Barbeque-Nation IPO listing day strategy: COVID-19 restrictions may hurt BBQ shares debut; sell or hold?

Barbeque Nation Hospitality’s Rs 453-crore IPO, which was subscribed nearly 6 times, is likely to make its stock market debut on Wednesday, April 7, 2021. This would be the first IPO listing in the new financial year 2021-22. The casual dining chain Barbeque-Nation Hospitality has finalised the share allotment last week. The issue was sold in the range of Rs 498-500 per share, and received bids for 2.99 crore shares against 49.99 lakh shares on offer. In the previous fiscal, Indian companies raised over Rs 31,000 crore driven by global liquidity and bull run in the domestic stock market.

Vishal Wagh, Head of Research, Bonanza Portfolio Ltd, told Financial Express Online that seeing the recent listings, it is better to book listing gains and wait for the next opportunity. Barbeque-Nation is the country’s leading casual dining restaurant (CDR) chain (in terms of outlet count as of September 30, 2020), and International Barbeque Nation Restaurants. The company owns and operates Toscano Restaurants and UBQ by Barbeque Nation Restaurant.

Rising COVID-19 cases, restrictions may hurt BBQ shares listing

Analysts believe that Barbeque Nation Hospitality listing seems to be gloomy on the back of restrictions in response to rising COVID-19 cases, as it will hit the hospitality and entertainment sectors the most. Vishal Balabhadruni, Senior Research Analyst at CapitalVia Global Research, told Financial Express Online, that the Hospitality sector seems good in the long term, however, in the short-term, it seems to be on a bumpy road. “Shares of BBQ Nation are expected to list in the range of 510-512. Investors interested only in listing gains may be disappointed but investors who are in it for the long term must hold their positions,” he added.

Barbeque-Nation Hospitality shares are set to list amid spiking corona cases. “We had clearly highlighted the risks of investing in this IPO which included the cut-throat competition in the restaurant business and the hit taken by restaurants due to lower footfalls,” said Aditya Kondawar, Founder, COO, JST Investments. Kondawar had given a ‘avoid’ rating to the issue.

Allotted investors must book profit in Barbeque Nation

Even though fundamentals of Barbeque Nation remain steady with demand for QSR seen increasing post Covid, the listing price band is highly overvalued given the current IPO frenzy, said AR Ramachandran, Co-founder & Trainer, Tips2Trades. “On the listing day, allotted investors should book substantial profit and wait for a 20-30 per cent correction to re-enter the stock at more reasonable valuations,” he told Financial Express Online.

Jubilant FoodWorks operates in the same industry as Barbeque Nation. Among the likes of Westlife Development, Speciality Restaurants and Burger King India, only Jubilant FoodWorks has a positive P/E ratio of 140.05, according to the RHP filed by Barbeque Nation. As of December 31, 2020, the company had 147 Barbeque Nation Restaurants, six International Barbeque Nation Restaurants and 11 Italian Restaurants of which nine are operated under ‘Toscano’ brand name and one each under the brand names ‘La Terrace’ and ‘Collage’. respectively.

(The recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)