Burger King IPO to debut today: Here's what to expect from the listing

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Burger King India, the subsidiary of US-based quick service restaurant chain Burger King, will debut on bourses on December 14 after receiving a strong response to its initial public offering.

The company has fixed the issue price at Rs 60 per share. Its shares are available at a 75 percent premium in the grey market. The premium increased significantly in the grey market from 42 percent seen before the public issue opening in first week of December.

Considering the stellar subscription, cheaper valuation compared to listed peers, strong revenue growth on the back of consistent addition in restaurants, analysts expect bumper listing of 70-75 percent over issue price on December 14.

"Burger King IPO received an overwhelming response from investors group (especially HNIs) mainly due to cheaper valuation compared to its peer companies such as Jubilant FoodWorks and Westlife Development (McDonald's). Also, the company is at a nascent stage in India and has tremendous scope for growth in the long term," Ajit Mishra, VP Research at Religare Broking told Moneycontrol.

Further, "taking instances from the past, the company which receives such remarkable response from investors usually sees a stellar listing and thus we feel Burger King would follow the suit," he said.

The Rs 810-crore public issue received second highest subscription of 156.65 times in 2020, during the December 2-4 period.

"Looking at the strong subscription demand one can expect a bumper listing gain with 70-75 percent listing premium (Rs 90 - 100 plus levels) on allotment price of Rs 60. The listing premium is justified as there is a high probability of floating into the profit zone from loss once normalcy demand comes back from COVID challenges and once this happens Burger King valuations will rise and IPO price will look eye-catching," Prashanth Tapse, AVP Research at Mehta Equities said.

He believes Burger King India gives investors an opportunity to play on India's fastest growing quick service restaurants (QSR) chains business. "We assume Burger King is still in the early stage of growth in India and with a strong brand it can make wonders in the next 2 years of investing horizon as future outlook sounds better."

Burger King India is one of the fastest growing international QSR chains in India during the first five years of their operations based on number of restaurants.

The company had its own 259 Burger King restaurants and nine sub-franchised Burger King restaurants as of November 25 this year. It has a target to increase this restaurants chain to 700 by the end of December 2026.

Its revenue increased at a 49 percent CAGR and EBITDA at a CAGR of 258 percent respectively, led by 2x the store strength in FY18-FY20, though it continued to report losses at PAT level.

Its same store sales growth stood at 12.2 and 29.2 percent in FY18 and FY19 while it surprisingly became flat in FY20. In first half of FY21, Burger King India witnessed COVID-19 impact and as a result, revenue declined 68 percent YoY and it reported losses at EBITDA and PAT levels.

The public issue consisted a fresh issue of Rs 450 crore and an offer for sale of 6 crore shares by promoter QSR Asia. The company plans to use roughly Rs 270 crore of the offer towards expansion of stores with a target of opening 370 restaurants by CY22.

"We like QSR story as a solid Indian discretionary play for long term and advise investors to add & hold in long term portfolio," Tapse said.