Burger King India IPO fully subscribed on day 1; retail portion booked nearly 10 times

Quick service chain Burger King India initial public offer (IPO) got fully subscribed within two hours of the bidding process on the day one. The Rs 810-crore IPO was subscribed 1.86 times so far in the afternoon. The issue received bids for 13.82 crore equity shares against IPO size of 7.45 crore equity shares. One day before the issue opening, Burger King India had raised Rs 364.4 crore from the anchor investors. The company has reserved up to 75 per cent of the issue for Qualified Institutional Buyers (QIB) while 15 per cent for Non-Institutional Investors (NIIs). However, 10 per cent of the issue has been reserved for retail investors. The issue is being sold in the price band of Rs 59-60 apiece.

So far on the first day of the bidding process, retail investors subscribed 9.84 times their reserved portion, while non-institutional investors subscribed 19 per cent. However, the portion set aside for Qualified Institutional Buyers (QIB) was subscribed just one per cent.

Most of the research and brokerage firms have recommended to ‘subscribe’ Burger King India IPO for the listing gains. Motilal Oswal Financial Services said that at the higher end of the price band, the issue is valued at 2.7x FY20 Price/sales and 8.3x FY20 P/BV which is reasonable compared to peers. “Considering its strong brand positioning, robust store expansion plans and the bright growth prospects of the QSR industry in India, we expect its financials to improve going ahead,” it said.

Nirali Shah, Senior Research Analyst, Samco Securities said that Burger King is in the race to take advantage of India’s fast-growing QSR industry as well as the shifting trend towards the organized sector. However, Covid-19 has hit the industry hard as most of the restaurants were non-operational in the first half of 2020. Further uncertain events and state-wise lockdowns remain a big threat to the company. For now, the debt to equity ratio is comfortable at 0.8x and the CFO has improved from the negative territory to Rs 112.7 crore in FY20. “We advise investors to Subscribe for listing gains only for now. Further improvement in bottom-line, reduction of debt and same-store sales growth should be analysed in the following quarters to take a long-term call,” Shah said.

Link Intime India Pvt Ltd is the registrar of Burger King India IPO and will manage allocation and refund. Kotak Mahindra Capital Company Limited, CLSA India Private Limited, Edelweiss Financial Services Limited and JM Financial Limited are the book running lead managers to the offer.