Barbeque Nation Hospitality, a casual dining restaurant chain, is set to make its stock market debut on April 7 in the first listing of the new financial year.
Experts expect the share to begin trading at a discount to the issue prices, as a spike in coronavirus cases poses a risk to the hospitality sector along with a tepid response to the IPO and weak market conditions.
The lack of interest is also highlighted by the fact that Barbeque Nation shares have not been trading on the grey market, which is an unofficial trading platform where shares are traded well before the allotment in an initial public offering (IPO) and listing on bourses. The trading pattern gives a broad idea about a stock's debut.
"Considering volatile market conditions, lower-than-expected subscription demand to its initial public offering and restrictions in response to rising COVID-19 cases may affect listing sentiments which also lead to zero demand in grey market," Prashanth Tapse, AVP Research at Mehta Group told Moneycontrol.
The Rs 453-crore public issue was subscribed 5.98 times during March 24-26. The IPO, the price band for which was fixed at Rs 498-500 a share, comprised a fresh issue of Rs 180 crore and an offer for sale of Rs 273 crore. The fresh issue proceeds are to be used for repaying debts.
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Barbeque Nation debut can be disappointing, Tapse said, adding that the restaurant and hospitality sector would be under pressure as more restrictions in response to rising COVID cases will lead to lower footfalls in the short term, effecting business dynamics.
Gaurav Garg, Head of Research at CapitalVia Global Research, also expects Barbeque Nation to list at a discount.
The equity market has fallen 5 percent from its record high in mid-February and has since remained in a 1,000-1,200 points range on the Nifty50.
"The benchmark indices in correction has spoilt the mood and the rising COVID cases is acting against the hospitality sector. We expect the listing price to be around Rs 490-492 due to choppy markets and reduced retail interest," Garg said.
While Barbeque Nation has posted revenue growth of 20 percent CAGR between FY18-FY20, it has been continuously incurring losses at PAT level despite topline growth.
"The COVID-19 pandemic too has had an adverse impact on the operations of the company hence we expect profits will remain under pressure over the medium term," Jyoti Roy-DVP-Equity Strategist at Angel Broking told Moneycontrol.
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"At the higher end of the price band, the company is asking for a valuation of 2.4x FY20 EV/Sales which we believe is expensive given the current environment. Hence we expect the stock to be under pressure post listing," he said.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.