Barbeque Nation IPO Review & Recommendations @ Chanakyanipothi.com , India`s Oldest & most Trusted Investment Blog.Operational since 8th December 1999, this is the Only Investment Platform in India, which has successfully completed 21 Years
Generally we evaluate the IPO and its offer price mainly with the profitability of the company and also grey market trends. Whether we like or not but Grey market trend has been all important factor in deciding the IPO subscription.
But in this IPO, the company has negative EPS. More over its book value is in negative. At the same time , there is no fancy in the grey market. Before few months, we came across such other IPO of Burger king which also showed losses and yet it has strong grey market fancy and the IPO sailed through with extra strong listing gains.
Let me first give salient information about the company, Barbeque Nation
This Bangalore headquartered company,Barbeque Nation Hospitality Limited owns and operates Barbeque Nation Restaurants, one of India’s leading casual dining restaurant chains . It also owns and operates Toscano Restaurants and UBQ by Barbeque Nation. Its first restaurant was launched in 2008 and now it has steadily grown to 147 Barbeque Nation Restaurants in 77 cities of India and 6 International Barbeque Nation Restaurants in 3 countries outside India
I am sure you will like to know what is Casual dining restaurants.
Restaurants fall into several industry classifications, based upon menu style, preparation methods and pricing, as well as the means by which the food is served to the customer. A casual dining restaurant is a full-service concept with a laid-back, comfortable, family-friendly ambiance and an affordable menu; where as Fine dining restaurants offer an upscale setting and service while featuring unique and often more expensive menu options,
According to Technopak, the Chain Casual Dining market in India has been flourishing over the last few years. The Chain CDR segment represents the 2nd largest share in the chain food services market in India after QSR. In FY 2020, the size of the Chain Casual Dining market is estimated at Rs. 13400 Crore. The segment is expected grow at a healthy CAGR of 18% to reach Rs 30200 Crore by FY 2025. The Barbeque Nation Restaurants have experienced steady growth in the number of covers over the last three Fiscals, and the proportion of total revenues from weekday sales and lunch covers at Barbeque Nation Restaurants is relatively higher as compared with the industry average according to the Technopak Report. The number of in-dining covers at the Barbeque Nation Restaurants in India has grown from 6.86 million in Fiscal 2017 to 9.92 million in Fiscal 2020 at a CAGR of 13.08%. Further, out of the 147 Barbeque Nation Restaurants owned and operated by the company in India as of December 31, 2020, 24 Barbeque Nation Restaurants were opened between March 31, 2019 and December 31, 2020 and 71 Barbeque Nation Restaurants have been opened since April 1, 2017. Consequently, the company is in position to monetise the benefits of its recent expansion in the past few Fiscals.
The Promoters of Barbeque are Sayaji Hotels ltd , its group companies ,Kayum Danani & family members. So we can safely assume that the promoters have rich experience of operating restaurants.
The Offer comprises of a Fresh Issue and an Offer for Sale.
Net Proceeds is proposed to be used for
A. Setting-up of new Barbeque Nation restaurants in India;
B. Repayment or prepayment of loans of the Company and Subsidiaries
IPO Opens on : 24 March 2021
IPO Closes on : 26 March 2021
This is Book Built Issue IPO of 9057470 Shares & Issue Size is Rs. 452.87 Cr
*Fresh Issue Up to 36 lac Equity Shares amounting to Rs 180 Cr
*Offer for Sale Up to 54,57,470 Equity Shares amounting to Rs 272.87 Cr
The shares of Face Value Rs. 5 are being offered in the price band of Rs. 498-500
minimum Lot Size for retail investors is 30 Shares
The scrip will be Listed at BSE,NSE,on 7 April 2021
Shares offered to
75% of the shares amounting to Rs 339.65 Cr are reserved for QIB investors
NII Quota is just 15% , only Rs. 67.94 Cr
Only 10% shares amounting to Rs. 45.28 crore, are reserved for Retail investors
So with just 30,191 applications, Retail portion will be oversubscribed one time.
I expect chances of huge oversubscription of NII and RII portions.
Now most important part of this discussion, evaluation of the IPO.
Earnings per Share 2017-18 Rs (11.77)
Earnings per Share 2018-19 Rs (8.31)
Earnings per Share 2019-20 Rs +2/14
Earnings per Share 2020-21,8M Rs (28.50)
Book Value of the Share as on 30.11.2020 Rs (5.33)
Return on Net Worth: 17-18 (556.59) %
Return on Net Worth: 18-19 (29.16)%
Return on Net Worth: 19-20 (4.00) %
Return on Net Worth: 20-21,8M : %
Upper Price Band/last EPS: NA
Upper offer price/Book Value Ratio : NA
Lets do Peer Comparison
Jubilant Food Works @ PE multiple of 140.05
Speciality Restaurants : NA
West life Development : NA
Burger King India : NA
So what to do ???
Due to negative EPS and also negative book value, standard financial ratios : PE Ratio, Price to book value ratio etc are not ascertainable.
Another tool is Grey Market premium. However in this IPO, no grey market premium or subject to rates are quoted. So what to do ?
Under such circumstances, we CAs can venture to evaluate the company based on its topline, topline growth and EBDIT.
The consolidated Total Revenue, EBITDA and Adjusted EBITDA from continuing operations of Barbeque Nation Restaurants has changed from Rs. 590.45 crore, Rs 140.37 Crore and Rs 82.394 crore, respectively, in Fiscal 2018 to Rs 850.79 Crore, Rs 1,68.04 Crore and Rs 78.25 Crore , respectively in Fiscal 2020, at a CAGR of 20.04%, 9.41% and (2.55%), respectively. ( So remember, Topline growth is 20.04%, also considering new outlets )
Barbeque Nation is one of India’s fastest growing and widely recognised restaurant brands in the rapidly growing CDR market. It has steadily grown its owned and operated Barbeque Nation Restaurant network from a single restaurant in 2008 to 147 Barbeque Nation Restaurants. According to Technopak, the chain CDR market is expected to further grow at a CAGR of approximately 18.00% from Fiscal 2020 to Fiscal 2025.
As of December 31, 2020, the average rating of Barbeque Nation Restaurants on an online food aggregator was 4.38 out of 5.00. It also has a large social media following. As of December 31, 2020, the Company had over 1 million followers on Barbeque Nation’s Facebook main page and, as of January 8, 2021, over 0.15 million followers on its Instagram page.
So considering all these aspects, and inspite of no fancy in the grey market and negative EPS, one may venture to apply in this IPO and the chances of long term gains are very strong whereas chances of listing gains 50:50.