Burger King grey market premium surges ahead of stock market debut, up 83% over issue price

Days ahead of its debut on Dalal Street, Burger King’s shares are trading at a 83% premium in the grey markets. The fast-food major’s initial public offering was subscribed a massive 156.65 times by earlier this month, making it the second most subscribed public issue of 2020 so far. Burger King IPO received bids for 1,167 crore equity shares as against 7.44 crore shares on offer. This intense demand by investors for the issue has also helped jack up the grey market price of the US-headquartered fast food company.

Grey Market Premium rises

“Burger King is commanding a premium of Rs 50-55 per share in the grey market over its issue price of Rs 59-60,” Sandip Ginodia, CEO, Abhishek Securities told Financial Express Online. He added that momentum has been strong for Burger King in the unlisted market as liquidity flushed markets have been rushing to invest in IPOs. “The market is gaining momentum helped by liquidity and here the story is similar. The strong brand of Burger King has also helped,” he added.

The IPO of one of the fastest growing fast food chains in the country has allotted 75% of its shares that were on offer to qualified institutional buyers who oversubscribed their portion 85 times during the bidding process. 15% of the total issue has been reserved for non-institutional investors or the high net-worth investors, who were the highest bidders for the issue with bidding going up to 354 times. Retail investors have a minor 10% reserved for them and they oversubscribed the portion 67.15 times.

Attractive valuations

“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,” said brokerage and research firm Motilal Oswal in a note. Burger King’s strong brand position, robust store expansion plans, and healthy growth prospects have made Motilal Oswal recommend a ‘subscribe for listing gains’ strategy. On the other hand, brokerage firm Choice Broking, valuing the firm at an EV/sales multiple of 5.2x, a discount to the peer average of 8.9x, had recommended investors to subscribe to the issue.

Top listing gains this year

In 2020, so far, Dalal Street has witnessed the listing of 11 new stocks. Of these the best performance on listing day was given by Chemcon Speciality Chemicals, gaining 114% on listing from its issue price of Rs 340 per share. This was followed by Happiest Minds Technologies, giving 111% listing gains and then Route Mobile with a 104% jump on listing day.