Barbeque Nation- IPO Detailed Review

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IPO of Casual Dining Restaurant Chain operator Barbeque Nation, backed by marquee investor Rakesh Jhunjhunwala led Alchemy Capital has opened from Wednesday 24th March. The offering is worth Rs. 453 Cr. Should you apply? Read detailed analysis of the company in this blog.

Detailed Analysis of Barbeque Nation IPO

Introduction:

Barbeque Nation owns and operates Barbeque Nation Restaurants, India’s one of the leading casual dining restaurant chains and International Barbeque Nation Restaurants. Creates a one-of-a-kind overall customer experience by delivering quality food offerings and ambiance and services to its restaurants. Barbeque Nation Restaurants pioneered the format of the ‘over the table barbeque concept in Indian restaurants.

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Detailed Review of Barbeque Nation IPO

1) IPO DETAILS:

  • Barbeque Nation IPO is open for subscriptions from 24th March 2021 to 26th March 2021.
  • With the Initial Public Offering, Company plans to raise Rs. 453 crores from the market. Out of the total value of IPO, Rs. 180 crores are fresh issues and the Offer for Sale is worth Rs. 273 crores.
  • The price band of the IPO is Rs. 498- Rs. 500. The Face value is Rs. 5 per equity share.
  • Barbeque Nation is listing on both BSE as well as NSE.
  • Of the Total Issue, 75% is reserved for Qualified Institutional Buyers (QIB), 15% for Non-Institutional Bidders (NIB), and 10% for Retail Investors. Shares up to Rs. 2 Cr. Are reserved for Employees.
  • Promoters of the company are Sayaji Hotels Limited, Sayaji Housekeeping Service Limited, Kayum Dhanani, Raoof Dhanani, and Suchitra Dhanani.
  • The Objective of issue of IPO are:

i) Prepayment or repayment of all or a portion of certain outstanding borrowings which is taken on a consolidated basis ii) General Corporate Purposes iii) As Capital Expenditure to expand and open new restaurants.

  • Since the IPO involves an offer for sale, then definitely it will reduce the promoter’s stake after listing. Before the IPO, 62.21% of the stake was with the Promoters. But Post-IPO, the stake of Promoters & Promoter Group will reach down to 37.79%.
  • Shareholders who are selling their stake are as follows:
Selling ShareholdersNo. of Shares to be sold
Sayaji Hospitality Sevices Limited10,18,288
Azhar Dhanani3,39,430
Sadiya Dhanani3,39,430
Sanya Dhanani3,39,430
Tamara Private Limted33,23,106
Aajiv Investment Trust71,186
Menu Private Limited26,600
Source: RHP, moneycontrol.com
Barbeque Nation- IPO Details
Barbeque Nation- IPO Details

2) Few Key Points to keep in mind:

  • In January 2021, Company has made a Pre-IPO Placement at Rs. 252 per share to Xponentia Capital and Jubilant Foodworks and raised Rs. 150 Cr.
  • Jubilant has made a financial investment in Barbeque and had acquired a 10.72% stake at Rs. 252 per share. Now the IPO is coming up with the price band which is just double the rate at which Jubilant has purchased the 10.72% stake. Here, this financial investment of Jubilant proves to be beneficial for them, as their investments got doubled within a couple of months.
  • While, Ace Investor of India, Mr. Rakesh Jhujhunwala has also invested Rs. 47.55 Cr. in Barbeque at the price of Rs. 827 per share on March 29, 2018. Still, his investments are at a loss of nearly 40% at the base of the price band of IPO.

3) Business Overview:

  • Barbeque Nation Restaurants was launched in 2008 by Sayaji Hotels Limited.
  • It also owns and operates Toscano Restaurants and UBQ.
  • Barbeque Nation Hospitality launched its first Barbeque Nation restaurant in 2008 subsequently acquired 5 restaurants owned and operated by Sayaji Hotels in 2012.
  • Barbeque-Nation Hospitality acquired a 61.35% stake in Red Apple Kitchen Consultancy which currently owns and operates under the Brand Name “Toscano”, which is an Italian Restaurant.
  • Further, they own UBQ which provides an a-la-carte Indian Cuisine in the value segment.

4) Market Presence:

  • As per 9MFY21, Barbeque owns and operates 164 restaurants in total.
  • Out of 164, 147 restaurants are Barbeque Nation Restaurants, across 77 cities in India.
  • Barbeque has its presence in foreign land also, having 6 International outlets in 3 countries, 4 of them are located in the United Arab Emirates (UAE),  and 1-1 outlets in Oman and Malaysia.
  • The company also has 11 Italian Restaurants across 3 metro cities in India.

5) Valuation:

  • The total Market Capitalisation of the company is expected to be around Rs. 1,800 Cr. To Rs. 2,000 Cr. At the upper price band of Rs. 5,000 Post listing.
  • Since the Company is loss-making, the PE is negative.
  • The listed peers which are engaged in this similar business are Jubilant Foodworks, Westlife Development, Speciality Restaurants Ltd., and Burger Kind Ltd.
  • Among all the listed companies including Barbeque, only Jubilant has a positive PE of 140x.

6) Key Strengths:

  • Barbeque Nation is one of India’s fastest-growing and widely recognized restaurant brands in the rapidly growing Casual Dining Restaurant (CDR) market.
  • Attractive offerings based on constant menu innovation and customer focus.
  • Barbeque has a strong business process and back-end systems that have been established over the past 14 years, which add to their efficiency in operations.
  • Experienced Staff and Value-Oriented business.
  • The company has recorded strong revenue growth of 20% CAGR between FY18 to FY20.

7) Key Challenges:

  • 85% of the revenue of Barbeque comes from its Dine-In business, and because of the arrival of the second wave of Covid-19 in India, may affect the business for a longer period, despite there is increasing normalcy in the economic activities.
  • Barbeque Nation believes that the Dine-In concept will exist at the end and that’s why Company is not focusing much on the online delivery segment. On this front, the company may need to face further losses in coming quarters also as normalcy in dine-in had not yet reached the pre-covid level.
  • The company is loss-making for the last 3 Financial Years that are FY18, FY19, FY20, and 9MFY21, losses in the respective Fiscal years are Rs. 5Cr., Rs. 31 Cr., Rs. 38 Cr and Rs. 100 Cr. (Approx.) respectively.
  • The average Bill size of Barbeque has fallen by 15% from its earlier level Rs. 3250  to Rs. 2,700 as of now. It exposes the financial risk of the company.

8) Key Risks:

  • The company’s business is greatly affected by the Covid-19 pandemic. Although the company has witnessed an operation level of 84% of the pre-covid level, with the current situation of the second wave of Covid-19, it may again become a worrisome situation for the company.
  • Sales growth has declined in the last 3 fiscal years. It was 7.2% in FY18 which fell to 5.6% in FY19 and became negative -2.6% in FY20.
  • The company is having a negative cash flow position.
  • Presence of strong players in the market like Westlife Development and Jubilant Foodworks mainly.

Conclusion:

Currently, there is no good news for individuals looking for listing gains as Grey Market Premium of Barbeque Nation IPO is currently Rs. 0. As of now, there is no surety of listing gains, there is less demand for this IPO. Investors with a long-term horizon should carefully look at the factors related to the financials of the company, business operations, and the industry overview and should then only proceed for subscribing to this IPO.

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