Burger King is a quick service restaurant (QSR) that has grown to become a global brand and the India arm of the company is set to launch an IPO to raise Rs 810 crore. The offering includes a fresh issue of shares worth Rs 450 crore, and an offer for sale (OFS) of up to 60 million shares by promoter entity QSR Asia Pte Ltd worth Rs 360 crore, at the upper end of the price band.
The company has stated that the proceeds of the IPO will be used to finance the roll-out of new company-owned Burger King Restaurants as well as other general corporate purposes. The band for the IPO is set at Rs 59-60 per share, with a minimum bid of 250 equity sharesand in multiples of 250 equity shares subsequently.
Burger King was ranked the fastest-growing international QSR chain in India in their first five years of operations. The brand is the world’s second largest fast food burger brand, based on the number of restaurants, with more than 18,000 restaurants in over 100 countries.
Experts have recommended subscribing to Burger King India Ltd (BKIL) IPO, considering the brand’s success in just five years, with 260 stores and huge runway for growth as it targets 700 stores by 2026. The brand also has competitive advantages over other businesses, enabling it to capitalise on emerging opportunities.
Near-term financials are expected to remain under pressure. However, a major turnaround is predicted by FY23/24, attributed to post Covid-19 recovery and benefits from rising economies of scale and new stores. The shares are currently being offered at 2.9x FY20 enterprise value (EV)/Sales, compared to 8.4x for the likes of Jubilant FoodWorks and 4.4x for Westlife Development.
Burger King currently has exclusive rights for the development, establishment, operation and franchise of Burger King branded restaurants as the national master franchisee. The company grew its revenue by about 49% CAGR over FY18-FY20. It has also improved its gross margin consistently from 62% in 2018 to 64% in 2020, with its earnings before interest, tax, depreciation, and ammortisation (Ebitda) also growing during the same period.
While Burger King India’s strength cannot be denied due to its strong customer proposition, brand positioned for millennials, vertically managed and scalable supply chain model, and operational quality, investors have to consider systemic factors that are beyond the control of the brand. Unfavourable macroeconomic conditions, competition from other QSR entities and delivery aggregators, slower expansion in the restaurant network, and continuation or worsening of the Covid-19 crisis are risk factors for the company and potential investors.
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