Burger King IPO subscribed over 3 times, Retail Portion booked over 15 times | check valuation, expansion and outlook

Burger King IPO (BKIL): The Rs 810 crore initial public offering (IPO) of Burger King India the fast-growing international Quick Service Restaurant (QSR) chain in India, was subscribed 3.13 times on the first day of subscription. The quota set for QIB was subscribed 0.17 times, while the portion set for non-institutional investors (NII) was subscribed 0.71 times. The quota set for retail investors was subscribed 15.54 times. The price band of the issue is fixed at Rs 59-60 per share. Today is the second day for subscription and the offer will close tomorrow, December 4, 2020. Bid Lot is 250 Shares and in multiple thereof.

Post Issue the Implied Market Cap of the company would be Rs 2259 cr - Rs 2290 cr. BRLMs (Book Running Lead Managers) of the issue are Kotak Mahindra Capital, CLSA India, Edelweiss Financial, JM Financial and the Registrar is Link Intime India Pvt. Ltd. The Issue opens today and closes on: Friday, 4 th Dec’2020. The company had raised Rs 364.5 cr from anchor investors on Tuesday. The IPO was oversubscribed with hours led by robust retail demand. Analyst community said that it seems Retail Investors were hungry for this IPO, as investors believe it could yeild them good returns on listing and staying invested in the company for long term 
 
Valuation and Outlook:

Burger King India Limited (BKIL) is one of the fastest-growing international Quick Service Restaurants (QSR) chains in India with 261 stores as of Sept 20 (the first store was opened in Nov 2014). On the operational front, the company’s revenue grew by 2.2x over FY18-FY20 to Rs 8412 mn in FY2020. Moreover, the company aims to have 370 stores by the end of Dec 2022 (700 stores by Dec 2026).On the valuation front, At the upper price band, the company is valued at 23.7x EV/ EBITDA considering the diluted equity shares which looks attractive compared to its listed peers (i.e Westlife development - 37x and Jubilant Foodworks - 38.5x) based on FY20 numbers. Considering its robust franchisee model, increasing market and strong store expansion plans would enable the company to improve its growth prospects in the upcoming years

Expansion of restaurant networks:

As the national master franchise of the Burger King, the arrangement provides exclusive rights to BKIL to open 700 restaurants by Dec 2026, with favourable royalty fees capped at 5% of total sales in India. Although the COVID-19 crisis has adversely affected its ability to open new restaurants and expand its restaurants network temporarily. However, BKIL aims to expand its restaurant network in a disciplined manner by continuing to identify new locations across India. Prior to the COVID-19 crisis, BKIL has expanded its number of restaurants from 12 in 2015 to 260 by March 2020. BKIL also aims to increase the pace of expansion of its restaurants network by using its well-defined new restaurant roll-out process, the cluster approach and penetration strategy with respect to restaurant location, while it also aims to achieve an optimal mix of different types of restaurant formats in order to drive footfalls and compete effectively with other QSR brands in India.
The Burger King brand is the second-largest fast-food burger brand globally as measured by the total number of restaurants, with a global network of 18,675 restaurants in more than 100 countries and US territories as of Sept 30, 2020.