Burger King IPO – Loss making + Hit with Pandemic effect – Should you subscribe then?
Burger King IPO Price, Valuations, Prospectus, RHP and DHRP details
There are half a dozen of IPOs that are lined up now which would open for subscription in next 2 months. Burger King IPO news has been there for some time. Burger King India IPO date is announced as 2nd December, 2020. Burger King India Limited is India’s fastest growing chain of quick service restaurants. Its issue price band is fixed at Rs 59 to Rs 60 per share. It is a loss making in the last few years. Should you invest in a Burger King IPO then? How would the Burer King India IPO Valuations look like? We would provide a review and analysis in this article.
About Burger King India Limited
Burger King is one of the fastest growing international QSR chains in India. As the national master franchisee of the BURGER KING® brand in India, they have exclusive rights to develop, establish, operate and franchise Burger King branded restaurants in India. Its master franchisee arrangement provides them with the ability to use Burger King’s globally recognised brand name to grow its business in India, while leveraging the technical, marketing and operational expertise associated with the global Burger King brand.
Burger King IPO Issue Details
Here are the IPO issue details.
|Burger King India IPO – Issue Details|
|Burger King IPO Date||Dec 2 to 4, 2020|
|Face Value||Rs 10 per share|
|IPO Price band||Rs 59 to Rs 60 per share|
|Issue Size||Total of Rs 810 Crores
Fresh issue – Rs 450 Crores
OFS – Rs 360 Crores
|IPO Lot Size||250 shares|
|Lead Managers||Kotak Mahindra Capital, CLSA India, Edelweiss Fin Services, JM Financials|
|Listing at||BSE and NSE|
There is only 10% share allocation to retail investors.
Objects of issue – Burger King IPO
Here are the objects of the IPO issue.
1) Offer for Sale (OFS): Promoters would be entitled for the proceeds and company would not receive any proceeds from this OFS.
2) Funding roll out of new Company-owned Burger King Restaurants by way of:
(i) Repayment or prepayment of outstanding borrowings of the company obtained for setting up of new Company-owned Burger King Restaurants
(ii) Capital expenditure incurred for setting up of new Company-owned Burger King Restaurants.
3) General corporate purposes.
Who are the company promoters?
QSR Asia Pte. Limited is the promoter of this company.
Company Financial Performance
Here is the summary of the financial information of the company.
|Total Revenues (Rs in Millions)||Profits after tax
(Rs in Millions)
|6 months ended Sep-20||4,253.6||-174.2||-4.1%|
Its incurring losses in the last 3.5 years, hence EPS is negative.
What are the key strengths of Burger King India Limited?
Every investor should understand the company’s key strengths so that one can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the company.
1) Exclusive national master franchise rights in India
2) Strong customer proposition
3) Brand positioned for millennials
4) Vertically managed and scalable supply chain
5) Operational quality, a people-centric operating culture and effective technology systems
6) Well defined restaurant roll out and development process
7) Experienced, passionate and professional management team
What are the various strategies of Burger King India Ltd?
Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.
1) Increase the pace of expansion of its restaurant network
2) Continue to build on its value leadership
3) Continue to grow brand awareness and loyalty
4) Actively manage unit economics and achieve economies of scale through operational leverage
5) Leverage technologies across its business
How is the Burger King Market Share?
Here is the Burger King market share in terms of number of outlets.
Here is the Burger King market share in terms of revenue.
Why to invest in this Burger King IPO?
Here are a few reasons to invest.
1) Burger King India Limited is the fastest growing chain of quick service restaurants in India.
2) Company has posted steady revenue growth in the last 3 years till year ending Mar-2020. Its revenues grew from Rs 388.7 Crores in FY2018 to Rs 846.8 Crores in FY2020. However, due to curved-19 pandemic and lock down, it generated only Rs 151.6 Crores for 3 months ended Sep-2020.
Why NOT to invest in Burger King IPO
These risk factors can impact company revenue and margins which would affect its share price. Investors should go through these points and understand them before investing.
1) Company reported a loss in financial year 2018, 2019 and 2020 and 6 months ended Sep-2019 and Sep-2020. Such losses can continue in future too. Some Burger King News tried to provide positive side by indicating losses reduced from FY17 to FY19, however, they miss to provide FY20 loss nos which are latest and high and that too these are pre-covid level.
2) Covid-19 pandemic + Govt of India measures to reduce the spread corona virus had a substantial impact on its restaurant operations. It is still uncertain about the timing of how long the Covid pandemic and the related GoI measures will last.
3) People are more concerned about their health. Any health concerns arising from food-borne illnesses, health epidemics, food quality, allergic reactions or other negative food-related incidents could have a significant impact on business.
4) Company has exclusive right to develop, operate and franchise Burger King restaurants in India depends on the Master Franchise and Development Agreement, which imposes certain restrictions and other obligations on its operations that could adversely affect its business, results of operations, financial condition and prospects.
5) The termination of Master Franchise and Development Agreement would have a material adverse effect on its business, results of operations, financial condition and prospects.
6) Demand for its products may decrease due to changes in consumer preferences and food habits, which could have a material adverse effect on its business, results of operations, and financial condition.
7) Its business depends in part on the continued international success and reputation of the Burger King brand globally, and any negative impact on the Burger King brand may adversely affect its business, results of operations and financial condition.
8) For complete internal and external risk factors, you can refer the RHP of the company.
How to apply for Burger King IPO?
You can follow these steps to apply for this IPO
1) Login to your demat account
2) Visit IPO section
3) Click on Burger King India IPO link
4) Select the IPO price and select bid Qty and submit
How to apply for Burger King India Limited IPO on Zerodha Platform?
1) Visit Zerodha website and login to Console.
2) Click on Portfolio and click the IPOs link.
3) Go to the ‘Burger King IPO’ row and click the ‘Bid’ button.
4) Enter your UPI ID, Qty, and Price to bid.
5) Click on ‘Submit’ button to submit IPO application form.
6) Visit the UPI App (net banking or BHIM) and approve the mandate.
Burger King India IPO Promoter Holding
Pre-issue share holding – 99.39%
Post issue share holding – 65%
Burger King India IPO Tentative Dates / Timetable
|Burger King India IPO – Time Table / Tentative Dates|
|Finalization of Basis of Allotment||09-Dec-20|
|Unblocking of ABSA and Initiation of Refunds||10-Dec-20|
|Credit of shares to Demat Accounts||11-Dec-20|
|IPO Shares Listing Date||14-Dec-20|
Burger King India IPO Price Valuations
The company has incurred losses in the last 3.5 years. Hence we cannot ascertain whether Burger King India share price is under priced or overpriced. Its price band is Rs 59 to Rs 60 which needs to be paid considering future valuations of the company.
Is Burger King IPO good?
Burger King India is the fastest growing chain of quick service restaurants in India. It has been incurring losses in the last 3.5 years. Its issue price cannot be ascertained whether it is under priced or overpriced due to this. Such businesses incurred huge losses due to Covd-19 pandemic. Untill, covid-19 vaccine is found, such business cannot recover fully to its pre-covid level.
When it is incurring losses running at full capacity during pre-covid time, how it can move to profitable when such pandemic is going on? This might take 1-2 years for such companies to recover. If you are investing in this IPO at current IPO price, you are investing based on future valuations and not based on past performance. This is from the fundamental point of view.
From current stock market sentiments point of view where we could see bullish view, investors might be still optimistic and could bet for listing gains. Don’t get surprised with this aspect.
I would personally like to give a miss and stay away from this IPO at this point of time.
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