After 12 initial public offers mobilising close to Rs 25,000 crore in the year so far, Burger King's public offer, with an issue size of Rs 804-810 crore, is all set to tap the market on December 2. It consists of a fresh issue of equity shares amounting to Rs 450 crore and an offer for sale of 6 crore equity shares with a face value of Rs 10 per share. The proceeds from the sale of fresh issue will be utilised for repayment of outstanding borrowings, capex for setting up of a new company owned restaurants and general corporate purposes.
The company recognises revenue from sale of food and beverages through company-owned stores and when the items are delivered to or taken away by customers. It is one of the fastest growing international Quick Service Restaurants (QSR) chains in India with 261 stores as on September 2020. It has 5 per cent market share in the country's QSR market.
Burger King's revenue more than doubled over the past two years to Rs 841.2 crore (FY20) with store addition by 2.95 times to 260 stores in FY20. However, in the six months ended September 30, 2020, its revenue from operations declined by almost 68 per cent compared to the corresponding period last year. "Although the COVID-19 crisis has adversely affected its ability to open new restaurants and expand its restaurant network temporarily, they continue to evaluate the pace and quantity of new restaurant openings and the expansion of its restaurant network," said an Axis Capital IPO note. Its growth has been facilitated by a well-defined new-restaurant rollout process that enables them to identify locations and build restaurants quickly, consistently and efficiently, it added.
The company's average ticket value stands at Rs 500-550 crore and operating profit margin at 12-14 per cent (post Ind AS116) is in-line with close peers. "Since the company is in a growth phase it continued to make losses at the PAT level. However, highlighting factor is sustained improvement in the gross margins which stood at around 64 per cent in FY20 and negative working capital aiding operating cash flows to improve over FY18-20. FY21 will be the year of disruption for the QSR industry as Q1FY21 performance was disrupted by shutting down of stores during the lockdown period in India. Strong franchisee model, negative working capital, market share gains from standalone players, and strong store expansion plans would help in improving growth prospects in the coming years," highlighted a note from Sharekhan.
The entity plans to continue building its restaurant network using cluster and penetration strategy. It targets to open around 300 restaurants by December 2021 and 700 by December 2026. "The company is repaying around Rs 165 crore debt out of IPO proceeds which will support future profitability," adds a Geojit report.