Burger King Share Price Doubles On Listing After Oversubscribed India IPO

Burger King India Ltd saw a stellar stock exchange listing on Monday, with shares jumping 100% on debut after its ₹810 crore initial public offering was subscribed more than 157 times last week.

The stock opened at ₹115.35 on the BSE and touched a high of ₹119.50 apiece. At 1005am, the scrip was at ₹110, up 86.7% from its issue price of ₹60 per share. The benchmark Sensex was up 0.24% at 46210 points.

Burger King which operates 268 stores in the country had fixed the price band of its IPO at ₹59-60 a share which was open for subscription during 2-4 December. The company plans to open around 700 restaurants, including company outlets and sub franchise entities, by 31 December, 2026.

At an upper price band of ₹60, the IPO is valued at a price to sales ratio of 2.7 times based on sales of fiscal 2020. In comparison, peers Jubilant FoodWorks Ltd has a price to sales ratio of 8.4 times while West Life Development has 4.4 times, according to analysts.

Also, on a per-store basis, the company’s valuation (market cap/total stores) stands at ₹8.8 crore, compared to Jubilant FoodWorks’ ₹26.2 crore and Westlife’s ₹23.8 crore.

“The valuation seems reasonable when compared to peers. While the COVID-19 crisis have 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”, said Anand Rathi Research in a recent report.

IPO proceeds are seen at ₹450 crore which Burger King plans to use to repay debt and for expansions. Existing shareholders private equity firm Everstone and its co-investors will garner ₹360 crore. Burger King India had raised ₹364.5 crore from anchor investors.

The portion reserved for retail investors was subscribed 68.79 times while the portion set aside for qualified institutional investors was subscribed 86.48 times and that of high net worth investors 357.45 times.

As of September, the company had reported revenue of ₹135.20 crore while for fiscal 2020 it reported revenue of ₹841.20 crore. The company is yet to report a net profit. However, it has been able to record decent gross margin, earnings before interest, taxes, depreciation and amortization and a positive operating cash flow prior to covid.

Investment banks Kotak Mahindra Capital, Edelweiss, CLSA and JM Financial advised Burger King India on the IPO.

The article was first published on livemint.com