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 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> started trading on 14<sup>th</sup> December 2020. The shares opened trading at INR 112.5 per share, up 88% from the offer price and closed the opening day at INR 138.4 per share, up 131% from the IPO price. The momentum is till strong and Burger King India shares are currently trading near INR 200.0 per share.</li>
<li>Burger King entered the Indian market in 2015, almost two decades after Domino’s, which currently leads the Indian QSR market with about 1,250 restaurants compared to the 261 Burger King restaurants. Subway, McDonald’s and KFC, entered the Indian QSR market in 2001,1996 and 2004 respectively and has 2.5x, 1.8x and 1.5x the number of Burger King restaurants in India currently.</li>
<li>We liked the company’s growth potential, but we were worried about its lower profitability compared to peers. Therefore, we were skeptical about Burger King India as a long-term investment, even though the IPO was priced at a significant discount to peer multiples.</li>
<li>In this insight, we explore what could be a good exit point for IPO investors and also suggests an entry point for short sellers.</li>
</ul>


India’s fastest growing quick-service restaurant chain Burger King India (BKI IN) started trading on 14th December 2020. The shares opened trading at INR 112.5 per share, up 88% from the offer price and closed the opening day at INR 138.4 per share, up 131% from the IPO price. The momentum is till strong and Burger King India shares are currently trading near INR 200.0 per share.
Burger King entered the Indian market in 2015, almost two decades after Domino’s, which currently leads the Indian QSR market with about 1,250 restaurants compared to the 261 Burger King restaurants. Subway, McDonald’s and KFC, entered the Indian QSR market in 2001,1996 and 2004 respectively and has 2.5x, 1.8x and 1.5x the number of Burger King restaurants in India currently.
We liked the company’s growth potential, but we were worried about its lower profitability compared to peers. Therefore, we were skeptical about Burger King India as a long-term investment, even though the IPO was priced at a significant discount to peer multiples.
In this insight, we explore what could be a good exit point for IPO investors and also suggests an entry point for short sellers.


Burger King India IPO Trading Update: More Speculation Than Investment

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><p>Burger King India (BKI) raised around US$110m via a mix of selling primary and secondary shares in its India IPO. </p></div><div><p>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. </p></div><div><p>I’ve covered various aspects of the deal in my earlier notes:</p></div><div><ul style="list-style-type: disc;">
<li dir="ltr"><p><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></p></li>
<li dir="ltr"><p><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></p></li>
</ul></div><ul><li><a href="https://www.smartkarma.com/insights/burger-king-india-ipo-can-still-grow-fast" target="_blank" rel="noopener">Burger King India IPO - Can Still Grow Fast</a></li></ul><div><p>In this note, I’ll talk about the updates for the deal and provide a table with implied valuations at different share price levels.</p></div>

Burger King India (BKI) raised around US$110m via a mix of selling primary and secondary shares in its India IPO. 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. 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
Burger King India IPO - Can Still Grow FastIn this note, I’ll talk about the updates for the deal and provide a table with implied valuations at different share price levels.

Burger King India IPO Trading - Can Probably Double from IPO Price

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

<p><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>.</p>
<p>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. </p>

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

<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 27<sup>th</sup> 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 2<sup>nd</sup> December and close on 4<sup>th</sup> December and shares are expected to start trading on 14<sup>th</sup> 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

<div>
<p>Burger King India (BKI) aims to raise around US$110m via a mix of selling primary and secondary shares in India. </p>
<p>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. </p>
<p>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.</p>
<p>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.</p>
<p>I’ve covered various aspects of the deal in my earlier notes:</p>
<ul>
<li dir="ltr"><p><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></p></li>
<li dir="ltr"><p><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></p></li>
</ul>
<p>In this note, I’ll cover the updates in the company’s latest filings and run the deal through our ECM framework</p>
</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

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 IPO Trading Update: More Speculation Than Investment

Burger King shares are up over 2.3x from the IPO price, mostly driven by speculation. we explore what could be a good exit point for IPO investors...

Oshadhi Kumarasiri

Burger King India IPO Trading - Can Probably Double from IPO Price

Burger King India (BKI) raised around US$110m in its India IPO. BKI is the national master franchisee of the Burger King brand in India.

Sumeet Singh

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

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