Pizza hut operator Devyani International’s IPO subscribed 9.5 times so far; check grey market premium

Devyani International’s Rs 1,838 crore IPO has been subscribed 9.56 times so far on the final day of sale, with all pockets of investors oversubscribing their portion of the issue. Retail investors have subscribed the IPO in the highest numbers so far. Devyani International is the largest franchisee of Yum brands in India and operates brands KFC, Taco Bell, and Pizza Hut under its banner align with Costa Coffee. Devyani International’s IPO has seen strong demand from investors since opening on Wednesday and was fully subscribed within three hours of the first day of bidding. 

Devyani International’s IPO can be subscribed by investors in the fixed price band of Rs 86-90 per share, in a bid lot of 165 shares. From the overall 11.25 crore shares on offer, investors have placed bids for 107.5 crore shares or 9.56 times the issue size. Retail investors have bid for 58.8 crore shares or 28.87 times their quota. NIIs have placed bids for 36.82 crore shares or 12.05 times the reserved portion, while Qualified Institutional Buyers (QIB) have subscribed their portion of the issue 1.92 times, placing bids for 11.76 crore shares. The IPO is a mix of an offer for sale (OFS) and a fresh issue of equity shares.

In the unlisted space, shares of Devyani Internation were trading at a premium of Rs 65 per share or 72% above the IPO price. Devyani International has continued to trade at a stable premium since the IPO opened for subscription, people dealing in the grey market said. 

The company caters to an attractive industry that is expected to grow at 12% CAGR over the next five years. “QSR is expected to experience a rise in the number of transactions and average transaction amount due to the short service time at an affordable price offered by QSR,” domestic brokerage and research firm ICICI Direct said in a note. “We believe DIL would be able to capture the growth owing to metro lifestyle and outside food habits. This, coupled with the company’s cost rationalisation initiatives will help drive profitability in future,” they added while pinning a ‘Subscribe’ rating on the IPO. The brokerage firm believes that the IPO is priced at 7x price/sales (post issue) FY20 on upper band.

Post-IPO, promoters of the company will hold a 67.99% stake in the company while public shareholding will increase to 32% from 24.2% currently. Devyani International also operates KFC and Pizza Hut stores in Nigeria and Nepal, giving it international exposure. Analysts at Ventura Securities have a ‘Subscribe’ rating on the issue. “ Our target price of Rs 149.8 (59.9X FY24 EPS) represents a potential upside of 66.4% from the offer price of Rs 90 (upper limit of the band) over a period of 18-24 months,” they said.