Burger King IPO opening tomorrow: Apply or Avoid?

Quick-service restaurant chain Burger King India is set to open its maiden public issue for subscription on December 2. The issue will close on December 4 and the listing of equity shares is expected to be on December 14. Kotak Mahindra Capital Company, CLSA India, Edelweiss Financial Services and JM Financial are the book running lead managers to the Burger King issue.

The fresh issue size was scrunched up to Rs 450 crore from Rs 600 crore earlier as the company has undertaken a pre-IPO placement by way of rights issue of Rs 58.08 crore to promoter selling shareholder at Rs 44 per equity share and preferential allotment of Rs 91.92 crore to Amansa Investments at a price of Rs 58.50 per share. One can place bids for a minimum of 250 equity shares and in multiples of 250 equity shares thereafter. The company in consultation with merchant bankers has frozen IPO price band at Rs 59-60 per share, which is 5.9-6 times of its face value of equity shares.

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The most striking feature about this IPO is the lower quota for retail investors. As per the red herring prospectus (RHP) the upper limit has been set to 10% of the offer with regards to the availability for allocation to retail individual bidders, in lieu with the SEBI ICDR regulations.

The company will utilise net fresh issue proceeds for supporting the further branches of Burger King restaurants by way of repayment or prepayment of outstanding borrowings obtained for creating new owned Burger King restaurants (Rs 165 crore) and capital expenditure incurred for setting up of new owned Burger King restaurants (Rs 177 crore), and general corporate purposes. But company will not be benefited by any proceeds from the offer for sale. All the money will go to promoter selling shareholder.

The Burger King brand is the second largest fast-food burger brand globally as assessed by the count of the total number of restaurants, with a global network of 18,675 restaurants in more than 100 countries and US territories as at September 2020. Technopak report says Burger King India is one of the fastest growing QSR brands to achieve the set-up of 200 restaurants among international QSR brands in India during the first five years of operations.

Its revenue from operations swelled up from Rs 378.1 crore in FY18 to Rs 632.7 crore in FY19 and to Rs 841.2 crore in FY20, but it was just Rs 135.2 crore in first half of FY21 impacted significantly by the COVID-19 crisis. Company has utilizing credit facilities of Rs 210 crore from ICICI Bank for the purpose of undertaking expenditure for various undertakings, of which, principal outstanding was Rs 181 crore as of November 16 this year.

Burger King set with its own strengths strong consumer proposition and well-defined development process is soon to mark its IPO debut. The market awaits this move with heightened anticipations as the public issue shall open tomorrow.