Premium on Burger King shares in grey market jumps to 75% ahead of listing

Quick restaurant chain Burger King is expected to witness a strong debut on December 14 as shares traded at a 75 percent premium in the grey market on December 11.

In absolute terms, shares traded at a premium of Rs 44-45 in the grey market against the final issue price of Rs 60, as per the data available with the IPO Central and IPO Watch websites.

In fact, this premium in the grey market jumped significantly since the last week. It was available at a premium of Rs 20-25 per share before the IPO opening and at Rs 30-35 per share after the closing of IPO.

The overwhelming response to the public issue and healthy financials of the company seem to be the reason for the strong premium in the grey market.

The Rs 810-crore public offer, which was open during December 2-4 period,  was subscribed 156.65 times. The portion set aside for retail investors had seen a subscription of 68.15 times, qualified institutional buyers' portion was at 86.64 times and non-institutional investors' portion was at 354.11 times.

The issue consists of a fresh issue of Rs 450 crore and an offer for sale of 6 crore shares by promoter QSR Asia.

Burger King is the second largest burger brand globally with 261 restaurants at the end of September 2020. It aims to increase the number of restaurants to 700 by the end of December 2026.

The company plans to use some of the IPO proceeds to repay its debt and for expansion.

"Burger King is in the race to take advantage of India's fast growing QSR industry as well as the shifting trend towards organized sector. Now the debt to equity ratio is comfortable at 0.8x and the cash flow from operations has improved from the negative territory to Rs 112.7 crore in FY20. At 2.7x P/Sales, Burger King is relatively cheap compared to 10.4x P/Sales and 6.32x for Jubilant Foodworks and Westlife Development respectively," Nirali Shah, Senior Research Analyst at Samco Securities said.