The public offer of Devyani International, the operator of KFC and Pizza Hut quick service restaurants chain, was oversubscribed by 6.73 times as it received bids for 75.78 crore equity shares against IPO size of 11.25 crore shares, the subscription data available on exchanges showed on August 5.
Retail investors continued to fuel the IPO frenzy as the portion reserved for the was subscribed 23.15 times and that of employees witnessed 3.12 times subscription.
Qualified institutional investors have put in bids 1.32 times their reserved portion and non-institutional investors bought 6.68 times their portion set aside.
Devyani International is aiming to raise Rs 1,838 crore through its initial public offering that comprises a fresh issue of Rs 440 crore and an offer for sale of Rs 1,398 crore by Dunearn Investments and RJ Corp. The fresh issue proceeds are going to be used for repaying of debts
The company has already mopped up Rs 824.87 crore through its public issue at higher end of price band of Rs 86-90 per share.
The trading premium in the grey market has been increased to Rs 65 today, the IPO Watch data showed. This resulted into a trading price of Rs 155, which is 72 percent higher compared to its issue price of Rs 90.
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The strong trading premium in the grey market indicated that the listing price could be even much higher than Zomato, the restaurant aggregator and food delivery company, which had listed with 52.63 percent premium last month.
Devyani International Limited is one among largest chain operators of quick service restaurants on non-exclusive basis with premium brands such as KFC and Pizza Hut. This provides huge opportunity to scale up their business through food delivery aggregators like Swiggy and Zomato.
"At upper price band, the company's market cap to sales for FY21 stands at 9x which is attractive to the industry average of 11x. Thus, we recommend to subscribe for the listing gains," said Canara Bank Securities.
Also read: Devyani International IPO: Should you grab a bite?
The largest franchisee of Yum Brands in India has successfully moved towards asset-light expansion business model to reduce the capex/operating expenses cost. Post IPO, the company will be debt-free. "This will reduce the finance cost burden (15 percent of the revenue) and turnaround the company to be profitable," said the brokerage.
Further, the company have plans to acquire the existing Yum brands KFC and pizza hut owned outlets in future.
Also read: Devyani International IPO subscribed 2.69 times on day 1, retail portion booked 11.37 timesDisclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.