Devyani International IPO – Issue Details, Review and Analysis
Devyani International Limited IPO (Devyani International IPO) Details
Many of us would have been having Yummy Yummy KFC Chicken and Tasty Pizzas from Pizza Hut. Devyani International (which own such brands) is coming up with IPO that would open for subscription on 4th August 2021. Devyani International Ltd is the largest franchisee of Yum Brands and among the largest quick-service restaurants (QSR) chain operators in India. Company revenues are fluctuating in the last few years. It has been incurring losses in the last 3 years. Should you invest in Devyani International IPO? What are the risk factors in this IPO?
About Devyani International Limited
They are the largest franchisee of Yum Brands in India and are among the largest operators of chain quick service restaurants in India on a non-exclusive basis. It operates 696 stores across 166 cities in India, as of June 30, 2021. Yum! Brands Inc. operates brands such as KFC, Pizza Hut and Taco Bell brands and has presence globally with more than 50,000 restaurants in over 150 countries, as of December 31, 2021.
In addition, they are a franchisee for the Costa Coffee brand and stores in India.
Its business is broadly classified into three verticals that includes stores of KFC, Pizza Hut and Costa Coffee operated in India. Stores operated outside India primarily comprising KFC and Pizza Hut. Stores operated in Nepal and Nigeria and certain other operations in the F&B industry, including stores of its own brands such as Vaango and Food Street.
Devyani International IPO details
|IPO Opening Date||04-Aug-21|
|IPO Closing Date||06-Aug-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 1 per equity share|
|IPO Price band||Rs 86 to Rs 90 per equity share|
|Lot Size||165 Shares|
|Min Order Quantity||165 Shares|
|Listing at||BSE and NSE|
|Issue Size||Total Size: Rs 1,838 Crores
i) OFS: Rs 1,398 Crores
ii) Fresh Issue: Rs 440 Crores
What are Devyani International Limited competitive strengths?
1) The product portfolio of well-recognized QSR brands.
2) Company is the largest franchisee of Yum Brands in India.
3) Cross brand synergies provide operating leverage benefits.
4) Disciplined financial approach with a strong focus on cash flow management.
5) Strong store network; 264 KFC Stores, 297 Pizza Hut stores, and 44 Costa coffee store
What are the Objects of the Offer?
It has two objects of the offer for the IPO size of Rs 1,838 Crores
1) Offer for Sale (OFS) Rs 1,398 Crores: Under OFS selling shareholders would sell the shares and company would not get any proceeds from the issue.
2) Fresh issue of Rs 440 Crores: Fresh issue would be used towards funding the following:
i) Repayment and prepayment of company’s borrowings fully or partially.
ii) General corporate purposes.
Who are the promoters of Devyani International Limited?
Ravi Kant Jaipuria, Varun Jaipuria, and RJ Corp Limited are the promoters of the company.
How is the company financial track record?
Here are the total assets, revenue and profits of the company in the last 3 years.
|Profit After Tax||-592.9||-787.5||-813.2|
Why to invest in Devyani International IPO?
Here are the positive factors in this company.
1) Devyani International Ltd is the largest franchisee of Yum Brands and among the largest quick-service restaurants (QSR) chain operators in India.
2) Company has strong network of over 264 KFC Stores, 297 Pizza Hut Stores and 44 Costa Coffee Stores.
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Risk Factors in Devyani International IPO
1) Company revenues are fluctuating. Its revenues for FY19, FY20 and FY21 are Rs 1,323.6 Crores, Rs 1,535 Crores and Rs 1,198.8. It is difficult to predict the revenues for future in such volatile revenues.
2) Company is incurring losses in the last 3 years. It had incurred losses in FY19, FY20 and FY21 for Rs 59.2 Crores, Rs 78.7 Crores and Rs 81.3 Crores.
3) Current and continuing impact of the ongoing COVID-19 pandemic on its business and operations have significant impact. The impact might continue in the future too which can affect the business.
4) Company rely on the arrangements with Yum for its KFC and Pizza Hut stores that comprise a significant majority of its business. Any termination or inability to renew these arrangements will have material adverse effect on company business.
5) Company rely on Costa IDA with Costa for its Costa stores. Any termination or material modification would have adverse impact on company business
6) Company statutory auditors have included certain adverse remarks, qualifications and matters of emphasis in its audited consolidated financial statements.
7) Company had negative cash flows in the past. It might continue in future too which would have adverse effect in its cash flow requirements
8) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Devyani International IPO dates (subscription, Allotment and Listing Dates)
|Finalization of Allotment||11-Aug-21|
|Initiation of Refunds||12-Aug-21|
|Credit to Demat Account||13-Aug-21|
|IPO Shares Listing Date||16-Aug-21|
Is Devyani International IPO Price is underpriced or overpriced?
Its IPO price band is Rs 86 to Rs 90.
Since company has incurred losses in the last 3 years, we cannot compute P/E ratio and cannot ascertain whether Devyani International IPO is underpriced or overpriced.
What is Devyani International IPO GMP?
Devyani International IPO GMP today is at 52 per share. GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about IPO price as it is unorganized market.
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Devyani International IPO – Review and Recommendation
Devyani International Ltd is the largest franchisee of Yum Brands and among the largest quick-service restaurants (QSR) chain operators in India.
Company revenues are fluctuating. Its revenues for FY21 have reduced compared to FY20 and FY19 which can be attributed due to Covid-19 pandemic.
Company has been incurring losses in the last 3 years.
The issue price cannot be ascertained whether it is under priced or overpriced as it is incurring losses.
If you observe, Barbeque Nation that came for IPO few months back also was incurring losses, had 5.8x oversubscription on IPO and listed 2% discount on listing day. Yes it recovered and gave up to 50% returns in short term.
Due to current bull run, such IPOs may provide gains on listing day and in short term. However, if investors are looking for medium to long term investment, they need to wait and watch company performance for some more time. As of now investors can give a miss to such IPOs.
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