Barbecue Nation IPO kicks off: Analysts iffy; should mute you do away with?

NEW DELHI: The IPO of Rakesh Jhunjhunwala-backed Barbecue Nation Hospitality opened for subscription Wednesday.

The casual eating restaurant chains on Tuesday raised Rs 202 crore from 15 anchor investors, allocating 40,57,861 shares at Rs 500 apiece.

The IPO is a new issuance of shares aggregating as a lot as Rs 180 crore and a proposal for sale of as a lot as 54,57,470 shares. Shares aggregating as a lot as Rs 2 crore will seemingly be reserved for eligible workers. The concern will discontinuance on Friday.

Now not now not as a lot as three sellers dealing in unlisted shares told ETMarkets that there is a lacklustre search info from for Barbecue shares so a ways in the grey market, because of of Easy Day commute (yet every other Covid-hit firm) that had a tepid list despite getting 159-occasions subscription.

The asking rate band of Barbecue IPO at Rs 498-500 per portion is almost double the Rs 252 apiece rate at which the firm dispensed shares in pre-IPO placements in December 2020 and January 2021.

The firm’s income contribution from dine-in is excessive at 85 per cent, even supposing it has declined from 97 per cent in the pre-Covid duration. The firm administration would now not imagine transport can vastly replace dine-in as the “ride that the latter offers can’t be packed in a field.”

"Given the contemporary pre-IPO part in December and January became as soon as done at a cost 50 per cent now not as a lot as IPO rate and the reality that Covid concerns would be a discontinuance to timeframe headwind for the dwelling, the pricing appears on the elevated aspect, with now not unparalleled left on the desk for investors. We additionally indicate that earlier fund raises in 2018 had been done at a unparalleled elevated rate, but fundamentals occupy deteriorated since," acknowledged YES Securities.

This brokerage has instructed investors to give this IPO a skip and now not sleep for greater entry opportunities post list.

At a time when a second wave of Covid virus is sweeping India, search info from would possibly well per chance maybe also decide successful for the largely-casual eating firm. Being an informal eating firm, the moderate invoice dimension for Barbecue is additionally elevated than fleet provider restaurants (QSRs) equivalent to Delighted Foodworks's, Burger King's and MCDoland's.

That too has dropped for Barbecue Nation Restaurants to Rs 2,757 (as a substitute of taxes) in eight months ended November 30, 2020 from Rs 3,249 in FY20 and Rs 3,215 in FY19.

Angel Broking acknowledged that whereas the firm has posted annual income boost of 20 per cent over FY18-FY20, it has been continually incurring losses at PAT stage. The Covid-19 pandemic too has had an adverse affect on the operations of the firm and the brokerage expects profits will remain underneath strain over the medium timeframe.

"On the elevated stop of the associated price band the firm is soliciting for a valuation of two.4 occasions FY20 EV/Gross sales which we imagine is costly given the original atmosphere. We counsel a "neutral" rating to the IPO," Angel Broking acknowledged.

Now not just like the Jhunjhunwala-backed Nazara, which is a key participant in Indian cell gaming market and is a beneficiary of Covid-19, Barbecue Nation would now not tackle any cloth market portion. Moreover, Jhunjhunwala-led Alchemy India holds staunch 1.69 per cent stake in the company. That too became as soon as purchased at Rs 827 per portion in March 2018.

Prabhudas Lilladher acknowledged less scalability possibilities of the firm’s international operations (six stores) and the now not-so-impressive music document of promoter neighborhood in scaling up Sayaji Accommodations – loss in five out of ultimate 10 years, promoter pledge (Rs 24.60 crore), insolvency complaints and OFS by promoters in IPO – merit caution.

"We imagine the firm is valued cheaply at 1.4 occasions FY23 EV/gross sales. On the different hand, at 46 occasions FY23 EPS, the stock offers minute upside. Even supposing we search info from affordable list gains given the euphoria in the IPO market, the firm’s operational transport desires to give a steal to vastly for any severe re-rating in the long speed," the brokerage acknowledged.

Madwadi Monetary Products and companies acknowledged despite an amplify in the collection of restaurants and boost in consolidated revenues, Barbecue Nation has incurred losses in some of the contemporary financial years.

“There would possibly well per chance maybe also be no assurance that the consolidated or standalone in finding income is now not going to decline in future,” it acknowledged.

“Interesting in regards to the danger of rising Corona Instances, lockdowns and restrictions in some aspects of the country, adverse base line and e book rate, we're now not rating the priority," acknowledged AUM Capital.

CX Advisors will offload 10 per cent stake in the IPO, post which this would possibly well per chance maybe tackle around 16.5 per cent in the firm. Delighted Foodworks is a financial investor in the firm.

Nirmal Bang analysts, who attended the analyst meet on the IPO, acknowledged the Barbecue administration and CX Advisors don't occupy any future commitments, and the parties would thought how the partnership evolves out as soon as things soundless down.

Integrated in October 2006, Barbecue Nation Hospitality owns and operates Barbecue Nation Restaurants, casual eating restaurant chains and World Barbecue Nation Restaurants. It additionally owns and operates Toscano Restaurants and You and Barbecue.

As of December 31, 2020, the firm owned and operated 164 restaurants, which included 147 Barbecue Nation Restaurants across 77 cities in India, six World Barbecue Nation Restaurants across 4 cities exterior India and 11 Italian restaurants across 3 metro cities in India. Out of them, 9 operated underneath the logo name “Toscano” and one every underneath the logo names “La Terrace” and “Collage”, respectively.

Angel Broking acknowledged whereas the firm posted annual income boost of 20 per cent over FY18-FY20, it has been continually incurring losses at PAT stage.

The coronavirus pandemic has had an adverse affect on the firm’s operations and the brokerage expects profits to remain underneath strain in the medium timeframe.

"On the elevated stop of the associated price band, the firm is soliciting for a valuation of two.4 occasions FY20 EV/gross sales, which we imagine is costly given the original atmosphere. We counsel a ‘neutral’ rating to the IPO," it acknowledged.

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