Burger King's Stock Market Debut: IPO

We all know Burger King for the reason that it serves one of the most delicious burgers and other fast food around the world and its has been growing its outlets in India since its inception in 2014. At present they have a total of 202 restaurants in India also they are planning to start more outlets in India and hence they have opted out for an IPO (Initial public Offering) to raise funds for its expansion plans. Burger King IPO opened its application from 2nd to 4th December. The allotments shares were made on 9th December 2020 and the shares were listed on the Stock exchange on 14th December 2020.The total Issue size is of 810 Cr. of which Rs450 Cr. is IPO and Rs360 Cr. is offer for sale (Companies Existing shareholders will sell shares worth 360 Cr).The Lot size of IPO is 250 shares and the unit share price is expected to be Rs59 to Rs60.

Burger king founded in 1954, Restaurants Brands international is the parent company. Burger king is the 2nd largest fast food chain after MC Donald’s. It works on the QSR (Quick service restaurant model) which has a lot of demand specially in the youth.

Talking about the revenue, the revenue of Burger King India has increased from Rs234Cr. in 2017 to Rs846 Cr. in 2020 with a great jump of 261% in 3 years. But at the same time the expenses of the company has also sky rocket because of that the profits are decline and losses are going up – in Financial year 2017 the company recorded a loss of Rs71 Cr and in 2020 the Loss has increased to Rs76.5 Cr. But its Global business is still profitable.

Also we need to look how its competitors are doing so the major competitors of burger king is Mc Donald’s and Dominos. Dominos has a market share of 22 % MC donads has a market share of 12% and burger king has a market share of just 4 % in terms of revenue, considering these figures we can ascertain that Burger king has a long way to go.

There is a lot of buzz in the market regarding the Burger King IPO and due to that on the opening date itself the IPO was fully subscribed within 2 hours. Also Burger king is able to get a attractive push of 56% in the grey market just two days before the IPO. Grey market is an Unofficial market where individuals buy and sell IPO shares before the stocks are officially open for trading in the stock market. The Surge in the prices level of Burger King in the Grey market indicates a strong trust that the investors have in the Company. But before a investor invest he/she needs to go through the financial report of Burger King also its important to note that the price to sales ratio (Market capitalization / Revenue) of Burger King is 2.67 where as the price to sales ratio of westlife Development Ltd (parent company of Mc Donald’s) is 4.37 and that of Jubilant food works (Dominos) Ltd is 8.4 so from the Price to sales ratio we can conclude that the valuation of Burger king is quite low than their competitors.

Burger king on Monday closed at Rs138.40 which is 130% premium over its issue price which was Rs60. As per the records it’s the strongest listing day since December 2017.

So a investor should look on all these aspects before investing in a IPO.

Thank you.

Regards,

Abhigyan Jha,

Kautilya,

IBS Mumbai.