Will investors bite Speciality Restaurants Rs 182cr IPO

Moneycontrol Bureau

Last 6-7 months have not been very good for initial public offerings. Seven public offers hit the street since November. But barring MT Educare, most others are trading well below their issue price. Even MCX, the biggest IPO so far in 2012, despite surging on debut, is trading 2% below its issue price. Fine dine restaurant chain operator Speciality Restaurants is now testing the turbulent waters with its IPO this week. The company, run by Anjan Chatterjee and Suchhanda Chatterjee, has set a price band of Rs 146-155 a piece for its 11.74 million share issue. At the higher end of the price band it aims to raise Rs 182 crore. It plans to use the funds raised to expand its restaurant footprint, develop food plazas and repay a term loan, according to its draft red herring prospectus. It currently runs 69 restaurants and 13 confectionary stores across 22 cities in India.  Mainland China, its biggest brand, accounts for 60.3% of its revenues, followed by Oh! Calcutta at 12.3%. Mainland China and Oh! Calcutta, are quite popular. But will it manage to tickle the tastebuds of investors? The general mood in the markets is not quite buoyant. Samvardhana Motherson Finance was the most recent casualty, it  had to defer its Rs 1,665 crore offer, which had opened on May 2, due to poor response. Kotak Mahindra Capital, the book running lead manager for the Speciality Restaurants' issue and the management are betting on the consumption boom in India to continue to drive the company's sales going ahead. Consumer goods stocks have been in much demand over the last one year as investors parked their money in defensive bets amid overall market volatility. The CNX FMCG index is up 24% in the last one year. However, no other players in the hotels, especially fine dining space, are listed on the stock market. So its difficult to compare valuations of Speciality Restaurants. Jubilant Foodworks, which operates the Domino's Pizza chain, is one of the few listed players (though not a direct competitor). It has seen strong growth in the last few years. Its fourth quarter same-store sales growth, however, has slipped to 26.2% from 30% in Q3. Analysts, also point out that Jubilant's sales growth has been more volume driven, rather than value driven, meaning, people may have cut back on their spends.  The company  is trading at around 44 times its FY13 P/E. If the overall macro environment remains volatile, consumers could also defer discretionary spends like fine dining.  The Speciality Restaurants IPO will open on May 16 and close on May 18, so we will know soon, how much response it gets. Speciality Restaurants' net profit increased to Rs 15.63 crore in financial year 2011, from Rs 3.12 crore in FY2007 at a compounded rate of 49.6%. Its revenue in the same period was up 35.1% CAGR to Rs 173 crore. For the nine-months ended December 2011, it reported a net profit of Rs 15.34 crore, while revenue was Rs 149.7 crore. Anjan Chatterjee, who is Speciality Restaurants' MD, says the focus will remain on expanding Mainland China. The plan is to scale Mainland China to 100 restaurants by 2016. It also plans to expand Sigree to a formidable Indian fine dining brand over next few years. The company also operates brands like  Fire & Grill,  Haka, Just Biryani, Kibbeh, Machaan and confectionary stores Sweet Bengal across India.  Speciality Restaurants is also setting up food courts in Kolkata and Pune, which will house most of its brands under one roof. Nachiket Kelkar
nachiket.kelkar@moneycontrol.com