Burger King ahead of IPO trades at a 40% dividend in the grey market

Burger King of India is an Indian supplementary of the US-based fast food restaurant chain serving the best hamburgers. Burger King has almost 17, 796 outlets in over 100 countries among which half of it are in the US. The Indian branch of Burger King traded at almost 40% premium over its release rate, ahead of what it used to offer to the public.

 The Indian branch has exclusive rights to establish, operate and expand burger king branches in India. The first restaurant was started in November 2014; the franchisee has initiated almost 261 restaurants which also included sub-franchised outlets in 57 cities across the nation and across 17 union territories and states. Burger King was looking forward to raise a fresh issue at 600 crores.

As per the information gathered from the IPO Watch Website, portions are accessible at a premium of Rs. 20-25 in the grey market opposite to the issue cost of Rs. 59-60 per share. The premium at the upper band amount comes at 41.7 percent and 33.9 percent whereas the lower part of the value band in percentage terms, the premium comes to 42.4 percent and 33.9 percent over the Initial Public Offer price.

On 2nd December 2020, Burger announced to the huge audience that it has decided to launch and initiate its 810 crore maiden public issue. They also added that the closing will be on December 4th. Due to the pre-replacement of IPO, the issue reduced from 60 crore and made way to a fresh issue of 450 crore. Promoter QSR Asia Pte ltd made an offer for sale of 6 crore equity shares.

Reports of Techno Park stated that during the first five years of Burger King’s operations based on the number of restaurants, Burger King is the fastest growing global quick-service restaurant chain. To advance their business in India, their master franchisee arrangement provides Burger King with the opportunity to use the globally recognized brand name.

As stated by Keshav Lahoti, Associate Equity Analyst at Angel Broking, Burger King cannot attain premium valuation as Jubilant Foodworks as Burger King’s profitability record doesn’t come near to that of Jubilant. Burger King’s associate Jubilant is currently trading at 8.7EV/sales on FY20 basis. He also added in his statement that Indian citizens prefer Jubilant – Pizza much more than they prefer Burger King’s hamburgers.

Burger King’s return from sale and beverages was 375.2 crores in FY18 and gradually rose up to 835.2 crores in FY20. The covid-19 situation has impacted the company a lot and also saw significant disruptions in the operations towards the end of FY20 and in September 2020 which marked the end of six months. The revenue from the sale of food and beverages has decreased badly to 134.69 crores till September 2020 marking six months whereas, in 2019, the revenue from the sale of food and beverages was 419.37 at the end of six months which ended in September.

The company is expected to inaugurate at latest 700 restaurants including sub-franchised burger king restaurants and company-owned Burger King Restaurants by December 31st 2026 under the Master Franchisee and Development Agreement. The one-year extension from December 31st 2025 had taken place because of the COVID crisis.

Authorities expect equity shares to appear on bourses at the latest by the end of 14th December 2020. JM Financial, CLSA India, Kotak Mahindra Capital Company and Edelweiss Financial services are the chief managers of the issue which involves the delay that has been caused due to the COVID-19 crisis.