Restaurant chain Burger King's initial public offer (IPO) was subscribed more than three times on Wednesday, the first day of issue. The initial public offer, which opened for subscription on Wednesday, December 2, received 23.32 crore bids for 7.45 crore shares on offer on the first day, data from the NSE showed. The IPO of US-based Burger King's Indian unit, Burger King India, will be available for subscription till Friday, December 4. Shares in Burger King India will be available for bidding under the IPO at an issue price of Rs 59-60, in lots of 250 units. (Also Read: Should You Invest In Burger King IPO?)
Here's what brokerages say on the Rs 810-crore Burger King India IPO:
"At the higher end of the price band, the issue is valued at 2.7 times the FY20 price/sales ratio, and 8.3 times FY20 times the price/book value ratio, which is reasonable compared to peers," Motilal Oswal said in a note.
"Considering its strong brand positioning, robust store expansion plans and bright growth prospects of the QSR industry in India, we expect its financials to improve going ahead. Thus, we would recommend investors to subscribe to the IPO for listing gains," it added.
"Burger King India is the fastest growing quick service restaurant chain with a target to reach 700 restaurants by the end of 2026. As the company is in a growth phase it has been making losses, but its revenue is growing at a CAGR of over 50 percent due to rapid expansion," said Nirali Shah, senior research analyst, Samco Securities.
"We advise investors to subscribe for listing gains only for now. Further improvement in bottom line, reduction of debt and same store sales growth should be analysed in the following quarters to take a long-term call," she added.
"At the upper price band of Rs 60, the IPO is valued at a price to sales (P/S) ratio of 2.7 times based on FY20 sales, compared to peers like Jubilant FoodWorks (8.4 times) and West Life Development (4.4 times). Also, on the per store basis, the company's valuation (Market Cap/total stores) stands at Rs 8.8 crore, compared to Jubilant FoodWorks' Rs 26.2 crore and Westlife's Rs 23.8 crore). The valuation seems reasonable when compared to peers," Anand Rathi said in a note.
"While the COVID-19 crisis has impacted short-term growth, we believe the company remains well-placed for long-term growth, given its strong brand position, diverse food offerings, well-established supply chain, aggressive expansion plans, cost management efforts and benefit from the gradual recovery in the QSR industry after COVID. As such, we recommend subscribing to this IPO."