Consumer Analyst / Channel Surveillance Specialist, Trudence Capital Advisors

Pranav Bhavsar

Consumer Analyst / Channel Surveillance Specialist

ASA Capital Management

ASA Capital Management is a boutique Research and Investment Advisory firm focusing on primary research in India. ASA provides bespoke research services to Institutional Clients with a focus on due diligence backed with primary research, Field Trips & Channel Checks.

Equity Bottom-Up

Restaurant Brands Asia / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/burger-king-india" target="_blank" data-smartkarma-citation="entities:28445:1" rel="noopener">Burger King India (BKI IN)</a> is the second most sought after IPO of 2020. The IPO specifics are well covered by <a href="https://www.smartkarma.com/profiles/sumeet-singh" target="_blank" data-smartkarma-citation="accounts:4" rel="noopener">Sumeet Singh</a> in this insight <a href="https://www.smartkarma.com/insights/burger-king-india-ipo-can-still-grow-fast" target="_blank" data-smartkarma-citation="insights:45890" rel="noopener">Burger King India IPO - Can Still Grow Fast</a> and by <a href="https://www.smartkarma.com/profiles/oshadhi-kumarasiri" target="_blank" data-smartkarma-citation="accounts:3584" rel="noopener">Oshadhi Kumarasiri</a> in his insight <a href="https://www.smartkarma.com/insights/burger-king-india-ipo-valuation-offered-at-a-discount-to-peers-but-not-cheap-on-absolute-value" target="_blank" data-smartkarma-citation="insights:45883" rel="noopener">Burger King India IPO Valuation: Offered at a Discount to Peers, But Not Cheap on Absolute Value</a>.
This Insight, provides our preliminary takeaways from interactions with restaurant managers located in the northern part of India. The objective of this insight is to provide a preliminary on-ground narrative when it comes to growth.

Burger King India (BKI IN) is the second most sought after IPO of 2020. The IPO specifics are well covered by Sumeet Singh in this insight Burger King India IPO - Can Still Grow Fast and by Oshadhi Kumarasiri in his insight Burger King India IPO Valuation: Offered at a Discount to Peers, But Not Cheap on Absolute Value.
This Insight, provides our preliminary takeaways from interactions with restaurant managers located in the northern part of India. The objective of this insight is to provide a preliminary on-ground narrative when it comes to growth. 

Burger King India (BKI IN) | Preliminary Channel Checks Confirm Growth Potential

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

Restaurant Brands Asia / Equity Capital Markets

<ul>
<li>India’s fastest growing quick-service restaurant (QSR) chain, <a href="https://www.smartkarma.com/entities/burger-king-india" target="_blank" data-smartkarma-citation="entities:28445:1" rel="noopener">Burger King India (BKI IN)</a> filed an updated prospectus with the Securities and Exchange Board on 27th of November 2020, offering 135 million shares (75 million new shares) at a price range of INR 59.0-60.0 per share.</li>
<li>Applications open on 2nd December and close on 4th December and shares are expected to start trading on 14th December. According to news articles, Burger King India shares are available at a 34%-42% premium to the offer price in the grey market.</li>
<li>Burger King India will utilise INR 1.65 billion of the net proceeds from the IPO to repay outstanding borrowings related to the opening of new company-owned restaurants, and another INR 1.77 billion, of which 63% on FY22 and 30% in FY23, to open new company-owned Burger King restaurants. The remaining amount will be used for general corporate purposes.</li>
<li>Shares are offered at a significant discount to peers. However, it does not necessarily mean that the shares are undervalued or has long term upside potential. Indian QSR players are currently trading at lofty forward multiples. We believe the market has significantly overvalued QSR players, considering only the rapid growth potential and ignoring the extreme competition and its impact on profitability. Therefore, we believe Burger King India is overvalued on absolute value.</li>
</ul>


India’s fastest growing quick-service restaurant (QSR) chain, Burger King India (BKI IN) filed an updated prospectus with the Securities and Exchange Board on 27th of November 2020, offering 135 million shares (75 million new shares) at a price range of INR 59.0-60.0 per share.
Applications open on 2nd December and close on 4th December and shares are expected to start trading on 14th December. According to news articles, Burger King India shares are available at a 34%-42% premium to the offer price in the grey market.
Burger King India will utilise INR 1.65 billion of the net proceeds from the IPO to repay outstanding borrowings related to the opening of new company-owned restaurants, and another INR 1.77 billion, of which 63% on FY22 and 30% in FY23, to open new company-owned Burger King restaurants. The remaining amount will be used for general corporate purposes.
Shares are offered at a significant discount to peers. However, it does not necessarily mean that the shares are undervalued or has long term upside potential. Indian QSR players are currently trading at lofty forward multiples. We believe the market has significantly overvalued QSR players, considering only the rapid growth potential and ignoring the extreme competition and its impact on profitability. Therefore, we believe Burger King India is overvalued on absolute value.


Burger King India IPO Valuation: Offered at a Discount to Peers, But Not Cheap on Absolute Value

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<div>
Burger King India (BKI) aims to raise around US$110m via a mix of selling primary and secondary shares in India. 
BKI is the national master franchisee of the Burger King brand in India. As of Sep 2020, it operated 261 restaurants, including 8 sub-franchised restaurants, across 57 cities in India. 
BKI’s no. of restaurants have increased by 2.95x over FY17-20, while its revenue has grown even faster at 54% CAGR over FY17-20. Although BKI hasn’t managed to break-even, with the COVID induced lockdown pushing it back into losses.
As compared to its two main listed peers, BKI appears to lie in between on most measures, although its cost structure leaves much to be desired, as of now.
I’ve covered various aspects of the deal in my earlier notes:
<ul>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/burger-king-india-pre-ipo-has-been-growing-fast-and-plans-to-grow-even-faster" target="_blank" rel="noopener">Burger King India Pre-IPO - Has been growing fast and plans to grow even faster</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/burger-king-india-pre-ipo-peer-comparison-yields-interesting-nuggets-on-profitability-and-capex" target="_blank" rel="noopener">Burger King India Pre-IPO - Peer comparison yields interesting nuggets on profitability and capex</a></li>
</ul>
In this note, I’ll cover the updates in the company’s latest filings and run the deal through our ECM framework
</div>


Burger King India (BKI) aims to raise around US$110m via a mix of selling primary and secondary shares in India. 
BKI is the national master franchisee of the Burger King brand in India. As of Sep 2020, it operated 261 restaurants, including 8 sub-franchised restaurants, across 57 cities in India. 
BKI’s no. of restaurants have increased by 2.95x over FY17-20, while its revenue has grown even faster at 54% CAGR over FY17-20. Although BKI hasn’t managed to break-even, with the COVID induced lockdown pushing it back into losses.
As compared to its two main listed peers, BKI appears to lie in between on most measures, although its cost structure leaves much to be desired, as of now.
I’ve covered various aspects of the deal in my earlier notes:

Burger King India Pre-IPO - Has been growing fast and plans to grow even faster
Burger King India Pre-IPO - Peer comparison yields interesting nuggets on profitability and capex

In this note, I’ll cover the updates in the company’s latest filings and run the deal through our ECM framework


Burger King India IPO - Can Still Grow Fast

Barbeque Nation Hospitality / Equity Capital Markets

Barbeque nation (BN) aims to raise around US$150m in its India IPO. It owns and operates casual dining restaurants under the same name, Barbeque Nation Restaurants. As of Nov 2019, it had 138 restaurants  in 73 cities in India and seven international restaurants in three other countries.The company had tried to list earlier in FY17 but was held back due to regulatory reasons. Hence, one has a longer financial history available for the company. The number of restaurants operated by the company has increased by 4x over FY13-19. This has led to strong revenue growth. However, EBITDA and PATMI have lagged revenue growth even though the cost of foods and beverages as a percentage of revenue has been declining. The pressure of margins appears to stem from rising employee costs.Even on a per restaurant basis, revenue, EBITDA and operating cash flow has been declining. Furthermore, the company recently acquired a group of Italian restaurants in order to diversify its offering. The last time it tried to diversify, it didn’t end up doing too well.

Barbeque nation (BN) aims to raise around US$150m in its India IPO. It owns and operates casual dining restaurants under the same name, Barbeque Nation Restaurants. As of Nov 2019, it had 138 restaurants  in 73 cities in India and seven international restaurants in three other countries.The company had tried to list earlier in FY17 but was held back due to regulatory reasons. Hence, one has a longer financial history available for the company. The number of restaurants operated by the company has increased by 4x over FY13-19. This has led to strong revenue growth. However, EBITDA and PATMI have lagged revenue growth even though the cost of foods and beverages as a percentage of revenue has been declining. The pressure of margins appears to stem from rising employee costs.Even on a per restaurant basis, revenue, EBITDA and operating cash flow has been declining. Furthermore, the company recently acquired a group of Italian restaurants in order to diversify its offering. The last time it tried to diversify, it didn’t end up doing too well.

Barbeque Nation Pre-IPO - Not Really a Feast

Burger King India (BKI) plans to raise around US$150m via a mix of selling primary and secondary shares in India. BKI is the national master franchisee of the Burger King brand in India. As of Oct 2019, it operated 224 restaurants, including 8 sub-franchised restaurants, across 47 cities in India. In my previous note,<a href="https://www.smartkarma.com/insights/burger-king-india-pre-ipo-has-been-growing-fast-and-plans-to-grow-even-faster" target="_blank" rel="noopener"> Burger King India Pre-IPO - Has been growing fast and plans to grow even faster</a>, I covered the company’s background and looked into some of the issues that the company might face.In this note, I’ll compare the company to its two main listed peers in India, <a href="https://www.smartkarma.com/entities/westlife-development-ltd" target="_blank" data-smartkarma-citation="entities:14207:1" rel="noopener">Westlife Development (WLDL IN)</a> and <a href="https://www.smartkarma.com/entities/jubilant-foodworks-ltd" target="_blank" data-smartkarma-citation="entities:986:1" rel="noopener">Jubilant Foodworks (JUBI IN)</a>.

Burger King India (BKI) plans to raise around US$150m via a mix of selling primary and secondary shares in India. BKI is the national master franchisee of the Burger King brand in India. As of Oct 2019, it operated 224 restaurants, including 8 sub-franchised restaurants, across 47 cities in India. In my previous note, Burger King India Pre-IPO - Has been growing fast and plans to grow even faster, I covered the company’s background and looked into some of the issues that the company might face.In this note, I’ll compare the company to its two main listed peers in India, Westlife Development (WLDL IN) and Jubilant Foodworks (JUBI IN).

Burger King India Pre-IPO - Peer Comparison Yields Interesting Nuggets on Profitability and Capex

India

Westlife Development Limited is an operating-cum-investment company that puts up and operates quick service restaurants. The Company, through its subsidiary, operates fast food franchise restaurants across western and southern India.

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Westlife Development (WLDL IN)

Burger King India (BKI IN) | Preliminary Channel Checks Confirm Growth Potential

In this channel check we present, our takeaways based on interactions with a couple of BKI's restaurant managers in order to understand the growth...

Pranav Bhavsar

Burger King India IPO Valuation: Offered at a Discount to Peers, But Not Cheap on Absolute Value

Burger King India’s share price could rise following the IPO, as there is already a 34-42% grey market premium. We would void this IPO due to the...

Oshadhi Kumarasiri

Burger King India IPO - Can Still Grow Fast

Burger King India (BKI) aims to raise around US$110m via a mix of selling primary and secondary shares in India. BKI is the national master...

Sumeet Singh

Barbeque Nation Pre-IPO - Not Really a Feast

Barbeque nation (BN) aims to raise around US$150m in its India IPO. It owns and operates casual dining restaurants under the same name, Barbeque...

Sumeet Singh

Burger King India Pre-IPO - Peer Comparison Yields Interesting Nuggets on Profitability and Capex

Burger King India (BKI) plans to raise around US$150m via a mix of selling primary and secondary shares in India. BKI is the national master...

Sumeet Singh

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