Burger King India, the Indian subsidiary of US-based hamburger fast food restaurants chain, traded in the grey market at more than 40 percent premium over its issue price, ahead of its public offering.
Shares are available at a premium of Rs 20-25 in the grey market against issue price of Rs 59-60 per share, as per the data available on the IPO Watch website.
At the lower end of price band in percentage terms, the premium comes to 33.9 percent and 42.4 percent over IPO price, while the premium at upper price band comes at 33.3 percent and 41.7 percent.
Burger King decided to launch its Rs 810-crore maiden public issue on December 2 and close on December 4.
The issue consists of a fresh issue of Rs 450 crore (which reduced from Rs 600 crore earlier due to pre-IPO placement) and an offer for sale of 6 crore equity shares by promoter QSR Asia Pte Ltd.
Burger King is the fastest growing international QSR (quick service restaurant) chain in India during the first five years of their operations based on the number of restaurants, reports Technopak. Their master franchisee arrangement provides them with the ability to use Burger King's globally recognised brand name to grow their business in India.
"Burger King peer Jubilant Foodworks is currently trading at 8.7 EV/sales on FY20 basis. We believe Burger King won't get such a premium valuation as Jubilant Foodworks as it does not have a profitability track record like Jubilant, its outlets are young and we believe majority of the Indian people prefers Jubilant - Pizza over burger sold by Burger King," Keshav Lahoti, Associate Equity Analyst at Angel Broking told Moneycontrol
Its revenue from sale of food and beverages grew from Rs 375.2 crore in FY18 to Rs 835.32 crore in FY20. However, the COVID-19 crisis has had a significant impact on its results of operations at the end of FY20 and in the six months ended September 2020, resulting in a decrease of revenue from sale of food and beverages to Rs 134.69 crore in the six months ended September 2020, compared to Rs 419.37 crore in the six months ended September 2019.
In addition, although its same-store sales grew at 29.21 percent in FY19 and 6.11 percent in the nine months ended December 31, 2019, same-store sales decreased by 0.30 percent in FY20 and by 56.9 percent in the six months ended September 2020 primarily due to the impact of the COVID-19 crisis.
The company would utilise fresh issue proceeds for funding roll out of new company-owned Burger King Restaurants; and general corporate purposes.
As of November 25, the filing the date for red herring prospectus, Burger King had its over 259 restaurants and nine sub-franchised restaurants, of which 249 were operational, including two sub-franchised Burger King Restaurants.
Under the Master Franchise and Development Agreement, company is required to develop and open at least 700 restaurants (including Company-owned Burger King Restaurants and Sub-Franchised Burger King Restaurants) by December 31, 2026, which has recently been extended by one year from December 31, 2025 due to the COVID-19 crisis.Kotak Mahindra Capital Company, CLSA India, Edelweiss Financial Services and JM Financial are the book running lead managers to the issue. Equity shares are expected to debut on bourses around December 14, 2020.