest now. It is a bit difficult to say whether the issue price is overvalued or undervalued. 

But from a looking ahead perspective, investors can remain optimistic with the investment and may expect future gains. So if you are ready to take some risky and adventurous investments, go for it.

So what will it be? Take or miss?

About the Author: Ananya Mitra | 10 Post(s)

Ananya is a CFA aspirant. Other than nurturing the dream of becoming a financial analyst since high school, she likes to indulge in words both of fiction and non-fiction.

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