Burger King, the global Quick Service Restaurant (QSR) brand is coming out with a new IPO in India. The brand will issue fresh equity in the Indian market amounting to Rs.450 crore, along with an offer for sale offering Rs.6cr equity share. Its share will likely go on sale at a face value of Rs.10 per share.
The reasons for fresh equity aren’t clear. Some experts argue that the on-going pandemic and impending coronavirus crisis may still loom large for QSR companies in India. However, despite the unclear reasons, the impending deal is likely to sweeten up the promise for investors, thanks to the burgeoning growth of the brand in recent times.
Burger King India Limited or BKIL continues to be one of the fastest-growing international franchises. Moreover, the international recognition of the brand value would make it an attractive proposition for potential investors.
At lower, and upper price band, the Offer for Sale, may be valued at Rs.59-60 per share. This will make the fresh equity valuation around 7.5-7.6 crore shares. Moreover, the franchise remains a big seller in metropolitan cities in India, wherein the brand boasts of 261 stores. The brand may also be undertaking an expansion of Burger King’s technical operations. The rising home-delivery business has been a boon for store operations in recent times.
Technical Expansion Maybe on the Cards
A QSR business continues to grow, thanks to flourishing home-delivery apps in metropolitan cities. The brand appeal and its reliability continue to fetch premium prices for its products, despite the major slowdowns in pandemic times. For example, the company’s average ticket price stands at 500-550. Moreover, the OPM or Operating Profit Margin continues to be in line with other QSR companies at 12-14%.
Perhaps the new equity will bring tremendous good news for investors, as extending technical services like self-serving checkouts, digital kiosks, and will be major advancements in an era where consumers are increasingly becoming tech-savvy. However, recently, the Burger King brand has also suffered economic loss much like other brands, due to the covid-19 pandemic. During the pandemic, the same store growth fell by 59%, as large numbers of stores were closed amidst the various brief lockdowns. This led to a 68% fall in revenues and eventually to an operating loss of 3.9 crore rupees.
In the second half of 2021, the share prices are more likely to rise, as there is the possibility of welcoming a vaccine, and an increasing move towards opening up the economy. The Burger King Franchise will remain a promising draw for investors, because of its national franchise rights, strong customer proposition, and scalable supply chain model.
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